Steve Schlecht’s “The Art of Building a Brand”: Book Review, Notes + Analysis

Poor Ash’s Almanack > Book Reviews > Business / Finance

Overall Rating: ★★★★★★ (6/7) (standout for its category)

Per-Hour Learning Potential / Utility: ★★★★★★ (6/7)

Readability: ★★★★★★★ (7/7)

Challenge Level: 1/5 (None) | 105 pages

Blurb: Steve Schlecht didn’t technically found beloved consumer brand Duluth Trading, but like Howard Schultz of Starbucks, he nurtured it into the half-a-billion-dollar brand it is today. This unique entrepreneur story provides granular insights into the process of brand-building and managing growth.  The format is unique, too: it’s a big coffee-table book with lots of beautiful graphics and intriguing sidebars.

It’s a shame that this book is so under the radar – I discovered it entirely by accident, as it essentially hasn’t been marketed.  It’s not even sold on Amazon! This is my effort to make it better-known, as it’s infinitely superior to many popular entrepreneur stories, like the vastly overrated Shoe Dog by Phil Knight.  The Art of Building A Brand is one of the most educational and enjoyable entrepreneur stories I’ve read; it’s what Shoe Dog should’ve been, but wasn’t.  

Summary: I’ve gotten to the point where I rarely read entrepreneur stories anymore because after a while, most of them start to sound the same – there aren’t a lot of new lessons.  Today, I typically only read them in the course of researching a company: for example, when doing a project in the outdoors apparel sector, I read One Tough Mother by Gert Boyle (the matriarch of Columbia), and Let My People Go Surfing by Yvon Chouinard (the founder of Patagonia.)

I read The Art of Building A Brand for similar reasons: I was researching Duluth Trading (disclosure: long as of May 2019), and while making a purchase at one of their stores, noticed a copy of this book sitting near the checkout.  I knew I had to get it to learn more about the background of the company – but I wasn’t expecting it to be so enjoying/educational even for a hypothetical reader with no interest in Duluth Trading as either a consumer or an investor.

Highlights: Too many entrepreneur stories stay high-level, leaning on platitudes (“follow your dreams,” “don’t be afraid to fail,” etc) without actually exploring the real day-to-day challenges of building a business.  There are, of course, some exceptions – Made in America” (WMT review + notes) by Sam Walton, or Pour Your Heart Into It (PYH review + notes) by Howard Schultz – but many, like the aforementioned Shoe Dog, are disappointing and uneducational.

The Art of Building A Brand is different – each phase of Duluth’s history is carefully deconstructed, with specific challenges (and solutions) discussed from the perspective of both strategy and culture.  Schlecht overviews all the “pillars” of the brand – customer service, marketing, product, etc – with extensive commentary by, and analysis of, the team members (internal and external) that helped craft the company’s approach in each area.

It, incredibly, manages to provide this level of thoughtful detail without getting long or boring – at a little over 100 pages, a decent chunk of which is taken up by large pictures, this is a brief, easy read that you could knock out in a couple hours at most.

Lowlights: None.

Mental Model / ART Thinking Points: constraints, storytelling, local vs. global optimization, growth mindset

You should buy a copy of The Art of Building A Brand if: you want a business “origin story” that is as beautiful as a book it is engaging and educational a narrative.

Reading Tips: None.

Pairs Well With: Made in America” (WMT review + notes) by Sam Walton, or Pour Your Heart Into It (PYH review + notes) by Howard Schultz

Reread Value: 4/5 (High)

More Detailed Notes + Analysis (SPOILERS BELOW):

IMPORTANT: the below commentary DOES NOT SUBSTITUTE for READING THE BOOK.  Full stop. This commentary is NOT a comprehensive summary of the lessons of the book, or intended to be comprehensive.  It was primarily created for my own personal reference.

Much of the below will be utterly incomprehensible if you have not read the book, or if you do not have the book on hand to reference.  Even if it was comprehensive, you would be depriving yourself of the vast majority of the learning opportunity by only reading the “Cliff Notes.”  Do so at your own peril.

I provide these notes and analysis for five use cases.  First, they may help you decide which books you should put on your shelf, based on a quick review of some of the ideas discussed.  

