How can a rapidly-growing company maintain customer satisfaction and build loyal customer fans? Tony Drockton, founder of Hammitt, tells CXOTalk how his handbags-focused luxury accessories brand defines the customer differently and keeps adding fans through price integrity, brand integrity and product integrity.

“There’s a lot of conflict” in the fashion industry, Drockton explains. “Everybody thought they were fighting over the same one customer. I took a different approach, and I embraced retail partners, both in wholesale, online, offline, always with the vision that the customer is the most important person, and developed a business philosophy, which was all about that customer… The ideal goal for me is, wherever a new fan, an existing fan, or a fan that maybe purchased their Hammitt three years ago encounters us again, they have a similar experience. Advocacy, passion, almost, ‘Wow! I just love that bag. I love Hammitt.’ It’s a goal.”

As chief cheerleader at Hammitt, Drockton is the driving force and creative genius behind the Los Angeles-based luxury brand, which has grown 40% a year over the last four years and 300% via online direct-to-consumer sales. As a lifelong entrepreneur, Drockton led startups in the construction and finance industries, before moving on to high fashion with a goal of a successful American brand built on the European model where design and craftsmanship lead, and products are made to order and crafted for a lifetime.

Transcript

Michael Krigsman: We are live at NetSuite SuiteWorld 2018, in Las Vegas. I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk. I'm speaking with Tony Drockton, who is the founder of Hammitt. Hey, Tony. How are you?

Tony Drockton: How are you doing, Michael?

Michael Krigsman: Good. Tony, tell us about Hammitt. [Laughter]

Tony Drockton: [Laughter] We're a southern California based designer handbag line, rapidly growing, and we just celebrated our ten-year anniversary.

Michael Krigsman: Congratulations. Handbags, and you've been growing rapidly. How fast have you been growing?

Tony Drockton: The last four years, about 40% a year. We just broke 800 points of distribution in the U.S. Primarily, we sell through our retail partners in the wholesale channel. Our online, direct to consumer, has grown about 300% year-over-year.

Michael Krigsman: Wow. [Laughter]

Tony Drockton: [Laughter]

Michael Krigsman: It's an extraordinary growth rate. I think the obvious question is, how do you manage a business that's growing that rapidly?

Tony Drockton: Because it's been ten years, and the rapid growth has come on the tail end, I think the key was a strong base. Luckily, "The Great Recession" held me back for five years. I was able to really block and tackle and get ready for this spurt over the last four years.

I think it starts with great people. Obviously, we've got some processes in place. Then the product; it has to deliver.

Michael Krigsman: A big part of your success is the relationship that you have with your customers and your community. Tell us about that.

Tony Drockton: In the fashion industry ten years ago, when I got into it, it took me a couple of years to get my feet wet because I'm not a veteran. I figured out that there's a lot of conflict. Everybody thought they were fighting over the same one customer.

I took a different approach, and I embraced retail partners, both in wholesale, online, offline, always with the vision that the customer is the most important person, and developed a business philosophy, which was all about that customer. We like to say at Hammitt we have what is called price integrity, brand integrity, and product integrity. What you see is what you get.

My goal is, if two Hammitt fans are on a plane sitting next to each other and they compare notes, they share the same story. If I get to that point one day, to me it's almost the holy grail.

Michael Krigsman: We hear a lot of companies talk about placing the customer in the center, but it's really hard to do that. In a practical way, what are the steps or the issues that you address in order to make that happen?

Tony Drockton: Well, I think the customer is a little bit of a wider term at Hammitt. To me, it's the artisans that make the bags. They're my customer. First, I have to make sure they believe in the vision.

It's the team members in the company. They're also my customer. I get them behind that ultimate goal of who we are.

Then, with a great product and a great team, finding people out there that can sell, that can carry our brand, and that can really deliver on that vision every day — that's the third hardest step. When you get all three of those, the rest takes care of itself.

The ideal goal for me is, wherever a new fan, an existing fan, or a fan that maybe purchased their Hammitt three years ago encounters us again, they have a similar experience. Advocacy, passion, almost, "Wow! I just love that bag. I love Hammitt." It's a goal.

Michael Krigsman: You talk about fans, not customers.

Tony Drockton: [Laughter] Yeah, I do. I do, and way before social [media]. Fans, advocates, you can call them what you want, but clients, I guess, would be the term. To me, it's a one-on-one relationship that you cannot create. You have to embrace it. You have to be authentic. You have to be transparent.

