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Did you have any fear about leaving Ralph Lauren to start something?
Sure.
But I felt so comfortable when I could like take an original design concept and I know I could see the finished garment.
So like if I found an antique. piece of fabric from a quilt right from the 1920s.
I could take that and visualize a cool shirt with these type of buttons and this type of wash and these type of seams.
And I just knew I could make it.
And I'm like, if I can do it here, it's go time.
Welcome to How I Built This a show about innovators entrepreneurs, idealists and the stories behind the movements they built.
I'm Guy Raz and on the show today how a college admissions essay grew into Faherty, a clothing brand that traveled the country in a mobile beach house before growing to a quarter of a billion dollars in sales.
Most entrepreneurs are taught to pick a lane go all in on wholesale or all in on direct to consumer or all in on retail.
But today's guests, they didn't pick one.
They picked all of the above.
When Mike and Alex Faherty launched their clothing brand in 2013, investors were throwing money at direct-to-consumer companies.
Low overhead, high margins, no middlemen.
That was the quote-unquote smart play.
But the Faherty twins had something else in mind.
A blend of wholesale, brick and mortar, and online sales.
A strategy most people thought was outdated, maybe even doomed.
And yet, that contrarian move helped turn Faherty into a $250 million brand.
Now, if you're not familiar with it, Faherty is a brand of clothing that takes its inspiration from surf culture.
Today, the company has around 80 stores across the US.
The roots of the story though, go back more than a decade before launch, because Mike Faherty first dreamed of starting a clothing brand as a teenager.
And instead of rushing into it, he and his brother Alex spent 12 years getting ready.
Mike studied fashion in college and then worked at Ralph Lauren.
Alex built a career in finance to learn business and to save money.
It was a long first step, but that patience and that all-of-the-above business model, it paid off.
And for Mike and Alex, it was the culmination of a childhood dream of working together.
The twins are the youngest of seven children.
They grew up in a small town on the Jersey Shore where they both learned to surf and all the clothing they wore was bought at the local surf shop.
In middle school, the family moved to New York City.
And Mike remembers noticing different fashion styles around him, starting with the clothes his dad wore to work.
My dad had a pretty good style, so I always looked up to him.
His first gig after college was on Wall Street in the 70s, so you can imagine dressing the part was a big part of it.
So he had naturally good style.
I always remember...
As a kid, going through his tie closet and like looking at the color combinations of the paisleys and being like wow, that's interesting.
And then like feeling his t-shirts because they were like better than my Quicksilver t-shirts.
And then all of a sudden, I'm in New York City and my dad took me to Bergdorf Goodman.
And I remember feeling a cashmere sweater for the first time.
And being like, what is that?
And I was like, there's something... I'm into this.
I'm into walking into Bloomingdale's by myself after school and going to the Ralph Lauren store.
And then you get to high school and you're like, trying to create my own style.
And the surf stuff didn't feel like where I wanted to go anymore.
So I started buying some other pieces to play with the surf stuff.
And so...
Junior year, right, you got to start thinking about going to college.
You got to sit down and write an essay.
And one of the questions that, whatever the prompter was like, you know what do you want to do when you get older?
And I sat there and I started writing about starting a clothing company.
I started writing about this line called Coast to Curb.
And it was my life, the things that worked on the coast.
Came to the city, the quality of the things I saw in the city, the vibe of the things I saw on the coast and this line of clothing that I could create.
I'm wondering Mike, in high school, did you ever feel like you kind of had to hide?
You know your interest in fashion and design.
Like because, you know, high school people can be weird about that stuff.
Was that something that you didn't really talk about much?
No, no, because some of the gift of moving to New York City was like arts cool.
Yeah, that's true.
You know, like being an artist is cool where you live in a small suburban town, like being a surfer is cool.
Yeah.
And, you know, I had some great mentor like teachers that I was like, this guy's really cool.
And he's like, you know, a professional ceramicist.
And so probably the combo of my parents.
Like my mom is creative and always pushed me to be more like take a lot of art classes.
So like I started getting comfortable with like, I'm actually going to be an artist.
I can actually have a real job being a fashion designer.
And then my dad is like the ultimate optimist.
And like anything's possible, guys.
Like whatever.
Who cares what people say?
Just go do it.
Yeah.
I should also mention that both of you guys, both of you were really good at sports.
I think, Alex, you played football in high school and then in college.
Yes.
And, Mike, you played basketball at Wash U in St.
Louis.
And I also read that you majored in fashion design there.
Correct.
Yeah.
And you took a sewing class in college.
I had multiple years of sewing as a curriculum.
Okay.
But on the team, like, I'm just trying to imagine these guys like, dude, you're doing what?
You're majoring in fashion design?
You're taking sewing?
Like, did you get grief?
Totally.
I mean, my coach was beyond, you know, because he's like this old Midwestern guy.
Incongruous.
Absolutely.
And you know, let alone to have an art school kid on the basketball team like to have a fashion designer.
You know, I had fashion shows, guys.
So like the guys would come to the shows, you know, and I was like using them as models.
Wow.
We would fly to games, come home Sunday night.
I'd have to go right to the studio to finish a sewing project.
I'd be sewing all night.
I'd be so tired.
I'd sew seams backwards and then like stay up another two hours to seam rip it and start again.
And You know, I was the only male student in the program.
I had no previous experience sewing but there was just something about it that I like.
Even when it was hard and I was like there was, I had that.
Just stick with it, learn the craft, keep going step one on your journey.
Alex, when you were in high school, right, you're playing football.
Yeah, yeah.
And you saw your brother's interest in art.
I'm sure you remember him talking already in high school about one day wanting to start a clothing business.
Yeah.
When he started to talk about that, did you already at that point see your you having a role in doing that with him?
Yeah, he wrote when he wrote his college essay.
Can't remember if it was exactly right after he wrote the essay.
But the dots that we connect is I met my wife.
She tells the story of when we kind of first met and started hanging out that I told her I was going to start a clothing company with my brother.
When you first met her in college, you said yeah, when I graduated, I'm going to start a clothing company with my brother.
Yep.
And so I think that our friends... our world, like it was just, we kept, we said it.
So we put it out in the world.
I think we were always like, we got to do something together.
Like, whatever our job is in the future, like it needs to be together, because what could be better than us working together one day?
I just, I'm curious.
And you may not have the answer to this because maybe I'd have to ask your mom or I don't know other people but what did your parents do to cultivate the relationship that you guys have?
Because You know, like my sisters are best friends, absolutely best friends.
And my children are really close.
My boys are, and I hope they will be forever.
But like, you guys are grown men with families and you're so tight.
What do they do to cultivate that and help you guys become not only brothers, but like best friends?
I think some of it is we were the, you know, we're the last two.
So we were the youngest.
We just could easily be with each other.
And so whether that's a twin thing or that's a brother thing, it's just like.
It's even hard to describe.
It just was like a natural thing that we experienced from the day we were born.
Yeah.
I mean my mom talks about, like when we're zero years old and couldn't walk or crawl, we still ended up in each other's cribs.
She'd be like, I don't even know how you guys can't even move.
And like you end up in each other's cribs every night.
I mean, it's very rare and you're extremely lucky that already at a young age you had this vision of what you wanted to do.
Mike, you knew you wanted to start a business in fashion, a fashion brand.
Alex, you knew you wanted to work with your brother.
