How I Built This with Guy Raz - Tumi & Roam Luggage: Charlie Clifford

Episode Date: July 25, 2022

Over nearly 50 years in the luggage business, Charlie Clifford has built two premium brands and weathered three existential crises: the recession of 1982, the travel slowdown post- 9/11, and the extreme aftershocks of Covid. His fist luggage company, Tumi, was inspired by his time as a Peace Corps volunteer in Peru. Charlie began by importing hand-crafted leather duffels from South America, but quickly pivoted into more durable and distinctive ballistic nylon bags. Business travelers loved them, and by the 1990’s, Tumi was spreading to Europe and Japan. Today, Tumi is owned by Samsonite and its stores are in airports and shopping malls around the world. Meanwhile, Charlie—unfazed by the challenges he’s faced over the years—has launched another premium luggage brand, Roam. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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And I can recall getting off the elevator, walking down the hall, and the sign on the frost and glass above the door said asset recovery department. Asset recovery department. That's not a good sign. One didn't have to be a banker to realize what that meant. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz and on the show today how Charlie Clifford's time as a Peace Corps volunteer inspired an import business that eventually became the high-end luxury brand to me. There's a moment you may remember from my interview a few years ago with John Foley, the founder of Peloton.

He mentioned that when he first started selling his stationary bikes, he priced them at around $1,200. At the beginning, sales were sluggish. Apparently, customers thought a $1,200 bike was too cheap and was probably low quality. So John Foley raised the price to $2,000, and soon sales started to pick up. Now, as some of you who went to business school know, this is called a premium pricing strategy. It's what you do to signal to consumers that what you're selling is exclusive, special, available only to the most discerning customer. It helps explain why people will pay more for a bottle of Domperignon or a cotton t-shirt by Balenciaga. The price is part of the brand's very identity.

I mean, is that Canada Goose coat really keeping you warmer than the one at H&M? Well, to the consumer who pays a thousand bucks for that Canada Goose coat, it doesn't really matter. Which brings me to today's guest, Charlie Clifford, the founder of Toomey Luggage. You may know to me from its ubiquitous presence at airports and high-end shopping malls. The brand makes very good luggage, high-quality, practical, and expensive, anywhere from $600 to $3,000 a bag, which, as you will hear, was part of the strategy. When Charlie started selling ballistic nylon bags in the early 1980s, he wanted to attract a certain type of high-end traveler. So he designed his bags to be sleek and strong and easy to use and he priced them at what you might call the lower range of luxury.

Charlie understood that enough people care about luggage and use it often enough to be willing to spend that kind of money on it. And the interesting thing about Toomey is that unlike many products that start high-end but eventually wind up on a bargain basement rack, Toomey stayed high-end and flourished there. Charlie moved on from the company when it was sold to a private equity firm in 2004, but in 2016, when Samsonite acquired Toomey, it was valued at $1.8 billion. But Charlie wasn't done. After he sold to me, he launched yet another high-end luggage brand called Rome. But as you will hear, luggage is by no means a bulletproof industry.

Over the past 40 years, Charlie's brands have had three life-threatening challenges. The first, with the big recession in 1982, just as he was getting Tumi off the ground, then came the massive downturn and travel after 9-11 in 2001, and most recently, with this new company, Rome, travel again ground to a halt when COVID hit. But let's start a few years before Tumi began. After growing up in New Jersey and attending college there and, in Indiana, Charlie joined the Peace Corps in the late 1960s and spent two years working in Chiclio, Peru.

Chicklio was lacking in support for small businesses and for entrepreneurs. And in some of the other areas of Peru, they had developed industrial parks. They would have all of the electricity, all of the infrastructure that businesses need to operate. So there was another Peace Corps volunteer for the MBA program by the name of Jerry Patentoneo, assigned to Chick-Leo along with us. And Jerry and I work with a group of people under the sponsorship of the Chamber of Commerce and essentially set up a local group of business people to encourage them to organize and promote the idea of Chick-Lio getting an industrial park. All right. So you, obviously, you're in the Peace Corps for that to your period, and then eventually

you return to the U.S. And from what I understand, you get a job in management for like a large company that operates supermarkets. But I gather that around five years in, you start to get restless, right? Yes, I was definitely restless, and I recognized that I would probably do better in an environment that was not a corporate environment. Almost all of my friends were in the corporate world. They were moving up. They were happy. But I guess I had enough independence and was enough of a Maverick that I felt that getting involved in something that was more entrepreneurial. That was my only, thing would be more interesting and ultimately more satisfying. Did you start to have conversations with friends? Did you start to talk to people about ideas? Yes. You did? Yes. During the period I was there,

I carried on communications with my old friend from the Peace Corps, and we talked about potentially starting a business together. And because we had a wonderful experience in Peru, first thing we thought about was potentially getting involved with importing Peruvian handcraft. And what was the name of this friend? Jerry Papantonio. Jerry and I learned from another friend, another Peace Corps friend, that George Millard had set up a company that was importing handcrafts from Peru and actually several other South American countries. The name of the company, the training name was La Maline, and George had been an associate director of the Peace Corps in Peru and went on to be head of the Peace Corps in Uruguay after leaving Peru. Lovely guy who I was happy to go into business with. And what was he doing?

Tell me a little bit about what he was bringing in. George and his business partner, Dana Danielson, another XP Corps guy, were bringing in handcrafted rugs, hand-loomed rugs, wall hangings, hand-carved gourds, hand-knit sweaters, costume jewelry that was made by hand. And I became their regional salesperson. I was calling on and visiting stores in the Northeast going to trade shows and basically helping them sell their various products. And this is in the mid-70s.

Was there a market for it? Were people interested in, mainly indigenous crafts from Andean region? Was there enthusiasm for this stuff? There was a reasonable amount of enthusiasm, particularly in the gift store market. But at the Northeast, I was able to sell to Bambergers in New Jersey and Bloomingdale's in New York to the gift departments. And we enjoyed a pretty good business there. I guess not too long into your time there, because you were selling a bunch of different products from a bunch of different categories. And you felt that maybe it was the leather goods that you should focus on, that the company should focus on.

