Michael Kors was always destined for fashion. Modelling at a young age to losing everything and starting again. Open to adapting is his legacy.
Dave Young:
Welcome to the Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.
[Tapper’s Jewelry Ad]
Dave Young:
Welcome back to the Empire Builders Podcast, Dave Young here with Stephen Semple, and we’re talking about businesses and empires and people that started a company and grew it to fabulous heights. As Stephen whispered the topic into my ear this morning, I thought, well, I don’t really know these guys. There’s a reason for that. You said this is one of the top 50 brands in the world?
Stephen Semple:
Yes. That’s what they’re considered.
Dave Young:
Okay. So this is just proof that Dave is just a hick from the sticks. I promise you that Michael Kors products are not being sold in the town I spent 50 years in.
Stephen Semple:
There you go.
Dave Young:
This is something that you buy in New York City, right?
Stephen Semple:
In the big town.
Dave Young:
Tell me more. Do tell.
Stephen Semple:
So Michael Kors, it started in the early 1980s, and as I mentioned in the past 15 years when they really exploded, they became what many consider one of the 50 biggest brands on earth. You may recognize this one because Michael Kors has also been a judge on one of your favorite shows, Fashion Runway.
Dave Young:
I’m sorry, what was that?
Stephen Semple:
Fashion Runway.
Dave Young:
I got nothing. I got nothing.
Stephen Semple:
You got nothing. They’re now part of a big company. They’re owned by a parent company that owns other brands such as Versace and ones along that line.
Dave Young:
Oh, of course.
Stephen Semple:
And today it is public and it’s worth about $6 billion, but it’s not been an easy ride. In 1990 through all of this, Michael Kors had to go bankrupt. So this is a ride with a couple of twists and turns in it. So Michael Kors was actually born, Karl Anderson and his stepdad’s last name is Kors, and he decided he wanted to change his name to core. And when he went about changing it, he decided he also wanted to change his first name because he liked the sound of Michael Kors. And he was exposed to fashion at an early age. His mom was a model and she was tall.
And because she was tall, she was always the bridal model because for whatever reason, the bridal model were always the ones that were tall. And when Revlon opened a store called The House of Revlon, they wanted an in-house hair model and she became that for a while. He also did a little bit of modeling as a kid. So as a kid, he grew up around fashionable people. His mom was fashionable, his dad, his grandmother who worked as a secretary got dressed up for work every day. So it was very much that type of household. And he loved to draw, much of it was fashion, and he was very flamboyant.
He was very fortunate in terms of the family that he grew up with because they gave him confidence even though he was not the same. He was lucky that as a gay child in the ’70s that he wanted to do fashion and his family supported all of that. So he considers it very fortunate family background that he grew up in. And he grew up loving movies, and they would go into Manhattan and New York City as a destination, and it was always a magical thing for him to go to and buy something at Saks, and he would try to find something that no one else had.
So he knew he wanted to do fashion, and he enrolled in the Fashion Institute of Technology and that lasted nine months. While he was in school, he was working at this boutique called Lothar, and it was a small high-end fashion boutique in New York, and they had big celebrity clients from all around the world. So he’s 18-years-old and Cher and Goldie Hawn and these people are coming into the store. School kind of became boring. He was learning more at work and out at night watching street fashion. A lot of his was just watching how people were dressing.
And so he knew he wanted to have a business and a collection, and he had his own view. So he started doing some little designs for Lothar. And they allowed him to start doing the store window. So he would decorate the store window, and he was constantly being told by people he should do his own thing. And around the end of the ’70s, there had been a change design, like the ’80s was very different fashion design from the ’70s. And stores like Lothar today would sell other brands, but back then they had their own brand. And so he started making clothes for that store.
And he also learned to be really reactive. If it started to rain, they would change the display to have raincoats in the window. And people liked the one of a kind things that they have. And women would come in asking who designed the clothes? Who designed these things? And one day, Dawn Mello, who’s a very famous fashion designer, was in and basically said to Michael, if you ever have a collection, call me and I’d love to see it. So he went home that night and he started to sketch because there was someone interested, and he created this little small collection.
But he knew nothing about logistics or style numbers or production or anything like that. But he put together this small collection and he went and he met buyers and he got models to wear some of the clothes and show it off to the buyers. And so he’s doing this, and by the third piece being shown to these buyers, he’s asked to leave the room and he’s like, oh God, what just happened? And two minutes later, he’s invited back in the room and basically this one buyer for Bergdorf Goodman, who’s also in Manhattan, said they love the designs, but they want an exclusive for a year.