And so...
I mean, it sounds like and just correct me if I'm wrong that you both went into college studying these things so that you could get jobs to help you learn more, in order to help you get to the place where you could then leave and start a business.
Is that more or less true?
Yeah, bingo.
Yeah, that's true.
And I even, in starting my sophomore year in college, eBay was just coming up.
And I used to.
In free time I used to go to like the local Marshalls and TJ Maxx's in like the New Haven area and I would buy things and resell them on eBay.
Like I got into, you know, whatever merchandising or whatever you want to call it.
And so I think for me, a lot of it was I got to learn.
I got to figure out what am I going to bring to the business.
All right.
So you graduate from Yale.
You go to New York Alex, to work finance, not with the intention of like, making partner and buying a house in the Hamptons and, you know, taking a helicopter there one day on the weekends.
But just to make enough money so you could leave and start this fashion business?
Like from the time you got to your first job after college?
Yeah, it was make as much money as I can and learn as much as I can.
And you know I found myself always wanting to work on the consumer projects, that investments that we were looking at, where I could invest, learn more about specific things within consumer or apparel.
So I always gravitated towards, okay, if I'm going to do this, what can I work on?
How do I work on this team to get me a little bit more exposure?
And Carrie, who was your girlfriend in college, who factors in because she would go on and marry each other and she would join the company that you guys would start as a co-founder.
She went to law school at this time, right?
She went to California.
Yep.
All right, Mike, you graduate from Wash U in 2005.
And again, like you and your brother are just you've got this vision.
But the vision is I'm going to start a clothing company, but I'm 2223.
There's no way I can do this now.
I better go find a job and in a bigger company and you got a job with Ralph Lauren.
Oh, yeah.
Wow.
So I worked in – about a year in kids.
And then I got picked to move into men's design at Ralph Lauren.
And that was just, you know, that was incredible.
All right.
So you would spend, I think, seven or eight years at Ralph Lauren?
Yeah.
Yeah, eight and change.
And most of the time I read that you were working on their like their double RL line, which is their like outdoor Western –.
Yeah, it's kind of like super premium but rugged and very vintage inspired.
It's sort of like focused on denim and American workwear and sort of the heritage of American clothing and trying to sort of replicate that style.
They sent you to Asia to like – you know, the dream for Ralph was like to replicate a garment from the 1930s.
So, like, and how do you do that in 2015 or 2016?
Like you've got to dissect every element of that fabric, from the yarn size to how the yarn's finished, to the finishing of the fabric, to how densely it's woven, to then when it's sewn like.
What kind of stitching do you do to have it be like super durable or crinkle in certain ways?
And then how do you wash it to break it in?
And so, like...
I just started becoming an engineer, really.
You become a garment engineer at that point.
And that was like took my passion to another level.
Did you guys see, I mean, did you see each other a lot in New York City when you were both, because you were based?
Both of you were based in New York City, right?
So we lived together until Karen and I moved in together in 2010.
Okay.
So for like the first five years we lived together.
So you guys are roommates in the city.
Yep.
And Alex, you would be going to your finance job and Mike, you'd go to Ralph Lauren every day.
Yep.
To the office.
Okay.
And I, you know, I had a great discount at Ralph Lauren's.
I got to dress Alex for his Wall Street part, you know.
All right.
How often were you guys talking about the contours of what your company would be like?
As early as, I don't know, a year or two years after graduating or even before?
Take me into those conversations you guys were having.
I think the first thing for me was seeing Mike in the Ralph Lauren world.
He would have me come by the showroom sometimes and we would go to the mansion.
I was going from this stodgy Wall Street office, barren office.
To just like this amazing world that mike was living in.
And when mike would get up in the morning, He would dress a unit like a costume.
You know some They looked like a 1980s preppy guide to a 1940s lumberjack, like they just the costumes that he wore.
It was cool.
Like it was just fun to experience He was living in this creative world, you know, and i'm living in this like spreadsheet world and I wanted a little bit of what he had.
I started feeling that, you know, probably four or five years in.
And we started it was like once a month.
We would sort of get together on like a Sunday for a couple hours and we would start talking about it.
What do we want to do?
Where do we want to go?
What products do we want to make?
What's the brand going to be?
What's the brand slogan going to be?
What's the name of the brand?
We spent years, two years probably trying to think about what the name of the brand is going to be.
We didn't get anywhere with that.
So settled on our last name.
What was the point, Mike, where you felt like, okay...
I'm ready to leave Ralph Lauren.
Like, I mean, that's a huge platform, right?
And a huge launching pad.
Like I'm sure you could have worked for any number of other fashion brands and had an incredible career, right.
Maybe become the fashion director or the creative director of a couture house or something like that.
But clearly that was not in your part of your plan.
So what point did you start to say, okay, I'm ready to kind of do this thing?
Yeah.
Yeah.
I started feeling that way when I felt so comfortable, when I could take an original design concept and I know I could see the finished garment.
So if it started with a fabric swatch that was this big, if I found an antique piece of fabric from a quilt from the 1920s, I could take that and visualize a cool shirt with these type of buttons and this type of wash and these type of seams.
And I just knew I could make it.
And I'm like, if I can do it here, it's go time.
Did you have any fear about leaving Ralph Lauren to start something?
Sure.
But again, when you have the identical twin brother, who's like when you're ready dog, when you're ready?
Wow.
So, all right.
So in 2012, you officially quit Ralph Lauren.
Yeah.
And we'll get to that in a sec.
But before you do that, in high school already, you had this brand Coast to Curb.
Coast to Curb.
Yep.
Okay.
That was not going to be the name, but the concept was basically the same.
It was going to be a surf and meet streetwear brand.
Yeah.
Probably more like surf meets streetwear.
New York fashion.
And what did that mean?
Like if somebody said, okay, Mike, tell me.
All right, big shot.
You missed your big shot as a designer, Ralph Lauren.
What do you think you're going to do that's going to be so interesting?
You know, you're like 27, 28 or 30 maybe.
And so come on, kid.
What are you going to do that's going to be better than all these things out there?
I would have said –
Remember how big the surf brands were in the 90s?
Like PacSun was in every mall, right?
These were billion-dollar companies.
Quicksilver, yeah.
Huge.
I think that was like a $3 billion company at one point.
Volcom.
Yeah, you name it.
Rusty, like they're these huge brands.
Yeah.
And they sold to a subset at a quality and a price point, but there was fervor around that world.
And like what if I took all of my experience in like luxury American fashion...
And implemented that into, like, the surf coastal style that I grew up with.
People love vacation.
People love the beach.
People love that outdoor lifestyle.
And what if it went toe-to-toe with premium fashion?
Got it.
So how could I, like, take board shorts, for example?
That was, like, the first product I designed for Faraday.
And how could I take board shorts and instead of them being, like, really long...
Kind of like monochromatic, you know, prints sort of not that interesting.
Board shorts for surfing.
For surfing, exactly, for surfing.
So board shorts.
Traditionally they were long and you wouldn't wear them on the street because you would look like a weirdo.
Yeah.
I mean, not a weirdo, unless you were on the Jersey Shore.
Totally.
But if you were in like...
I don't know, Chicago in a bar.
But you would want to make it so people could wear it, like walking around the street of a city.
Exactly.
And at the same time, do you remember the line, Villebequin?
Yes, of course.
They're from France.
Yeah, it like exploded.
