FUBU co-founders J. Alexander Martin, Daymond John, Carl Brown anKeith Perrind in 1998 (Click Image To Enlarge)
I’m a sucker for Shark Tank – in which wide-eyed entrepreneurs pitch their “once-in-a-lifetime” ideas to a group of rich men and women running the gamut from owners of an NBA franchise to some schmuck they call “Mr. Wonderful,” who I like to imagine made his money selling doll furniture. One guy in particular, Daymond John, always appealed to me. While most of his fellow gurus earned their massive fortunes in the tech space, John had built the fashion empire known as FUBU. I thought.
”Holy shit. If he’s sitting next to Mark Cuban who made enough money to own the Dallas Mavericks, Daymond must be swimming in it!”
The "Shark Tank" TV series cast for 2015 from L-to-R: Mark Cuban, Barbara Corcoran, Daymond John (FUBU founder), Kevin O'Leary (Mr. Wonderful), Lori Greiner and Robert Herjavec (Click Image To Enlarge)
But as we all know, FUBU isn’t exactly flying off the shelves these days. What exactly happened to the company before, during, and after its massive success?
Daymond John was raised in the Hollis neighborhood of Queens. He didn’t come from a family with money. His parents divorced when he was 10 years old, and he would never see his father again after the separation. He says.
“We went from middle class to poor. I became the man of the house and started working at that age.”
Prior to launching his own line, John still looked to fashion as a means to make money. According to the Washington Post,
“Initially, it was through printed T-shirts, but not my own brand. I went and printed up some shirts when the Rodney King riots were happening in Los Angeles, with lines like ‘What happened to poor Rodney King?’ Then Mike Tyson got incarcerated, and we did the whole ‘Free Mike Tyson’ shirts. We would sell them at events and on street corners. It showed me something about the reason people buy clothes – that when there’s an emotional slogan or an emotional connection, products sell quicker. That’s when I started thinking about this concept of ‘For Us, By Us.’”
By the end of the day, he had sold out of the hats and turned a $800 USD profit. He knew he was on to something – although he didn’t exactly have the capital to immediately capitalize on the momentum he had seemingly conjured out of thin air. He told CNN.
“The next step could be how do I finance all of this? Do I sell one or two hats and then re-up? Do I take out a loan from a bank or do I get an angel investor? Do I just chug along at $50,000 a year, $100,000 a year? When do I go balls out? Quit the job. Mortgage the house. Sell the car. Do I do this at all?”
While those were all smart questions to ask, $800 USD dollars worth of sales didn’t necessarily mean that he should quit everything. But that would soon change. According to CNBC,
“During his off hours, however, John would hit music video sets and try to coax rappers to wear FUBU apparel in the shoot, a move that would ultimately pay off as millions of fans saw their favorite stars wearing FUBU clothing.”
“First it started with Brand Nubian in one of their videos, then Ol’ Dirty Bastard wore it in a Mariah Carey video, then Busta Rhymes wore it on one of his videos, and LL Cool J decided to wear FUBU on the “Hey Lover” video with Boyz II Men. Our product was front and center on the biggest and most influential personalities for our core consumers.”
As legend has it, John also used a bit of guerilla marketing in his attempt at reaching the top. John remembers.
“One of the most well-known hits we had with LL was during a Gap commercial. He was wearing a pair of Gap jeans and a Gap shirt, but he was somehow able to sport one of our hats during the commercial. Then during his thirty-second freestyle rap, he looks directly into the camera and says, ‘For Us, By Us, on the low.’ No one at Gap nor any of their ad execs thought anything of it. It wasn’t until a month later that someone at the Gap found out, pulled the commercial, and fired a whole bunch of people after they had spent about $30 million running this campaign.”
After an appearance at a trade show in Las Vegas, he and his partners – J. Alexander Martin, Carl Brown and Keith Perrin – had managed to sell $400,000 USD worth of clothes that didn’t exist yet. Ultimately, his mother took out a second mortgage on her home after John was turned down by 27 banks for a business loan.
Soon after, his partners moved in, and they turned the home into a makeshift factory. John remembers.
“It was a typical Queens house, the kind you see on All in the Family. It had three levels: A basement, the first level with a dining room, living room and the kitchen, and then three bedrooms upstairs. After we took out the mortgage, we took all of the furniture out of the house, sold what we could, and the rest we burned in the backyard. We put all the raw materials down in the basement, and on the first floor, we converted the living room and put eight sewing machines there and we hired some seamstresses. In the dining room, we put a cutting table where we cut all the fabrics. The kitchen, well, the kitchen was still the kitchen.”