Second, as I discuss in the memory mental model, time-delayed re-encoding strengthens memory, and notes can also serve as a “cue” to enhance recall.  However, taking notes is a time consuming process that many busy students and professionals opt out of, so hopefully these notes can serve as a starting point to which you can append your own thoughts, marginalia, insights, etc.

Third, perhaps most importantly of all, I contextualize authors’ points with points from other books that either serve to strengthen, or weaken, the arguments made.  I also point out how specific examples tie in to specific mental models, which you are encouraged to read, thereby enriching your understanding and accelerating your learning.  Combining two and three, I recommend that you read these notes while the book’s still fresh in your mind – after a few days, perhaps.

Fourth, they will hopefully serve as a “discovery mechanism” for further related reading.

Fifth and finally, they will hopefully serve as an index for you to return to at a future point in time, to identify sections of the book worth rereading to help you better address current challenges and opportunities in your life – or to reinterpret and reimagine elements of the book in a light you didn’t see previously because you weren’t familiar with all the other models or books discussed in the third use case.

Page ix: The Art of Building a Brand was originally supposed to be a compilation of catalog cover art, but it turned into much more: at 70, Schlecht wanted to “leave a legacy… for my grandchildren and for all the folks who have been part of the journey – employees, vendors, advisors, and customers.”

The premise of Duluth as a brand is “there’s got to be a better way.”

Schlecht is to Duluth what Schultz is to Starbucks – not literally the founder, but the founder of the modern form for all intents and purposes.  An interesting wrinkle here is that against the stereotype of entrepreneurs being young, Schlecht was in fact in his 50s when he bought the Duluth catalog (after selling a business to Grainger.)

Page 1: The origin story: some carpenters in Duluth, MN were hauling tools around in five-gallon drywall buckets, and decided “there’s got to be a better way.”  They had local company Duluth Pack sew up some protoypes.  (I visited the Duluth Pack store when I was in Duluth.)

Page 2: It went nowhere slowly, then upward really fast; they were (unsurprisingly) not ready to ship a huge order to K-Mart.

Page 3: Having visited Duluth myself – it’s kind of grungy, or “gritty” if you prefer a better word – I can attest to the following:

“The grit remains in the nature of the people of Duluth.  It has a frontier-town reputation… mining, lumbering… shipping… if you are from Duluth… you have got to be built to endure.”

Page 4: The early company also had trouble with the working capital cycle – big retailers want to wait to pay… direct sale had higher margins and faster payment terms, which is why Portable Products (the predecessor to Duluth) tried to focus on that route via its catalog sales.

Meanwhile, one thing that current Duluth still retains from this era is the “formula” – which was not “calculated,” but was nevertheless:

“One of a kind design and a humorous style of marketing that defied convention.”

Page 6: Field-testing was a big part of the brand; Duluth, with its blue-collar trades, was obviously a great place to do it.

Page 7: More typical stuff: as the company grew, it became more corporate; by 1995, the company had about $6MM in sales.

Page 8: The company was pushing up against infrastructure constraints and decided to sell itself to Fiskars.  I’d heard of Fiskars, but didn’t realize they were A) Swedish and B) 350 years old, apparently.

Page 11: The product line kind of got lost in Fiskars; it was a different business model, created channel conflicts, etc.

Pages 13 – 15: Here we meet Steve Schlecht for the first time (he has not, yet, been involved with Duluth.)  He grew up working on his family farm; he can weld and do all sorts of other “manly arts,” as he calls them.  He’s also an avid tool collector, and has a hobby farm (as of this time). He was not an instant success (as we’ll learn later), but he got there eventually.

His first experience with Duluth was as a customer receiving their catalogs; he reached out to them and told them he’d be interested in buying if they were interested in selling.  Eventually, they were. Duluth had 300 SKUs at the time and about $6MM of revenue (this was 2001). It wasn’t making a lot of money, but Steve thought there was something there. Fortunately, Gempler’s already had great customer service (fast order picking, real people on the phone, and the predecessor to Duluth’s “No Bull” return policy.)

Page 17: Mike Atkin, an ex-Lands’ End guy (and ex New York ad guy before that):

“We felt like there was a germ of an idea for a brand in Duluth.  It had a connection with its audience that was more than just the traditional stuff you do in direct marketing: putting pictures of products on the page and the price and saying, here’s why you should buy it.”