So we want an exclusive for a year, but to give us an exclusive for the year, what do you want? He’s like, I have no idea. Let me get back to you. So he goes back to families and friends and he says, well, what should I ask for? And they’re like, well, what do you want? So he creates a list. And so he asks for windows, he asks for New York Times advertisement, personal appearance, and prepayments. And he presents this list and he was like, I’ve asked for too much. I just know I’ve asked for too much. And they’re like, nope, we’re good with all that.
Dave Young:
Should’ve asked for more.
Stephen Semple:
Yeah, there you go. But point is he got the list, he’s making the clothes in his apartment, he’s using a friend’s apartment for cutting. He’s delivering the clothes using his aunt’s car. I mean, this is tiny bootstrap.
Dave Young:
Yeah.
Stephen Semple:
The New York Times ad comes out and he gets a telephone call from the reporter who wants to look at the clothes and they have nowhere to meet. The stuff’s just all in his bedroom.
Dave Young:
I love it.
Stephen Semple:
He didn’t even know basic accounting. So he meets this guy Jack Orlike, and he brings him in to help him build the business, and they become partners. And Jack’s not from fashion, Jack’s from real estate, but he knows some things about business and they set up their first office. It’s in the loft that Michael’s living in, but it’s still an upgrade. It’s still an upgrade because there’s still a separate room. And a lot of the initial business was built in specialty stores, and they built these strong relationships with customers. Customers became friends.
They had these huge insights because they were going to these specialty stores and meeting with the customers. And what Michael wanted to create was this everyday clothing that was elegant, but easy to wear and long-lasting. And what he found was when he did this was it appealed across generations. This was the type of thing that the daughter and the mother and the grandmother would all want to wear. He brought this when he was working on Project Runway as one of the judges. He would hear designers say, oh, I don’t design for people of this age.
And Michael’s view was as a designer, you are a problem solver. Figure that out. Figure out the problem. Figure out the feel or the issue and design to that.
Dave Young:
Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.
[Empire Builders Ad]
Dave Young:
Book your starter session on this podcast website. Just visit theempirebuilderspodcast.com and click on get started.
Let’s pick up our story of where we left off. And trust me, you haven’t missed a thing.
Stephen Semple:
So he’s traveling around and Jack’s running the business and the scale of the business they launched a lower price line called Kors by Michael Kors, and they licensed it to an Italian company. So they wanted to get broader than just these specialty stores. And they felt like they needed to have something like that, that had a broader appeal to grow. This idea came because one day Michael was at Saks and it was the day the store had some stuff on sale and he would see that people loved the stuff, but it opened his eyes to the fact that there was this new market that he could serve.
But there was some compromises that needed to be made to serve that market because everyone has a different budget and you had to design to that budget and whatnot. And this licensed deal didn’t work out long-term unfortunately. Worked first the great year, shot out like a canon on launch, huge selection, full collection of women’s sport wear is what they did. And this became the biggest part of their business. But this was the first big success for the licensee. The licensee had not done this before.
But based upon that success, the licensee went out and got other designers and they thought it would be easy, and they got over extended. Meanwhile, Michael’s building up his infrastructure, relying on the licensee, and the licensee got into trouble and went bankrupt, and they owed Mike a bunch of money. And plus this stream of sales came to a stop. So Mike had to declare bankruptcy. So brushed himself off, got out of chapter 11, and he got hired by a French company, Celine, to be their in-house designer. It’s a French fashion house.
So he’s an employee as well as doing his own thing. But what he learned at Celine was the bulk of their business is accessories, and he had never done accessories. It’s the bracelet and the handbag and the broach and all that other stuff. But here’s the interesting thing is he was doing things for Celine and doing things for himself. So he was really competing with himself, but never felt that he was because they always felt like he had so many ideas and the market for the two were slightly different. And so he would create an idea and he’d go, yeah, that’s perfect over here.
And he’d create an idea and go, that’s perfect over there. And the other part is what he found was the New York market, which was Kors market, was more pragmatic than the French market-
Dave Young:
Okay.
Stephen Semple:
… Which was more stylish. And that became the dividing line.
Dave Young:
That makes sense.
Stephen Semple:
And in 1999, Celine bought 1/3 of Michael Kors, but this also opened up and allowed him to launch non clothing stuff, sunglasses and colognes and things along that line. So it opened up that world to him, and in 2003, he got two new investors came along and they bought 85% of the business and gave him $100 million for 85% of the business. But this allowed him to scale the business even more because he had found he was stalling out because he just didn’t have the expertise. And the investors that came in are the ones who had taken Tommy Hilfiger and blew him up, and he wanted the same.
Tommy had been at a similar size to Michael Kors, and they took him huge and he wanted to become an iconic American brand. But he’s now a minor shareholder and he’s trying new things. And first mistakes that they made, it was one of the first lines that they created, had a lot of sweaters, but they weren’t machine washable and so therefore didn’t sell. This was new to him. This market was new and he had to live and learn. But what he recognized was, look, even the richest people in the world want to wear a nice t-shirt.