What were the leather products they were selling? Well, I should have mentioned those at the outset. They were selling some leather handbags and some small leather duffel bags that were made in Columbia. Very rustic, very rugged, very natural leather for the most part, very well-priced. It was a good price-value relationship. So I felt that we should focus on that category because unlike handcrafts, which patterns would vary, and sometimes what people ordered at a wall hanging or a rug, it would come in slightly differently because they were made by artists.

The sizing might be different. The colors might be different. So I thought that leather bags would offer the opportunity to focus on a product that had a lot of handwork in it, but essentially be able to be reproduced consistently the same way every time. So you thought the leather bags that they were selling, that was really where the business should focus on. But I guess your partners did not see it that way. And from what I understand, you decided to leave. It wasn't like a, it was amicable.

It was perfectly amicable. But you just decided that, you know, maybe I'll go my own way. That's right. The two fellows who owned the majority of the company, they were reluctant and did not want to focus on leather. So with their blessing, I essentially had an introduction to their leather supplier in Columbia. You know, I found through my original business partner another leather supplier. and we set off to focus on the leather business. And this was a man named Seth McQuillan, I think, right?

That's correct. A nice guy, smart guy. He was not involved in leather goods, but he did have experience importing products from Columbia. So you and Seth decide to join forces and focus on importing leather bags from Columbia. I think this is 1975. And you decided to call the company to me. First of all, just tell me about that name to me. It's basically a ceremonial knife that was used back in the Incan days.

It's got a Peruvian god figure on it, and the bottom of the knife is a curved blade. It was also used as a symbol used for wall posters by the Peruvian tourism promotional agency. So the Toomey figure was a figure that was near and dear to my heart. And when we were trying to come up with a name, I thought Toomey was one that would travel. well. For some people, it sounded Italian, for other people Finnish. It sounded, it was very easy to pronounce for the Japanese. So I thought it was a name that would travel very well over time. All right. So you, the two of you joined forces. You've got to me. And I think you both invested a few thousand dollars to get this started, right? Like $5,000. Is that about right?

I think we had $10,000 between us. Right. And the plan was to basically import these leather, would they're like duff, Describe the kind of bags that you were importing? Our most important product originally was indeed leather duffel bags. They were made from a very rustic leather. They had kind of a handcrafted look to them, which they should have because they were made by leather artisans. And they became very popular because they were very well-priced. I believe our most popular size at the time was selling for $49, then $55, then $59.

So tremendous value would be several hundred. today. We found a ready marketplace for them in stores where people were crafting leather sandals and making leather belts. They were happy to buy our leather bags because their customers might think that these bags were being made in the back of these stores where indeed they were making some products for themselves. Right. So online, I mean, it was just, it was just leather. I mean, you would open it up and inside was like a rough texture of the inside of the leather hide? It was the nap side of the leather. That's correct. In the early days.

Not waterproof. Definitely not waterproof. All right. I read that that first year of business, 1976, I guess, you did pretty well. Over $600,000 in sales. I mean, that's 1976. That's a lot of money. Yes. I mean, I would have thought, and I'm not spoiling the story here, but for anyone listening, this is going to get dark for some time. This story is going to get dark and challenging. But I'm thinking, 1976, you guys must be like high-fiving each other, thinking we're crushing it.

$600,000 our first year. It's only up from here. Yeah, I don't remember thinking we were crushing it. I think we were happy that we were making progress and we made progress for another five or six years, steady progress. But I think any entrepreneur, part of what motivates you, you're always looking over your shoulder. And we certainly weren't fat and happy. We weren't making a killing in terms of, you know, being able to take a lot of money out of the business. We were still very much of a mom and pop

business. So happy with the progress, but by no means thinking we had made it. All right. So you had this line. It was leather, and that was your brand. That was what you were doing. But I guess at a certain point, 81, 82, you felt like there was an opportunity to branch up beyond leather. Tell me about sort of the evolution of your thinking around that. What made you think that the opportunities might actually be outside of leather products? Well, there were a couple of things. Perhaps four or five years into this process, I remember discovering the fact that luggage, as you might surmise, is an infrequently purchased product. People buy a piece of luggage and use it for a number of years. But many people do own a variety of travel bags, a variety of luggage.

So we felt that if we move into the luggage stores, we could do a lot more business. And as we made this transition, we discovered that most travelers didn't want to buy a large leather suitcase because they felt that it might get damaged during transit when it was checked by the airlines. Yeah. So we felt that moving into a fabric, a synthetic material would help us to penetrate this market. Meantime, while you're kind of thinking about other fabrics, the business is, I think, steadily growing every year for the first five or six years, but the 1981, 82 recession hits and all of a sudden, from what I understand, things just start to go downhill,

like very, very quickly. Because people forget, this was the biggest economic downturn in the U.S. since the Great Depression. The 82 recession was really bad. Yeah, it was tough times. Inflation was spiraling out of control. At one point during this period, prime interest rates went, I believe the height was 21.5 percent, over 20 percent. Wow. Which is just inconciseise inconceivable today. Today, yeah. Yeah. And we're talking about 5% today and people are freaking out.

I'm not sure how we survive with that type of interest rates because our bank was our best business partner, which is another segment of the story. You did not have any outside investors. It was just you and Seth and then borrowing from the bank. Right. So, 1982, this is the first year since you founded to me in 75 that you actually lost money. And the bank, I guess, that was lending you money, started getting nervous. Yes, we had gathered with them to talk about quarterly results over lunch, and I can vividly remember the atmosphere changing from one second to the next, one minute to the next, when we told them that we had actually lost money the last quarter. The tone of the conversation sobered up very quickly, and before the end of the afternoon, got a call from the bankers saying that they wanted us to come down and talk about the business the next week.

