The Rise and Fall (and Rise Again) of Joe Boxer How a quirky designer label was saved from near-death to become a billion-dollar brand. And how it might help save Kmart too.
(Business 2.0) – Nicholas Graham loves to create a spectacle. Like the time he dressed up as the queen of England, suspended himself by a crane 100 feet above Times Square, and tossed boxer shorts attached to bagels to the crowd below. Or when he flew 200 magazine editors from New York to Iceland for a fashion show that featured a model singing the Icelandic national anthem while wearing an outsize mirrored bustier and towering white Viking horns. When the local crowd unexpectedly stood up, sang along, and wept with patriotic pride, Graham was in heaven--it made the moment far more surreal than anything he could have planned.
Graham's title is chief underpants officer of Joe Boxer, the company he founded in his San Francisco loft in 1985 when his career as a punk-rock singer was going nowhere. A tall 44-year-old man with a rebellious spike of blond cockatoo hair, Graham always looks like he just woke up--forever running his hands through his hair, yawning, and fumbling for a cigarette. When not performing, Graham is soft-spoken and even a bit shy, though he also has a knack for one-liners that let him keep up with friends like Robin Williams, exemplified by his motto for the Joe Boxer car entered in the 2001 Indianapolis 500: "No skid marks."
Thanks largely to Graham's bizarre stunts, Joe Boxer became one of the hottest brands of the '90s while spending almost zero on advertising. What Graham was selling didn't lend itself to traditional advertising anyway. Joe Boxer fans were buying a hip, funny, slightly subversive sensibility that made them feel instantly cooler, smarter, and more fun. By the end of the decade, Graham had created a business with 140 employees and revenue of about $100 million.
But imagine John Cleese running an underwear company and you get an idea not only of Graham's comic brilliance but also of his managerial acumen, which brings to mind Basil Fawlty chasing Manuel around the kitchen. By late 2000 the company's finances were so badly bungled that Joe Boxer had fallen deeply into debt and nearly went bankrupt.
Today, however, Joe Boxer is back, saved by a small Connecticut apparel firm called Windsong Allegiance, which bought it in April 2001 and then promptly struck gold. It signed an exclusive deal with Kmart to sell Joe Boxer products ranging from underwear and sheets to shower curtains and watches.
Since the launch at 1,800 stores nationwide in August--with Graham happily shooting people out of cannons at a Detroit Kmart--shoppers have gone wild over Mr. Licky, Joe Boxer's signature yellow smiley face. After ringing up almost $200 million in sales in its first three months, Joe Boxer may be the most successful product launch in Kmart's 102-year history. Not a bad deal for a retailer that has been closing stores and firing workers in droves while struggling to emerge from bankruptcy. But it's an even better deal for Joe Boxer, the left-for-dead designer label that now looks like a billion-dollar brand.
Joe Boxer was built on a lie. Every artist tries to convince his audience that the world he imagines truly exists, and Graham, at heart, is an artist. When he arrived in San Francisco in 1980 from his birthplace in Calgary, Alberta, he didn't have enough money to buy the skinny ties everybody was wearing, so he made his own and sold them to boutique shops. When he approached Macy's, the buyer naturally asked about his production capacity, so Graham waxed eloquent about his many factories--in Italy for leather, in China for silk, in Egypt for cotton. "I lied in such clear detail that I frightened myself," he recalls.
Macy's asked him to create a line of boxer shorts. So Graham came up with wild concepts like a red tartan number with a detachable raccoon tail. Ask him why he named his company Joe Boxer and he shrugs. Why did he dress up as the queen of England in Times Square? He just thought it would be funny.
Joe Boxer was never a character, even a fictional one. It was an aesthetic Graham created from things he loved: '50s retro style, Jetsons futurism, rock music, pop art. Like Andy Warhol, he enjoyed toying with cultural icons. During his first year, he got the idea to put images of $500 bills onto a pair of boxers, figuring, "Money, underwear--what could be more sexy?" A kid playing in the garbage found Graham's discarded silk screens and showed them to his father. The Secret Service showed up the next day with badges and guns to investigate a possible counterfeiting case.
It was the kind of hilarious moment that Graham lives for. A day later the San Francisco papers ran stories about how the feds confiscated fabric for thousands of pairs of Joe Boxer shorts and burned them in a bonfire. Graham was ecstatic, astonished at how easy it was to get such publicity--for free. So began his career as a modern P.T. Barnum, updated to include Monty Python, John Waters, and the European Dadaists.
