The Real Story Behind Shinola Detroit

Former President Bill Clinton showing off his Shinola Runwell watch while giving a thumbs up. Getty/Alex Wong

It's no surprise former President Bill Clinton has been fixture at the 2016 Democratic National Convention. And it seems Clinton doesn't leave home without his trusty Shinola Runwell 47mm watch, which retails for $600 and of which he owns at least three.

Clinton called the watch "elegant and informal," saying that the large numbers help his poor eyesight, according to a report by Crain's when he visited Shinola's factory in Detroit in 2014. He's reportedly purchased 13 in total, mostly for gifting.

President Obama is also a Shinola fan, and has praised the Detroit company, declaring it a symbol of an American manufacturing revival and jobs brought back to the US.

And it's true: Shinola makes a high-quality, handsome watch, and it's one of only a few companies that assemble watches in America.

The Detroit-based brand has cultivated a cachet among consumers who are looking for a nice watch but aren't willing or able to shell out the coin required for a high-end Swiss brand like Rolex.

Besides watches, the brand also builds bicycles and enlists other manufacturing companies to create journals, apparel, leather goods, pet accessories, and other accessories.

Shinola CMO Bridget Russo told NewCo that the company generated $100 million in revenue in 2015, up from $20 million in 2013 and $60 million in 2014.

But even as the brand has built a large following across the country, there's a little more to its story.

A Detroit-raised company

A Shinola store in Portland, Oregon. Facebook/Shinola

Launched in 2011 by Tom Kartsotis of Bedrock Brands (who also cofounded Fossil), the company purchased its name from an early 1900s shoe-polish brand called Shinola. The shoe-polish brand is where the 20th-century phrase "You don't know s--- from Shinola" came from, according to Adweek.

Though the company is not as old as its name and marketing might suggest, that's not necessarily a bad thing — plenty of companies revive old trademarks hoping to cash in on nostalgic cachet.

Shinola moved into a former General Motors design lab in Detroit to build its watches. It proudly stamps "Detroit" — the home to Shinola's headquarters and main factory — on all of its products, even a shoeshine that the company makes in Chicago, according to The Washington Post.

Kartsotis and the other early members of Shinola had no previous ties to Detroit before starting the company there, but the company says it is committed to the city, providing well-paying manufacturing jobs to its citizens and investing in its infrastructure. It sponsored the creation of a dog park in Midtown Detroit in 2014.

"Shinola is, and always has been, a job-creation vehicle, and our intention is to create jobs in this city we now call home," Shinola President Jacques Panis told Business Insider.

Shinola hired more than 300 people for its Detroit factory and headquarters, and it employs about 200 more worldwide. Shinola trumpets the fact that it is providing jobs to an economically depressed city in desperate need of them. This lends a philanthropic air to the company that customers and employees can buy into, similar to the Toms Shoes giveback and Warby Parker's "buy a pair, give a pair" program.

Detroit is also associated with quality American manufacturing in many people's minds, and customers respond strongly to it when it is used in marketing materials.

An unnamed employee told Crain's about a focus group Kartsotis had commissioned before choosing the brand's home base. The focus group was given a choice between a $5 Chinese-made pen, a $10 US-made pen, and a $15 Detroit-made men. People consistently chose the Detroit-made pen over the other options, which suggested that others might be more inclined to pay a premium for products stamped with the Detroit name.

Quartz watches

The Shinola Rambler watch. Facebook/Shinola

The watches made in Shinola's factory are assembled by hand using techniques from the company's Swiss partner brand Ronda, which sent representatives to Detroit in the early days to train the workers in the new workshop.

Some criticize Shinola for the fact that it emphasizes craftsmanship and engineering in its products while using quartz movements and charging a premium for it. Quartz movements are relatively cheap and easy to produce compared with mechanical watches, as they have far fewer moving parts and require less watchmaking expertise.

Shinola watches retail at $475 to $1,125, while quartz watches made by Skagen and Fossil hover close to $100. Some of the higher costs of manufacturing in the US are most likely baked into that premium, along with the high-quality materials Shinola uses, but "compared to some of the other products out there, they're definitely charging a premium," Ariel Adams, founder of the blog aBlogtoWatch, told the Detroit Free Press.

A Shinola representative told Business Insider the company must make its watches with the less-complicated quartz movements to be able to produce watches at scale and be the job-creation vehicle the company hopes to be. Shinola does, however, hope to one day create a mechanical watch.

Some have also questioned Shinola's stated commitment to Detroit, as the product's prices are out of the range of many people who live there.

"The thought of a company selling such luxuriously priced goods in a city that, according to the 2010 Census, has a per capita income of $14,000 is downright laughable," Jon Moy at Complex writes.

Indeed, the company's first retail store outside Detroit was built in the trendy, wealthy New York City neighborhood of Tribeca in Manhattan, inside a townhouse Shinola purchased for $14.5 million, according to The New York Times. Shinola has since opened stores in luxury destinations including London, Miami, and Los Angeles, and the watches are stocked in almost 1,000 stores worldwide, according to the company's website.

'Made' versus 'Built'

A watchmaker assembling a watch in Shinola's Detroit factory. Reuters/Rebecca Cook

Shinola's tagline is "Built in Detroit." The company assembles all of its watches and bicycles in the 30,000-square-foot Detroit factory, but it seems that's not quite enough for the Federal Trade Comission.

A letter the FTC sent to Shinola's parent company, Bedrock Manufacturing, on June 16 detailed a prior FTC review of Shinola that "raised concerns that certain marketing materials overstated the extent to which certain Shinola ... products ... are 'made' or 'built' in the United States."

The company is being forced to clarify its "Built in Detroit" slogan on all of its products and advertising copy, as the FTC says it could mislead customers to instead think they are purchasing a product made in the US.

In order for a product to be claimed to be "made in the US," it must be assembled in the US from "all or virtually all" American parts. Shinola's slogan attempted to avoid this FTC requirement, and the company is not secretive about using foreign parts for the products assembled in the Motor City while listing all part sources on its website.

The FTC saw a potentially misleading difference between a "made in the US" claim, which the FTC polices, and Shinola's "Built in Detroit." The company is now implementing a remedial action plan.

In a statement, Shinola's founder, Tom Kartsotis, said:

We have always believed that “Built in Detroit” most accurately describes the watches (and jobs) that are being created in Detroit and will continue to mark our watches as "Built in Detroit." While the FTC did show us some flaws in our communication, we believe that we have genuinely tried to be completely transparent as to the origin (and mission) of our products from the outset. We are thankful to the FTC for helping us identify some areas of improvement within some of our communication, which we began adopting over the last year.

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