Monday, 20 October 2003

Doing it for themselves: the young entrepreneurs

Speaker: sass & bide Founders H. Middleton & S. Clarke
Building a business is about a good idea and lots of hard work. But there’s that special something that can get you over the edge.

sass & bide have turned the fashion world on its head since they started selling their distinctive hipster jeans four years ago.

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Transcript

This is an edited transcript of the Q & A sessions with the founders of sass& bide, Heidi Middleton and Sarah-Jane Clarke and CEO Josh Sparks at the AFR BOSS Club in Sydney on October 20

Q. I have a question about the marketing approach that you've taken, which is really often, in a sense, about viral marketing. I just wonder whether you'd talk a little about that, Sarah-Jane, and how you've managed to roll this out without any advertising?

A. (Sarah-Jane Clarke) Well, actually, how it first started was just through word-of-mouth. So when we first did the production run of our very first jeans we invited our friends in to have a look at the jeans and they ended up buying a pair each and then they'd go along to their friends and tell ten people, and then that friend would tell another ten people. So it just rolled out that way and it created the hype. We just really hyped it up to fashion editors, and the editors were always really supportive of the pieces that we showed them, and it received editorial. So it really came about that way. So we really have a policy of no advertising. I think it's far better to actually get an editor to choose clothes out of the collection, rather than to pay for advertising. So that's how it's worked for us.

Q. And obviously in those early days because of wearing the clothes as well, there's word-of-mouth?

A. Yeah, we always wear sass & bide, obviously, because that's what we love to wear, and that pays off as well, because we always have people asking where's this from, where can I get it?

Q. What was your most challenging moment in the business, the point where you thought it's going to fail, this is a bad mistake?

A. (Heidi Middleton) We have been asked that many times before you know, there have been so many, because with the highs come the lows, and I guess, we often think it's the way we face the challenges or the low points, we try to address them as quickly as possible, and just move forward. But, to try and think of them, when there've been many. You know, there's staff, the HR issues were something that were totally new to us. So it was managing staff mainly.

(Sarah Jane Clarke) Production's also quite a big area and it's one of the most risky areas of the business. So we've had our fair share of

production nightmares. So probably those two.

Q. Which country currently do you have the most orders from?

A. (Heidi Middleton) Well, still domestically. Our focus at the moment is on international growth and we've just launched in the US. We've been stocked in the UK and Europe, well, predominantly the UK for the last two and a half years. So we're consolidating this market and we're going to maintain and service Australia, but that is still where we have most of our representation in the way of retail stores. But at the same time our focus is very much on international growth from this point on.

Q. How many employees do you have in the company now?

A. (Sarah-Jane Clarke) 22.

Q. But clearly that doesn't include your production staff?

A. (Heidi Middleton) Well, we out-source the making of the garments, but we have a team within the company of six people who look after all of that.

Q. Going back to your early beginnings, you came from an advertising background as an art director and you were obviously studying accounting. How did you stay focused when you were obviously from careers that were quite successful? How did you keep your aim and dream happening when you could just go, I may as well just go back to art directing?

A. (Heidi Middleton) I think our belief in what we were about to do was just so strong, so it was running through our veins and we just didn't feel like it was an option to not follow that through. So we just felt like you were being carried along by this, it sounds funny, but by this external force. So we didn't really question that. We made a decision and we had so much conviction in it that we just went with that, and we were fortunate enough for it to go quite well in the beginning, and for the first product to sell well.

Q. And did your full-time career as an art director then take second place, become a part-time sort of thing, just to get your fashion career

happening?

A. (Heidi Middleton) Well, actually, we made the change, so the art directing finished and then it was, let's head back to Sydney, and as a full-time venture we started sass & bide. (Sarah-Jane Clarke) I know it really wasn't a hard option. For me it was a dream come true. We're best friends, we're working together, we're about to go into this clothing business, which we absolutely love, and we worked at the markets every weekend, and we paid ourselves, like, $250 to start off with just to cover our rent, and it was exciting times. We'd got to travel the world together. We were really passionate about what we were doing. So it was a clear road for us.

Q. How does your sales and marketing strategy vary in the obviously much bigger markets of the UK and US, where it's not just a case of a few hips from the eastern suburbs getting to know you?

A. (Josh Sparks) In terms of what we did differently in the US and the UK, there is not the familiarity with the girls and there's not the same level of PR as we've enjoyed here in Australia. However, that is building. In terms of what do we do specifically different, well, we're probably a little more proactive in terms of rolling out things like trunk shows, in terms of things like in-store appearances, etcetera, etcetera. Not that the girls weren’t proactive, they were exceptionally proactive, but we didn't do a lot of that in-store kind of work that gives a very intimate connection with the customer. So here in Australia because it's Sydney or Brisbane or Melbourne there's that forced intimacy because we're all Aussies, and it's not a protected market any more, but it's a small market. But in the US and the UK you're competing, obviously, against many more prospective labels and you have to be just that little bit more committed, and probably that little bit more driven to be heard above the noise. So the girls do a lot of travel, basically, spend a lot of time out in the stores and making connections with the customers on a one-to-one level. And as Heidi or, maybe it was SJ said previously, we don't want to advertise, we want to stay away from that, we're much more interested in a more intimate marketing campaign, as well, of course, as PR.