So we went down on a Monday, and they were in a very traditional classic bank building. And I can recall getting off the elevator, walking down the hall to the office number they had given us, and the sign on the frost, a glass above the door said asset recovery department. Asset recovery department. That's not a good sign. One didn't have to be a banker to realize what that meant. That meant they were freaking out that you guys were going to default on your loans. Well, they were certainly concerned, and they began to watch over the business very carefully.

They looked at our budgets, our cash flow. They insisted during this period that we set up our receivables, so they would go into a lockbox. Wait, let me just understand this. The money that you were getting from customers was going directly to a bank lockbox? Once they put us into the asset recovery department, that was one of their requirements. That's correct. So you didn't have control over your receivables? We had use of the money, but the deposit.

were going first to the bank and then we had to use of it. Wow. The money was not going to repay the loan. They were letting us run our business, but they just wanted to take greater control because they were concerned about whether or not they were going to get repaid. And there was certainly a big brother mentality to the relationship. No question about it. Yeah.

I mean, that must have been a very, very tense time because here you had this business that was on the up and up and you were starting to kind of think about new product lines and moving into nylon and other fabrics and all of a sudden this recession hits and sales drop. What about your partnership with Seth? Did that create any tension between the two of you, the financial situation? Well, certainly when a company is under duress like that, there's a tension that everybody in the company is aware of. Before this started, it was apparent that we had some different views as to the best way

to run the business and we had different vision for the business. What was the difference? Why did you see it differently? Like, what did he want? What did you want? I think one of the major differences was that I began to feel we had to build a brand. We were existing because we were offering a nice product, a differentiated product, but we had no brand loyalty among consumers. Nobody was saying, oh, I got to get a, I got to get a tu me leather duffel bag. They were just seeing these leather bags and saying, I got a leather bag. We weren't creating demand. We were getting sales because we were distributed by, stores where people were going, frequenting, looking to buy bags. But we were not creating any pull-through demand. And he wanted to stick with the existing business model? Well, let me just say he was more comfortable with the type of operation that we were running. I started pushing to put

more features into the bags and to essentially to upgrade the products that we were selling. because it became, again, pretty clear to me that there was a terrific opportunity selling more expensive products to frequent travelers. And we would have discussions about whether we wanted to do that. There was risk involved. It was quite expensive for the time. So we were able to function and do things together, but it was clear that we were seeing things somewhat differently.

And the financial crisis of the company certainly exacerbated the whatever differences there were. I mean, this is a problem, right, because you've got a partner, your equal partners, and your vision is diverging significantly, which we've told a version of this story on the show in the past. That is a recipe for a lot of tension. So what did you do? I mean, did you, how did you work through that? I mean, did you say, hey, let's try this out. Let's compromise. What was your plan at that point? Well, unfortunately, the tension, the real tension began when I decided that the business would be better off if one of us were running it, and I approached him and offered to buy him out. It was unexpected. It was out of the blue, and he was quite disconcerted by my suggestion that I wanted to buy the business, and that meant he would leave if he agreed, he would leave and go on and do something else. the discussions were on again, off again, and lasted the better part of two years because we couldn't come to an agreement. He did not want to leave, and I was determined to see it through. And there were a couple of times that I attempted to backtrack and say, well, let's find a way to resolve

there are different points of view and set up a working relationship, and we'll see this through together. But unfortunately, I was not able to repair the damage that was done by the fact that we're that I was the one who had approached him and suggested that I would buy him out. And during that period, while we were having these negotiations and discussions, unfortunately other people in the business became aware of it. We lost Jeff Brutelson, our designer, who was hired by Samsonite, our most important salesperson, who was a terrific guy, a very charismatic figure who everybody in the company loved and his customers loved him.

So that two-year period from 1983 to 85 was a struggle. There's no question about it. We were struggling. When we come back in just a moment, how Charlie goes all in on turning to me into an upscale brand. And how a snub from Samsonite turns out to be a blessing. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This.

I'm Guy Raz. So it's 1983 and Toomey is in trouble. It's recovering from a recession, its top designer has left, and Charlie and his co-founder are not getting along. Meanwhile, the brand is making its first major pivot, away from leather duffel bags and into serious luggage. In 1983, we did introduce our ballistic nylon line, our garment bag, which was designed by Jeff Brutelson,

before he left, became our best-selling piece. It was widely sought after in the industry because from a functional standpoint, we ended up thanks to Jeff's work with the best design garment bag in the industry. So from 1983 to 85, we had begun to recover thanks to the movement into nylon luggage and the designs that Jeff Fertlson had come up with

before he left for Sampsonite. So let me ask you about ballistic nylon because this is now kind of a signature of what we think of Toomey today and other luggage brands. This was a fabric, I think, that was developed literally for like flat jackets for the military. And it's this very durable nylon that you can throw around. I mean, there was a reason I called it ballistic nylon because it covered bulletproof vests. And I think a version of it still does.

And that started to kind of gain traction. I mean, you mentioned the garment bags. Was that also the ballistic nylon? Was that used on the garment bags? Yes, it was. It had four very capacious outside pockets. Our designer had to come up with the concept of putting upside down U-shaped flap opening. So if you imagine the way a hatch opens on a ship.

Yeah. Well, this would open the other way. The U-shaped tongue would flap down, and you had a very wide, easily accessible opening. So it was easy to see what was inside the pockets, so they were very easy to pack and unpack. Which became a signature of Tumulgages now is widely used on luggage everywhere, that sort of a U-shaped flap at the top of the tribal bag or the garment bag. 1985, that year you finally convinced Seth to sell his shares to you. How did you do that? Did you come to an agreement on the value of the company?

Is that what put it over the top? We did, and that was not an easy number to reach an agreement on. But we reached the number on the value, and it was for a fixed amount of money and a percentage of sales up to a cap for a number of years. So you had to basically come up with that cash? I had to come up with the cash for the down payment. That's correct. The business did buy the rest of his shares over time in terms of the fixed payments and the percentage payments. All right. So 1985, you're doing $4 million, a little over $4 million in sales. you've bought out Seth and now you are the sole CEO.