Yeah.
Starting.
So it was huge.
And all of a sudden people are like, ah, 250 bucks for a bathing suit.
Sure.
Bathing suit.
Yeah.
And then before it was like 69 bucks Quicksilver.
Right.
So like.
Right.
So all of a sudden I was like, oh, there's somewhere in the middle for me.
There's a playing ground of like taking surf and starting to put a luxury element to it.
Meanwhile, Alex, it sounds like you were just waiting for your brother to make this move because you were waiting to jump ship as well and help him.
But here's the question I have for you.
I mean, you're pulling in hundreds of thousands of dollars.
You're a young guy making a ton of money in New York City because that's what they pay you.
Did anybody, I don't know.
Parents, friends say you're making like hundreds of thousands of dollars.
Like, what are you doing?
You want to quit this and start this fashion brand?
Like, what?
Yeah.
People I worked with.
I remember I had one mentor of mine and I was like I'm going to start a clothing company with my brother.
I'm thinking about leaving.
And he looked at me in straight face and said, that is the dumbest thing I've ever heard.
Like you're joking, right?
And I remember like that was the first time I really said it to someone besides like a friend of mine.
And I was like, oh, wait.
So I definitely had a moment before I was leaving where I was like do maybe I just finance Mike, you know, I can keep my job.
Because you had the cash, you had the money that you were saving.
I had the cash.
So I was bankrolling kind of like the early developments.
You know, Mike was Mike was once he left Raffle and he was out of a job.
So I'm sort of bankrolling it. moving it along.
And I remember like one day came from like business trip overseas and I was exhausted.
Carrie and I were, she was home and I was like, should I do this?
Like, you've known me for so long.
Should I do this?
And she was like, you got to do this.
Um, Alex, I read that your dad, who I know he's not, he's no longer around.
He was not super psyched that you were leaving finance.
Uh, yeah.
Before he passed, you know, it was like 2008, 2009.
I would you know we would get together and I would tell him that you know we're starting to work on this and get his advice.
And and he, he kind of took the stance of you know, just keep doing what you're doing, build your career.
You know, you can finance Mike.
Um, you guys can do it together on the side.
Yeah.
And I think he had an experience in his career where he had some ups and downs.
And I think he saw what that did to his relationship with my mom and the family.
And I think he's like.
He kind of looked back and was like if I would have just kept that first job I had in that one firm and moved my way up, you know, life would have maybe been easier.
And so I think that was his experience.
So I definitely always had that in the back of my mind.
Which is understandable.
He cared about you, right?
I mean, wouldn't you agree?
I would totally agree.
Yeah.
Maybe even advice I would give to my own kid, but I think I've learned that...
You can get two forms of advice and they're both right.
Totally.
And so you got to pick what's best for you.
Yeah.
But I honestly, when I made the decision that I was going to do this, I just was convinced it was going to work.
Mike, did you have that confidence when you left Ralph Lauren?
Were you absolutely sure this was going to work?
I was just thinking about the fabric I was going to design first.
You know, I'm such like a methodical engineer like that.
You're like step by step.
Yeah, it was like, all right, first it's like, what's the product?
Okay.
I took a trip around the world and I went and sat with my favorite factory owners and I said here's what I'm doing.
What do you think?
And you could do that because you already knew them right from your time at Ralph Lauren.
That's what I'm saying.
It was such a gift.
Yeah.
So, like, I was very close friends.
I mean, I'm still to this day one of the owners of the factory.
I would call a very close friend.
He was one of the first guys to give us money when we started the brand.
So, building product is so hard.
They just knew I wasn't the typical employee who just came and clocked in and clocked out.
I was always there too late.
I was always telling one engineer, like, what if we change this?
Like, what if we did that?
You know, and so, like, they saw the opportunity in me, right?
Because you have to sell yourself, right?
And a lot of it was, you know, we started from scratch from like the yarn, right?
Because a lot of the synergy of Faraday, right, was like we were going to do it.
We were going to do like what I did at Ralph Lauren, from a quality craftsmanship, but we were going to do it from a Patagonia material perspective.
It started with like what was the recycled fiber to make the board shorts with?
What did you need it to do?
What was going to make the – because board shorts are probably like the traditional surf shorts, are probably made from polyester nylon right.
Yep, exactly.
So –
I'll geek out with you a little bit.
So you need the synthetic to keep it so it's hydrophobic, right?
So it doesn't absorb all the water, right?
So we need- Because cotton wouldn't work.
Cotton wouldn't work.
A little cotton, I found out could work fine.
So what I did was it was like all right, first you got to find what's the best version of the recycled filament yarn.
And that's from a company in South Carolina called Unify.
They're like to just make the best version of the recycled polyester from plastic bottles and stuff.
So I was like-
All right.
No one's really doing this mix of like, I still like the way cotton feels.
There's like a feel to it that feels like softer, a little less sticky, let's just say, on your body.
So I kind of just kept working and working and working.
It was like trial number six, right?
If I only had 17 cotton with the recycled polyester, it didn't change the quick dry mentality of it.
But when you touched it, you thought it was a regular fabric.
You didn't think it was a board short.
And and Alex, how much money did you have to, or did you, were you, did you make available to do this?
Like you had some saved cash, probably living, as you know, frugally as possible, but how much money did you were you able to put in?
Yeah.
The first inventory.
I remember when we did our first inventory buy of the of the board shorts that Mike developed.
The initial deposit was like 150000.
And for the year that Mike was after he left Ralph Lauren, he rented a little studio and he set up shop there and he could have set up his concept wall.
You know some of the branding, the fabrics that he was working on.
He was there seven days a week all the time.
And I would go over there on the weekends to catch up with him, brainstorming about the business.
And so that kind of went on and on for months and months and months.
And I loved it.
I freaking loved it.
And I was just feeling like I wasn't really enjoying my job that much anymore.
I felt like my dad was in my head still, but I had to make the decision.
It was getting closer.
And I just had a couple of sleepless nights and just like woke up in the middle of the night, turned to Carrie and was like I got to do this.
When we come back after a quick break.
How a cross-country road trip, an old-fashioned catalog and a boutique clothing store in Japan all helped the Faraday brand get on its feet.
Stay with us.
I'm Guy Raz, and you're listening to How I Built This.
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Hey, welcome back to How I Built This.
I'm Guy Raz.
So it's February 2013 and Alex Faraday quits his finance job to go all in on a new fashion brand with his twin brother, Mike.
They're looking to raise some seed money.
They order their first run of clothing, and they're planning to launch their website in the spring.
And I remember we launched the website.
Alex and I were like, if we're going to launch this brand, we have to be on a surf trip.
So we went to Puerto Rico at a friend of a friend's apartment in San Juan that had good Wi-Fi.
We were with our buddy who was helping us with the final back end of the website, like making sure everything was linking, etc.
And at one minute, it was like, the website was live and there's nothing we can do.
And we went surfing and like, you know, we got some good press hits out the gate.
And then, you know, it's like, all right, we're selling stuff.
And just board shorts.
That's the only thing available.
Men's board shorts.
And women's bikinis.
And women.
Okay, got it.
So it's just swimwear was the first product that we made.
And I had started sort of six months before.
You know, we started reaching out to people that we knew, kind of friends and family and people that we had relationships with.
And so I started during that time period, you know, trying to raise our first kind of angel round.