Q. What was the first step that you took to go off-shore?

A. (Heidi Middleton) I guess I wouldn't say we'd exhausted our opportunities here, but it was just a natural progression and I think Sarah-Jane and I had spent those three years living in the UK, and we'd got to know that market quite well, and that was actually when we felt that our designs could probably sit well, and perform well in the UK. (Sarah-Jane) It was also the East Village jean, which was the first product that we did and Heidi was over in London at the time travelling, and she just basically cold-called (department store) Harvey Nichols and said, I've got the best jean, and Heidi's great at creating hype. So somehow she managed to get her foot in the door of Sue Gunn’s office, who is the head buyer of denim in Harvey Nichols, and Sue bought it straight away. (Heidi Middleton) Yeah, she said, Get here. She said, I'm getting on a plane to New York in an hour. So she said, if you can get here in an hour, that's great. And I walked in and I remember I had sweaty

palms, and I went in, and showed her this one product, which was our first jean, and she wrote an order on the spot, and that was our first in into the UK market.

(Sarah-Jane) And once we got Harvey Nichols it kept rolling from there, because you could drop the name, Harvey Nichols and it just kept rolling.

Q. How did you first attract the new staff to the company? Did they seek you out or did you seek them? And attract CEOs and so forth?

A. (Heidi Middleton) Well, we identified quite early on that our strength lay more in the creative and the marketing/PR areas of the business. So we went through two general managers that weren't quite suited to the business before we found Josh, before we found gold. Well, we struck gold. So we started with a general manager and then a production manager. (Sarah-Jane Clarke) A bit of both, basically. I mean, we let people know that we are looking. Some were through word-of-mouth, but now Josh is in charge of all that and he makes sure we get the best. (Heidi Middleton) We do use recruitment agencies now, but in the beginning it was word of mouth. We'd speak to people in the industry and try and find out who the best were in different areas.

Q. Sarah, I'm quite interested in how you were talking earlier about how you relied on word-of-mouth for your marketing. Do you still do that marketing in the States where there's so much competition?

A. (Sarah-Jane Clarke) Well, no, I mean, half the time we do but now we have a little bit more of a marketing plan and strategy in place to get the whole of the States. So we have a few celebrities that we like to target who we think will represent the label, like, Naomi Watts and Kylie Minogue, and some of the big girls over in LA and New York, and then we do these in-store appearances. Next week we’re doing an in-store at Bloomingdales, and we're also holding a tea party in LA. We're inviting all the stylists and editors of some magazines over there. So even though we're still not advertising in the US, I think we need to go a little bit harder and stronger in there.

Q. When you are hiring are you looking for experience in the industry or do you look for passion like you had when you started?

A. (Josh Sparks) It would be a little bit hypocritical for the three of us to say, You absolutely must have industry experience to work at sass & bide, because we didn't. The girls didn't and they built this incredible business and I came from a different background as well. So, no, experience in the fashion industry is not absolutely a prerequisite. Having said that, about half of the hires we've made over the last twelve months have come from the industry and about half haven't. So it depends on the level and it depends on the skill set. If it's a very specialist skill set, then clearly they must have that experience. If it's more, say, a sales position, for example, where you may have exceptional experience in selling a product or service in a different industry we'd be silly not to look at you just because you haven't worked in fashion. So it depends on the role, but there's no hard and fast rules.

Q. Does production take place here in Australia or overseas?

A. (Heidi Middleton) Actually, it takes place both here and overseas as well. We make all of our ready-to-wear seasonal fashion collections in Australia, from this point forward, and we make the basics, the jeans where we do quantities that can't be made in Australia offshore. So both.

Q. Starting out and having the courage to start out, could you have done it alone if you hadn't met each other, or did you have mentors or did you mentor each other?

A. (Sarah-Jane Clarke) Personally speaking, I would never ever be able to do it without Heidi and she's an inspiration to work with, and for me half the fun is that I've got this incredible person that I work next to every single day.

(Heidi Middleton) I think for both of us there's no way we would have done it alone and we often feel that in the early part of the business when there were so many challenges and obstacles we just found that if one of us was having a down day the other one would pick the other one up, and we've been very fortunate to have each other, and we've got quite a unique relationship where we wouldn't have done it on our own.

Q. Has it been hard to share [with Josh], to move out of being the close duo and share with all the other people that you have to as a business grows?

