A Chat with Fred Meyers, President & CEO, The Queensboro Shirt

© Profile of Success, Catalog Success magazine, August 2006

Catalog Success: When was the catalog established?

Fred Meyers: The company was founded in 1982, and we mailed the first catalog in 1987.

CS: What is your primary merchandise?

FM: Men's and women's shirts, hats and bags with custom-embroidered logos

CS: How did the company get started?

FM: The company started as a hobby when I was a college student in New York. The Lacoste alligator shirts were kind of at the height of their popularity. I had grown up wearing the shirts and had always liked them, but as they got to be really popular, and it became a status symbol, that turned me off. I was saddened by the fact that I couldn't wear these shirts that I loved, but I thought wouldn't it be great if you could get a shirt that was the same high quality as that Lacoste shirt, but with anything you wanted on it, so you wouldn't have to use Lacoste's logo, but you could use your own logo. It started off as a hobby. I found some resources, some shirt suppliers and some embroiderers and things like that. And I founded it kind of goofing around while I was a college student. I got a couple of customers. I then went directly to Columbia business school from college. I continued to work on it, and I was making a little money on it, but it wasn't a huge moneymaker. I kept working at it through business school, and it was very interesting to have this little project going on while I was still in school. It put what I was learning in school into context. When I got out of business school, I wasn't really all that ready to get serious about the world. Having gone straight to business school from college and not really having worked ever. So I decided to just run with this thing until I hit a brick wall, and then I'll get serious about life, and that was 25 years ago.

CS: You mentioned that the first catalog mailed in 1987. Was that while you still were in business school or after?

FM: That was after business school. We started off marketing mostly through space ads. In the back of the New Yorker Magazine, Wall Street Journal, and a few airline magazines, for instance. In its early form, all we offered was a men's polo shirt in two colors, white and navy. Our first new product introduction was when we added red. As I started getting a few more customers, I realized I'd have to come up with a few more products. So we added bags and hats and eventually had enough for a catalog. We started with a 6" x 9" catalog, which would fit in a standard size envelope and could mail first class at the regular letter rate.

CS: What was your biggest challenge in the first few years?

FM: hat's always an interesting question in retrospect. From my perspective now I can say that the biggest challenge was that I had no idea what I was doing. But sometimes your biggest weakness can be your biggest strength. Everything was approached with a fresh perspective. I never capitalized the business; it was always financed from order to order. As we started to get a little traction, and started growing, it was very challenging. But it really doesn't take that long to go from zero to a couple hundred thousand dollars and from there to a million dollars. But there are a lot of physical challenges to managing that growth, especially if you don't have enough money to go ahead and buy a big warehouse. In the first 12 years in business, I moved the whole business nine times. I would keep going into a space that was an adequate fit for where I was at the time, but a year later, I'd be twice as big. And we weren't going from $4 million to $8 million, this was just $200,000 to $400,000. There were a lot of logistics and movement involved. As the business got a little more established, there were some technology challenges, in terms of what the proper platform was for building the business. And if choose wrong, I've seen a lot of people that have gotten taken down. With any small business, finding the right people to help you grow is always a challenge. I've made more than my share of bad hires over the years. Hopefully I've learned something, but I still make bad hires from time to time. You just have to learn to overcome the bad decisions that you make, because it's inevitable that you're going to make plenty of them.

CS: When did you hire your first employees?

FM: I hired the first one when I was still in business school. I hired an assistant, then I hired someone to help answer the phones. I got out of business school in 1983, and that's when I hired my first full-time employees.

CS: Is there a particular event that was particularly challenging? How did you get over that?