But Duluth wasn’t a brand (yet).  Still, as the book puts it:

“A large part of the value of Duluth Trading lay in the quirky humor and straight-talking style of its catalog, along with its factual, no-nonsense illustrations with their strong appeal to the male buyer…. “Most of it was already in place, it just needed to be MORE.  But the essence of the whimsical and artistic nature of the brand was in place.”

My personal favorite is this one:

Also:

“Customers [wrote in to] describe how they read it from cover to cover and looked forward to receiving it each time.”

Per former creative director Al Shackleford:

“The artwork, the sense of humor, the little stories… those things are meaningful to a lot of men.  The Duluth catalog is not a graphic novel, but it has a little of that quality.”

Even then, the brand inspired the same excitement it does today (cough Underwear Overshare cough).  Bill Ferry, a former Lands’ End EVP on the Duluth advisory board, stated:

“In the early days, a lot of people, when I told them who I was working with, they’d say, ‘you know, that’s the greatest catalog I’ve ever seen.  I read it cover to cover. It’s great entertainment.’”

Page 19: Interesting backstory here on Steve, who had tried (and failed) to start a number of businesses (after failing as a manager of a grocery / drugstore retailer).  Third time was the charm with Gempler’s.

Page 21: Duluth was willing to push the boundaries a bit with its advertising, though never too much – the goal was “humorous and warm-hearted but never disrespectful.”

Page 22: A lot of Duluth management (including future, i.e. current, CEO Stephanie Pugliese) hail from Lands’ End, bringing a focus on:

  • Fit consistency
  • Measuring offshore vendors
  • Customer service

This apparently helped Duluth avoid some of the Lands’ End potholes.  In 2002 – 2003, Duluth introduced workwear, expanding beyond tool carriers.

Board member David Finch:

“Steve brought in some terrific art people and some very strong product people, and he’s continued to upgrade that throughout the history of Duluth Trading.”

Also, fun fact – I had seen him before but didn’t realize he was Steve’s son – Ricker Schlecht works at Duluth in the product department.  In the early 2000s, when he was in college, he came up with the first Plumber’s Butt storyboard for the Longtail T. That puts him late 30s today, which is nice from a succession standpoint – culture will remain intact…

Page 24: Interesting sidebar here on catalogs and how/why they were successful.  The interesting note is that at some point, the LTV/CAC starts degrading, so you have to expand products, or start a new catalog.

Page 25: This line sums up the Duluth sense of humor:

“Cheeky and irreverent without being crass – and solving a real-life problem.”

There is a discussion here of Ballroom jeans and the practice of naming things functionally.  The punchline:

“With this name change, Duluth Trading flipped the formula that most companies used.  Instead of talking about the features of the products, they made a decision to talk about the problem their product solved in an interesting and relatable way.”

Page 26: Despite focusing on humor, Duluth remained aware that humor alone wasn’t enough.  They tried new stuff but subsequently pruned many SKUs.

Meanwhile, Schlecht sold Gempler’s to Grainger.  Duluth had $22MM revenue in 2003.

Page 27: Women’s was an early idea, but it took them quite a while to figure it out.

Page 28: Interesting bit here – why illustrations rather than photographs?  They were cheaper, and Schlecht:

“believed it was a differentiator that had a strong appeal to male buyers, who tend to be very literal in their buying decisions.”

Conversely, photographs resonate more with women.

Pages 31 – 33: Duluth Trading did feel the impacts of the recession; apparently “Duluth’s banker was getting nervous about them”  Women’s was still struggling, the travel expansion failed, and a retro toy event left them with a lot of excess inventory.  They went into “survival mode,” laying off 10% of employees.  (The business was circa-$70MM at this time.)

A consultant with an ad background helped them realize some problems in 2007: they weren’t yet a brand, they didn’t have a good product planning process, they didn’t focus on star products, and they needed to move beyond the catalog.

Page 35: Sales were apparently down 10% from plan in the Christmas selling season in late 2008 – that’s actually not awful, although the brand was of course in rapid growth mode then, so likely had some cushion.

Page 37: They refocused strategically – they wanted to focus on their best customers (and develop products based on their needs, wants, and purchase behavior).  They focused on work apparel. And they focused on branding rather than being a catalog. This last one:

“Was the biggest decision you made and the most important in the whole Duluth saga.”

