With over $18 billion in debt, an area of 140 square miles, and empty skyscrapers and decaying houses all over the city, Detroit has earned the nickname “America’s Warzone”. One company claims to bring manufacturing back to a plagued motor city.
This company is Shinola. Not too long ago, the Gentleman’s Gazette Team (Sven Raphael Schneider & J.A. Shapira) were invited to visit the watch factory, and we accepted.
When we stepped off the plane in Detroit, it became painfully obvious that this wasn’t exactly a tourist attraction. Rundown buildings, homeless people on many street corners and most of the once-funky boutique shops are nothing more than an empty building with the occasional mannequin head collecting dust on the floor.
We checked into our hotel, the Westin Book Cadillac, and it became evident that if Shinola has done anything right, it’s their marketing. With a room view that overlooked the river, all you had to do was look down to see a massive Shinola advertisement branded on the side of another building. The hotel lobby had Shinola bikes and a few leather goods, and you can find their public watches all over the city of Detroit. GG reader, Jeremy, gave us a fantastic city tour on Sunday, that showed us the beautiful architecture of Downtown Detroit, as well as the river promenade. He took us the to Detroit Institute of Arts, and showed us the city Grosse Pointe, which has huge mansions and is so very different from Detroit itself.
Shinola, despite being a young company, has grown leaps and bounds. With flagship stores in Minneapolis, Detroit and New York, Shinola watches are also sold at merchants such as Barneys New York, Bloomingdale’s, Neiman Marcus, Nordstrom and Mr. Porter. That’s in addition to another forty independent watch dealers.
Shinola has always advertised themselves as “Where America is Made” and “Built in Detroit”, but we knew that they shipped most of their parts in from overseas, so now it was time for us to find out how much of that marketing slogan was really true.
Who is Shinola?
Originally, Shinola used to be a brand for shoe polish, which was founded in 1907, and based out of New Jersey. In 2001, the rights to the name Shinola was acquired by Tom Kartsotis, the founder of Fossil watches, where he served as a CEO from 1984 to 2000. During that time, he grew a company that started out making cheap fashion watches in Hong Kong, to a $6.3 billion watch business with global recognition. Today, Fossil is managed by Tom’s brother
Owned by Ronda & Bedrock
In 2003, Kartsotis founded the Bedrock Manufacturing Company, LLC, a Dallas based venture capital firm that focuses on entertainment, digital, and consumer products. Today, Shinola is owned by the Swiss Ronda AG and Bedrock, who has filed for trademark rights over the Shinola name for a range of items such as shoe polish, watches, cosmetics, handheld electronic devices, jewelry, leather goods, clothing, toys but also sporting equipment. This might be a good indicator to see where Shinola is headed. In addition, Bedrock acquired Filson a few years ago, bought controlling stakes in Original Jams and Mollusk Surf Shop (both are surf brands), and made minority investments in accessories maker, Clare Vivier, and designer label, Marissa Webb. In 2011, they also acquired a minority stake in the retailer Steven Alan.
Interestingly, despite all these major involvements, it seems to fly under the radar. For example, the website www.bedrock.com simply has a login form and apart from a linkedin profile there seems to be hardly any realiable information that one can find.
So why Detroit?
Capitalizing on a downed economy or helping to revive a once bustling metropolis, it’s tough to decide where Shinola privately stands on this. There is no doubt that they’ve helped Detroit and are giving people jobs, but was that really the initial thought? When Shinola bought the shoe polish brand rights in 2001, they put out a survey asking people how much money they would spend on a pen made in China, US and Detroit. Take a wild guess which had the highest return.
The Company & Jobs
Located in the former Argonaut Building, home to the College for Creative Studies, Shinola created a 30,000 square foot floor for offices and manufacturing facilities for watches and leather goods. Currently, Shinola employs a total of 309 people, 84 of which are in watch manufacturing and 50 in leather manufacturing with 10 more in warehouse distribution. The other 165 people are split up into design, sales, IT and, most importantly, marketing. Every successful company needs good marketing, and so it doesn’t surprise that less than half of the people are actually in manufacturing. At the end of the day, their motives don’t matter. What really counts is what they do, and they undeniably creates jobs in Detroit – it seems like they provide more marketing and sales jobs than manufacturing jobs, but jobs nonetheless.
How much Detroit is in a Shinola Watch?
The majority of Shinola revenue is generated by watches with bikes and leather goods playing just a minor role. Considering Shinola is often associated with “Made in Detroit,” it deserves mentioning that we have not seen a single piece of advertising or marketing material that claims exactly that. Instead, you see words like built in or assembled in and while this may sound like it’s all the same to a layman, legally it is not.
