PREP RALLY

De­spite the fall of re­tail and the rise of ca­sual wear, Vine­yard Vines has qui­etly built a near-bil­lion-dol­lar brand—without tak­ing a cent of in­vest­ment cap­i­tal.

Forbes - - CONTENTS - BY STEVEN BERTONI

De­spite the fall of re­tail and the rise of ca­sual wear, Vine­yard Vines has built a near-bil­lion-dol­lar brand—without a cent of in­vest­ment cap­i­tal.

A tidy putting green with a pink smil­ing-whale logo greets guests at the Vine­yard Vines head­quar­ters in Stam­ford, Con­necti­cut. In the lobby of the preppy cloth­ing brand a madras golf cart is parked be­side a cus­tom re­cep­tion desk that’s rigged with deep-sea rods to look like a fish­ing boat. The 90,000-plus-square-foot office also boasts ca­bana fur­ni­ture, Tiki bar con­fer­ence rooms, a har­bor-view pa­tio and a sail­boat dock. Seated next to his brother and co­founder Ian in one of those con­fer­ence rooms, Shep Mur­ray says, “My goal has al­ways been to be a cross be­tween War­ren Buf­fett and Jimmy Buf­fett.”

Over the past 20 years, Shep and Ian Mur­ray, 47 and 43, re­spec­tively, have built a busi­ness that would im­press ei­ther Buf­fett. As cloth­ing brands weather price wars, the rise of fast fash­ion, the de­cline of depart­ment stores and the ex­plo­sion in on­line shop­ping, Vine­yard Vines has thrived. Founded in 1998, the com­pany now has 95 stores, and sales of its col--

or­ful, whale-lo­goed shirts and neck­ties hit $476 mil­lion in 2016. Even more im­pres­sive, the Mur­rays have man­aged to scale while maintaining 100% own­er­ship of the com­pany, which Gold­man Sachs re­port­edly val­ued at $1 bil­lion two years ago when the broth­ers ex­plored sell­ing a mi­nor­ity stake. Given the tur­moil in the re­tail sec­tor, Vine­yard Vines is prob­a­bly worth slightly less to­day.

They’ve built the brand by be­ing fash­ion’s feel­good guys. With more than 2,800 em­ploy­ees, Vine­yard Vines makes cloth­ing that’s clas­sic but re­laxed, preppy but not fussy. The com­pany avoids edgy trends, celebrity mod­els and fash­ion weeks. In one ad, a sea­plane lands on turquoise wa­ter under the phrase “We don’t do run­ways.” “We couldn’t out-polo Polo,” Ian ex­plains. “We couldn’t be glitzier than Bergdorf Good­man, and we couldn’t be tougher or more rugged than Patagonia. But we could be us—and we like to go to beach bars and have fun.”

So do its cus­tomers. “They struck a chord with a gen­er­a­tion of shop­pers when Ralph Lau­ren and Tommy Hil­figer lost mo­men­tum,” says Mar­shal Co­hen, chief re­tail an­a­lyst at NPD Group. “It’s a lifestyle brand like Ap­ple is a lifestyle brand—you buy their clothes, you com­mit to the whole port­fo­lio.”

The vibe may be laid-back, but Shep and Ian are control freaks in flip-flops, tena­ciously man­ag­ing every as­pect of the brand. “Our prod­ucts are like jer­seys that say you’re a mem­ber of the Vine­yard Vines com­mu­nity,” Ian says. “We don’t be­lieve we’re in the

cloth­ing busi­ness. We’re in the brand busi­ness.”

Shun­ning main­stream chains and on­line re­sellers, the com­pany sells gear through its own web­site, at spe­cialty lo­ca­tions like re­sorts, pro shops and college book­stores, and in a grow­ing em­pire of stand-alone stores. The Vine­yard Vines head­quar­ters has a model show­room where the Mur­rays ob­sess over every de­tail: the cloth­ing on the shelves, the dec­o­ra­tions on the wall, even the mu­sic on the speak­ers—the broth­ers cre­ate cus­tom playlists for every shop.

As other re­tail­ers shut­ter stores to fo­cus on ecom­merce, Vine­yard Vines has been push­ing harder into brick and mor­tar. To­day 55% of sales comes from stand-alone stores and 25% from e-com­merce; whole­sale, cus­tom and li­cens­ing deals make up the rest. “If I don’t have a store on your street, you’re not go­ing to think about us,” Shep says. “When we open a re­tail store in a lo­ca­tion, our on­line busi­ness goes up dra­mat­i­cally.”