How much were you looking to raise?
$1 million.
And you did it?
You got it?
We got it.
I mean, I'm assuming that given your backgrounds and your track record, it probably wasn't easy.
But like, yeah, I mean, you guys are smart guys.
You had all this experience in finance.
Your brother had all this experience in fashion and design.
Yeah.
I guess you get checks ranging from what?
5,000 to, I think our biggest one was 100,000.
So I think we had 44 investors in the first round.
And pretty much all connections, people you knew or loose ties.
Absolutely.
People, friends of friends.
Yeah.
We did a couple smaller add-on rounds to that, because I think what we figured out quickly is that inventory eats up capital really fast.
At some point in the first year we needed to figure out how to make clothes, because we were moving from bathing suits to into a full clothing line.
And so we needed to find somewhere to make the line, because we were going to only order 50 units, 75 units 100, like small quantities.
And so This one factory owner, who's one of Mike's close friends, who's an amazing guy, we met with him, talked to him about the business and he said he invested and then opened up his factory to us for that first production run.
All right, I want to talk, just talk business for a sec with you Alex, because you had experience in working in private equity and investment banks, but not necessarily with like inventory management, right.
Like you could build a financial projections, you could build a P&L, but like, This is different.
Retail, especially apparel, is a different kind of beast, because one misstep can really set you back.
Too much stuff hanging around that you have to eventually throw away.
You're dealing also with different sizes.
You don't want too much excess.
You know you're going to throw stuff away.
Like it's a restaurant, right?
At the end of the day, a restaurant's got to throw away food.
So how hard was that learning curve for you?
Was it pretty steep?
It was incredibly steep.
I'm still, 12 years later, still trying to learn it.
And I think that, if I look back at what was one thing that I did not anticipate or understand going into this was how complicated and difficult inventory management was going to be.
And we learned it right away, because we have to sell this amount of clothes every In order to survive.
What was the amount that you had to sell in order to survive that first year?
We had in our mind that we needed to sell $1,000 a day.
That's an ambitious goal, right?
Especially when you're an unknown brand.
First of all, how did you get people to be aware of the website?
Were you doing Facebook ads?
What were you doing?
We weren't doing Facebook ads.
We had an Instagram account.
And we got some press right when we launched.
So we had like a nice initial launch in April for the first couple weeks.
Friends are telling about friends.
We're emailing everyone we know.
So we got a couple thousand dollar days, $5,000 a day.
We're like, wow, this is great.
And then all of a sudden it's like – Crickets.
There's nothing.
Wow.
So clearly sales are slowing down.
But I read that by the summer of 2013, you guys come up with kind of an unusual idea, which is –
You basically take the clothes on a tour of the country like almost like you were a band or something.
Like I read that you built kind of like a mobile pop-up store.
Can you tell me about that?
Yeah.
So Alex told you I had this little studio in Union Square, 2012, right?
Food trucks.
They're everywhere.
And I was like – why don't we just have a food truck store and we can travel?
Just get a food truck and just have your stuff in on hangers in the store.
Absolutely.
But, you know, I'm not a plug and play kind of guy.
So I had to design a custom trailer with hydraulics that looked like, you know, a 1940s cape.
You know, I had my mom, who's an interior decorator, help me with it.
Another friend is an architect in San Francisco.
Just tell me like a couple of things.
And We built this basically trailer that was completely clad in reclaimed wood and you opened it up and it was birch wood on the inside with photography and cool fixtures and racks.
And the two sides of the trailer completely opened on hydraulics onto a sort of porch on both sides.
And so we could basically pull it on a pickup truck, go anywhere and sort of create a clothing store.
And then what?
You would have a plan to drive around the country or –
Yeah, so it first started with yeah, we basically took the trailer and we started like just plotting out where we would go.
We did a mix of, like, individual clothing retailers who we, like, reached out to.
And we were like, hey, we could do an event in your parking lot.
Or we reached out to, like, concerts, like, festivals.
And we're like hey, we did this festival in Charleston where we just like plotted it next to like, all the food trucks.
And we're like we're selling bathing suits also, like the founders are there.
Like every time i've gone to like a crafts fair or because that's the kind of thing you guys might have been doing right, like you go there and you're like oh, this is the, and you meet the guy who's making the leather pouches yeah, and you're like wow, these are really cool, exactly.
You're like okay, it's a little expensive 90 bucks but you know what?
The guy's here and they i'm gonna buy this.
It's not made in like you know some giant factory and by some faceless person like this is the guy's making it.
And especially when you're outside of big cities, People like events.
They like something different.
You know there's not a lot going, as much going on in Charlotte, North Carolina, as there is it's going on in New York City or LA.
So it was a it was a cross-country trip through the southeast.
Yeah, we did a U, a U of the country.
How long did that take?
35 days.
Wow.
I mean, how long were you guys driving per day?
Like eight, ten hours?
Yeah.
So you guys are doing like days in and like fast food and whatever you had to do.
Yeah, a couple of flat tire in Shreveport, lost the keys in the trailer somewhere in L.A.
The funniest story is like when we're on the PCH in Big Sur and we just park on the water and like a dozen people pull up and buy stuff from us.
You open up the store on the side of the road.
Yep.
Right when there's a curve and there's a big like and 12 people showed up and never seen this stuff.
They're like, this is kind of good.
I'll buy it.
I'll buy something from it.
We sold $1,500 on the side of the Pacific One by Big Sur.
I'll never forget it.
It's a great idea because it's like a great way to at least get your brand in front of people.
But meantime, like you're running the business, right?
So you guys are driving this truck and then, like you had to deal with the suppliers and they were probably like calls you to be on and and you're mike, you still were like had to be working on.
You work in cad to design clothing.
Yeah, you work in cad.
You know it's just a lot of back and forth with your partners at at the factory.
You know your partner engineer partners on the garment side of things.
So this was may, okay.
All of the trade shows for spring 14 start in july, okay.
So i needed all my samples July 1st.
Then, once we got back and we started the trade show circuit, where it was like Faraday's launching a collection, the trailer became our trade show booth.
And it was like, oh my goodness, this is amazing.
You took the trailer to the trade shows?
Yeah.
To the floor of the trade show?
Yeah.
So the New York trade show, they let us park out front the front door.
So we were actually on Mercer Street in Soho.
And we're out front.
Granted, it was 100 degrees that week.
Still, every buyer who walked in saw this cool thing.
And then we went to Vegas.
And I think that helped just like as buyers come through.
Like, oh, this is something different.
This is something that feels bigger than maybe it is.
How much did you – your goal was $400,000 that first year.
What did you do that first year?
So what ended up happening that first year was –
We ended up doing like 365, 350 in direct to consumer sales.
And this sort of experience on the road showed me the power of these small specialty retailers across the country, because we didn't have to spend any money on marketing.
We just had to get the beach house there.
And so when Mike designed that first line, there's momentum.
These stores are interested in this brand.
Online, no one was interested in us.
In person, people were interested in us.
And then now I found these buyers from these sort of clothing stores that were interested in what we're doing.
And I'm like, this is going to be what gets us going.
At what point did you start to offer other items besides board shorts and bikinis?
Yeah.
So that was the collection, that first collection spring that we showed in 13.
In that fashion show.
Yeah.
In that trade show.
And that included, just give me roughly.
Like T-shirts and polos, short sleeve printed button downs, you know.
