thecoolhunter.net - THE KATE SPADE COMPANY

THE KATE SPADE COMPANY

Sunday, 02 April 2006

The Kate Spade Company, which now enjoys annual sales of more than $125 million, started with a dare at dinner. In 1991, Andy Spade and his girlfriend Kate Brosnahan were eating out in New York City. At the time, Kate was accessories editor for Mademoiselle magazine and was far from inspired in her $14,500 a year job. Why not start something together, suggested Andy—with his vision, her innate sense of style and attention to
detail they could make something work. The couple talked about what Kate could do. Andy suggested handbags. After all, she adored them and knew the product extremely well. “How hard could it be?” said Andy.

Kate Spade arrived in New York City in 1986 with $7 in her pocket. She grew up in Kansas City, the fifth of six children. Her father ran a construction company. Kate studied journalism and met skateboarder and advertising whiz kid Andy Spade at Arizona State University. He grew up in Birmingham, Michigan. Despite saying to Andy, “You don’t just start [a business],” Kate took up Andy’s dare, quit her job, and started designing handbags in their tiny apartment on the Upper West Side. The Kate Spade bag concept began with white drawing paper and Scotch tape. Kate painstakingly put together six prototypes and had samples made up in satin-finished nylon rather than leather. She found suppliers through Women’s Wear Daily classifieds and they launched in January 1993. “Everyone said we’d be out of business in a year because we had no experience,” says Andy. Kate and Andy called the company Kate Spade. The brand name was Andy’s idea. “Andy kept
saying ‘Kate Spade, Kate Spade.’ And he wasn’t proposing,” says Kate. (That would happen a few years down the track.) Kate Spade started attending accessories trade shows in 1993 to spruik her wares. The night before one of the early shows, Kate was inspired to unpick all the Kate Spade labels sewn inside the bags and reattach them to the outside of the bag—and the signature Kate Spade bag was born.

While the first few trade shows did not generate enough orders to cover exhibition costs, they received small orders from prestigious retailers such as Bergdorf Goodman, Barney’s, and Fred Segal, a clear sign that Kate’s bags were getting noticed by the fashion crowd. The Kate Spade brand was fresh, quirky, and accessible yet still stylish. Her stands always stood out, not just for the bags. Because she couldn’t afford to hire the trade show furniture, Kate would set her stand up with flea market chairs and tables that she collected, adding an extra style dimension to her stands. The bags sold brilliantly and word began to spread about this 5’2” girl from Kansas City. To cope with demand, Kate invited two friends, Pamela Bell and, later, Elyce Arons, to join the business. Instead of salaries they were offered equity in the company. (She broke all those golden rules about working with friends and lovers.) Both are still principals with the company. Kate never had the fever for conventional handbag brands—hot one minute, relegated to the back of the closet the next. She preferred vintage, having no desire to repeat what was already out there. Her range of bags was quirkier, with plaids, herringbone, bold stripes, bright linings, and a classic, uncomplicated, slightly unconventional character. After all, this was a girl known to carry raffia bags in NYC in the middle of winter. The Spades cleverly pitched their brand at the more affordable price point of $100-$500. All those girls who couldn’t afford Hermes and Gucci now had a new, distinct brand of their own. They also had a new style icon in Kate, with her bold accessories, quirky bags, etiquette, midwestern charm, and a love of elegance. (After more than a decade in New York, taxi drivers mistake Kate for a tourist because she is too polite to be a local.)

Rather than have two collections of bags each year, Kate chose to offer her clients five. She playfully designed bags with a personal touch—her favorite greens, yellows, checks, even a favored wallpaper pattern could end up incorporated into a new bag. The new product lines were about that Kate wanted to do next. “One idea just leads to another,” she says. In 1993, the business had sales of a respectable $100,000. By 1995, revenues had tipped $1.5 million. The fashion press was closely following Kate’s every move, the best retailers were stocking the bags, and the explosive growth of the company had begun. Andy Spade knew that he could afford to quit his day job in advertising when he started being offered lots of money for stakes in the business. He left his advertising job in 1996 and became president and creative director. The Spades estimate that it cost $35,000 to get the business off the ground. Both loathe borrowing money, so they cashed in their savings, lived off Andy’s salary from the advertising agencies he worked at, and ploughed every cent they could back into the business. There were no salaries at Kate Spade until 1996, the year Kate received an award for Best New Fashion Talent from the Council of Fashion Designers of America for her accessories. In 1997, Kate Spade launched its leather handbag range, there were overseas licensing deals, an ad campaign, the launch of Kate Spade eyewear, and the opening of two new retail stores. This incessant growth, while exciting, created huge pressures on the business. By this stage, the Spades’ home had become a giant storeroom of boxes. Neither of the Spades were prepared or interested in logistics, distribution, and other back-end aspects of the business. Andy was the marketing guru, the “brand visionary”—Kate implemented the big ideas, designed, and kept her eye on the product details. The Spades appointed experienced fashion executive Robin Marino as president of Kate Spade in 1999. She had worked with Burberry, Ralph Lauren, and Donna Karan and brought to the company the skills it needed to expand, particularly in terms of operations and licensing deals. Later in 1999, the Spades sold a 56 percent stake in the business to prestigious retailer Neiman Marcus for $33.6 million. Now there was the cash to fuel further growth, allowing the brand to move into more categories such as stationery, footwear, beauty, accessories, and homewares.

The next five years would see retail expansion, offshore expansion, particularly in Japan, and moves into homewares, luggage, textiles, wallpaper, and the Jack Spade label for men. There have been fluctuations in sales and, more recently, questions as to whether Kate Spade is continuing to develop must-have products
for its customers. Not that the Kate Spade business is showing any signs of slowing down. There are plans for fifty more stores in the next three years. From its inception, Andy Spade’s marketing strategy for the brand has been brilliant, always a little offbeat, fresh, and fun, from books about what people keep in their handbags, to Kate’s books on manners and entertaining, to ten-page advertisements celebrating ten years of Kate Spade that documented the dizzy soiree Kate and Andy hosted. It’s all so carefully orchestrated, keeping an edge of mystery about what the pair will do next.

In October 2004, Andy announced that he would be stepping down as chief executive of Kate Spade. He is expected to launch a brand consultancy. Added to his previous experience managing accounts for companies including Pepsi and Coach, he should be very highly sought after. Today, the pair live on the Upper East Side, surrounded by their contemporary art collection, flea market finds, Kate-designed wallpapers, flatware, glassware, and the honeysuckle perfume that is Kate’s signature scent. The latest addition to the household is their daughter Frances Beatrix Spade, born in February 2005. In September 2005, the New York Times reported that Kate Spade is considering putting the business on the market, or selling off further stakes in the business to finance growth. Thirty new retail stores is not a cheap exercise. By Emily Ross & Angus Holland – exclusive extract from 100 Great Businesses & the minds behind them. Buy online

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