First of all, Shinola is not a watchmaker in the traditional sense where one watchmaker creates a watch from start to finish. Much rather, Shinola watches are assembled in an assembly line, and at this point, Shinola only employs two actual watchmakers. So every watch model is different and it has different parts. For example take a look at these two watches:
- Runwell with 1069: Each movement is made of 40 pieces from Switzerland assembled in Detroit, then 21 extra pieces (including the casing and glass from China) to make the watch.
- Runwell Chrono Sport with 5050.B: Each movement is made of 103 Swiss pieces, which are assembled in Detroit and another 21 extra pieces (including the casing and glass from China) to make the watch.
In 2014, Shinola claims to make about 150,000 to 170,000 watches. So if 84 watch assemblers work 50 weeks a year for 40 hours and you make between 150,000 – 170,000 watches a year, it takes on average 59.3 – 67.2 minutes about per watch to assemble it. Now that’s very efficient, isn’t it?
Now, salaries for Shinola watch assemblers start off at $11, which is above the minimum wage, and it grows from there to $11.50 after about 45 days, and once hired directly by Shinola, the rate goes to $12, with employees being eligible for medical, dental, vision, short-time, long-term disability, life insurance and 401k. That means, on average every Shinola watch has about has about $13.44 of manufacturing cost in it. If you add the same amount for the leather strap and double that to include all benefits, you realize that the manufacturing value of Detroit in a Shinola watch seems to be about $50. Without benefits it’s more like $25.
All these calculations are based on numbers provided to us by Shinola. Overall, the numbers seem rather disillusioning. Of course, you have to add on the cost of material, facility, Marketing, Sales… and the profit margins in the watch sector are traditionally high. Shinola had to lease the building, buy machines and create something new and had to invest a lot of money. On top of that, it creates jobs for all the other related sectors like marketing, sales, and so forth. However, most of the parts come from abroad, so that’s not even supporting the American economy that much. At the same time, bear in mind that the average price of a Shinola Watch is over $500, and goes up to $1200, which is often justified by the fact that it is “built in Detroit”, alluding that you help people in a rough city. And, in fact, you still do help them after all, maybe just not as much as you thought you did.
First off, we really enjoyed the tour, and it was impressive. Initially, our biggest hesitations with Shinola were that they were using deceptive marketing practices. One thing I appreciated on the tour was the honesty. One of the quietest factories I’ve ever been in, Shinola employees aren’t allowed to talk to each other, one assembly worker told me. Confirmed with our tour guide Olivier, they do everything in their power to maintain a pristine and clean environment. Talking of course, causes saliva to leave the mouth occasionally, which can be detrimental to the watch. Starting in the watch factory they took us through each of the steps of assembly and some of their quality controls. Each watch is double and triple checked to ensure it works flawlessly and is finally signed off by one of the two watchmakers in the facility.
The equipment is top of the line, most of the testing machines automatic so new employees don’t need to learn how to test by hand. Still, they seem to do quite a bit by hand, building the Lego blocks of the watch until it’s complete.
In fact, it appears to be nothing more than an assembly line, taking the Ronda movement and encasing it. So long as you can tighten a screw and have patience to do a monotonous job each and every day, odds are you can get a job at Shinola. In fact, even their watchmakers aren’t overly exceptional. While the two in-house watchmakers have undergone education in horology, they’re still new to the craft which makes it difficult to push a top drawer product on limited experience. Of course, maybe it’s not their goal to create top drawer products, and they can produce whatever watch they want. Obviously they found a market for it!
In our opinion, the marketing of Shinola was much more impressive than their manufacturing.
Not everything that says Detroit is made / assembled / built in Detroit
First of all, everything is branded as Detroit, even though it may not have anything to do with Detroit. For example, take the leather goods.
At the moment, Shinola only produces 3,000 straps a month in Detroit, that’s 36,000 in 12 months. However, they produce 150,000 – 170,000 watches, which means the vast majority of straps has to be made somewhere else, more specifically from from Hadley-Roma in Largo, Florida. The upper leather comes almost exclusively from Horween in Chicago, the lining from Italy and it is, in fact, Made in the U.S. but not in Detroit, which is part of the reason people are willing to pay more. It’s the same with all other leather goods, because currently only a small number of watch straps are made in Detroit. The other leather goods are only designed at their headquarters but then made at other companies like Filson, which is also part of the Bedrock umbrella.