Long sleeve flannels, you know wash sweatshirts, Chino shorts, board shorts, couple jacket.
It was like a full, you know, full collection.
What was it that, like, how were you able to differentiate it in your mind?
I mean, it's sort of a kind of like laid-back coastal vibe.
Like, what made it, in your view, different from any competitors?
The type of stores we were going at... were more of a luxury fashion retailers.
So we were going after Barneys.
We were going after Japanese retailers.
We were going after Stag in Austin, this awesome store there.
And so these stores kind of had this, let's just talk about the American market, right?
They had this whole of like all right, we either have suiting, dressy haberdashery suiting, or we have Ralph Lauren, or we have like golf brands.
They sort of were like we're kind of missing a rugged, casual take on American.
You know that's got some coastal vibes.
You know, at that point, Tommy Bahama was kind of out of fashion in that world.
They just came and they were like, we've just been missing this.
The price point was higher end.
The quality was higher end.
But the vibe was just like so chill.
Yeah.
And then you had in the landscape.
At the time, you know, you had a store in LA called Fred Siegel which was sort of like famous.
And they, you know, a lot of it's like who takes a run at this brand and gives it a chance early.
And so the buyer at Fred Siegel really identified with the brand.
I think Mike coming from Double RL, which is a very well regarded brand.
Mine in clothing saw the potential.
And so he gave us some real space at Fred Siegel in L.A. in Santa Monica.
And.
One of the other things was all of a sudden we get this random email in Japanese from a store called Journal Standard, which is a very well-known kind of cool specialty boutique in Japan.
And we're like, oh, my God, Journal Standard, Japan.
Like, this is amazing.
And then the woman who was with Journal Standard is sort of like an agent.
She helps other Japanese brands.
And then all of a sudden it was like Journal Standard.
And then there's another store called United Arrows.
And there's another store called Isetan.
They all wanted to come see the line.
And that was really when the business went from, you know, 350000 e-com mobile beach house business to in one year.
Once we ship this product, you know we're going to be in some of the best stores in the world.
What is the idea?
Because, you know, we've done so many direct-to-consumer brands, Warby Parker and...
Perry's razors, and you know, all these brands that really kind of blew up in this time period.
Was the idea to be a direct to consumer brand?
Like to be a web based business where the vast majority of your stuff was was being sold online?
Or were you already thinking?
No, we want to be a wholesaler, we want to be in Nordstrom's and Bloomingdale's.
And we want to do both, or we want, you know, because the margins on direct to consumer are higher.
They're better.
So what was the idea that you had?
When I was working on the business plan, I was studying 10K's annual reports of Ralph Lauren Coach, Louis Vuitton whatever brands I could get my hands on that were public that I felt were the best, most valuable brands.
That's really interesting.
You were looking at their annual reports of these companies who you aspire to be one day.
Exactly.
And when you read about these brands, they do segment breakouts, wholesale breakouts.
At that time there wasn't really splitting up e-com and retail yet, but it was always like wholesale was half the business.
Retail, e-com was half the business.
So I was like, this is how you build a brand.
So we have our initial business plan.
Mike and I were looking at it before.
And in year six in the business plan, it said that retail would be 45% of the business.
Online would be 35% of the business.
And wholesale would be the rest.
And so wholesale was always a part of the plan.
But what happened was wholesale got going first.
So year two of the business, wholesale 75% of our business, because that's really what took off.
And that was because of the trade shows.
You went to the trade shows and you got all these orders.
Exactly.
And so we had – Nordstrom picked us up the first season.
Barneys picked us up the first season.
Nationally?
Was Nordstrom national or just – No, it was 10 stores.
Barneys was four stores.
And then Japan was probably 40% of that first year's wholesale business.
I mean, again, it proved to be the right decision.
But, like, already – I'm just curious how you thought about this because in 2014, like –
You could start to see that people were not going to department stores as much like today.
And again, even today, it's a mixed bag.
If you go to San Francisco to Union Square, nobody's in the department stores.
But if you go to like the Westfield Shopping Center in La Jolla, which is a beautiful outdoor mall, it's packed with people.
Or you go to like a suburban shopping center in Palo Alto, or I'm sure there's some you know on the East Coast around where you guys are.
They're busy.
But there was an argument to be made at the time that like, oh, this is not going to work.
Yeah, I think it was also just a function of the capital that we had.
And so when you think about the Warby's at the time and somebody – They raised a lot of cash.
They raised a bunch of money because when you do the financial model of spending money on marketing on e-commerce first, customer acquisition, LTV like it's not dollar one profitable in a meaningful way.
Yeah.
From a retailer like a Nordstrom.
You can give that order to the specialty finance company and they will first give you what's called PO financing.
So for some interest rate, they will give you an advance on – It's a high interest rate.
It's a high interest rate.
10 or 12 percent or more.
Yeah, it's a high interest rate.
But it's capital.
And then once you ship the product, you send your invoice and they'll dance you the money.
So when I was thinking about the float of this business and how do you make the business to scale without raising a lot of money, wholesale just naturally makes the most sense.
Yeah.
I mean, so because you didn't you didn't have you weren't venture backed, you didn't have hundreds of millions of dollars behind you.
You actually were forced to do this.
Yeah, so we didn't make any money our first bunch of years, but we were losing like 500000 a year or 400000 a year.
We weren't losing $10 million or $20 million a year.
So we had to.
There was no alternative.
We couldn't just lose a lot of money.
But the other challenge going wholesale is your stuff has to sell.
And if me or anybody walks into a Bloomingdale's and I just need a pair of trousers and I'm like I've got 15 minutes.
And this has happened to me, by the way.
It's a true story.
I'll go into a Bloomingdale's, like in some city, because I've got to do a live show or some appearance.
And I'm like...
I spilled something on my trousers and there's like an oil stain on it.
And I know that like rag and bone size 32 fits me perfectly.
I don't even have time to try it on.
I'm going and I'm just grabbing it and leaving the store.
So how – and you're an unknown brand.
How are you able to compete in those?
It must have been hard at times to get – attention in those places.
Yeah, the department stores were tough.
It took much longer to get the business moving in.
The in the department store world, where we saw the initial success was in these sort of smaller specialty stores where, you know, think of this story it's an owner who buys the product, he's the number one salesman, he knows all the customers, so he's gotta sell what he buys and, And so my job was to try and accumulate as many of these specialty clothing store customers as possible.
And they would give us a shot.
You know a couple thousand dollar order.
You know 40 pieces, 30 pieces.
But in those type of environments, those buyers are also the sellers.
They got to sell it.
So we found that those were the stores that could really move the product versus the big department stores.
So we had very little luck, even though we got some of these small orders from Nordstrom's in the first bunch of years it wasn't much.
It was really small.
But I guess it was enough to generate some interest or buzz or knowledge or awareness.
Yeah, you just stick around with those department stores.
You know, there was like a lot of just – being frustrated.
Like I wish the business was bigger.
I wish the business was bigger.
And then like, you know, X amount of years in when like Faraday's got more notoriety, it works.
And you also, I think there was a product.
You sort of got to figure out the product that to your point you come in.
You know your rag and bone pant size like what's the product?
If you walked into Nordstrom that would sell itself.
And what was that?
Yeah.
For us, it was plaid shirts. plaid shirts.
So I think Mike designed shirts at Ralph Lauren.
