#51 Wild Company The Untold Story of Banana Republic

In this episode of Founders Podcast, the host discusses the book "Wild Company: The Untold Story of Banana Republic" by Mel and Patricia Ziegler. The Zieglers, founders of Banana Republic, share their journey from journalists to entrepreneurs, revealing how they transformed military surplus into a fashion empire. The episode explores the Zieglers' creative and resourceful approach to business, their focus on product over profit, and the eventual sale of their company to Gap Inc. Despite initial promises of autonomy, the Zieglers' departure from the company underscores the tension between creative freedom and corporate control. The host also touches on the importance of supporting independent, ad-free podcasts like Founders, which offer unique and valuable content to listeners.

• Mel Ziegler acknowledges that finding the right scale for a business is crucial, and admits to misjudging it twice.
• Despite past mistakes, Mel expresses contentment with their current situation, highlighting happiness, gratitude, and the well-being of their children.
• The Zieglers aim to share their story with their children and others, encouraging a life created out of creativity and without fear.

"For every business, there's an appropriate scale. That one we got wrong twice, but I'm not complaining. We actually got what we wanted today. We are happy and grateful. Our kids are in their early twenty? S and although they've heard from a lot of other people that their parents started banana Republic, they haven't heard much."

The quote reflects on the concept of finding the appropriate scale for a business and the speaker's satisfaction with their personal and professional life.

• The Zieglers believe in the value of sharing their entrepreneurial journey, especially for the benefit of their children and other creative individuals.
• They emphasize that the challenges and unexpected turns they encountered were essential for their breakthroughs.
• The process of writing their story together was both a bonding experience and a reminder of the enjoyment they found in their partnership.

"It's never a straight or smooth road, but in our experience, it was the bumps and the breakdowns, the mishaps and the wrong turns that stimulated the breakthroughs we needed to get where we wanted to go."

The quote underlines the significance of overcoming obstacles and how they can lead to important breakthroughs in life and business.

• Patricia Ziegler discusses the discovery of the book "Wild Company" and her immediate interest in the story of Banana Republic.
• The book was found through a Twitter thread asking for founder biographies, and it stood out because of its focus on starting and scaling Banana Republic.
• Both Mel and Patricia Ziegler are praised not only as founders but also as storytellers.

"I actually saw this really useful thread on Twitter where somebody was asking for recommendations of biographies of founders, and I went through the list and I saw a bunch of the ones that I've read already and made into previous Founders podcasts."

The quote explains how Patricia Ziegler came across the book "Wild Company," which played a significant role in the podcast discussion.

• The hosts share methods for listeners to engage with them, primarily through Twitter and email.
• They encourage listener reviews and offer exclusive content as a thank you, highlighting the importance of audience feedback and support.
• The hosts also discuss renaming their Members program, which provides additional content to supporters.

"If you leave a review on Apple Podcasts or anywhere else, you listen and you take a screenshot and email it to foundersreviews@gmail.com. I reply back to every email with a private RSS feed."

This quote details the process for listeners to engage with the podcast and receive exclusive content, emphasizing the value of listener support.

• Mel and Patricia often referred to themselves as fundamentally unemployable, which led to the inception of Banana Republic.
• The Zieglers shared a vision of earning a significant amount of money within a set timeframe to avoid working for others.
• They stumbled upon the idea for Banana Republic after Mel found a military surplus jacket in Australia, which inspired them to start a business selling similar items.

"We had both scribbled to answer the first question. A million dollars. The second question. How long? Five years."

The quote captures the ambitious financial goals set by the Zieglers when contemplating starting their own business.

• The Zieglers had no formal business education or experience but had a clear vision for their company.
• The name "Banana Republic" was chosen for its catchiness and irreverence, with Mel's journalism background emphasizing the need to grab attention.
• Their lack of knowledge was seen as an asset, keeping them uninhibited by potential obstacles.

"The only asset we had was our own oblivion. That would keep us blissfully ignorant of the bewildering and arbitrary impediments that would entangle us until we became so embroiled that quitting was no longer a possibility."

This quote reflects the Zieglers' perspective that their ignorance was an asset, allowing them to pursue their business without being deterred by potential challenges.