Yeah. And I guess you managed to rehire that designer who had left, who he went to Samsonite, not just a competitor, but I wouldn't even call him a competitor at the time because they were the 800-pound gorilla on the block. How did you convince him to come back? Well, my first phone call after we consummated the sale was to Jeff who was living in Tucson area. I was on at the time. And I think he realized that by leaving Sampson night and coming to Tumi, instead of being a designer, one of many designers for Sampsonite, he would be the designer for Tumie. My second phone call was to Scott Harris, who was our New York salesperson who had become a

manufacturer's rep. And fortunately, Scott also agreed to join the company and became an instrumental part of building our sales team. All right. So now that you sort of your vision is going to be the vision of what this brand is going to become, 1985, you've got the ballistic nylon bags and the travel bags. And did you start to think, you know, really we need to become a premium brand, like almost not necessarily a luxury brand, but a brand that, you know, is not for the everyday traveler, but maybe for the premium traveler? That was an evolution, again, as with most things in business. Probably by the late 80s, we were moving into what I would call a serious premium brand mentality. By 1990, nylon was dominating, and it was dominating because it really is a more practical material for luggage. And we started making nylon bags in the U.S. from day one, and that was probably in, I would think,

1983, and we were lucky that we discovered an ad in the industry trade journal, luggage travelware, I think was called at the time. There was a company in Georgia run by a couple of brothers who basically had a very catchy ad that said they did great work for low prices, and that caught our attention. We contacted them, started talking with them, and ended up working with them for many, many years. So, all right, you've got this bag. And who is buying them in the late 80s? I mean, where are you selling these bags?

Because I think at the time, you know, you were probably doing, you know, by the late 80s maybe, I don't know, $7, 8 million in sales. Where were they being sold? Because you still are at this point primarily, or I think entirely an American-based. I mean, that was where you were selling them. That's correct. Actually, I think we hit 10 million, little over 10 million in 1988. But we were selling them primarily through luggage specialty stores. They became our brand ambassadors because the store owners and their salespeople

became convinced that to me was essentially the best upscale, serious luggage for traveling professionals, for frequent travelers. In the 80s, as we began the 80s, there was a brand called Hartman Luggage, which was a 100-year-old, respected American brand that had done a terrific job with nylon luggage. They were using a lighter-weight packcloth nylon, khaki-colored. And Hartman had become a market leader, but the ballistic nylon, I think people saw it as more contemporary.

They responded to the black-on-black look. It was considered to be a more modern look. They liked the pocketing. And by the late 80s, Hartman, though still very respected, was becoming a little bit like an Oldsmobile. High quality, good brand, but it did not represent contemporary design. And Toomey was able to fill that role due to the black-on-black look. Now, by the late 80s, were you starting to gain traction as a brand?

I mean, was it still relatively kind of niche at that point, or did more and more people know what Toomey was? Guy, it was certainly niche. It was, had good traction within the trade within luggage specialty stores and the department stores that we were beginning to partner with at the time. But we began doing some consumer advertising by putting black and white ads into airline magazines. And this was before everybody was traveling with their laptop.

And people would actually pull out the airline magazines from the seat jacket. We had a black and white ad, two-thirds of a page. And the only color in the ad was we had a red, To Me logo on our luggage store. Oh, wow. And the ads were strictly feature and benefit. We had a picture of the garment bag. The headline was 500,000 miles from now.

This bag will look better than ever. We had bullet points and arrows going to the particular features. And we had enough people who were interested enough to perhaps take that ad and go into a luggage store and look at the brand that we ended up developing a bit of a cult following among the frequent travelers. And long about 1990, we had become a market leader in the high-end luggage business in the U.S. All right. So now I guess it's time to expand.

And I guess the expansion that you really wanted to focus on was Europe. Yes. For people who listen to the show, they know all about distribution, right? Like whether you're selling kombucha or cookies or whatever, like you have to work with distributors in many sectors and many industries, including luggage. And I guess you went to Samsonite and you sort of what, you kind of pitched them. You said, hey, would you guys be open to being our distributor in Europe? Because they were the huge player, right?

They were. They were dominant player in Europe and they were considered to be a more upscale brand in Europe than in the U.S. Samsonite was really the luggage of choice for business travelers. So I was a little bit naive and I, both naive and audacious, and I really had no business approaching them, but I was able to get introduced to the vice president of marketing for Europe, who was an American. He politely told me that they wanted to focus on their own brand,

that they really would not be an appropriate business partner for us. I think what he was really thinking is there's no way in hell that Tumi's going to be successful in Europe and why should we get involved. And I end up speaking with another Samsonite person, a highly regarded marketing guy who had left the company. And he basically took me aside and he said, look, you're going in the wrong direction. If you want to have any chance of being successful in Europe, you better do it yourself. You're not going to find a distributor who's going to devote the time and the resources and we'll have the patience to do what it's going to take to be successful in Europe. It's interesting because when you went to Samsonite asking for their help, they said no.

And that must have been quite discouraging. But upon later reflection, you would realize that that was actually good fortune that they did not become a distributor. Because then they would have been involved in your business in a way that maybe you wouldn't want them to be. You're absolutely right. Best thing that ever happened to us was that they thought it got brushed off, cut off at the past. Right. But I'm sure at the time you felt like deflated. Right? Like, what, I can't, how am I going to do this?

Only momentarily. Only momentarily. Yeah. Having somebody say no was not something that was new to me. You're used to it and you pick yourself up and you figure out a different approach and go off and knock on a different door. All right. So you know that you have to do this on your own. And there are ways to start, right? There's going to be trade shows in European countries and, you know, sort of different paths that you can enter. But you, from what I read, you believe that the path into Europe was through Germany, that, that, that, if you could make it in Germany, not France, not the UK, not Italy. If you could make it in Germany,

that was where you could really expand. Tell me why you were so fixated on Germany. Well, there are several reasons. First of all, Germany was the largest market in Europe. Even at that time, there was an East Germany and West Germany. Germans are inveterate travelers. Yes. Most Europeans, even at that time, were getting five or six weeks of vacation a year. they also travel a lot on business. Germany is a tremendous export country. I think they've got the fifth highest export level in the world even today.