Shinola’s Defintion of “Built By”
Every Shinola product has a serial number which is either engraved on the product or certified on a metal card that you get with the product. Upon our arrival, we both received a Detroit city map in leather, both of which had a card that stated “Built By” “Eric Scott”. J.A. also received a watch from Shinola, and the card stated “Built By” “Stefan Mihoc”.
To us, it seemed like this product was mostly made by that one person, which is like quality products were made in the past – by one person for one customer. However, it turned out this was way too romantic. The same day, Sven Raphael Schneider spotted the Shinola leather goods in the lobby of the hotel, and the card stated again “Built By” “Eric Scott”. When he asked to meet this ominous Eric Scott who built all of these products, it turned out that Eric Scott is a company from Missouri that produces all these leather goods for Shinola.
It wasn’t very different with the watch. Before, we thought Stefan Mihoc made the watch but after our visit we know that watches are assembled in an assembly line by people who earn $12 an hour. We were told that Stefan Mihoc is, in fact, one of the two watchmakers at Shinola but we didn’t meet him because he was out that day. In any case, every of those 150,000 Shinola watches this year will have a card that says “Built By” “Stefan Mihoc”, which we find rather deceptive.
Made in the U.S.A
While their bread and butter is certainly their watches, they also about 1,000 bicycles a year with price tags from $1,950 and up . At first glance, everything looks nice, according to Alex Stchekine the frame is made by a Schwinn family member in the U.S and that’s what you see in the video below. Obviously, that is fantastic! But upon closer inspection Sven Raphael Schneider realized that a lot of parts like brakes, shifter, leather saddle, bell, and so forth, were all Asian. When we spoke with a Alex Stchekine in Detroit, he told us that all bikes are assembled in Detroit but he flat out admitted that “only the frame, fork and spokes come from America”, with every other major part coming from “Taiwan, Asia and India”. Even the leather saddle isn’t made by Shinola. On the Shinola fact sheet on their website, you can find a paragraph about origin of components. For Bicycles it looks like the following:
Frame and fork manufacturing—Wisconsin, USA
Complete bike assembly—Michigan, USA
Frame tubing—Mississippi, USA
Rear dropouts—Michigan, USA
Headbadge—Rhode Island, USA
Chainstay plate—Wisconsin, USA
Spokes and nipples—Colorado, USA
Decals—North Carolina, USA
Other small parts—Asia and Europe
As a consumer, it seems like the majority of the components are made in the U.S., but if you take a second look, you realize that Decals (the Shinola font in the frame) is listed as made in the USA, while tires, brakes shifters, rims… are all just listed as “Other small parts” in one line. If you count the parts, there are more foreign parts in this bike than American ones, but that’s not something mentioned in the video. Of course, bear in mind that just like with watches, it is difficult to find American bike parts. Nevertheless, a bike that mostly consists of foreign items, which are then assembled in the U.S. is presented so it looks like an almost exclusively American made bike, when in fact a lot of vital bike parts are not from the U.S.
The Leather Goods
As a part of our tour, we also saw the leather manufacturing facilities. Upon our arrival, we both received a little city guide. When we entered the leather factory, the machinery used was all imported from Italy. Our tour guide, a former employee at Louis Vuitton, took us through the floor, showing us how each leather strap is made and giving us the chance to see it in progress. The leather comes mostly from Horween, and is of high quality. The workmanship of the straps is neat, and the stitching is equally solid. The edges are edge painted, but not folded, because that would be too difficult for the young team of leather workers at this point in time, most of whom had never worked with leather a year ago.
The problem is that hardly any of the leather products are made in Detroit at all, despite advertising the company as being Built in Detroit. Currently only 24% of the straps needed are made in Detroit, the remaining 76% coming from Hadley-Roma in Largo, Florida. All larger leather goods are either made by Filson, Eric Scott or other companies, even though they are designed in Detroit. The good thing is that Shinola actually trains people from the street to create something, which is excellent. Of course, the training lasts just a few months before they start to work, whereas an apprentice in Europe has to complete a 3 year apprenticeship before they can call themselves craftsmen, but overall it’s better to do something than not to do anything and Shinola is certainly doing something. Rome wasn’t built in a day, and it will take time to produce more leather goods in Detroit, though some of them will probably continue to be made by companies like Filson, because they are also under the Bedrock umbrella.
In terms of design, Shinola leather goods are somewhat modern, rough and geared towards the jeans, flannel shirt and tie wearing hipster with Red Wing boots. The edges are just cut, and often not edge painted, which is certainly a look some people want, and if they sell the goods, all the power to them. Looking at it from the angle of a true craftsman though, Shinola leather products are simple, without folded edges and simply rough. If you wear suits a lot, this aesthetic is probably not what you are looking for, but Shinola definitely has a niche in the market.