This vision led to core principles – brand awareness, product leadership, high revenue growth.

Page 38: As crazy as it is given how popular / ubiquitous their ads are, Duluth had apparently never done ads prior to 2010.

Page 40: Duluth seriously gets storytelling – they use it a lot (cool real-world experiences of people using the products).  The stories give the products meaning, which gives them value, and value leads to growth.

Page 42: They tried to carry over the irreverent, humorous, rustic style of the catalog to the ads.  And it worked: a regional test ad during the Super Bowl shut down the website for twenty minutes.

Page 43: Schlecht oversaw the creation of the first retail store; the building in Mt. Horeb is an old hardware store.  It’s not the right location in the sense that it’s a 7,100 person town in the middle of nowhere, but 50% of its sales come from customers who drive more than 50 miles.

Meanwhile, Duluth clearly “gets” the man-woman shopping dichotomy; they cite the Men Buy, Women Shop study from Wharton.  It’s fascinating stuff, though mostly intuitive.

The difference with Duluth?  They wanted to make it the “kind of place men would actually get pleasure from visiting.”

Page 44: Travelers from all 50 states visited the Mt. Horeb store in the first twelve months of operations (commencing Oct. 2010).  It’s not a travel destination and the store wasn’t hugely advertised… people just found it.

Page 45: Women’s was still sluggish.  Schlecht admits that “women’s wear was not in his wheelhouse, and there was no one else in the company with a strong vision for the women’s brand.”

Then Stephanie Pugliese came along as the head of merchandising (she’s now the CEO).  They figured out who the “Duluth woman” was – someone who is untraditional, etc. I will note that in an interview, Pugliese noted (paraphrasing) the Duluth Women do mens’ work but don’t want to feel like they’re wearing mens’ clothes.

Pages 47 – 49: There’s a neat little “10 Welds” mission statement here:

  1. Uncanny merchants
  2. Great storytellers
  3. Innovators, not imitators
  4. We are a brand
  5. We aim to achieve a fair profit
  6. Risk takers, learning from mistakes
  7. Treat all stakeholders like neighbors
  8. Build lasting satisfaction into products
  9. Strive for growth
  10. Work hard, have fun, work/life balance

Page 51: Some financial disclosure: revenue was flat in 2009 and up 16% in 2010.  I’ll take it.

Page 54: It was clear by 2014 that the U.S. had too many retail stores… and that the trend was shifting from “stuff” to “experiences.”  Yet Duluth launched their retail initiative – albeit slowly; after the Mt. Horeb store in 2010, the next opened two years later, and by the end of 2015, they still only had 8.

Page 60: Duluth’s voice talent for commercials is actually a firefighter.  Huh.

And here’s a great story if I ever saw one:

“Very early on in the TV campaign… in a bar in Oklahoma [during] March Madness… when the Duluth commercial came on, the entire bar went quiet.  Every single person in that room stopped what they were doing and paid total attention to the television, then when the commercial was over, they all went back to talking.”

Advertising opened Duluth up to a younger, more affluent audience.  They stuck to humorous product-benefit explanation – the humor never overshadowed the product.

Page 61: Legitimately the single-best line in any entrepreneur book I’ve ever read:

“Dogs are very much a part of the Duluth brand DNA.  They’re great friends, provide service and comfort, and are not judgmental.  In the Duluth product line there are treats, toys, grooming, and feeding products for keeping them happy.

Cats, on the other hand, have not made it through the Duluth brand filter.”

Pages 62 – 65: Duluth Women don’t always live in the same household as Duluth Men, but they share similar traits – they’re active outdoors types.

Duluth also uses “real women” – not models – in their ads.  “Their female customers appreciated that authenticity and welcomed the celebration of women doing often-aspirational things for their livelihood.”

Across both men’s and women’s:

“The common tether… was that both men and women wanted functional apparel that solved problems as they rolled up their sleeves and pursued a self-reliant way of living.  Reaching that understanding was a defining moment in building the Duluth women’s brand.”  

Pugliese, here, is quoted reiterating what she said in that Youtube interview – the Duluth women still don’t want to wear guys’ clothes, or things that looked like it.

Pugliese notes at the bottom of this page that brand consistency is important; it has to stand for something.  Duluth’s focus is “top-selling products that they designed themselves, offering strong innovation, accessible and broad appeal.”