So there's a traveling mentality in Germany, both for leisure and for business. And secondly, there was a large network of specialty stores in Germany. They typically would sell fashion handbags in addition to luggage. So these were thriving family businesses, like in America, many of them were second and third generation. So it was a very challenging market. It was a little bit like if you could make it in New York, you could make it anywhere. Germany essentially was the mother load, if you will, of the leather goods industry in Italy, in Europe, excuse me. But how do you do it? I mean, because Germans have a very high standard when it comes to quality, right? And so you better

be offering like the best quality product. So how did you even break in? What was the first breakthrough you had there and had it happen? Well, again, what you do in a situation like that is you go to people who know more than you do about potential solutions. In this case, I went to one of the top leather goods retailers in Germany, set up an appointment with him and told him I wanted to come down and talk with him about a new brand that was entering the marketplace. During the appointment, I pulled out a leather bag, and he took one look at it, put his hand on it, and he said, is this leather or plastic. And I knew we were in trouble because I had not, I had been in a rush and I didn't take, I really

didn't take enough time to pick out my samples carefully. And we were manufacturing our leather goods in Columbia at the time. And when the leather was good, it was quite good. Often it was mediocre. And in this case, it was one of the poorer quality pieces that had just slipped through. He asked you if your leather bag was plastic. That is, that is quite an indictment. He did it with a straight face.

He says plastic. That is not a good sign. Well, the good sign is he didn't ask me to leave. He was a gentleman, and fortunately he did not order any leather during that trip, but he did like the ballistic to the point that he said, would you mind take in order? And I said, gee, you know, I really came to see you to get some feedback on the marketplace, and we really haven't priced our products yet.

and my day was made when he smiled at me. He said, well, why don't you take the order anyway? You'll know what I want. And when you finalize your prices, you could just send me a coffee of the order with the prices. So at that point, I knew that I knew we had some possibilities. Wow. And that was strictly on the strength of just showing him a sample of that ballistic nylon bag? Yes.

He recognized the quality of the material, that it was a performance material that could create superior performance for the process. and he liked the design of the pieces. And throughout the 1990s, Tumi really began to expand. I mean, you eventually got into dozens of stores in Germany. You got into Herods in London. You were growing in Europe. You were also in Japan.

And from what I understand, you were on the road all the time. What about on the home front? I mean, you did it, was that challenging for you to be on the road? all the time you have a family and, you know, how did you cope with that? Well, I don't, certainly I could not have done what I was able to do if I didn't have, had made a great choice in terms of the woman I married. Cricket held the home front together. She was, she was working full-time herself.

She was an adult educator. But she was able to keep the kids pointed in the right direction. And essentially, my children were very understanding and support them as well. I was probably on the road, depending on the time of the year, 30 to 40 percent of the time during the 90s. Certainly in the 30 percent plus range. I mean, by the end, and I should mention throughout this time in the 1990s, you were still self-financing. You were not, you had no, I mean, you had some friends and family who'd put a little bit of money here and there, but you had no private equity money or any outside major outside investors, right? We did not.

But presumably to go even further, you needed. more money, right? Because just dealing with lines of credit and loans sometimes can't, it isn't enough. So I guess at a certain point in the late 90s or early 2000s, you made the decision that we should bring in some outside money. We should bring in some private equity capital. Yes. And I think you signed a memorandum of understanding with a private equity company in the year 2000. And they were going to make a significant investment into me, which was going to help you really scale even further, that money did not come in. What happened? Well, it didn't come in for a couple

of reasons. Well, one major reason. We signed the MOU in December of 2000. Unfortunately, December of 2000 was not a good year for this retailer. Christmas was, did not meet expectations. The dot-com bubble was about to burst. I think consumers were aware of shifting winds. the early months of 2001 were not good. The economy started to slip. Therefore, we started to miss our projections. And as we began missing our projections, the private equity firm, they came back once, they came back a second time, and finally they came back a third time in the summertime

and to renegotiate the deal because we weren't making projections. In August, I went back to H&Q, our investment bagger, and said, look, this deal wasn't going to happen. happen. Let's go back to the marketplace and we'll have to end this, I should say, end the MOU term and go back to the marketplace. And that was probably a month before 9-11, which turned the world upside down. And of course, the travel industry upside down. Because I think up until that point, you were averaging 20% growth year over year. You had to slow down. But as you say, you started to see some upswing a little bit. 9-11 happens. I read your sales declined by 40%.

Yeah, it was close to 40% right after. There's immediate halt in the travel industry. Stores stopped buying. People weren't traveling. They weren't looking for luggage. It was a very, very grim period. Did you have anxiety? Did I have anxiety?

You ask that in jest, I'm sure. When we come back in just a moment, How Charlie salvages the business eventually sells it and then goes back to the drawing board to create a whole new luggage brand. Stay with us. I'm Guy Raz and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2001 just after 9-11 and world travel has ground to a halt literally overnight. And once again, Toomey is in trouble. The first thing we had to do was create a plan to survive.

We were in a survival mode. And we knew the first order of business would be to cut costs. And that meant letting some good people go, which was very, very difficult because you develop personal relationships with the people in a small business. I think you had to lay off 150 of your 500 employees. It was definitely in that neighborhood. So for the survival of the business, we had no choice but to make those decisions. and yes, it was extremely difficult.