The Shinola Runwell Chrono 41
Before we visited Shinola, they provided J.A. Shapira with a Runwell Chrono 41:
I’ve been wearing the Shinola Runwell Chrono 41 watch on my wrist now for a number of weeks. It’s a hefty watch at 41mm – very thick and chunky, but it’s aesthetically pleasing if you like denim, Red Wing boots and flannel shirts, and not so much if you prefer to wear suits and jackets. The “Shinola Detroit-built” Argonite 5021 quartz movement, hand assembled from 85 Swiss-made components is basic but made of better quality materials than most Japanese movements with EOL technology for battery life. Unfortunately, the high shine stainless steel scuffs easily and is tough to buff out, although, Shinola offers a lifetime warranty on the watch, so I guess I can’t really complain. At the same time, the brand is very young so we see how much the lifetime warranty is worth in 10 years from now because lifetime warranties are only valid for the lifetime of the product, not the lifetime of the owner.
All in all, Shinola makes a decent daily wear watch. However, I think the marketing practices are somewhat deceptive. The price is too high for the watch; it should be priced at $425 in my opinion.
In the end, we think that Shinola is a sitting pot of gold. They have the ability and desire to make an exceptional time piece. They just need to be slightly more humble about it and figure out a way to introduce mechanical movements. That or they need to cater to the same clientele as Fossil.
In fact, it really seems as though Shinola is just the name of the brand, similar to the original Rolex watches which originally served as a wholesaler for movements that were placed inside the watch and rebranded. Ronda, a Swiss based quartz movement provider makes all the movements for Shinola and ships it to Motor City where they are assembled into watches.
Is ‘Assembled In’ the same as ‘Made In?’
When we talked to the CEO of Shinola after our tour, Sven Raphael Schneider asked Steve Bock, the CEO of Shinola, if the slogan “Where American is Made” wasn’t more accurately named “Where American is Assembled”. Bock replied that it sounded better and that it was the same thing, but we at the Gentleman’s Gazette disagree with that evaluation. If someone assembles Ikea kitchens in the USA, that doesn’t make the completed kitchen Made in USA. The research, development and all things attached remain in other countries.
Shinola has a headquarter with a manufacturing space, and while a small number of leather goods are made there, the watch production is simply an assembly line of foreign parts. In that sense, Shinola is really no different from Hyundai that assembles their cars in the U.S., except that it doesn’t make cars. It’s a product thats parts are all made overseas and then someone takes screwdriver and puts it together following directions. That’s not what I, personally, and all people we know would assume when they hear Made in the U.S. Of course, one has to be fair in the sense that Shinola cannot source all the watch parts they need for a watch in the U.S. today, because they simply don’t exist. So either they would have to make them in the U.S. or import them from overseas. At this point, it looks like they choose the second option.
We’ve all heard the phrase “jack of all trades, master of none” and that seems to ring through with Shinola. It all started with Shoe Polish, and it is still made private label for them, but the core is now watches, but you can also get leather piggy banks, pet post cards or dog beds. One might wonder how long it takes before Shinola incorporates cat videos into their marketing strategy. Going forward, based on the trademarks on file, we may find Shinola jewelry, toys or clothing soon.
Conclusion & Outlook
Shinola is an interesting brand to watch. Their marketing works well, even though we find it a bit deceptive sometimes. They move quickly and constantly work on new things, such as a limited edition pocket watch that will be released soon. The whole concept of Detroit seems to be working very well for them, and they have a good impact on the city, though at the end of the day, they want to make money just like any other company out there, and that’s perfectly legitimate. If you like their watch design and are happy with Quartz movements, you get an average watch but it seems like you pay a bit for the lifestyle and nimbus of the brand. Personally, we think the watch is overpriced and the design is a bit too chunky for our tastes. The leather goods are mostly not made in Detroit and of good and rather good average. We have not tested the bikes, and hence, we can’t judge, but based on the price, you should expect nothing less but perfection, and maybe a bit more honesty about the origin of its parts.
It will be interesting to see what products Shinola will add to their portfolio going forward, but it seems to us like it is Shinola’s goal is to create a globally operating brand that sells people the idea of products made in Detroit. Only time will tell how Shinola progresses, but we are sure you will hear from the company again. Whether that’s a good thing or bad thing, is up to you to decide.
This article was written by Sven Raphael Schneider & J.A. Shapira
You can find the watches and products at www.shinola.com
If you want to learn more about the Made in… debate, checkout this article.