Masters of Reinvention
Paul Fredrick Sacher is one of the five premier catalog merchants of menswear — primarily dress shirts, neckties and cufflinks. If he had 100,000 customers like Franklin Watts, he would be in hog heaven.
Frank Watts was a hard drinking, wildly irreverent and funny traveling book salesman who founded a children’s publishing company in 1945 that bears his name today. The son of a Baptist minister, Watts once said that from his earliest boyhood he was made to wear a shirt and tie every day to be presentable in case a parishioner came to the rectory. All of his life, the only time Watts wore anything other than a shirt and tie was in bed or at the beach.
Watts would’ve gone nuts in the era of dress-down Fridays, not to mention the dot-com culture of jeans and T-shirts. It drove Paul Fredrick Sacher a little nuts, too, but more about that later.
Watts once said: “You can’t pay too much for a suit or too little for a shirt.” He is not only long dead but also dead wrong. As a long-time customer of Paul Fredrick MenStyle, I know the pleasure of opening a shipment and slipping into a truly fine shirt, knotting just the right tie and leaving home feeling like a million bucks.
Like many catalogers, Paul Sacher’s journey to the forefront of fine men’s fashions was circuitous, torturous and serendipitous. Baltimore-born Sacher earned a degree in chemical engineering from Carnegie-Mellon University in Pittsburgh. Afterwards, he took an engineering job with a company in the oil recovery business in New Orleans.
The New Orleans weather and social life normally would be ideal for a rambunctious 22-year-old. But he had a problem with that first job — and his subsequent promotion to plant manager the following year. It was a 24/7 commitment, and he despised it. Figuring his career would be enhanced with an MBA in finance and marketing, Sacher left his job and went to Tulane’s Freeman School of Business where he met his future wife, Cathy.
They moved to Dallas where his fiancée became a loan officer at Republic Bank, and he joined a class of 15 young whiz kids in Texas Instruments’ executive training program, moving among divisions. Although he learned a great deal about business, it soon became apparent to the young couple that neither of them liked working for big corporations.
Reinvention #1: From Engineer to Shirtmaker
Sacher’s grandfather-in-law — still going strong today at 104 — came to America from Poland in the early 20th century and found a job in New York as a shirt cutter. Along came the chance to partner with the owner of a shirt factory in Fleetwood, PA (original home of Cadillac Fleetwood automobiles).
He and his son, Lenny Abrams, eventually took over full ownership of the plant. In time, Abrams also established shirt factories in New Jersey and New Orleans. These factories were in an upmarket sewing business known as CMT, short for Cut, Make and Trim. Top designers such as Kenneth Gordon supplied the very best fabrics, and Abrams’ factories created the shirts that sold in such posh emporia as Neiman Marcus and Barneys New York.
Neither of Abrams’ two daughters was interested in going into business with their father. So Abrams invited his daughter and son-in-law to move to Pennsylvania, where he taught Paul Sacher everything about the business of shirt-making and how to run an apparel factory. And since then, Abrams has been at Sacher’s side as mentor and navigator.
The First Upheaval
From his MBA studies, Sacher knew a business with a hundred customers was a better risk than a business with 10 customers, so he immediately started searching for new markets for shirts. His first venture was manufactured shirts for women equestrians, with retail distribution through tack shops. His wife, a premier equestrian and competitive rider, was his inspiration and partner for this niche business.
In the mid-1980s, the overall business of shirt manufacturing in the United States started moving to Latin America where the quality was excellent, turnaround fast and labor costs a fraction of what they were in this country. Clearly the business model of making shirts in U.S. factories and selling them through middlemen (designers) was changing. Sacher convinced some department store buyers that they did not need big-name designer brands on basic dress shirts (e.g., straight and button-down collars in solid white and blue pinpoint oxford fabrics). Sacher began working directly with the stores’ merchandise managers creating simple, store-branded shirts, leaving the fancier striped and checked shirts to the designers.
But Sacher’s luck didn’t hold. He lost considerable business to Latin American factories. On top of that, the department store world was in turmoil. Many went bankrupt, and suppliers were stiffed. Fortunately, Sacher and his father-in-law had the foresight to invest in receivables insurance. But it became clear that they had to do something similar with dress shirts, but with a lower risk factor.
Reinvention #2: From CMT to Cataloger
Sacher decided that instead of dealing with stores and selling shirts at a discount, he would do far better selling factory-direct to the end consumers at full price.