Words are easy; actions are a lot more difficult. Follow through, to me, is the real key

Michael Krigsman: We are live at NetSuite SuiteWorld 2018, in Las Vegas. I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk. I'm speaking with Tony Drockton, who is the founder of Hammitt. Hey, Tony. How are you?

Tony Drockton: How are you doing, Michael?

Michael Krigsman: Good. Tony, tell us about Hammitt. [Laughter]

Tony Drockton: [Laughter] We're a southern California based designer handbag line, rapidly growing, and we just celebrated our ten-year anniversary.

Michael Krigsman: Congratulations. Handbags, and you've been growing rapidly. How fast have you been growing?

Tony Drockton: The last four years, about 40% a year. We just broke 800 points of distribution in the U.S. Primarily, we sell through our retail partners in the wholesale channel. Our online, direct to consumer, has grown about 300% year-over-year.

Michael Krigsman: Wow. [Laughter]

Tony Drockton: [Laughter]

Michael Krigsman: It's an extraordinary growth rate. I think the obvious question is, how do you manage a business that's growing that rapidly?

Tony Drockton: Because it's been ten years, and the rapid growth has come on the tail end, I think the key was a strong base. Luckily, "The Great Recession" held me back for five years. I was able to really block and tackle and get ready for this spurt over the last four years.

I think it starts with great people. Obviously, we've got some processes in place. Then the product; it has to deliver.

Michael Krigsman: A big part of your success is the relationship that you have with your customers and your community. Tell us about that.

Tony Drockton: In the fashion industry ten years ago, when I got into it, it took me a couple of years to get my feet wet because I'm not a veteran. I figured out that there's a lot of conflict. Everybody thought they were fighting over the same one customer.

I took a different approach, and I embraced retail partners, both in wholesale, online, offline, always with the vision that the customer is the most important person, and developed a business philosophy, which was all about that customer. We like to say at Hammitt we have what is called price integrity, brand integrity, and product integrity. What you see is what you get.

My goal is, if two Hammitt fans are on a plane sitting next to each other and they compare notes, they share the same story. If I get to that point one day, to me it's almost the holy grail.

Michael Krigsman: We hear a lot of companies talk about placing the customer in the center, but it's really hard to do that. In a practical way, what are the steps or the issues that you address in order to make that happen?

Tony Drockton: Well, I think the customer is a little bit of a wider term at Hammitt. To me, it's the artisans that make the bags. They're my customer. First, I have to make sure they believe in the vision.

It's the team members in the company. They're also my customer. I get them behind that ultimate goal of who we are.

Then, with a great product and a great team, finding people out there that can sell, that can carry our brand, and that can really deliver on that vision every day — that's the third hardest step. When you get all three of those, the rest takes care of itself.

The ideal goal for me is, wherever a new fan, an existing fan, or a fan that maybe purchased their Hammitt three years ago encounters us again, they have a similar experience. Advocacy, passion, almost, "Wow! I just love that bag. I love Hammitt." It's a goal.

Michael Krigsman: You talk about fans, not customers.

Tony Drockton: [Laughter] Yeah, I do. I do, and way before social [media]. Fans, advocates, you can call them what you want, but clients, I guess, would be the term. To me, it's a one-on-one relationship that you cannot create. You have to embrace it. You have to be authentic. You have to be transparent.

Words are easy; actions are a lot more difficult. Follow through, to me, is the real key ingredient, even in the worst of times, especially when the customer or client has a problem or an issue. That's when you have to deliver on everything.

Michael Krigsman: When you say follow-up, elaborate on that.

Tony Drockton: Well, I think, between advertising and marketing, most companies, I see, do a really good job of getting to the point of purchase. Maybe when they throw the handbag into that digital shopping cart or they touch it at the store for the first time and maybe even purchase it, to me, at that point, that's when the advocacy has to start. That's when the relationship begins.

The minute they put the bag on their arm and they walk out of the store or they open the box at their house, that's where the work really begins because, then, what is it you're all about? Are you delivering on those promises? If they compare notes with someone else about how much they paid, about the promises that were made, if they wear it for a long time and then the quality is not there, then the relationship ends. But, if they wear it for a long time and it delivers on quality, if they walk up to someone on the street and compare where they got it and how much they paid, and if they look at the two products that have the same name on them and they have the identical quality, you've created two customers for life.