Charlie, when you are facing a situation where you've got to engage in mass layoffs and to save the business, at the same time, I think you're facing just an incredibly challenging retail environment. Like describe what was happening in the luggage business. I mean, were the sort of mom and pop stores that you were depending on, were they going out of business? There were a number of closures, absolutely. specialty store segment of the market became challenged during the late 90s. And when the dot-com bubble burst, they were challenged even more. 9-11 was kind of the hammer that caused a number of them to either go out of business

or to close their poorer performing stores in order to focus on the better stores and survive. So yes, we went from probably having six or 700 viable points of sale to, I would suspect we lost maybe a third of those after 9-11. Wow. And I guess you felt like you needed to do something to shore up the cash situation. Yes. So I gather you eventually found a private equity firm. They were called Oak Tree Capital.

They were interested in making an investment into me, and they became a majority shareholder. And I'm assuming in 2002 they got a pretty good deal. They got a great deal. They got a great deal. We needed the capital at the time. They did come in with taking a majority share of the company. The fact that I was the largest individual shareholder meant that I had a seat at the table with them. I was part of the board of directors, but I could no longer call the shots when it came to major decisions. Was it the kind of investment firm that looked for distressed companies? They did. They looked for companies where they felt that they felt had a sound concept, a business concept, but for one reason or another, we're going through tough times. And after 9-11, we certainly fit into that category. Yeah. I'm trying to get in your head at this time because I would have thought if I'm you, you kind of have no choice. You've got to take this in because you want to save the business. You want to save the jobs.

And you want to see if you could turn it around. So whether it was a good deal or not, and it sounds like it wasn't an ideal deal, you kind of. you kind of had to take it, right? Well, we had other P.E. companies that were interested, but most of them backed off because they were concerned about the potential for another terrorist attack. So Oak Tree, essentially presented the best offer that we had at the time. Right. And they took a very strategic view of the business. Their sole job was to create value

for their shareholders, for their investment. To make money. Yes. Sure. That's your job. They're not a charity. Right. And they were good strategists. They're a couple of young guys who engineer the deal where very smart, very capable. The difference between financial investors and other types of investors is that people are fungible, and they were less interested in the value that different people brought to the parts

of the business than they were in getting down to what was a reasonable head count and a reasonable fixed cost for the business. Right. And I understand that. The business isn't worth anything if it doesn't survive. So they brought, I think, sound business principles to the table when we had those types of discussions. You also had to tell your manufacturing partner in Georgia that you were moving your operations to Asia, that you could no longer afford to manufacture in the U.S.

That was certainly extremely difficult. David and Alan Rice had been terrific partners and become friends. And we had to move to Asia for a number of reasons, one of which we had to improve our, margins to give the company sufficient cash flow. It was something we had to do for the sake of the business. But I'm wondering, I mean, you're talking about this in a very level-headed way, and I think you are a very level-headed kind of, you know, rational thinker. I'm just surprised that there's no emotion here.

I mean, this is your business. I mean, you created this. You started this from a Peace Corps experience, and I'm just surprised that you're not feeling any emotions about this, because I would. I would be, I don't know, kind of tied up in knots. Well, this is 20 years after the event, guys. I'm sure there were various emotions at the time. But the first emotion, frankly, was appreciation of the fact that we were bringing

some money and that the company would live to fight another day and jobs were going to survive. Yeah. The brand would survive. And I was optimistic about the future. I thought that we would live and prosper and leave the agony of not. 9-11 behind us, and that's what in fact happened. I mean, the travel business, it took some time for it to return, but it did return. Did you start to see a steady uptick in sales pretty soon after that investment from Oak Tree?

We did. The brand was still very healthy. We did not succumb to the temptations of creating sales by any means. During periods like that, when companies are under duress, often they will broaden their distribution or they'll run constant price promotions to the point that consumers might lose faith in what's this product really worth. Consistent pricing is very important if you're developing a premium brand. So we hadn't done anything to damage the brand.

We had held true to our values. And therefore, as travel began to recover, people began having more confidence that security was satisfactory. Sales certainly recovered. and began recovering in 2002, recovered more strongly in 2003 and 2004. All right. So within two years of Oak Tree becoming a majority shareholder, they get an offer from a British private equity firm to buy out to me, reportedly for $276 million.

So I think they probably did pretty well in their initial investment. How did you feel about selling at that time in 2004? When they approached me in 2004 and said that they had people who were interested in the business, my first reaction was it's too early that we shouldn't be doing this. But they estimated that they would be able to get a large enough multiple, that they were very comfortable turning the business over quickly, selling out their stake and moving on to something else. That's the way P.E firms operate.

And was it clear to you that it was time for you to leave at that point? Yes. essentially the team that was involved with marketing the company would really have to be united in feeling that this was the best thing to do. And I was, they surmised correctly that I wasn't ready to do that. But that was it going to be it. I mean, 30, it's almost 30 years to the year, right? 29 years, June 2004, how was it? You were out. Your math is right. But you had, at one point, you had 500 people working for you, you had people you knew in Europe. You had people you knew in Japan. You had all these specialty

stores. You developed all these relationships. You invested all this time getting to know people who believed in your product. And now like one day you go from just, you know, constant calls and emails and faxes to silence. Well, you hit the nail on the head. There was more emotion involved with leaving in 2004 than there was bringing in Oak Tree in 2002. Because in 2004, was essentially closing the door. So quite a difference. And there was stomach churning and some soul searching. You know, I wasn't ready to stop working.

I still feel very positive about the company today. But it was time to move on and do something else. So meantime, you're no longer involved in Toomey. And that brand really, it goes from, you know, obviously being privately owned and private equity and different strategic iterations, it goes public in, I think, in 2012. And it, it was valued like over a billion dollars. I mean, I know you had no involvement at the time anymore, but what did you think? I mean, as you, you're sort of completely out of that business, but all of a sudden there's just this march throughout, you know, across cities around the world, you see tumie stores opening left and right at airports and,

you know, and, you know, Shams Salisay or wherever, wherever, you know, I remember what in Georgetown in Washington, D.C. Were you paying any attention to that? Well, I was certainly well aware of it. I was still traveling to Europe. There was honestly a feeling of pride at seeing the stores. Yeah, I bet. They were taking the brand,

and they were taking it to the next level and beyond. I was very proud of having been part of the foundation in the early years and very happy to see that it was flourishing. Yeah, I mean, did you, that's right. I mean, they, I mean, the new owners essentially took this brand that you created and they really did kind of take it to the next level, right, as a luxury brand. And they didn't, you know, they could have sort of cheapened it, let's say, and you would see too many luggage at Target and at, you know, at Filene's basement or wherever, you know, right, like cut rate prices. But they didn't do that. They actually turned it into a super premium brand.