And if you go back to this world we were living in in 2014, 15, 16, it was like very contemporary.
Clothing was like solid black and white or very preppy like Vineyard Vines was kind of a big brand at the time.
And there just wasn't a classic, great sun faded plaid shirt that you could buy.
And so Nordstrom you know a lot of West Coast stores, a lot of stores in the Pacific Northwest They didn't have this sort of like premium, high-end plaid flannel shirt.
And that was the first shirt at Nordstrom that we really saw Velocity with.
Were you able to do anything to increase visibility at the Nordstroms and Bloomingdales?
There's a famous story, and we had this on our show.
Sarah Blakely was actually our first guest 10 years ago when we launched the show.
And true story that she would go into the Neiman Marcuses and she would like— make sure to put the Spanx by the register when no one was looking and she would like front face them and make sure that she positioned them better like, because it was just a few Neiman Marcus stores.
But now you're like shipping your stuff to these department stores.
And are you just kind of crossing your fingers and hoping that people notice it?
Well, that first year when we shipped to Nordstrom, I visited every single one.
It was 10 different Nordstrom's across the country.
And I did a version of what Sarah did, moving someone else to another rack, moving our stuff.
Without asking permission.
Oh yeah, you don't ask permission.
You just do it.
We still do it.
We still do it.
I went to Bloomingdale's yesterday and I moved our stuff and moved something out.
But the biggest thing I found successful was it was me walking into the store telling a salesperson hey, this is my brand.
Here's my story.
Here's why the product's good.
I just found that those interactions to the salespeople We're like pay dividends and dividends and dividends, because they're the ones who sell it every day.
And that human connection, I can't do that at scale in a department store.
I can't talk to everyone that walks in and looking for a pair of pants because I got to go home.
I'm about to have a family.
But what I can do is I can get the salespeople to be on our side.
Yeah.
Yeah.
How did you, you guys, opened your first store.
You actually started with a pop-up right in Greenwich Village.
Yep, on Thompson Street between Prince and Spring.
And then that became a permanent store?
It was sort of a pop-up for about three years.
And that was kind of the first time Mike and my mom designed a little store.
It was about a 200 square foot little storefront on Thompson Street.
One of the things that I think is really interesting, that you did in the first, maybe year and a half, was you sent out a print catalog, which you would think is counterintuitive.
Like, wait, a print catalog?
Because I get print catalogs.
I don't look at them, but I'm not necessarily the target.
Like, I do think that probably a lot more people look at them than I would assume because it worked.
Like, people were literally dialing a 1-800 number to order.
Yeah, I remember there was an article and there was some news in the industry in 2000, early 2015 that JCrew stopped doing their catalog.
Just went online.
It was like a big thing.
You know, J.Crew, everyone got the catalog for J.Crew for so many years.
And then one day they just decided to stop doing their catalog.
And I was like, that's interesting.
I remember as kids, we'd always got catalogs.
I'm like, there's just not catalogs coming anymore.
And I don't know, I think we were like, we got to do some type of marketing.
And I was like, why don't we just try a catalog?
And so that was our first paid media that we ever did in holiday 2015.
It's just interesting how you chose to spend your money because, again, it's counterintuitive.
It's like some brands take radio ads.
It's counterintuitive, but those things still do work.
The American classics were almost started by catalogs like Old Penny's catalogs from the 40s and Sears catalogs.
So I think just the idea of we were just selling product that needed to be shown in a way that was interesting.
So I think there was like when a customer picks this up, no different than the person who walked into the specialty store and was like this clothing looks kind of interesting.
Faraday, I don't even know how to say it, but this stuff's interesting.
I'm going to just keep – I'm going to take a look.
Meantime, you did raise a little bit more money from your existing investors, right?
Because you had cash coming in.
But this is an expensive proposition.
You've got to order stuff.
You've got to pay probably pretty quickly.
And then you're not getting the money in for 30, 45, sometimes 60 days, maybe longer.
Yeah, we were constantly running out of money.
And that's because of the inventory cycle of the business.
And it's just a constant playing your payables, trying to get as much extent on the payables, trying to make the cash flow of this business work.
But it was really, really stressful for me because, you know, I felt like the whole business, the financial, like it was just kind of on my shoulders to make this business work, to make this business work and be successful.
So it was like, as I said, I just got obsessed with how do we sell the product as much as possible.
Nothing, you know.
The wholesale business sort of hit the first year and a half and then it kind of stopped.
And the e-commerce business.
Just until we did that catalog, I didn't really see any customers coming in in droves because we had spent the money on the marketing.
And then the retail store was doing, you know, $250,000 a year or $300,000 a year.
It's not, you know, a million, millions of dollar store.
And so we're like, what's the next thing we need to do to keep scaling it?
When we come back after the break, just as the money starts to run out, an angel who also happens to be an investor appears from Nantucket with an offer.
Stay with us.
I'm Guy Raz, and you're listening to How I Built This.
Hey, welcome back to How I Built This.
I'm Guy Raz.
So around 2015, Alex and Mike are two years into building their fashion brand.
They're selling across multiple channels the Faherty website, wholesale and one retail store in New York.
But managing cash flow is a constant challenge, and they're still not making a profit.
And so I actually went back to my investment firm for two months as a consultant and Because I ran out of money.
So everything... You were stressed.
Everything was stressed.
And one of the guys I used to work with was like, you know, I got coffee with him just to catch up.
And I was like, I needed money.
I had no money left.
Wow.
And the whole time right, Guy?
We're telling all of our factories like, give us another month to pay.
We're basically like, you know, 60 days becomes 90 days becomes 120 days.
So half of our email traffic was just deflecting payment.
And you know you always.
You know we had a couple employees at that point, but you got to be like just so positive, right?
Like, and just, like, everything's awesome.
Like, the brand's so cool and amazing.
And like.
So you know, in many ways, like I'm sort of like, end up being the energy a lot around the positivity of the brand, as Alex sort of burdens a lot of the stress of the brand.
But kind of in that year we sort of started playing with what would become like probably our first hero product, which is the Legend sweater shirt, which is sort of like our take on a flannel shirt meets kind of a sweater.
And that was in like about 2015, I started working on it, and then we launched it in 2016.
And it was the first product where...
We put it in the store and it like evaporated.
Everyone who touched it bought it.
And that product really helped us be like all right, this is how we have to be a direct-to-consumer brand.
You guys had a – basically, the story I've read is that around 2016 you kind of like get cold contacted from a guy in Nantucket or who saw the shirt of Nantucket and he wanted to invest.
And he became, I guess to this day, your sole outside investor. non-family member, friend, investor.
And this person is like private.
They don't want to be known.
They're not public names.
Yeah, just an individual.
And a significant investment.
Made a significant investment.
He sent me an email to hello at FaradayBrand.com, like to our customer service email.
And it said, hey Alex, I bought some shirts in Nantucket.
They're great shirts.
If you're ever looking for money, let's talk.
And You know we're a couple million dollar fashion brand.
Two years, in three years, you know we're not getting many emails like this.
Yeah, we're looking for some money.
Yeah, I definitely told them.
You know we're not a high flyer, Warby Parker, raising money and venture capital.
You know we're selling wholesale.
Who wants to invest in a business that is doing wholesale?
Yeah.
And we spent some time with him and I think he really saw us and the vision of what we were doing and he became our first you know meaningful outside investor.