A. (Heidi Middleton) It actually hasn't and that's quite remarkable,

I think, and especially with the saying, two's company, three's a crowd, it hasn't been that painful at all. We've been lucky in that Josh has respected what we both stand for in the business.

Q. Now that you’re in a bigger market, and in department stores, perhaps not quite such a niche market, does that shift the way you have to think about the product, and think about the way you market, think about all those issues?

A. (Josh Sparks) Well, it's interesting because we were in a department store very early on, which was Harvey Nichols, and I think one of

the challenges that the girls faced early on in Australia was that there wasn't a department store in Australia that they felt was going to represent sass & bide in a way that was faithful to the brand. So we were expanding overseas into department stores, into Lane Crawford in Hong Kong, and Saks in the US, early on. So we were looking at department stores. Certainly we have no hesitation to go into the right department store if they offer us the right situation and the right kind of support in terms of marketing and brand presence. What happened in Australia was that Mark McInnes, the CEO of David Jones, approached us and said, this is where we're going, this is what we're committed to, which is building Australian labels and supporting Australian labels in a way that's faithful to the brand, and really pitched us something that we found irresistible. So I think there's no hard and fast rules. We've got this objective that we're trying to achieve, we're absolutely committed to, and if the right opportunity comes up that's going to allow us to get there sooner, then, obviously, we'll take it.

Q. How did you decide on your name? What's the story behind that?

A. (Heidi Middleton) They are actually just, simply, nicknames. I've been Bide since birth and I started calling Sarah-Jane Sass when I met her twelve years ago. We actually had registered another name, which was Folk, F-O-L-K, when we first started the business, and it was rejected, and we had twenty-four hours to re-register a name or else we'd lose our $150 registration fee. It was going to be Middleton and Clarke or Heidi and Sass, Sass & Bide, and, we're happy with the name.

Q. You're giving me the impression that you've been self-funding yourselves since the market days. Is that still the case? Meaning you’re not sitting at the bank with a business plan asking for two million to do your next launch, are you self-funding? And have you been since day one?

A. (Josh Sparks) Yes, we have been. We're at that point now where there's a few things that we'd like to do and we may have to alter that in the future, but to date we've been completely cash flow funded.

Q. Would you think of franchising?

A. (Josh Sparks) No.

Q. Will you float the company?

A. (Heidi Middleton) No.

(Sarah-Jane Clarke) No.

Q. How important is it for you to understand your consumers, for you

to be, I suppose, your target market when you're setting up a business, and to want to wear the clothes as much as you want your customers to wear the clothes?

A. (Heidi Middleton) That's an interesting one, because there was a stage in the business where I was quite, sort of distressed because I felt like I was aiming the designs at this very, very niche, tiny per cent of the market, and it took me a while to realise that we couldn't possibly grow this successful fashion label if you we were just selling to these people. So I guess it's very important and it's something we're addressing very much at the moment, getting to understand and know the mentality of our customers, and who we're targeting the clothes at. But it's definitely shifted from what I thought it was in the beginning. It was very much aimed at the early adaptor, the edgy girl who was on the cutting edge and, you know, there's no way we could sustain the business if we were just targeting those customers.

Q. A lot has been said about your roles in the business, being an accountant from a business point of view, and then an art director from a design point of view, is that the way you balance your business relationship?

A. (Sarah-Jane Clarke) Well, the roles actually just fell into place when we first started the business. So obviously my strength was more the back-end of the business in the exciting world of invoicing, and setting up systems, and a bit more of production. Heidi fell into the role of sketching. I mean, she's an incredible drawer and it was just what we fell into. But now, saying that, Josh deals with most of the business side and I really concentrate more on the PR side, but I think both of us enjoy getting out, being the faces of Sass & Bide, if you can say that. So we just gravitated to what we prefer doing.

Q. Are you thinking about diversifying your products into jewellery, men's clothes, accessories, things like that?

A. (Heidi Middleton) It's interesting, because we do get asked about menswear and children's wear – they are the most commonly asked questions. No. I think we feel like we've got so much to master yet in just the fashion, the womenswear wholesale business. So I think until we even master all of that we haven't really entertained the thought of branching off into other areas, perfume or children’s wear or menswear or anything. Not to say that we wouldn't look at that in the future, but at the moment we want to master what we're doing.