Well, private equity people are smart business people, generally speaking, very smart business people. And I think they realized that Toomey's future was as a premium brand. The middle of the market's a tough playing field. There are a lot of people fighting for a share of the middle of the market. And we looked upon it as no man's land. There's some good brands there. There's some good companies there. But I think playing at the premium end of the market.

And I think Toomey is not really luxury. It's still premium. Yeah. It's luxury, perhaps, for the luggage category. But as brands go, it's a high-end brand and well-made and so on and so forth. But beautiful stores, but they've maintained the integrity of the product for the most part. And I think the brand is still going very strong today. It's owned by Samsonite today.

They acquired it in 2016. It's a bit of an irony. I mean, the same company that was not interested in distributing it in the early 90s, is now the owner. How the worm turns, though? Yeah. So I wasn't shocked when Samsonite bought it, but it's not where I expected it would end up. I thought it would probably end up as part of one of the luxury houses as opposed to with Samson's

night, which is basically a very broadly distributed brand. Meanwhile, you had been doing consulting in the luggage business during this time, and you were working with a guy who worked with you at Toomey. He was an executive at Toomey. Yes. Larry Lean. Larry was a, uh, came to me and said, look, I'm leaving to me. Uh, perhaps we can do something together. And he worked with me for a number of years, uh, where we were consulting and distributing in the luggage and leather goods area. And I guess what, like around 2015, what, like somebody came to you guys with a new idea. Is that right? Yes. Probably around 2015 or 16. Uh,

We were approached by a couple of people, retailers that we knew, who essentially had turned to manufacturing, hard side luggage in America. And they approached me and they said, look, we think we've got a good product concept. It's high quality. We're making America, but we're having difficulty finding customers. And I understood completely what they were talking about. It was very difficult for a new brand to break in. Their product was high priced. we thought the designs needed work, we thought it needed a new name.

We basically told them that we thought that the traditional approach of selling through brick and mortar stores for a brand like theirs that wasn't already there was a very, very difficult road to follow. And we basically said if we're going to do this, we've got to focus on direct-to-consumer. Let me just understand this from a moment. I mean, this, so sometime in the mid-2000s, like mid-2010s, like 2012, 13, 14, 15, you started to see a very, very significant shift in luggage, direct-to-consumer, sort of the, not the upper range, but sort of below the Toomey range, right? Away suitcase is the classic example. We told that story on this show many years ago.

They were, their content marketing was really smart. They were, you know, their social media presence was great. They were selling travel. They were selling the travel lifestyle. They weren't selling suitcases. Did you notice that? Did you see that? I began to notice them probably a six months to a year after they had launched.

They came out of nowhere. There were a couple of young women who did a terrific marketing job. And as you said, they sold the lifestyle. They sold a travel adventure. They created an aspirational brand. They were targeting initially young millennials. You're right. So meantime, around that time, you were approached by two people who want to make luggage.

And I should mention at this point, Charlie, you're in your 70s. And from what I understand from clearly what happens is, you decide, yeah, I'm going to jump into another entrepreneurial venture at this point in my life. which is awesome. But tell me how you were convinced that you wanted to do this. Well, it really was stepping back and looking at the marketplace. During the 90s, Toomey black-on-black luggage, mostly ballistic nylon, had become really the travel uniform of professionals. Very broad market following, and it became very normal to see lots of Toomey when you were traveling.

I thought that there was room for a brand that essentially, could produce a high-end premium product that would be quite different from what Toomey was doing. Rather than gearing our product for Road Warriors who wanted to have a status piece of luggage that in this particular case, their boss might be carrying, we were essentially hearkening back to the early days of Toomey. We were looking for early adapters who were not afraid to adapt to adapt new products and essentially try something new if it was good-looking and well. made and would essentially differentiate them, allow them to stand out from the crowd. So basically, you landed on this concept of, instead of just a, you know, we design what the suitcase looks like and sell it, you basically have a number of shapes of different pieces

of luggage, but you allow, would allow the consumer, the customer, to design, to basically choose the colors, to the color of the suitcase, but not not. not the entire suitcase. They could choose different colors for different sides of the suitcase, the color of the fabrics, the zippers, the wheels. It's sort of like Buildabair.

You know, like Buildabair, but for suitcases. You know what Buildabair is? I do. That's a good analogy. Yeah. Yeah. You can totally customize

your stuffed animal, right? So this is a concept that really, did it exist in luggage at all? It did not. Not the way we're doing it. We allow our customers to personalize seven or eight elements and we don't charge them extra for it.

I should preface this by saying customers really look at price, right? But you're going for a sort of a more premium segment of the market. You offer total customization of a suitcase and it's made in the U.S. In the very same place where you made the tomy bags at the factory in Georgia, right? Yes. We've got an ideal situation where we've got the rice, brothers who are Toomey's original manufacturing partners. So that's a terrific outcome from my point of view, and we're able to do it in a way that allows us to have a reasonable price for the product.

We're reducing the carbon footprint because we're not shipping container loads of empty suitcases across the Pacific. Now, we do source some components in Asia that are not available in the U.S., but whatever component we can source in the U.S. we do, and the assembly takes place in Vidalia, Georgia. I'm just curious to start a luggage company like this. How much did you have to raise? Are we talking tens of millions of dollars? I wish that we had tens of millions of dollars to put it to the business. But, but you know, again, I think too much money too fast isn't necessarily good for a business.