Michael Krigsman: The brand equity, how does that connect to this fan relationship that you've just been describing?

Tony Drockton: Well, I mean I think I'd like to say we have a lot of brand equity. We're a fast-growing brand, but we're up against some much better-known brands. I think brand equity can only be earned. It can't be purchased. I've always believed that. You earn that with the efforts that you do every day with, again, those customers, the team members, the artisans, everyone. As it builds, and builds, and builds, it just kind of takes care of itself until you reach that Malcolm Gladwell tipping point, and then, all of a sudden, you're an overnight success that took 10, 20, 30 years.

Michael Krigsman: How do you compete against these larger companies?

Tony Drockton: When I think of the word "competition," again it goes to that limited pie. Instead, I really think about it more of embracing or trying to become part of that conversation. If you're really looking at somebody as a competitor, [it's] turning that relationship around and seeing what they are doing right.

We've embraced the European model of the designer world, the luxury world, which, again, it's price integrity, brand integrity, product integrity. It's designing craftsmanship first, brand second, taking care of that customer, as I said, well after the first time they encounter your brand. We've embraced that model, and that takes years, centuries, probably beyond my lifetime to really become even a deep part of the conversation.

Right now, we sit next to some of those brands in a lot of our retail partners in the U.S. To me, that's the start. We're part of that conversation.

Michael Krigsman: You're focused on really substantive values as opposed to flash in the pants social media.

Tony Drockton: [Laughter] We really are. We really are. It took ten years to get where we're at when I launched ten years ago as an entrepreneur. I'm a quick start guy. I'm literally the quarterback with the two-minute warning. We're behind. Hurry up, offense. Three-plays. I'm go, go, go, go as an entrepreneur. Then, I had to slow down about five years in and realized this is going to take a lot longer than I thought.

Michael Krigsman: We've been talking about brand building, but that's different from managing a fast-growing company.

Tony Drockton: Yes.

Michael Krigsman: Tell us. How do you manage the systems, the processes, the tools?

Tony Drockton: We launched with NetSuite, which to me was a strong back-end. It's sort of like launching with a great, small management team that can do almost anything. Right? We launched with that from the technology perspective.

Then, in the beginning, we had a few key players that wore many hats, including myself. Every time we grew a little bit, we added a specialist or somebody that was either better than me or could take over their duties. We layered in some additional software either within the NetSuite category or things that could API or talk to it.

In managing now the rapid growth that's happened, those strong building blocks of people and technology, layered in with, I think, some great processes, for example, budgeting--knowing when to follow the budget, knowing when to break the budget because the opportunity is too big. That's the key to growth. You don't want to be so structured, have systems in place so strong that you miss opportunities to really explode. At the same time, you have to say no to a lot of opportunities either because your capital constrained, you're people constrained, or you're product constrained. Managing both sides of that is the key to consistent, fast growth.

Michael Krigsman: How do you maintain the quality as you grow?

Tony Drockton: We don't.

Michael Krigsman: [Laughter]

Tony Drockton: No, I'm joking. [Laughter]

Michael Krigsman: [Laughter] I'm sure you just sort of let it go to seed and whatever.

Tony Drockton: Quality? What's quality? [Laughter]

Michael Krigsman: Whatever happens, happens, right?

Tony Drockton: Hey, you know. [Laughter] We actually have a lifetime, no question warrantee - a shameless plug. We don't just say it. We mean it. We replace bags. We repair bags for any reason at any time. It's an old-school model, isn't it? Some great brands of the past did it.

To ensure quality, we pick great partners to make our bags. If you have to have an inspector on premise for your artisans that are making the products every step of the way, you need a new partner. We sifted through a few in the beginning. We found one great partner that really creates every bag by hand one at a time, not just for us, but for other global brands.

To be honest with you, it's just turn on and go. We're very lucky. We like to say when we design a Hammitt, we start with our own signature silhouettes. Then we wrap it in the softest Italian leather, layer on some functionality and versatility, and then we put our signature rivet detail on it, so they're distinct and all of the quality of manufacturing that lies on our partner, and I trust them, and I trust the company that they're with.

Michael Krigsman: Okay. Tony Drockton, thank you so much and congratulations on your success.

Tony Drockton: Michael, thanks for having me here.