• The Zieglers began by purchasing surplus Spanish army shirts and selling them at a flea market.
• They initially struggled with sales until Patricia suggested doubling the price, which led to a greater perceived value and success.
• The anecdote of their first sale to a friend at a dinner party marks the official birth of Banana Republic.

"We need to double the price, she said. The shirts are too cheap. People can't appreciate the value."

The quote demonstrates the strategic decision to raise prices in order to increase perceived value, which was a turning point in their early sales efforts.

• The Zieglers discuss the difference in marketing strategies between their business and another.
• They highlight the advantage of having a unique product that is not a commodity.
• The Banana Republic's initial marketing approach involved increasing the perceived value of their products.

"In your business, if something's not selling, you market down. In mine, we market up." "As long as you're not a commodity and you have a unique product, which is what Banana Republic was at the beginning, that works."

The quotes explain the contrast between traditional markdown strategies for unsold items and the Zieglers' approach of marketing up, which relies on the uniqueness of their product to create value.

• Patricia's and Mel's attire played a crucial role in presenting their product appealingly.
• They used a new marketing tactic with a sign indicating "Short Arm Spanish Paratrooper Shirts, $12.95."
• Their strategy led to the successful sale of 102 shirts at $12.95 each.

"The next Sunday, we went back to the same flea market. This time, Patricia wore herself wore a Spanish paratrooper shirt, belted at the waist with tighter jeans and heels." "A sign which now read, Short Arm Spanish Paratrooper Shirts, $12.95. It was a new day. By the end of it, we sold more than 100 shirts. 102 to be exact."

The quotes detail the change in strategy with Patricia's attire and the new sign, which resulted in a significant increase in sales, demonstrating the importance of product presentation.

• The Zieglers, with limited funds, decided to open a store for Banana Republic.
• They found a low-cost retail space and focused on the essentials to start their business.
• The decision to open a store with only $1,000 in the bank is humorously recounted as a bold and somewhat humorous move.

"We decided to fast track with a $1,000 in the bank." "Banana Republic needed a store. It's just like hopefully I'm not the only one that finds this humorous."

The quotes reflect the Zieglers' determination to grow their business despite financial constraints, and their humor in acknowledging the risks involved.

• The Zieglers did not adhere to conventional business wisdom due to budget constraints.
• They had to be creative and resourceful, finding alternative solutions for location and store setup.

"There's a lot of conventional wisdom that just didn't apply to them." "Like, location, location, location. Well, we have $1,000 total."

The quotes highlight the Zieglers' need to diverge from traditional business advice because of their financial situation, leading them to unconventional but successful solutions.

• The Zieglers made a list of tasks to prepare for their store opening.
• They prioritized finding merchandise, printing a catalog, decorating the store, and making a sign.
• The catalog was seen as a key element for explaining and selling their unique products.

"We made a list of the things we needed to do. Number one, find merchandise." "The more we thought about it, the catalog struck us as a key to the whole endeavor."

These quotes outline the strategic planning involved in preparing for the store opening, emphasizing the importance of the catalog in their business model.

• The Zieglers sought a bank loan but were declined due to lack of experience and collateral.
• They learned about getting terms from wholesalers, which allowed them to stock their store without immediate payment.
• They strategically obtained terms from one supplier to leverage terms with another.

"But if you're in retail, why don't you just get terms?" "30 days credit would do just the trick, we decided it would give us a chance to get to the store, stocked and open, put a catalog in the mail, and start selling before we had to pay."

The quotes describe their introduction to the concept of trade credit and how it became a crucial part of their strategy to open and stock their store without upfront capital.

• The Zieglers faced challenges in finding quality merchandise.
• They discovered that many military surplus items could be repurposed due to their high-quality fabrics.
• They became innovative in creating new products from these materials, emphasizing the importance of adaptability in business.

"Instead, I found a lot of unwearable items... I could take them apart and make other wearable things from the materials." "The fabric themselves were treasures at below bargain prices."

These quotes illustrate the Zieglers' ability to see potential in overlooked surplus materials, transforming them into valuable products for their store.

• The catalog was crucial for storytelling and marketing their unique products.
• Mel assumed the role of 'Minister of Propaganda' to create compelling narratives for the catalog.
• The catalog's success was pivotal, later becoming a collector's item and contributing significantly to sales.