No, we did not raise tens of millions of dollars. We bootstrapped the business. We made a decision early on that as much as we admired and appreciated what a way had done with their business, is that we were going to grow at a reasonable pace. Yeah. We did not want to be rushing from one round of capital raise to the next with venture capitalists. Away had really meteor, you know, grew like a comet. Meteoric rise, yeah.

But they brought in a lot of capital. They raised a couple million dollars. They did. And then they raised $10 million. Then they raised $50 million. Then they raised $100 million. And they created tremendous valuation. and the early shareholders have done very well, I'm sure.

But growing a company too fast is a very risky proposition from a number of standpoint. So we were not going down that route, and therefore bootstrapping made the most sense to us. So you launched this company, and I think in 2019 you start to get some traction. But you're not going to be a market leader soon. But from what I gather in 2019, you're getting a little bit of traction. and things start to look pretty cool and interesting. And then like a great entrepreneur, Charlie, you've got one more crisis in you, at least one more crisis in you, because that is what you need in life. And the crisis is COVID.

And once again, a massive disruption to the travel industry, the biggest disruption since the previous one that you'd already experienced after 9-11. I mean, I mean, I've got to be thinking, if I'm you at this point, I've got to be looking up at the head. heavens and say, God, what are you, are you, I mean, are you just trying to torture me again? It's like you're Job and you're looking up and you're saying, what did I do to deserve this? Well, talk about being blindsided. I certainly nobody saw that coming. The impact of the pandemic was more, and I don't say this lightly, it was more than the impact of 9-11 and the financial crisis of 2007. made put together. It was more than that put together. The travel industry came to a screeching halt. And sales dropped by 60, 70, 80, 90 percent. I think the month of April, DTC brands,

publicly announced that their sales were down by 90 percent from one month to the next. So you go into a survival mode again. Fortunately, we did not have a lot of fixed expenses. We We were able to make adjustments in our variable span. We curtailed our advertising big time, as you would imagine. We focused on the product. We focused on making the product better. And we made a number of improvements during the product during this period. Small things, many of which the consumer would notice, but essentially make the product increasingly better.

So, but what did you do differently? I mean, of course, in after 9-11, you have a team 500 people. You are much leaner now. and presumably, you know, because you'd been through this, what did you know about how to weather this pandemic situation? You must have learned things from previous crises. So what gave you confidence and what did you do, rather, that helped you kind of weathered the storm? Well, the confidence comes from the fact that you're right, I've been through at least four crises, four major crises. is the confidence that the market will come back.

And we also were confident that we would continue to fund the business and we would be standing when people began to travel again. So that enables you to look at the numbers, which were depressing, because while we continued to book product and make and ship product, the numbers were much lower than we expected during 2020 and 2021. The second part of 2021, the market has become healthier, month by month, but we're still not where we would have been if the pandemic had not come along. You know, I love that you really have been thinking in an innovative way over the course of your

career, you know, from the leather duffles to the U-opening to the ballistic material, now a completely customizable suitcase. What is going to be, what's success to you? Like what has to happen for you to say, yep, we did it with Rome. It's successful. Is it when it becomes a $100 million business? Is it when it's, I don't know, ubiquitous? Like Tumi, how would you define that?

When Tumi was established back in 1975, to think that it would become, in my lifetime, I think our peak year was 140 plus million, and now it's over 500 million, that would not have been part of my game plan. I would have not have dared to dream that we could create a brand that was that large are that important. So where can Rome go? Like a $50 million, $100 million brand? Absolutely, no question about it. But I think I'll start to feel that we have created a sustainable brand when the buzz begins. People are coming to us saying that they discovered us not through the press, but a friend of theirs recommended Rome. Peer reviews and referrals by friends, I think that's the real

mark of a brand coming of age. That's what's going to just put the brand on the map. Charlie, when you think about your entire journey, your whole career, I mean, you built an iconic brand. I mean, you created an iconic brand. To me is in every airport and anyone who's knows suitcases, has seen it. It's a great brand name. And now, you know, you've got Rome and all the things that you've done in that time. How much of the success that you've had, Do you attribute to the hard work, the skills that you brought? And how much do you think has to do or had to do with just luck, getting lucky, finding the right partners, meeting the right people, getting a lucky break here and there? Well, I think we've had plenty of luck along the way.

I think that, you know, meeting the right people, marrying the right woman, hiring the right people, or being lucky enough to be exposed to talent. There is an art and a science to hiring people, I think, would be the best way to express it. And part of that art involves luck. We were lucky to meet the Rice brothers in Savannah. Larry Lean was a stroke of luck. If I hadn't attended that industry event, I never would have met Larry. So I think that if an entrepreneur or a business person always wants to be the smartest person in the room, I think their opportunities are limited.

I always took great pleasure in being able to find people who had different skill sets and were smarter in the areas that they were stronger than I was. I think that that's how you get one and one and come up with three. That's Charlie Clifford, the co-founder of Toomey and Rome. Charlie, I'm telling you, your next marketing push, it's like Buildabair just for luggage. What do you think? Are you suggesting that as a headline guy? Yeah, yeah, just try it out. test it. I'll present it to the marketing committee. If I presented it, it would immediately get

declined, but I'll present it as a guy's idea. Hey, thanks so much for listening to the show this week. Please do follow us on your podcast app so you always have the latest episode downloaded. If you want to contact the team, our email address is hibt and id.wondery.com. If you want to follow us on Twitter, our account is at how I built this, and mine is at Guy Raz. On Instagram, We're at How I Built This, and I'm at guy.org. This episode was produced by Liz Metzger with music composed by Rumpine Arablewe. It was edited by Neva Grant with research help from Sam Paulson. Our production staff also includes J.C. Howard, Casey Herman, Josh Lash, Alex Chung,

Carrie Thompson, Catherine Seifer, Elaine Coates, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This. Thank you.