And he gave us the capital that we sort of needed to kind of like take this next step.
We've had brands on that are just like rocket ships.
Year one, $2 million.
Year two, $10 million.
Year three, $50 million.
Year four, $100 million.
You're just like, what?
How does – and sometimes it's luck.
Sometimes it's just a lot of cash that's come in.
There's a bunch of different reasons.
Sometimes it's really just – you just hit the zeitgeist, like crumble cookies, right?
Just crumble cookies just went crazy.
This – it took you guys – a bunch of years before you were going to hit 20, 25 million, which is still super impressive.
I think five, six years in, you're at $25 million.
I'm curious, you're in New York.
You're there's a lot of hype.
And some of these brands run how I built this.
And I'm happy.
They're great brands.
The Warby Parkers of the world and the, you know, the Tom's shoes and the Casper mattresses.
And were you guys ever like looking at some of these brands, including competitors, and just thinking, like what's going on?
Like, why aren't we there?
Absolutely.
But at the same time, there was always this thing where Alex and I love the fact that our brand was always one of those things where, if you know, you know.
And like, I don't know, we just were like, yeah, I wish it would have gone faster.
It would have been easier.
But when you kind of know there's no out, if you know what I mean, like the end is maybe never right.
It changes how you think of the world around you.
And I think I had known, you know, I came from private equity.
And so I knew that sort of like going the venture capital private equity route was something we wouldn't do because of what we wanted to do with the brand, how we wanted to do this forever.
We didn't really want to sell it.
You know, this is like this was Mike and I's thing.
And I knew some of the founders.
I went on a ski trip in 2016 with a bunch of these founders of some of the brands you mentioned.
And they liked our clothes.
And I think they had given me feedback that they were like it's so cool that you don't have to do what we have to do and how fast we have to grow and how big the companies need to be.
Like that you get to kind of just do this with your brother.
And there was perspective that if I didn't meet these guys and have this ski trip with them, that I may have looked from afar.
But they were very excited about how we were building it and jealous of us in a way.
Meantime, you guys are expanding, right?
I think by 2018, you had seven stores, stores in Boston and Tuckett.
You had a store in New York and then you had Malibu.
Here's my question about those stores.
Were you at all nervous about signing a 10-year lease in Malibu or in Boston, even in New York City?
That's a lot of pressure.
You've got to perform to make sure that those don't drain your resources.
Yeah, some of it was timing.
In the Malibu store, Mike and I knew, as these two kids that grew up on the beach in New Jersey –
Malibu, California was like, we got to like- That's the Mecca for surfing.
If we're going to have this flagship store we've always talked about, it's got to be at this amazing shopping center called the Malibu Country Mart.
And that was, I think we signed a five-year lease to start.
That was the first time where we now had a real lease.
We were going to put some real money into the store.
And there's so much anticipation when you open up that first real store.
Is it going to work? oh my God, like this is one of our big moves we've ever made.
And I'll never forget when we went out there for opening weekend.
We had a little party that Saturday and the location was just amazing.
It's like right where all the traffic is and the music was great in the store.
It just was amazing energy and people walked in and it was busy and we sold clothes and it was like this is gonna work.
And it did.
All right.
So I want to fast forward a little bit to COVID, because COVID, I mean, it was a scary time.
But for a lot of retail brands, and especially e-commerce-focused brands, it turned out to be an incredible time, you know opportunity, because people are stuck in front of their computers.
Now, some apparel brands was a disaster, right?
Especially if you're if you're selling stuff for the office, but for more casual brands and things like that, it was actually a great year.
Tell me what happened to you guys during that COVID year.
So we had a couple really great things that were going into that year of 2020.
Our Nordstrom business was finally starting to work.
So stores were, you know, between wholesale and stores, it was about 70% of our business.
And only about 30% of our business is e-commerce.
So when it first shut down, 70% of our business is basically dead.
And it was really tough.
And you know we had to do furloughs for a bunch of the team and we had to figure out how to survive.
And then at some point in May, you know we're like all right, e-commerce is better than we thought.
We had comfortable product.
It was great for stay at home.
Like it's performing better.
Like let's start spending more on marketing.
Yeah.
And we started seeing our e-commerce business in May just started multiplying.
And then year over year, we started seeing like 100% growth year over year.
And what was the best thing that happened to us which we thought was the worst thing was we had all this inventory that we bought for our wholesale and our retail channels that all of a sudden, we could actually hit the demand for our e-commerce business.
And if we would have sold that product at wholesale, we would have made a significantly less gross margin.
But we had the e-commerce business now at a much higher gross margin.
So all of a sudden the business starts making money.
You know, we became, you know, meaningfully profitable starting in the summer of 2020.
And the other thing that happened was what's going to happen with our stores.
You know, at that time we had 12 stores, six of the 12 were in kind of resort beach destinations.
Nantucket, Martha's Vineyard, Sag Harbor, which is in the Hamptons.
Exactly.
And they're closed.
So we're like, what's going to happen?
And then when things got lifted, you know somewhere, in some places in June, some places July 4th weekend, business was insane in these places.
So not in the cities, but in the resort town.
And I had a bunch of people who were smart, who were like, I think you only got 11 stores.
Why don't you close all your non-beach stores?
Close all your New York City stores, all your Boston stores, and just walk away.
And I had listened to your podcast.
I'd heard the episode on the guy who started Panera Bread.
Ron Shake.
Ron.
Great episode.
It's a great episode.
And I'll never forget he has this part where he talks about during the Great Recession, where he said you know, could be an amazing opportunity because in recessions, you know, real estate's cheaper, construction's cheaper, landlords want you.
And I was like, what do we do?
We got this 11-store retail fleet.
It's small.
It's not at scale.
Maybe this is an amazing time for us to really scale our retail business.
Wow.
Listen to Ron Shake's story.
He had Panera Bread.
And in 2009, during the financial crisis, he was like well, let's just expand because we can get good terms for leases.
We can get good locations.
People are shutting down.
Let's go in.
Let's go big.
That's what we should do.
I was like this is going to be the best time ever for an up and coming clothing brand to get an amazing retail fleet.
So we went.
So how did you?
Yeah, keep going.
Yeah, sorry.
So we went, I have this amazing real estate advisor who was working with me before COVID.
And we started going out to landlords and saying, you know, here's all the places we want to be.
And I made the decision with my real estate advisor like the one thing we need to make sure we do is get as much term you know, make the leases as long as possible.
Because this is going to be the cheapest we can ever get rent ever.
And that's what we did.
And we signed, over the course of 2020 and 21, 40 leases for stores that would open over the next three years.
Wow.
That's crazy.
How were you going to finance that?
Yeah.
A little bit of it's my mentality of, you know, you'll figure it out.
And at the time too, with COVID, which helped a lot, was you know, landlords were giving a lot of tenant allowance.
So it actually wasn't.
You know, the amount of capital we had to put in in a lot of these locations was relatively minimal.
Also, you know, clothing brands that have dressing rooms and really nice spaces were just walking out of stores, so you didn't have to come in and do a ton of construction.
These stores were sort of ready for move-in.
We just had to build the fixtures.
Wow, and we at the time uh, you know, we only had 11 stores.
But my mom, who had been working with us since the beginning she at this point was running our, our store design and construction part of the business.
She was an interior decorator, And so we had this warehouse in New Jersey where we actually had two people on staff who were building fixtures for us.