"Our eclectic cache of surplus... could not tell its own story." "As every journalist knows, you are only as interesting as your subject."

The quotes convey the strategic role of the catalog in communicating the value and stories behind their products, making them interesting and desirable to customers.

• The Zieglers faced skepticism from friends about their business model.
• They remained determined, with no backup plan, committed to making their venture work.
• The story highlights the common experience of entrepreneurs facing doubt and the importance of perseverance.

"This won't work." "We're no safer if we swim back than if we keep going to the other shore. Failure was not a possibility. Not ever."

The quotes reflect the challenges of starting a business and the Zieglers' mindset of pushing forward despite criticism, emphasizing their resolve to succeed.

• Media coverage played a crucial role in Banana Republic's initial success.
• The Zieglers leveraged their storytelling skills to become interesting subjects for reporters.
• They recognized the importance of being quotable and helping journalists with their stories.

"I wasn't reporting the story anymore. I was the story." "As an entrepreneur, it was my job to be interesting."

These quotes highlight the strategic use of media coverage as a distribution strategy and the importance of entrepreneurs being proactive in capturing media interest.

• The Zieglers used innovative solutions for store displays due to a tight budget.
• They repurposed wooden fruit crates and belts for shelving and racks.
• Their resourcefulness demonstrated the ability to create an effective retail environment with minimal resources.

"We buckled a belt around each end of the dowel and nailed it to the ceiling, perfect hanging racks." "We had shelving."

The quotes illustrate the creative problem-solving skills the Zieglers employed to set up their store displays, showcasing their ability to adapt and utilize available resources effectively.

• The Zieglers discuss the exceptional performance of early sales compared to industry standards.
• They highlight a significant difference in response rates and returns on investment.
• The industry had a lower average response rate and return, while theirs was notably higher.

"Rate was something like, let's say 2%. Their response rate was 10%." "The average return would be like, let's say $2, theirs was $10, so on and so forth."

This quote outlines the disparity between the typical industry figures and their own, emphasizing their success in sales and marketing.

• The Zieglers credit media exposure as a significant factor in their business growth.
• They explain the phenomenon of media attracting more media attention.
• They utilized press packets and media stories effectively to build their brand.

"The more press we got, the more press we got. We happily played our part and accommodated each new media query with a press packet stamped propaganda handle with respect, still buying into this whole country theme."

This quote describes the cycle of media coverage leading to even more media interest, which they capitalized on for business growth.

• The Zieglers touch on the importance of publicity and its relation to the internet era.
• They argue that being an evangelist for what you love is more effective than criticizing what you dislike.
• They discuss the concept of negative attention still being beneficial publicity.

"The need for evangelists over critics has never been more important."

The relevance of this quote is to highlight the strategy of promoting what one is passionate about rather than focusing on negativity, which can inadvertently give more attention to the subject being criticized.

• The Zieglers recount an incident where a catalog joke led to an international issue with the Italian consulate.
• They use this story to illustrate the idea that not all publicity is bad.
• The controversy actually resulted in increased orders for their business.

"The serendipitous law of unintended consequences elevated that throwaway sentence into a small international incident."

This quote explains how an unexpected event, in this case, a joke in their catalog, can have a surprisingly positive outcome for a business, in this case, leading to increased sales.

• The Zieglers discuss the challenges of managing a growing business and the idea of expansion as a solution to operational problems.
• They share their personal struggles with managing the workload and the risks of not expanding.
• They ultimately decide that expansion is necessary to prevent constriction of the business's potential.

"We need to bust out, make a go for it. What? Bust out how? Open another store, he said."

This quote captures the pivotal moment when they decide that opening another store is the necessary step to take their business to the next level and alleviate operational strains.

• The Zieglers describe the daily grind of running their business and the multitude of roles they played.
• They emphasize the importance of focusing on product quality and customer satisfaction over profits.
• They notice that by not fixating on profits, they inadvertently increase them.

"Maybe everybody was happy because we didn't fixate on profits. Instead, we were focused on being a company as good as we wanted to believe we were and claim to be."

This quote reflects their management philosophy, which prioritizes the intrinsic quality of their work over the pursuit of profit, leading to a more motivated workforce and, ironically, higher profits.