Graham put Joe Boxer undershorts and a pair of Russian boxers inside a rocket and tried to shoot it into outer space. He staged the first-ever "in-flight fashion show" on Virgin Atlantic Airways, during which Graham and Virgin chairman Richard Branson dressed up as stewardesses and announced that "U.S. Customs requires that all passengers change their underwear." As a testimony to his stunt marketing, Joe Boxer's undergarments began showing up in movies including Pulp Fiction and Madonna's Truth or Dare.
Graham had begun to realize that his greatest talent wasn't in graphic design, theater, comedy, or music, though he was gifted in all those areas. His art was branding. "The brand is the amusement park," Graham began to say. "The product is the souvenir."
Like many of his pronouncements, this makes no sense at first. But hang around with him for a couple of days and it begins to sound like genius. When a couple goes shopping and starts laughing at Graham's glow-in-the-dark underwear that says "No, no, no" in daylight and "Yes, yes, yes" in the dark, they have entered the amusement park of Graham's soul, a mad and beautiful place. When they buy the boxers, as he sees it, they are actually taking home a souvenir of that experience.
Graham does not seem driven by a salesman's need to persuade you to buy something. What he really loves is creating an experience for that couple in the store--and perhaps again later that night--that provides a respite from the insanity of the modern world, a single precious moment that makes them stop, do a double-take, and laugh. More than anything else, that's what Graham wants--to make you laugh.
The amusement park of Graham's mind became such a compelling place to visit that sales of his souvenirs grew by 10 to 15 percent a year. The goofy guy with the cockatoo hair found himself running a substantial company--not just any company, mind you, but an apparel firm with all the inherent complexity. Graham hired presidents and chief operating officers to help with the dizzying details of contracting with manufacturers in Turkey and Thailand, making shipping arrangements, maintaining quality control, and fighting for shelf space. But for most of its life, Joe Boxer had no chief executive, only a chief underpants officer.
The joke began to wear thin as Graham's company hemorrhaged cash, eventually racking up $18 million in debt. Bill Sweedler, CEO of Windsong, which later bought Graham out, blames the debt on "ridiculous spending" and cost overruns like paying 30 to 40 percent too much for manufacturing. "They didn't know what they were doing," Sweedler says. Graham concedes that Joe Boxer could have been better managed, and adds that a failed Internet venture and expanding too quickly into other clothing lines also contributed to the debt.
Could his extravagant stunts--like the talking vending machine that dispensed underwear in cans--have anything to do with it? Graham says that joke cost "almost nothing." What about flying 200 fashion editors to Iceland for a 48-hour, all-expenses-paid runway show? Just $150,000, he contends, since sponsors picked up much of the tab. Launching underwear into space? A mere $20,000.
Whatever the true reasons, Joe Boxer was in such bad shape that in early 2001 a single lawsuit sent it over the edge. Van Mar, a New Jersey-based licensee of Joe Boxer women's wear, claimed Joe Boxer had launched its own line of women's undergarments before the Van Mar contract had expired. Around that time Graham hired a chief executive, an industry veteran named John Short, now CEO of the Leslie Fay apparel company of New York. It was too late. The court ordered Joe Boxer to pay Van Mar $3.15 million.
Graham's company didn't have the money and had nowhere to get it. By early 2001 he was ready to file for bankruptcy (the press release had been written) when Sweedler arrived at his door.
The son of an apparel entrepreneur, the 37-year-old Sweedler had heard rumors of Graham's troubles. He had worked at Polo Ralph Lauren during the late '80s and in 1992 teamed up with his father, Joseph Sweedler, to create Windsong. The company, which licenses designer labels and distributes branded underwear, is a $150 million business today.
Sweedler was amazed that Joe Boxer, with steadily rising sales and an astonishing 87 percent brand-name recognition, could be such a mess. While other apparel companies were just waiting for Joe Boxer to go bust so they could snap it up for almost nothing, Sweedler says, he thought he could make the company work, debt and all. Graham had no choice. Windsong acquired Joe Boxer in April 2001 in exchange for assuming its enormous debt. Sweedler took over as CEO, retaining Graham in an advisory role, and within a week was on the phone to Kmart.
It hadn't declared bankruptcy yet, but Kmart was in terrible shape too. Wal-Mart, the largest retailer on the planet, was luring customers with lower prices, and Target was enjoying great success as a chic alternative, battling Kmart for the role of the No. 2 discount chain. Still, Kmart was a $36 billion company with 2,100 stores at the time--twice as many as Target--and could boast that 90 percent of the U.S. population lives within a 15-minute drive of its doors.