And we were able to build kind of our fixtures and all the interiors for good prices.
So all of a sudden, in this very short period of time, you go from 13 stores to 40 stores.
Yes.
So by the end of 2022, we had we had approximately 40 stores.
Wow.
And I think today you've got 70 retail stores.
Is that right?
We have 80, 81 retail stores today.
Okay.
So, again, like somebody might have said to you, like very wanting to give you good advice.
Hey, Mike, you know, Alex, this is not the way to go.
Like you're going to expand too quickly.
You're going to get over your skis and you're going to see that all of a sudden, you're saddled with all these costs overhead employees.
You did have to do some layoffs.
And this is normal in any business.
This is cyclical.
But you have – was that – do you think that was connected to this expansion?
Yeah.
Absolutely.
If I go back to you know, we got through COVID.
We saw this huge increase in business and I definitely became more more focused on revenue growth than profit margin.
And you know my, my survival mode went from how am I going to sell enough things to survive to?
You know how am I going to grow this business?
You know, even faster because we got this great momentum finally.
And, you know, I got to build an executive team.
I got to build an organization so it can really stand the test of time, because we've now gotten the business to this level of sales.
That is, you know, bigger.
And then all of a sudden, you know, in 2022, when the COVID, you know, wind in our backs kind of Slowed down.
You got a ton of people.
We had a ton of people.
And so in 2023, we really had to rejig and retweak and really figure out what we want out of this business.
So you had to let people go, obviously.
Yep.
And that's hard, especially hard as a, as a family business.
You've built close relationships with people.
So yeah, we had to 50 people, I think was our, was the layoff that we had to do.
Wow.
So that was at least 10%.
More than 10%.
Yeah.
It was really hard.
Yeah.
The hardest, hardest, definitely the hardest thing we ever had to do.
I think it's fair to say a tough time for retail and apparel in general, from everyone I'm hearing.
Big brands have been on the show.
It's a tough time.
Obviously, tariffs make it even more complex because a lot of these products are manufactured in Asia.
How are you guys navigating this economic moment?
I mean, I think probably you're doing much more direct-to-consumer sales now, given that you've got 80 stores and probably a lot less wholesale than you used to.
But on the other hand, you know I have to assume, like for everyone it's been, things have slowed down.
Yeah.
I mean, we've just been dealing with different versions of economic issues in some way shape or form.
So I think to Mike and I, like we pay attention to it, obviously, but shit's going to happen.
Bad things are happening.
Good things are happening.
So as long as we keep doing our thing, we'll be OK.
But we've had to create a profitability model that gives us that margin of safety.
Yeah.
And the other thing that's really done you mentioned the tariffs is and I'm thinking from a supply chain perspective it's been wild right to sort of watch.
Yeah.
Our supply chain now is so global because it has to be.
So I have an amazing partner on the supply chain.
And so we're like able to, at tariffs, like just be ready to move.
We own the fabric recipe, right?
We own the yarn materialization of it, the customization of our product.
So the makers become less important for us because we own like the true recipe of all the garments.
So we can have that flexibility, right?
You mentioned a few times that this was started as a family business and that you don't have the same pressures that the other e-commerce or DTC brands that started around the same time do, because you don't have – really have many outside investors.
But I have to imagine that at some point there is –
Some exit or something.
I mean, is there a world where you would want to be acquired by, you know, a WHP or one of these, these conglomerates?
There's not a world if we had it in our own control that we would sell the business.
So Mike and I want to do this until we can't work anymore.
I think we both made that decision.
We feel really confident about that decision.
We've already sold some of the business you know a minority of the business to some different investors.
So, you know, we'll have to figure out ways to, you know, be good partners to them.
But Mike and I, you know no different than Ralph Lauren still owns a meaningful stake in his business.
Like, I think there's people who've done this before us.
Yeah.
Create, you know, kept the integrity, kept running it until they were older.
You know, and whether the family joins the business or not, I don't think we're thinking about you, know that far.
But there's people who've been able to do it.
And so why can't we?
We didn't get too much into this, but I think it's worth just noting like your wife is part of this business.
And Alex, and then you, Alex and Mike, your mom is a big part of this business.
And I mean, there have to be moments where that dynamic does create.
So I'm not trying to like create conflict.
I'm just curious, like because I'm more interested in how these conflicts are resolved, not not like how the conflicts happen.
But how but there must be conflict at times that have to be resolved.
Certainly.
But I think I goes back to the beginning of our talk, which is like two twin brothers in race car beds.
You know, i'm getting emotional about it, like that type of feeling of like we have each other, so like, even though there's important people around us who matter, it still is like we have to always be here.
Um, because this is like still, you know, a couple 12 year olds dream Race car beds was real.
You guys really did have twin race car beds in your bedroom.
Yeah.
So how do you Alex, how do you guys, I mean, when you have conflicts, the four of you, because you're family, there's a family business.
That's a good question.
I think we, probably like a lot of families, we're not as good as communicating as we should be.
But that's, you know, that's a wrinkle that we added to an already hard thing to do, which is start a brand, you know, adding a family dynamic into all of it.
But at the same time you know when you're just getting started out and you don't have many people and you got, you know, four people that whole livelihood depends on making this thing successful.
You know, that goes a long way and each one of us brings something else to the business and it adds a lot of value.
Mike, when you think about the journey that you guys took and how long it took and I mean how much of that journey do you attribute and where you are now to hard work and the grind and how much you think had to do with luck where you are now?
It's the grind, guy.
It's the grind.
And as you talked about it, we've done it the hard way.
And fashion's like a hamster wheel.
It's like Groundhog Day.
I mean, in a way, it's like you live Groundhog Day every year because it's like, all right, we got fall coming up.
All right, then we got winter.
Then we got spring.
Then we got summer.
All right, let's do it again.
And you just sort of keep going and going.
And every season, something gets a little bit better.
And people are like, wow, I want more of that.
Alex, what do you think?
I mean, I attribute it for the most part to the grind.
I think it's an attitude that we have that no matter what happens, we're going to figure it out.
Yeah.
The power of positivity.
And so I think in a business like ours, that so many things can go wrong.
And you're starting up, if you're just positive every day and you're like we're going to figure this out, we're going to get on the other end of it, we're going to motivate our people to like this, good vibes, positive energy, we can figure this out.
We can do it goes a really really really, really long way.
That's Alex and Mike Faherty, founders of Faherty Brand Clothing.
By the way, remember their beach house on wheels, the mobile pop-up store that they drove across the country in the early days.
Well, they continue to take it to events and concerts over the years.
But sadly, this past summer, it was destroyed in a fire.
Nobody was hurt, thankfully.
And a replacement beach house on wheels is now in the works.
Hey, thanks so much for listening to the show this week.
Please make sure to click the follow button on your podcast app so you never miss a new episode of the show.
And if you're interested in insights, ideas and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter on Substack or at Guy Raz dot com.
This episode was produced by Casey Herman with music composed by Ramteen Arablui.
It was edited by Neva Grant with research help from Noor Gill.
Our engineers were Patrick Murray and Jimmy Keeley.
Our production staff also includes Alex Chung, Chris Massini, Sam Paulson, Carrie Thompson, Catherine Seifer, Ramel Wood, Andrea Bruce and Elaine Coates.
I'm Guy Raz, and you've been listening to How I Built This.
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