FM: I started the business in New York, and as I mentioned, I started moving every two to three years. I was having a lot of trouble putting together a group of people with any kind of longevity. I'd hire someone, get them trained, and they'd either get married and leave New York, or they'd go to work for a bigger company. New York is a great place to start a business, but it's a pretty difficult place to run a business because you're always competing with the biggest companies in the world for labor. We were growing, but it was really hard to put a good group of people together. I was in a loft in the Williamsburg section of Brooklyn, back before Williamsburg was the hot neighborhood that it is today. And I was not getting and heat from my landlord. I had about 30 people working for me at the time, and most of the orders were coming in by phone at that point. And we were taking orders in this loft and there literally was ice on inside of the windows; that's how cold it was. And we were close to the East River, and the wind would just come whipping up off of the water. So I got into a dispute with my landlord and ended up losing the dispute. My lease was terminated. I was confronted with the situation of having to find another similar kind of place in New York, but the real estate market was heating up in those days. You were seeing a lot of places that were asking a lot of money for pretty depressing looking work situations. I still really believed in the concept. My customers were telling me it was a really good idea, but I still hadn't figured out how to run the business properly. I was struggling to find people, to pay the bills, and it was challenging just dealing with New York. I decided to move the business to a different environment to see if maybe I couldn't do better in a different place. So decided to pack everything up and move to Wilmington, N.C. We were doing a lot of the manufacturing of the shirts in the Southeastern United States at that time. I thought I'd be a little closer to my suppliers, and the culture of the South was different. I just thought it would be a good fit. I didn't have much money at the time, so I wasn't able to do extensive planning for the move, but we got a couple of tractor trailer trucks, closed down business as normal in New York on a Friday, moved over the weekend, and opened for business the following Monday in Wilmington. To our customers it was totally transparent. We've been down here since 1995. So we're over 11 years. And in the past several years, we've really started to do well. I've got a good group of people. I've got a very nice location. For Wilmington, they consider kind of rough, but considering where I was in Brooklyn, this is like Fifth Avenue if you ask me. And we're one of the more attractive employers in town. We're on the beach in Wilmington, and it's kind of a tourist oriented economy, so there aren't a lot of great jobs. We have some of the better jobs available. So we get a lot of great people who really want to live in this area because of the lifestyle. It's a great place to live. We survived the move, and it took some time to get reestablished. It took some time to repopulate the company.

CS: You mentioned on your Web site that you eliminated print catalogs from your marketing plan. When did you do that and why?

FM: I guess it was around 1999 or 2000 that we started messing around with the Internet. Our first site was in 1998. We started to get serious about e-mail marketing in 2000 or so. It required a lot of behind the scenes development to make sure you could process the orders. You didn't want to cause more trouble than you were solving. We had always produced our own catalogs. And producing the catalog, as anyone knows, creating each catalog is like birthing a child. It's a very difficult and time-consuming process, especially if you're trying to run a business at the same time. As we started to send out more e-mails to our existing customer base and began to build a file, we found that we were getting pretty good response from these promotional e-mails. We found that we were getting worse and worse at getting our catalog deadlines met for production. So we went from producing 12 catalogs per year to producing 10 because we missed a couple of deadlines. Then we went to eight and then to four. And the next thing you know, we never got around to producing a catalog this year. We'd sit at our meetings and decide on what to do. And we always said, we'll do this one things first, then get back to the catalog. And we eventually saw we were able to replace the catalog with the e-mails, and our sales actually went up without going back down. Our last catalog was in 2003. We sent four that year. Right now we send some postcards about once a month or every six weeks to our customers. That's the only marketing we're doing offline right now. Doing away with the catalog wasn't a planned death. It happened over time, from neglect more than anything else.

CS: I noticed on the Web site that you kind of selling the idea of not printing a catalog as a cost-savings to the customer. Have you always done that?

FM: We've seen the change of the economics in the business. It used to cost us more than $20 each to get an order from an existing customer, or reactivate them. Now it costs us less than $5, and sometimes less than a dollar. Our average order is $175 to $200. That's a huge cost savings there. It's really let us be a lot more competitive on our pricing. In fact, it's allowed us to under-price the market. Lands' End for example, their cotton polo shirt, their standard shirt, with embroidery the shirts end up being $28 each. And their minimum order is six shirts. Our shirts are the same quality, the same quality yarn and construction, although we style our slightly differently. We designed a shirt specifically for embroidery and office wear. And we sell that for $14.95, including embroidery, and a lot of times we put it on special for $12.50. So we're less than half the price of Lands' End, and they've got their catalogs to support.

CS: You credit that to the lower cost of acquisition and reactivation?

FM: Lower cost of reactivation and just overall operating efficiencies. The work we've done to integrate our Web site into our order processing system also. They've got to have great technology at Lands' End presumably. One time I was reading an e-mail they sent out to their customers describing a typical CSR day. She said, "I come into my desk each day and I log into the seven systems I need in order to track all of my orders." And she was bragging that their systems were so sophisticated. But we understand why should could be signing into seven systems, because we used to do that to. But we've integrated that all into one system now. I don't know if they've done that as well, but our order processing and our cost to process an order as we've moved to the Internet and e-mail has gown from $14 each to under $5. And that involves a lot of answering customer questions as well, not just order processing. That's our total customer service budget divided into revenues.

CS: What are your key points to success?

