Detroit (or \u2018the D\u2019) was once known almost exclusively for the manufacture of automobiles. Then the auto industry, and the D as a whole, fell on hard times. Now new companies are stepping in to take advantage of an excess of both available labor and real estate capacity [3]. One such company is Shinola, and they\u2019ve been quite successful so far.<\/p>\n
Business Model<\/u><\/p>\n
Shinola\u2019s primary value proposition is that they manufacture high-quality products that are built in America (the D, to be precise). The products themselves are an eclectic array including watches, bikes, shoe shine (a tribute to their name*), and a variety of leather goods. The watches are the feature product; they are assembled in Detroit by workers whose training was facilitated by a Swiss-based component manufacturer. The watches are made from all Swiss movement components [3], and each watch reads \u201cBuilt in Detroit\u201d [1]. The result is an American-made, Swiss-quality watch that Shinola considers to be an incredible value, and they hope their customers will too [3].<\/p>\n
Shinola believes that their customers value products made in America, but also that they value the work Shinola is doing to rebuild Detroit [3], a social mission side to the business. Before choosing the D as the manufacturing location, Shinola\u2019s founder reportedly \u201ccommissioned a study of pens in which subjects were asked if they prefer pens made in China, the USA or Detroit at price points of $5, $10 and $15 respectively.\u201d [4] The result was that people picked the Chinese pen over the USA pen due to the cheaper price, but were willing to pay the higher price point when it came to the Detroit pen. This is the customer sentiment that Shinola aims to capitalize on.<\/p>\n
Operating Model<\/u><\/p>\n
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Location, location, location\u2026<\/em><\/p>\n As you are now well aware, Shinola assembles products in Detroit. In addition to playing a huge role in terms of their value proposition, this also means:<\/p>\n \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 It\u2019s all about the training\u2026<\/em><\/p>\n Shinola spared no expense on the training of their watch assemblers (see below for a video clip), in part to support the high quality value proposition. Another advantage: their up-front investment in training has created a competitive advantage for them in the form of highly skilled workers. Their highly-skilled work force is a barrier to entry that other companies will face should they seek to compete at manufacturing watches of similar quality in the USA.<\/p>\n https:\/\/vimeo.com\/54969003<\/a><\/p>\n \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The value of partnerships\u2026<\/em><\/p>\n From the beginning Shinola has made a point of developing valuable partnerships. Ronda, LTD of Switzerland is the watch movement manufacturer that Shinola partnered with to train their employees. Shinola also partners with the College of Creative Studies in Detroit, in whose building the Shinola watch factory is housed. Shinola leads student design workshops, and in return has access to a wealth of up-and-coming design talent. [5]<\/p>\n Shinola has also pursued partnerships with other select watch brands. The intent is that when their production volumes are below factory capacity, they can use that excess capacity to assemble watches for their partner brands. This arrangement means Shinola can keep fixed costs per unit as low as possible even when their own watch volumes are below factory capacity. They also left themselves room to grow; the factory capacity started off at 500,000 pieces, with room for expansion to up to 1.2 million pieces. [3]<\/p>\n What\u2019s next?<\/u><\/p>\n Shinola\u2019s business is not without its critics, some of whom suggest that they are simply telling a really good brand story that takes advantage of \u201cdo-gooder impulses,\u201d while not really manufacturing much but rather just assembling foreign components [6]. On the flip side, others suggest that Shinola is doing it right: slowly building up the right capabilities, in the right way, to move toward manufacture their own components in the future [7]. Time will tell if Shinola will indeed bring more of its component manufacturing to the US, and if the power of \u201cBuilt in Detroit\u201d will continue to prosper, but for now they\u2019re doing just fine.<\/p>\n <\/p>\n *if you\u2019re interested more on that here: http:\/\/fortune.com\/2013\/07\/09\/think-you-know-shinola-think-again\/<\/a>, see 4th<\/sup> paragraph<\/p>\n Sources:<\/p>\n [1] http:\/\/www.shinola.com\/<\/a><\/p>\n [2] https:\/\/www.washingtonpost.com\/lifestyle\/style\/the-luxury-goods-company-shinola-is-capitalizing-on-detroit\/2014\/11\/17\/638f88a4-6a8f-11e4-b053-65cea7903f2e_story.html<\/a><\/p>\n [3] http:\/\/www.forbes.com\/sites\/arieladams\/2013\/05\/16\/the-story-behind-built-in-detroit-shinola-watches\/<\/a><\/p>\n [4] http:\/\/www.crainsdetroit.com\/article\/20120527\/FREE\/305279963\/fossil-founder-digs-the-d<\/a><\/p>\n [5] http:\/\/www.shinola.com\/our-partners<\/a><\/p>\n [6] http:\/\/www.nytimes.com\/2013\/08\/22\/fashion\/the-next-branding-of-detroit.html?_r=0<\/a><\/p>\n [7] http:\/\/www.ablogtowatch.com\/made-in-detroit-a-visit-to-shinola-watches\/2\/<\/a><\/p>\n Featured Image Credit:\u00a0http:\/\/www.shinola.com\/\u00a0<\/a><\/p>\n\n