“It was like investing in the stock market,” Sacher says. “A portfolio with 100 stocks is safer than one with four stocks.”
So following in the tradition of Lillian Vernon, Richard Thalheimer of The Sharper Image, Mel and Patricia Ziegler of Banana Republic, and John Peterman of The J. Peterman Co., Sacher began with a series of weekly space ads. His were in The Wall Street Journal, and he offered “the Finest Dress Shirts Made in America.” Sacher named his company Paul Fredrick Shirt Co., encompassing his first and middle names. The ad offer stated:
For 35 years, we have been making fine dress shirts for menswear stores. With their own label and retail markup, our shirts sell for OVER $50.
With a traditional fit and meticulous single-needle tailoring, our exclusive dress shirt features a seven button front, handmade button-through sleeve plackets, double reinforced side seams, and an extra long shirttail. Using 20 stitches per inch, our shirts have long been the epitome of fine tailoring.
Factory direct to you. No expensive menswear store markup. An Exceptional Value at $29. Two Shirts for $55. And if your selection does not meet your expectation, you may return it to us in good condition, and we will refund your original costs.
Because he couldn’t afford photography, Sacher used drawings just as the Zieglers did with their first shirt ad and John Peterman with his signature cowboy duster. The customer could order by phone or mail. All phone orders went to a local answering service because, as Sacher said, “At the time, the entire Paul Fredrick company was just me.”
Orders were forwarded from the answering service to a primitive ticker tape machine on the third floor of the factory, and Sacher got plenty of exercise running upstairs throughout the day to see if orders came in. Orders were shipped within 48 hours, and he included a simple 81⁄2-by-11-inch, two-fold self-mailer — dark blue printing on light blue background with a drawing of a shirt and tie — as his catalog/reorder insert. And he used this flier to mail his housefile.
“It was like a hobby in those days,” Sacher says. “This year, Paul Fredrick MenStyle does more [business] in a day than we did our whole first year.”
Those first customers ordered an average of one or two shirts as a trial, so Sacher lost money starting out. His competition was Huntington Clothiers, and Sacher advertised in the same media as Huntington, such as Signature, the magazine for Diners Club/Carte Blanche members. Sacher intuitively realized he should put his offer in those publications that have off-the-page advertising and where his competitors were cashing in. In addition, Paul Fredrick ran small lead-generation ads in The Wall Street Journal catalog sections, and fulfilled by sending one of the little catalog-fliers.
With careful nurturing and constant updating of the database, the little business grew. The company bought a building down the street from the shirt factory, to be used for fabric storage, office space, product warehousing and inbound call center operations. All the while, his father-in-law, Lenny Abrams, funded the expansion and contributed his expertise and experience.
Realizing he couldn’t do it all, Sacher looked around for help. In 1990, it arrived in the form of Ross Alaimo, manager of Abrams’ factory in New Jersey. Alaimo had come to this country from Sicily at the age of 17, and along the way, he became an accountant. He took over the day-to-day call center and pick-pack-ship operations, and became the financial controller. Today he remains as vice president of operations at Paul Fredrick.
The First Catalog
In 1990 Sacher created the first Paul Fredrick color catalog. He raided his father-in-law’s closet for neckties to be photographed on the shirts. The book was sent to his customer base, and he quickly discovered that his customers wanted neckties and cuff links along with the dress shirts.
Using Abrams’ contacts, Sacher bought finished ties with a Paul Fredrick label sewn on them. Within a year, the tie business was so successful he started making his own Italian silk neckties. His ties cost half the price of the finished ties he had been buying.
About this time, he went to Providence, RI, and contracted for cuff links to be packaged in Paul Fredrick boxes and shipped to Fleetwood. Ties and cuff links were a deliciously high-margin business.
The Japan Connection
In the early 1990s, Sacher went to Japan on a U.S. government trade mission for catalogers, and he became fascinated with Asia. He recognized that the convergence of two forces made doing business in Japan possible.
First, the dollar was very strong against the yen. “But more importantly, Japanese retailers use trading companies,” Sacher explains. “That means an extra middleman, which pretty nearly doubles the price.
“On top of that,” he continues, “credit card fees in Japan average 7 percent, versus a fraction of that here. I saw that if I took my catalog and translated it into Japanese, set up a call center in Tokyo and started taking orders, I could economically send individual orders to Japanese customers from this U.S. location.”