Most important, Kmart was a pioneer in one respect--signing famous brand names to exclusive contracts. Martha Stewart's $1.5 billion in annual sales was proof that even a troubled retailer could successfully market an upscale brand to the bargain-hunting masses. Kmart had begun aggressively expanding its "portfolio of brands" to challenge Wal-Mart and Target. It bought exclusive rights to sell Sesame Street products in 1997, and this year signed up Disney to make a line of kids' clothing.
But Kmart had nothing to woo teenagers and college students. Sweedler offered to create a special line of clothes called Republic of Joe. Kmart said forget it. It wanted the magic Joe Boxer name exclusively or nothing. Sweedler declined. Two days later, Kmart called back and said, How much money do you want?
"When I heard that," Sweedler recalls, "my ears chimed."
Sixteen hours later they had a deal. Thirty million people stroll through the aisles of Kmart each week, giving the Joe Boxer amusement park an audience beyond Graham's wildest dreams. But it was a bittersweet moment. By then, Joe Boxer wasn't Nick Graham anymore.
Clearly, the Kmart deal was a grand slam for Windsong. In exchange for giving the retail chain exclusive rights to Joe Boxer products for five years, Windsong received a lump sum that Sweedler will only say is "significantly higher" than the $24 million Target agreed to pay designer Mossimo in a similar deal in 2000. Windsong also gets royalties on each dollar of the $1 billion Joe Boxer is projected to sell in its first year. Even better, Kmart is responsible for all the manufacturing, so now Joe Boxer needs only its staff of 12 in San Francisco to handle design, packaging, and marketing.
Kmart, however, has more problems than a single product line can possibly solve. Since filing for bankruptcy in January, it has replaced top management, created a prototype "store of the future" near its headquarters in Troy, Mich., and closed hundreds of stores. It claims to have solved its chronic problem of running out of sale items. Kmart hopes to emerge from bankruptcy by mid-2003, so this Christmas season is critical.
But even if Kmart goes bust, Sweedler still wins. Joe Boxer would likely be scooped up by Target, which has invested heavily in famous brands in recent years, or even no-frills Wal-Mart, which recently signed the 17-year-old Olsen twins to an exclusive deal to sell products bearing the Mary-kateandashley label.
Sweedler believes that Joe Boxer can grow to $2 billion in sales by 2005. That could push aside Martha Stewart as Kmart's leading brand, though Stewart herself could help that happen sooner. The Stewart model worries Sweedler because it demonstrates the risk of a brand becoming too closely identified with a single personality. While Kmart is still promoting Martha Stewart, analysts believe her insider-trading scandal could start chipping away at the brand's sales.
All of which makes Sweedler concerned about any lingering perception that Joe Boxer is still Nick Graham. "I love Nick dearly," he says. "But Joe Boxer is not about Nick anymore. It's about the brand Joe Boxer and the creative team here that has accomplished so much."
Graham, meanwhile, is trying to stay busy to stave off a severe case of empty-nest syndrome as Joe Boxer becomes a superstar largely without him. Sweedler has him working on a variety of projects. Joe Boxer Play magazine is in the works, as is a TV cartoon featuring Mr. Licky. "Nick creates special events and PR--that's Nick's role," Sweedler says. "His job is the brand guru. Chief underpants officer--that's perfect for Nick. He's the cheerleader, as I call him."
Graham is writing a book about branding and has gone back to music, singing in a band he started. His publicity stunts aren't as wild as they used to be--launching human cannonballs isn't nearly as avant-garde as dressing up as the queen of England--but his performances still somehow maintain the essence of what Joe Boxer has always been about. And he still calls himself the Lord of Balls, a title he purchased in 1998 from the Manorial Society of Great Britain for $4,000.
This enduring spirit was clearly on display soon after Joe Boxer signed with Kmart, when Graham gave a presentation to several hundred Kmart employees in the company headquarters to generate enthusiasm for the upcoming product launch. In a large auditorium, he narrated a slide show of his greatest gimmicks. At the end of the presentation, a 150-piece high school marching band took the stage and began playing "This Land Is Your Land." Graham led the crowd in a sing-along with new lyrics projected onto a screen: "This brand is your brand, this brand is my brand..."
Today, Graham winces a bit at the irony of using a Woody Guthrie protest song inside a company often criticized for using sweatshop labor. But these employees had been having a rough time. The attacks of 9/11 had taken place just a month earlier, the economy was worsening, and their jobs were threatened by the company's slide toward bankruptcy. Nevertheless, as the trumpets blasted and the drummers drummed and the baton twirlers twirled, Nick Graham was still chief underpants officer. And even if just for a moment, he was making the people in that room very, very happy.
Paul Keegan (email@example.com) is a senior writer for Business 2.0.