Q. Do you intend to open your own retail stores?

A. (Josh Sparks) Yes, yes, we do. The girls would love to open a retail store. In fact, I think they'd probably like to have had a retail store for the last twelve months or so. What we decided to do, because the girls have always wanted to build a global business, was channel the cash that would otherwise normally go into setting up a retail business in Australia into growing the label overseas. I mean, if people wanted to throw millions of dollars at us, then we're not sure we'd take it and start stores in Australia. In fact, to be honest, we probably wouldn't. I mean, the overseas market is where we want to build the business at this point in time. The brand enhancing opportunities of a flagship store are going to be most well-felt in the markets where we don't yet have a huge brand. So there doesn't seem to be a huge impetus for us to have one in Australia at this stage, although we'd love one in time. In terms of the brand building and the marketing impact of a flagship store, I think we're probably better off looking at London or New York a little bit further down the track. The other thing is we've got partners in those markets that are prepared to share the risk. So from a financial perspective it makes a lot more sense to look at those markets, as well as the marketing and PR.

Q. I'm interested in your thoughts on how you deal with competition and how you deal with the industry itself.

A. (Sarah-Jane Clarke) Well, I think we've always liked to think that we stay quite focused on our story and our dream, and what we're trying to achieve. Though, saying that, the industry if very important and we wouldn't be here without them. So we sort of keep one foot in and one foot out, to just have a nice balance between personal life and work life. (Heidi Middleton) I think in the beginning we probably weren't aware enough of what was happening outside of our little world, but we realise now that it's important to know what our competitors are doing, and as the business grows it's becoming much more important.

Q. How important was Sex In The City for you?

A. (Heidi Middleton) Look, we were very, very fortunate and I don't think we probably even realised at the time. But looking back, it was just amazing for us to have run into Sarah Jessica Parker that day and for her to have loved the product, and bought it, and then it was on the show. I mean, you couldn't really buy that. So, looking back it was incredible and I think it was just part of this magic in the beginning, you know, we felt like there was this sort of magic surrounding the start-up of the business, and that was one of the things that we look back on now, and think, my God, you know, how lucky were we to have that happen early on, because we got a ridiculous amount of press from that,

Q. Obviously, celebrities wearing your product has helped you. Did you have already established contacts that could help you along the way, or was it just a jinx that you'd run into Sarah Jessica Parker, you'd established other celebrity contacts, was this all something that you had endeavoured to do, to meet people that way, or did you already have established contacts?

A. (Sarah-Jane Clarke) We didn't have, actually, one single person or anything. Basically, we asked people who may have known and we got a few contacts through that, but then, basically, we used to target the people who we wanted to send the product to, and in the days when we'd first begun we sent off maybe five to ten parcels of jeans. And basically, we just had to ask, and, you know, there's always fashion editors that know someone.

(Heidi Middleton) And we were so happy with the first few products, and we thought we just have to get them to the right people. So we'd write all these cover letters and present them, beautifully, and send them off to all the editors in New York and London, and give them a gift of a pair of jeans, and we'd do that to celebrities, and we found that out of the dozen we'd send out, half-dozen would write back, and say,

Oh, my God, we love this, how about we do a little profile, and then, celebrities would endorse them. So it was just something we did very

early on because we didn't have the money to spend on advertising and marketing, we thought that viral marketing would be the way to go.

Q. When you're starting your own business, obviously, you had some accounting expertise there, but were there any courses you did, or anything to find your way around the taxes you pay, everything else that you need to know?

A. (Heidi Middleton) Well, not really, because I used to help my parents out with their business and their tax returns, and because I worked in the industry for about four years I knew a little bit about that, and sometimes I'd look up books, and that type of thing, but it's pretty basic at the end of the day. We used quite a simple program, MYOB, and it was all quite self-explanatory, and then once it started getting big we got an in-house accountant, and now we've got a financial controller who deals with all that.

Q. How were you able to source reliable manufacturers overseas and who did you approach for advice in that respect?

A. (Josh Sparks) We use an Australian management company to manage it for us and in terms of who did we approach, we spoke to a number of

different labels in Australia, and found out who different companies were using, and really went on word-of-mouth. It's such a small industry and contrary to the impression that's widely thrown out, people are very happy to help you out. So in terms of suggesting contacts, it's just

this big network that you form, and then you sit down, and talk to them, see samples of their product. Heidi, sampled product and we went from there. But, I think sourcing offshore reliably depends on the market you're talking about. We're talking to some manufacturers directly now in Canada and California and we're very comfortable working with them, but there are other markets that perhaps, through language barriers or cultural issues or whatever, we wouldn't feel quite so comfortable going to directly. So in that instance we would want to use an expert management company to manage it for us.

Q. Being self-funded and all that, when you came back from traveling, roughly what did you start out with when you first landed back in Sydney?

A. (Heidi Middleton) We borrowed $70,000 in total from a friend and mentor, and we couldn't believe that this friend had believed in us, and our dream, and so we made it our mission to pay him back, and we did that with interest, we paid him back $100,000 about a year after we'd started the business. So at that point we were debt free and we have been up until this point. So it was $70,000, but we paid back $100,000.

Venue

Four Seasons Hotel Sydney, 199 George Street, The Rocks