• The Zieglers recount the process of selling their company, Banana Republic, to Gap Inc.
• They discuss the negotiations and the terms of the deal, including their continued involvement in the company.
• They express their initial reservations and the eventual loss of creative control after the acquisition.

"I'll buy it, but only if you two stay with it."

This quote signifies the condition set by Don Fisher of Gap Inc. for the acquisition, which was contingent on the Zieglers' continued leadership, a point that later led to conflict as their autonomy was compromised.

• The Zieglers narrate the changes in their roles and the shift in company culture post-acquisition.
• They express frustration with the new corporate directives that contradicted their original vision for Banana Republic.
• The narrative concludes with their departure from the company and the end of their freedom to operate as they had previously.

"There's going to be some changes I have to make for the good of the company."

This quote marks the beginning of the end of the Zieglers' autonomy within their own company, as changes imposed by Gap Inc. start to take effect, ultimately leading to their exit.

• Mel Ziegler experienced intense emotions during a confrontation with Mickey.
• His physiological response included a pounding heart and rising rage.
• The conflict reached a peak when Mel decisively refused Mickey's demand, leading to Mickey's angry departure.

"My heart was pounding and rage was bubbling up from every cell in my body. I looked at Don, who said nothing. Then I took a breath and looked Mickey in the eye. It's not going to happen, Mickey, I said. Fuck you, Mel. Mickey screamed and stormed out."

The quote illustrates the tension and resolution of a conflict, showcasing Mel's firm stance and Mickey's aggressive reaction.

• Mel and Patricia Ziegler valued freedom and autonomy over financial gain.
• They left a lucrative contract to maintain their independence.
• Their concept of freedom encompassed creativity, exploration, and the ability to defy conventions.

"The money, as much as we enjoyed having it, was an unexpected byproduct anyway. All along we had been in it for the freedom."

This quote emphasizes that for Mel and Patricia, the primary motivation was freedom, not financial success.

• The Misfit program is crucial for the podcast's sustainability.
• The program name reflects the podcast's ethos, celebrating nonconformity and innovation.
• Supporting the podcast through membership allows for ad-free content and a focus on listener experience.

"The members program is now misfits."

The renaming of the member program to "misfits" aligns with the podcast's celebration of individuality and the unconventional.

• Steve Jobs believed that prioritizing product quality leads to enduring companies.
• A profit-centric approach can undermine a company's long-term success.
• The podcast adopts a similar philosophy, prioritizing content quality over advertiser interests.

"My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary."

Steve Jobs' quote reflects the philosophy that product quality should be the primary focus, a principle that the podcast embraces.

• There's a debate over whether increased analytics and tracking are necessary for podcast industry growth.
• The podcast discussed opposes intrusive advertising and prioritizes listener experience.
• Subscription models, like China's, could be more sustainable than ad-based models.

"Podcast industry in China, four to 7 billion, almost all subscription based."

The comparison of the Chinese and U.S. podcast industries highlights the potential benefits of a subscription-based model.

• The podcast industry is seeing a trend of celebrities starting podcasts for ad revenue.
• This trend could overshadow independent podcasts that focus on quality and listener experience.
• The podcast aims to remain independent and listener-supported to preserve its integrity and uniqueness.

"I'm an independent, ad-free podcaster."

The podcast's independence is a key aspect of its identity, distinguishing it from ad-driven podcasts.

• Founders Notes is a subscription service offering detailed notes on entrepreneurship.
• It condenses hours of audio content into key ideas that can be read quickly.
• The service supports the podcast and provides value to listeners interested in entrepreneurship.

"Founders notes is that nerdy kid, except you're copying notes off of entrepreneurship."

This analogy explains the purpose of Founders Notes, which is to provide listeners with a distilled, educational experience on entrepreneurial topics.

• Listener engagement and support are critical for the podcast's continuation.
• The podcast has a personal impact on the host, and listener feedback is highly motivating.
• Encouraging word-of-mouth promotion and direct communication with the host are ways to support the podcast.

"I've never worked on anything in my life that has been this emotionally motivating as I have on founders."

The quote conveys the host's deep emotional investment in the podcast and the importance of listener support.