Dave Young:
Yeah.
Stephen Semple:
To the lower income, that fancy t-shirt is a splurge, but to others it’s not. And handbags and watches make leggings special. So that was the other part about the accessories. The accessories would make everyday things special. So within the first few years, accessories become the biggest part of the business. And in 2011, they go public as Capri Holding. And at one point, this conglomerate was like a $15 billion market cap. But what I found interesting about this whole thing was just this journey where it was like one step led to the next step, led to the next step.
But Michael was always open when somebody said to him, when you’re ready to do a line, call me, he didn’t forget about that. He kept that.
Dave Young:
Well and kept learning and pivoting.
Stephen Semple:
Yes.
Dave Young:
When somebody takes you down, then you learn to pivot in a way that you don’t allow that to happen again.
Stephen Semple:
Yes. And then when he went to Celine, he went, oh wow, look at that. Could have been very easy to go, well, I don’t do accessories. He’s like, oh, look at that, accessories is a really important big part of the business. I should learn how to do accessories. He didn’t start by saying, hey, I want to do accessories. He wanted to do fashion and clothing and things along that lines, but he kept his mind open to these opportunities and these ideas. And he also, even though he was doing high-end fashion, he didn’t look down on people.
Because no, that person wants to buy that one thing because that one thing is special. That’s awesome that all of a sudden that one thing is making their day special.
Dave Young:
Well, yeah, like you said, one person can splurge on one t-shirt and another that can afford more will say, give me three in each color.
Stephen Semple:
Yeah. But both were equally important to him. But I also love this whole idea that a fashion designer is also a problem solver, which I thought was a really interesting perspective. And he would talk about, and the problem he’s solving is where is this person wearing this clothing and how do they want to look and feel in that moment? That’s the problem you’re solving.
Dave Young:
Yeah. That’s a great way of looking at it too.
Stephen Semple:
Remember Sarah LaFleur from episode 54, and she had that test. You had to be able to get in and out of a backseat of a taxi, and you had to be able to sit down and I forget what the three rules that she had. But remember there was the three rules in terms of function that the clothing had to fit for it to fit her line. But that’s same idea. Here’s the problem she wanted to solve in fashion.
Dave Young:
I think it makes it accessible to more people. I think of, you talk about the runway shows and runway models and things like that, and the image that comes to mind is that the ones that get the most publicity, you see them in social media are always just the most outrageous and ridiculous things.
Stephen Semple:
Yes.
Dave Young:
You see people walking down a runway and it looks like they’re wearing a trash bag with feathers glued to it or something. You couldn’t sit down, you couldn’t even get it in a car. Just looks ridiculous. As opposed to, oh yeah, I could see myself in this.
Stephen Semple:
That’s like the famous thing when Lady Gaga did the meat dress.
Dave Young:
Yeah. Exactly. Yeah.
Stephen Semple:
And those are the things that get the attention and the social media and all that other stuff. But I also just found it interesting perspective of him saying, fashion designer is actually a problem solver, and I thought that that was really interesting.
Dave Young:
It’s a very similar lesson to what you would learn from Sam Walton and Walmart. I think one of the quotes that he’s known for is sell to the classes and live with the masses, or sell to the masses and live with the classes.
Stephen Semple:
Yes.
Dave Young:
If that’s not his saying, it’s basically his philosophy was we’re going to sell to everybody and we’re going to get rich selling to everybody as opposed to hobnobbing with rich folk and selling them a few things, but never enough volume to make me one of them.
Stephen Semple:
Right. And even a lot of the luxury brands, they will have things that are at a price point that yes is a splurge, is a stretch, but the middle class can purchase to get in the door.
Dave Young:
Yeah.
Stephen Semple:
Not all Rolex watches are $100,000 or $50,000 watches. They have a lot of five and $8,000 watches, which let’s face is still an expensive watch, but if somebody really wants it, they can still purchase it.
Dave Young:
All right. Well thank you for bringing Michael Kors to my attention. I should probably pay closer attention to high fashion. I probably won’t, but I probably should.
Stephen Semple:
There you go. There you go. Just look for the big K. It’s a K with circle. That’s the Michael Kors stuff. You’ll know. Somebody will be coming through the academy at some point and you’ll see a Michael Kors item.
Dave Young:
I probably have. If he makes a fishing shirt, let me know.
Stephen Semple:
We’ll reach out to him and see if he can make you one.
Dave Young:
Thank you, Stephen. Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review. And if you have any questions about this or any other podcast episode, email to questions at theempirebuilderspodcast.com. I.