FM: We've not always operated 100% smoothly and efficiently. We've had periods where we made more errors than we should have and when it's taken us much longer than it should've to turn around orders. But the quality of our products always has been great. We've always guaranteed everything we did unconditionally for the past 10 years. We've never argued with the customer if they haven't been happy with the quality of our product. When we've made mistakes, we've gone to extraordinary lengths to solve the problem for the customer, whatever was involved. Even if we weren't running on all cylinders all the time, our customers knew we were going to work hard to fix any problems or issues. That's just a lot of hard work, and it can be difficult. But the fact that I've been able to keep as many customers as I have over the years because of the effort we've put into the relationship has enabled us to get through the difficult times. The other thing is just to always be innovating, and trying to improve your processes. Lower your prices whenever you can. Whenever I've been able to, I lower my prices, rather than keep that margin for myself. I've always been a believer in the fact that the lower the prices are, the more we'll sell, and the more money that we'll make. A lot of people don't feel that way, but we do a lot of price testing on our promotions, and almost invariably, the lower the price, the more money and more profit we make on the promotion. But originally, our minimum order was 12 shirts with the logo, back 20 years ago. Ten years ago we were able to drop it down to six, and four years ago we dropped it to four. And all during that time, we were lowering our prices as well. We kept trying to improve our efficiencies and invest in technology. We were early onto the Web, which gave us a big advantage over a lot of people.

CS: What's the biggest mistake you ever made in the business and how did you recover?

FM: I made some hasty decisions to hire key managers, who I thought were going to be key managers without thinking through the whole process. And that set me back a lot. There have been a couple... One of the lessons of organization building is that you really have to be systematic in how you add to your organization, but the lowest levels all the way to the highest levels. You don't meet someone and hire them. You have to have a process you go through. As much as you would like to short-circuit the process, they need to fit into the organization; they need to understand the culture; they need to have the skill and talents and the temperment to mix with other people. Early on, I made a couple of bad mistakes by not doing that. And the wrong people in the wrong places can really mess up a business. Particularly if they're involved with sensitive areas like finance or customer service. The way I got through that was to deal with the problems as soon as they were recognized. Fortunately, I'm one of those people that know a little about a lot of things, but not a lot about any one thing. So I've been able to go into the areas these people were responsible for, take over the areas, and fix them and get them back on track myself. And it set us back, it set us back a lot of years, but I'm getting better at it, and I've made some very good hires also. But there should be no luck involved. It should be the result of a process. I think that's a hard lesson to learn.

CS: Any goals for the business?

FM: We'll do $7-8 million this year, and our goal for the last few years is to get to $10, and we're on track to do that next year. That's our short term goal. My big picture goal, and I've always been much more interested in being a really good small business than a mediocre bigger business. I wasn't interested in hitting $10 million in sales just to say I had a $10 million business. I wanted to be a really great $10 million business. When I say great, I want something that runs really well. I want customers who aren't just satisfied, but happy and delighted with our work. After 10 comes 20, and after 20 come 50. As to how big the business can be, I think that's just a function of how good we are. Businesses keep reinventing themselves. As our minimums and prices go down, we're on the border of serving the consumer market, which is sort of what I was thinking when I started out. I wanted a consumer-oriented business, but businesses actually had the logos, whereas most people don't have their own logo they want to promote and publish.

CS: What about this business appeals to you?

FM: The business is great. I love it for a bunch of different reasons. I love the fact that we have a product that's tangible, that you can touch and feel. In business school, a lot of people were getting jobs on Wall Street and consulting services, and to me, I love the fact that I can wear our product. I love the way our shirts feel. I like being able to develop and sell fabrics, design a product and see it come to fruition. On the marketing side, it's been great to utilize all these new technologies as they develop. I remember when the fax machine was invented, and we were able to fax insertion orders. All of a sudden customers could fax us orders. It was clear as soon as the computer was developed what kind of impact it would have on the office environment. And then the Internet after that. To be able to have a business that's been able to walk through all of these technologies has been a great experience. It's been intellectually satisfying.

CS: Do you have any hobbies?

FM: Well, I've got five kids, ages 6 to 15. That keeps me pretty busy. I love to play tennis. I play three to four times a week and I'm working hard to improve my game. We're down on the water, so I love to go to the beach with my family. I actually like looking at the water rather than being in the water. But I read, a lot, fiction and non-fiction. I love movies. I go to the movies once a week with my wife. We have a date night on Sunday. We can usually find a decent movie to go to, but it's been a bit of a drought this summer.

CS: Favorite book or movie?

FM: My favorite business book is probably The Fountainhead, which people don't always see as a business book, but it told me that it was okay to go out and make a living. It even says that there's something noble about it if it's done properly.