By 1998, FUBU’s reached its peak with sales over $350 million USD. John and his partners had used hip-hop culture and stars like LL Cool J – a fellow Queens native – to put FUBU’s clothing in seemingly ever rap video at the time. John and crew thought to themselves, “we should put out a record too…”
FUBU released the compilation album The Good Life on September 25, 2001 which featured the likes of LL Cool J, Nate Dogg, and Keith Murray. It lost the company an estimated $5 million USD. John told Fast Company.
“We didn’t know our numbers, we didn’t look at our numbers, we were spending money like drunken sailors, we were getting caught up. What was the reason we were doing it? Did we get exposure? Yes, but from the business model, we died.”
“Fatty Girl” was the lead single from FUBU’s The Good Life album, prominently featuring the apparel in the music video directed by Hype Williams
In a book he co-authored, The Brand Within, John explained that one of the major factors that led to the company’s demise is that they had too much product. He writes.
“Once you hit mark-down bins, it’s tough to climb out, because you’ve lost the sense that your clothes are fresh and vibrant.”
By 2003, FUBU left the U.S. market completely – except for its footwear division – and built business in Europe and Asia. Additionally, they acquired up and coming brands Heatherette, Drunkn Munky, Kappa USA, Coogi, and Crown Holder. Worldwide sales for those brands reached $200 million USD in 2009. Despite being absent from the marketplace, there was no catastrophic collapse or new people coming on board.
In 2009, John announced that FUBU would be making a comeback after a six-year hiatus with an aesthetic similar to “Carhartt meets Abercrombie.” In speaking with WWD John said.
“I wasn't too worried about losing FUBU’s brand identity since the kids nowadays have a three-year memory span, so most don’t have a sense of the brand’s roots.”
COMMENTARY: Daymond John blamed excessive inventories as the chief cause for FUBU's failure. Excessive inventories is not a cause, but a symptom that something bigger is going on. It is my belief that John did not have a good understanding of fashion retail marketing and the need to identify changing trends in fashion. In short, John's ownership of FUBU's marketing strategy and failure to listen to marketplace signals is really what did in FUBU.
John started FUBU as a fashion brand that appealed to and targeted young urban black males. Young urban black men were the biggest fans of rap and hip-hop music when it began to take off in the late 1990's. John's love of rap and hip-hop music and associaiton with several well known rap and hip-hop music artists like LL Cool J, Salt-N-Pepper, Run-DMC, and others, provided the perfect vehicle to reach his target market.
John did not have a marketing budget and relied mostly on guerilla marketing to get the FUBU brand recognized in the marketplace. Providing many of these black rap and hip-hop music artists with FUBU apparel that they wore on stage and on music videos was a great strategy to gain brand recognition. The FUBU brand quickly become part of the rap music culture. Young urban black males wanted to become part of this music culture and the FUBU brand was the perfect way for them to express their association with that culture. As the FUBU brand grew in popularity among rap and hip-hop music fans, the brand took off, eventually peaking with revenues of $350 million in 1998.
Many nascent rap groups undoubtedly embraced FUBU and Cross Colours due to accessibility and their finger-on-the-pulse relevance. Later on many hip-hop insiders launched their own lines, with Wu Tang and Wu Wear, Russell and Kimora Lee Simmons with Phat Farm and Baby Phat, Nelly with Apple Bottoms, and more. This crop of urban wear newcomers quickly became the "next big thing" in urban and hip-hop fashion, and the results were obvious: FUBU, Tommy Hilfiger and Abercrombie & Fitch, who had grown and prospered due to the early popularity of rap and hip-hop music, began to lose favor with young urban black males. The handwriting was on the wall, and John either missed these market signals or completely ignored them.
Clearly, J0hn failed to realize that fashion trends can change quickly and dramatically. Like many startups that experience dramatic and early success, John learned too late, that success is a lousy teacher. Those that assume that success will continue by doing the same things they have been doing often have a rude awakening.
John's announcement in 2006 that FUBU would make a comeback, obviously has not been realized. Market forces in the fashion industry quickly change, and young urban blacks no longer emulate their counterparts of the late 1990's. Though urban brands certainly enjoyed their moment, their popularity seems to be waning. Instead of Jay-Z wearing Rocawear, you’re most likely to see him in Givenchy. Though Beyonce is the face of House of Deréon (and is wearing it in their new ad!), we know the R&B and pop songstress truly has a soft spot for Balmain, Lanvin and Alexander McQueen. Nicki Minaj loves her Versace as much as Kim loves her Kanye West.
Courtesy of an article dated June 30, 2015 appearing in TheHundreds.com, an article dated November 17, 2014 appearing in Business Insider, an article dated October 9, 2012 appearing in Fashion Bomb Daily, and an article dated March 27, 2009 appearing in Marketings411