Data col­lected from on­line or­ders pro­vides a heat map for po­ten­tial lo­ca­tions and has led to suc­cesses in land­locked towns like St. Louis and Kansas City. “Be­cause of their full own­er­ship, they have the nim­ble­ness and mo­bil­ity to do what they want,” says Mar­shal Co­hen of NPD. “It lets them keep the in­tegrity of the brand—they have no out­side in­ter­fer­ence.”

The de­sire to avoid out­side in­ter­fer­ence was one rea­son they launched the com­pany. In fact, they left cor­po­rate gigs—Shep at a mar­ket­ing firm, Ian at a PR firm—to make ties pre­cisely be­cause they didn’t want to have to wear them. At first, they kept their day jobs as they planned their busi­ness. They even per­suaded their den­tist to take out their healthy wis­dom teeth while they still had health in­sur­ance—just in case.

Even­tu­ally the broth­ers quit their jobs and ran up $8,000 in credit card debt. They spent the sum­mer of 1998 on Martha’s Vine­yard sell­ing ties in park­ing lots, on beaches and in bars. Later, they printed cat­a­logs at Kinkos, plac­ing ties di­rectly on pho­to­copiers. Un­able to af­ford mod­els, they pho­tographed friends—a tradition they still fol­low.

Twenty years ago, as Sil­i­con Valley ca­sual wear spread east, the tim­ing for a neck­tie busi­ness seemed aw­ful. But the Mur­rays set­tled on a con­trar­ian the­sis: Yes, guys were wear­ing ties less of­ten, but when they did, they wanted to make a state­ment. And neck­wear had high mar­gins and no siz­ing is­sues.

The broth­ers caught a break in 2002 when Aflac or­dered a cus­tom de­sign fea­tur­ing the com­pany’s duck mas­cot. The Mur­rays faxed a mock-up and re­ceived a $400,000 or­der for 10,000 ties. When the $95,000 de­posit check ar­rived, they ran out and bought a boat and then hus­tled to fill the or­der, brib­ing pals with pizza and beer to box the mer­chan­dise. The ties were, and still are, made by a domestic man­u­fac­turer in Queens, New York—mak­ing it eas­ier to fill or­ders and control qual­ity.

The com­pany ex­panded beyond ties in 2004 and opened its first stand-alone store in 2005 on Martha’s Vine­yard. More fol­lowed. And then the credit cri­sis hit. “For years it had been one big party,” Ian says. “The re­ces­sion forced us to grow up.” Sales fell 35%, some clients can­celed or­ders, oth­ers couldn’t pay. With the com­pany liv­ing check to check, sur­vival hinged on ef­fi­ciency. They in­vested in in­ven­tory and data-man­age­ment sys­tems, rene­go­ti­ated sup­ply deals, built dis­tri­bu­tion cen­ters and scooped up prime store­fronts on the cheap. “The re­ces­sion mo­ti­vated us to in­vest in our own stores,” Ian says. The in­vest­ments set up Vine­yard Vines to ride the eco­nomic re­cov­ery.

The Mur­rays see the cur­rent re­tail tur­moil as a sim­i­lar op­por­tu­nity. In ad­di­tion to their con­trar­ian push into phys­i­cal stores, the Mur­rays are try­ing new things on­line. Last year they ceased most dis­counts and pro­mo­tions to im­prove mar­gins and main­tain brand ex­clu­siv­ity. The move has slowed sales growth— ex­pected to be up 5% to around $500 mil­lion in 2017—but with no share­hold­ers or in­vestors, the Mur­rays can ex­per­i­ment. They’re even pon­der­ing in­ter­na­tional ex­pan­sion and brand ex­ten­sions like re­sort-in­spired fur­ni­ture, beach-style restau­rants and fish­ing char­ters. “What’s hap­pen­ing in re­tail right now is not an evo­lu­tion,” Shep says. “It’s a rev­o­lu­tion.”

Beach boys: Shep and Ian Mur­ray say the iconic Vine­yard Vines whale logo was in­spired by a wooden carv­ing done by their dad.

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