Page 68: There’s a real strong customer focus here.  Pugliese:

“It’s about a legacy, heritage, hand-me-down type of product.  It might be a winter jacket, so for six to eight months of the year it’s sitting in your closet.  But every time that season rolls around, you pull it out and think, “I love this jacket.” And when you’re wearing it that tenth time you say, “I didn’t realize it had that pocket over there.  That would be perfect for…” whatever. So it’s that product that grows with you, stays with you, and has that kind of connection. It’s just the perfect solution for whatever your activities are.  It becomes part of your lifestyle.”

Page 69: They discuss the trades’ panel here, including people who work in really extreme conditions.

Page 72: Duluth was aware of “the skeletons of companies that became hot very quickly, then turned out to be a flash in the pan.  They grew too fast, their technical infrastructure failed, their supply line couldn’t keep up.”  So Schlecht didn’t want Duluth to “get out over their skis.”  They’re focused on protecting the integrity of the brand experience.

Page 75: Nice little note here:

“One of the best indicators of the brand’s performance came through in strong repeat purchases of core products.  Time and again customers were coming back for more Fire Hose and Buck Naked. They were hooked.”

Pages 78 – 79: The focus of the catalog storytelling is “humor, history, shared interests, and personal connection.”

Page 86: Nice little mission statement here:

Page 87: Duluth’s not overly influenced by what everyone else is doing.  Schlecht notes:

“We don’t have direct competition.  Competitors think we’re selling to the trades, but that’s not the case.  We sell to a particular lifestyle, and it’s very subtle. It’s about being self-reliant, the kind of person who has the confidence to roll up their sleeves and take on a job – whether in their home and hobbies, or their paid occupation – and the mindset to do it well.”

Page 92: Alaskan Hardgear was acquired in late 2013; it’s now a fast-growing sub-brand (not specified here, but on the Q4 2018 CC they stated Alaskan Hardgear had a 3-year CAGR of 95% – so however big it was, it’s 7.5x bigger three years later.

Page 94: neat-o sales chart since inception:

Page 97: Duluth has chosen scarcity over ubiquity; their stores are destinations and lots of people drive far.  They don’t sell through any other channel than their own.

Pages 99 – 101: Nice discussion here about Lands’ End and how it was assaulted by Sears, private equity, etc.  Schlecht discusses some of the management transitions, including the weird one from New York (I remember writing about that in a research note on LE.)  Schlecht notes:

“It is remarkable to me that any brand, no matter how sturdy, can survive ownership and CEO changes as often as Lands’ End has and still survive… the survival of Lands’ end… to me indicates that some of their core brand fundamentals still have meaning to a lot of customers.”

Of course, the brand hasn’t grown at all since 2001; apparently it was $1.4B then, and it’s still roughly that today.

On quarterly earnings, Schlecht notes:

“We are under pressure to meet quarterly earnings targets created by the analysts.  (We don’t believe in giving out quarterly guidance.) We do guide for the year, but internally our focus is long-term.  We continue to try to think like a private company and think about what’s best for the brands.”

He goes on to talk about the B shares; see below for proxy data – Schlecht retains 30% economic ownership (roughly) but over 66% voting power:

Ricker has been there for more than a decade; he “has a deep appreciation for our customers and how we can design and make clothing that works for them.”  I like this – Ricker wouldn’t seem to fit the typical second-generation mold, since his dad’s business didn’t really make it big until just recently.  He didn’t grow up with the silver spoon; he helped build Duluth into what it is today alongside his dad.

Page 105: Schlecht opining on meaning and fulfillment; he wants his legacy to be:

  1. Successfully stewarding Duluth’s brand, and,
  2. Creating a company where “folks could enjoy their work, adding meaning to their lives.”

Page 111: Coda on five things he’s learned:

  1. Avoid bad business concepts.
  2. Acknowledge the macro and don’t fight it.
  3. Conduct complete due diligence on major acquisitions.
  4. A bad real estate location will always be a bad real estate location.
  5. Don’t get involved with a business you don’t like.
  6. …………

 

First Read: spring 2019

Last Read: spring 2019

Number of Times Read: 2

Planning to Read Again?: yes

 

Review Date: Spring 2019

Notes Date: Spring 2019