Sacher met an English-speaking call center operator who was taking orders for body building machines, and they struck a deal to set up a Paul Fredrick inbound call center operation and customer care center. Prices were in dollars and billed via U.S. credit card companies where the transaction fees were low. Because America’s trade deficit with Japan was horrendous and the U.S. government was promoting exports to Japan, Sacher was able to negotiate a very good postage rate with the U.S. Postal Service. Orders were shipped from Fleetwood each day, trucked directly to JFK Airport and were in Japanese customers’ hands within 10 days after placing their orders. Best of all, the average Japanese order was twice the size of Paul Fredrick’s American customer base.
By the mid-1990s, Japan represented 30 percent of Sacher’s business. He also began doing business with Mexico (but not on so grand a scale as in Japan). Other foreign business was marginal. The United Kingdom had high duty and shipping rates, and Germany had so many bureaucratic rules that Sacher didn’t want to touch it. Italians simply did not buy by mail.
Nevertheless, by the mid-1990s, Paul Fredrick was beginning to rock and roll. He never imagined that the dollar would tank against the yen or that the Japanese stock market bubble would burst. But both events seriously depressed that side of the merchant’s business.
While catalogs are no longer printed in Japanese, Paul Fredrick still has a loyal cadre of about 7,500 24-month buyers from the region, representing about 4 percent of total revenues.
Reinvention #3: Outsourcing Overseas
The years 1999 to 2000 were pivotal for Paul Fredrick MenStyle. In a very painful decision, Abrams and Sacher made the most drastic of decisions — to close their remaining U.S. shirt factory and outsource all dress shirt manufacturing to overseas plants.
They were guilt-ridden, having to lay off 100 people. The Paul Fredrick MenStyle shirt business had been built on promoting “Made in the USA.” Sacher says, “I believed in that stuff — remember the jingle ‘Look for the Union Label?’” Yet he could get equivalent quality shirts at half the price from Asia. So he contracted with two factories in Hong Kong where they knew management treated the workers well, paid them better than average wages and took excellent care of the workers’ families.
Reinvention #4: From Dress-up to Dress-down
“After we cut back in Japan, another domino fell — the casual revolution,” Sacher notes. “We were a three-product business: shirts, ties and cuff links, with no casual wear, no sportswear, no tailored clothing. Our niche was dress business wear for men. Dress-down companies suddenly were in vogue, and kids out of college were going to interviews in jeans and T-shirts, and wearing khakis to weddings and bar mitzvahs. Unfortunately, for a long time, I was in denial regarding this trend.”
The company did eventually begin marketing casual clothes, but that’s getting ahead of the story.
Reinvention #5: The Internet
The dot-com revolution hit Paul Fredrick MenStyle with a double-whammy. Not only were these youngsters turning traditional business dress on its ear, but they were threatening to turn the entire retail distribution and marketing systems into a cocked hat.
“Many people — including some in my own organization — honestly believed no one would ever again shop in stores,” Sacher says. “And I was being pressured to scrap my catalog and concentrate on the Internet. Venture capitalists were showering start-up companies with names like guy.com and male.com with tens of millions [of dollars], while I had to beg the bank for a few million, even though I had been in business for 15 years and making a profit.” Sacher adds, “Thankfully I didn’t take on any venture capital deals that required unrealistically rapid growth.”
However, some serious decisions had to be made. Because of the casual dress revolution, Paul Fredrick’s revenues started slipping. The company had to do something. Caught up in the day-to-day operations of every facet of the business, Sacher had no time for strategic planning to deal with these tectonic changes in the marketplace. He offered the position of senior vice president of marketing to a good friend and neighbor in Allentown, PA — Allen Abbott, who had left Day-Timers and spent two years as a consultant.
The Abbotts and Sachers met when their children were classmates in the same pre-school. Both wives were serious equestrians, further tightening the bond, and Abbott had a great deal of direct marketing experience.
“I thought long and hard about the offer,” Abbott recalls. “Conventional wisdom says you don’t work for a good friend or a small, closely held private company. But I signed on anyway, and it has been a great four years.”
Two huge issues had to be resolved. First, should Paul Fredrick MenStyle start a casual line? Second, should it have a serious Internet presence? After a series of long meetings, the answer to both questions was “yes.”
At the time, the company had a somewhat primitive Web site, but as Abbott says, “It’s difficult to survive today without a sophisticated presence on the Web.” After months of angst and an expenditure of $1 million, the Paul Fredrick Web site is now world class and accounts for about one-third of the company’s sales.
While the core business is comprised of dress shirts, ties and cuff links, the company now offers a full line of casual shirts, trousers, sports coats, suits and shoes. Also, at the end of last year, the company launched a business whereby a customer can “build a shirt” much like Detroit lets consumers “build a car.”
Paul Fredrick’s 85 employees work in their headquarters building some 50 miles from Philadelphia in a small town surrounded by bucolic fields and farms. Here inventory is stored in plastic wrappings, picked, packed and shipped. A 24-station inbound contact center takes orders. When inbound spikes occur, every telephone and computer screen in the place can double as a contact center station, and every employee is trained to talk to customers and prospects. After-hours calls are forwarded to a Louisiana call center for 24/7 service.
Merchandising and Prospecting
Several times a year, Vice President of Merchandising Larry Schechterman, a veteran of Macy’s, Bloomingdale’s and The Limited, travels to Europe to buy fabric for shirts and silk for neckties that will not show up in the catalog until almost a year later. The company creates four completely new menswear collections each year, and mails 11 million catalogs annually to customers and prospects.
So how does Paul Fredrick MenStyle prospect? Very carefully. Only three other top quality men’s catalogs have housefiles of more than 25,000, so the usual sources of new names can quickly become a dead end. Paul Fredrick uses Abacus and other co-operative databases, but they still don’t yield a sufficient number of new names, he says.
For the past few years, Sacher and Abbott have gone back to their prospecting roots and have been running an aggressive off-the-page advertising campaign in Atlantic Monthly, Men’s Journal, Esquire, in-flight magazines and financial publications. The offer: white, 100 percent cotton dress shirts in five collar styles; regularly priced at $36.95 but introductory priced at $19.95. Shipping charges extra. Limit four shirts per customer.
What happens to unsold inventory? Six or eight times a year, the merchant sends several thousand postcards to friends and neighbors announcing a warehouse sale, as well as sending seasonal sale catalogs from which customers can save on discontinued merchandise.
Paul Fredrick Sacher has an advantage over some of his brethren in the catalog business in that the company is privately held and runs lean and mean with exquisite efficiency. With no antsy stockholders or impatient venture capitalists pounding on him to double the business in three years, decisions can be made based on long-term profitability rather than the stock market price du jour.
He also is blessed with an immensely knowledgeable father-in-law, wonderfully talented and dedicated associates, and the ability to delegate tasks so that he can take the long-term view. More to the point, he can see changes in the marketplace, and, when necessary, turn the business 10 degrees or 90 degrees to satisfy the needs of his customers and prospects.
The Paul Fredrick MenStyle List
12-month buyers: 83,171
Contact: Millard Group, Magda Baranowski, (603) 924-9262, ext. 2106
About Paul Fredrick MenStyle
Headquarters: Fleetwood, PA
Customer demographics: married men, college graduates, homeowners; average age: 48; average income: $160,000
Average order value: $140
Rank on the Catalog Success Top 200 list in 2004: 162 (as measured by recent housefile-growth rate). This was up from No. 175 on the 2003 Top 200 list.
Annual catalog circulation: 11 million
Paul Fredrick Sacher of Paul Fredrick MenStyle offers the following tips for cataloging success:
• Advertise in the same media as your competitors. Many fledgling entrepreneurs believe the best place to advertise is where the competition isn’t. When he first started out, Sacher put his offer in publications that have off-the-page advertising and where his competitors were cashing in. Such a practice has paid off handsomely for his catalog.
• Be careful with whom you partner. Says Sacher: “Thankfully I didn’t take on any venture capital deals that required unrealistically rapid growth.”
• Expand your scope. Originally, Paul Fredrick MenStyle sold just three products: shirts, ties and cuff links. But changing lifestyles and work dress codes forced the company to expand its product scope. The company now offers a full line of casual shirts, trousers, sports coats, suits and shoes. Also, it recently launched a custom shirt business.
• Invest in e-commerce. Allen Abbott, vice president of marketing, says, “It’s difficult to survive today without a sophisticated presence on the Web.”
• When in doubt, do the obvious. When asked who designed the highly professional and complete catalog order form, Sacher said that he did. “I studied what everybody else was doing and did what they did,” he notes.