Richard Birnbaum: CEO, ShopWorn

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Bio:

Richard Birnbaum is the CEO of ShopWorn, the only ecommerce website exclusively selling designer display-model watches, jewelry and accessories sourced from authorized retailers around the world. Prior to ShopWorn, Richard was a Production Manager of Men’s Tailored Clothing for import and wholesale distributors. There he sourced fabrics from mills in Europe and orchestrated manufacturing “Behind the Iron Curtain.” Following that he embarked on an entrepreneurial voyage where he negotiated a contract with Eastman Kodak Company to lead countertrade activities in South America. Richard sourced and sold manufactured products for export to create hard currency for importation of Kodak products.

Quickly finding his niche with designer brands, he went on to manufacture private label and designer apparel in Central America for U.S. retailers and brands. This is when Richard became aware of the secondary market for designer and branded merchandise. Taking a step in another direction, he then started purchasing close out designer clothing and accessories in the United States to export to retailers and distributors in Europe. After the Silhouette Ruling barred the importation of branded merchandise into the E.U., he turned to eBay to begin selling his warehouse full of designer clothing and accessories.In 2000, he expanded the product range to include high-end Swiss timepieces. Operating in the close-out and parallel markets, Richard sold over $100 million worth of Swiss watches on various e-commerce platforms as well as wholesale. Brands began realizing they needed to end their practices of turning a blind eye to gray markets, leading to the conception of ShopWorn as the only way a brand can participate in ecommerce without diminishing their reputation. ShopWorn.com officially launched its ecommerce website in 2016 and continues to be embraced by brands and consumers alike.

What is ShopWorn:

My brother and I have been in the watch business for 20 years. We noticed the shift in the tectonic plates over the last few years, how everything is changing. Between bricks and mortar and gray market websites and consignment websites and preowned, there was a total change. We saw an opportunity to create a new category—ShopWorn. It’s not new, it’s not gray market, it’s not preowned, it’s not vintage, it’s not consignment, it’s goods that were gently handled in store, and tried on a few times. A lot of the goods are stocked balanced goods, which means that the brand takes the goods back from the authorized dealer at the end of the season, so that they can buy new goods. If you’re an authorized dealer for a very elite brand, you can’t show last season’s merchandise. You have to have the best and the greatest. So those goods get sent back to the manufacturers, and we saw an opportunity.

We are ShopWorn, selling the world’s most elite products, the best brands, the 5th Avenue and Madison Avenue brands, at a significant discount. The goods are all authentic because they are all coming from the brands or from the authorized dealers—contrary to a lot of the other goods out there. A lot of the gray market goods are of dubious origin. The consignment and preowned goods, especially with watches, you never know what is inside because you could have after-market parts—you don’t really know. It could have been serviced and not water tested, so it’s not water resistant any longer.

We see ourselves as the solution for the brands to sell their store returns to.

Emerging Industry Trends:

We sell goods that are the highest craftsmanship, so what we sell are goods made in France, Germany, Italy and Switzerland. They are all made in shops, not in China, and they are all made by artisans. For us, it’s all about the best brands and the best quality. As far as the trends go, there will always be a market for elite products. I saw an interview with Bernard Arnault from LVMH two weeks ago, and he said that he met Steve Jobs back in 2010. Steve Jobs said to him—“You know Bernard, in 50 years I don’t know if anybody is going to have an iPhone, but they will still definitely be drinking Dom Perignon.” And that’s the case.

For these products, the trend is timeless.

Industry Challenges:

The gray market, and groups backing up the gray market. It has been a killer on brands for many years.

99% of branded merchandise sold online is considered gray market merchandise. The seller is not an authorized retailer, meaning they got the goods from a distributor or closeout. There is a story behind every single item being sold. I’m not saying that it’s counterfeit or illegal—it’s definitely legal. The Supreme Court ruled, back in the 1960’s that once a product is sold for the first time the owner of the trademark relinquishes his/her right to control that trademark.

The gray market is 100% legal, but it’s a brand killer because the brands can’t control their products including price. If you go onto any website, including Amazon, and look at high-end brands, it is all gray market goods. The goods were not purchased from the brand directly.

Inspiration and Vision for ShopWorn:

The vision is to be a global brand. We see ourselves as a very reasonable alternative for brands to sell goods to on a direct basis. Brands don’t sell goods to any internet seller. Now, that’s not to say Neiman Marcus or Saks doesn’t have a website with every product they sell in the store, but it’s sold for full retail. Brands don’t sell to any company who sells online at a discount, except us.

We gave the brands a reason to accept and embrace the internet and gave them transparency and trust, where they believe that we will protect them and not sell the goods as new. The goods are virtually indistinguishable from new, handled in store/lightly tried on, but we don’t represent the product as new.

We have convinced over 15 brands to sell to us directly, and in the next couple of years, we believe that we will grow to over 100 brands.

Our long-term business plan is to have the brands sell to us directly, rather than buying from department stores and other retailers.

Most in Demand Brand:

Graham, Fendi, Dior

What’s Next for the Business:

To become a brand. Right now, we are a solid, profitable family business. I think that we will always be a family business because that’s our mentality—family takes care of family. You can still be a billion dollar business and be a family business.

The biggest obstacle is someone with deeper pockets coming into our space and beating us to the punch on things. The goal is to have the consumer really understand what our new category is because it is a category that people don’t really understand today. They know that they can buy new or buy used, but they don’t really know what this middle ground of ShopWorn is. The goal is that people don’t have to questions ‘What does ShopWorn mean,’ they just know, and it just becomes a category.

Keys to Success:

We are great merchants. We buy brands that fit together, so it’s not about a short-term buck to buy a brand that doesn’t fit in. It has to be the best quality, the most elite brands, the best craftsmanship, and can’t be licensed new. Which, I hate to use the word ‘dubious’ again, but with licensed goods you always have that feeling that you never know what quality you’re getting. The licensee is just in it for the quick buck—it’s not their brand to protect.

We’re focused on a long-term vision, and we can’t screw up our vision by buying a brand to just make a quick turnaround buck that doesn’t fit.

Family Business:

My brother and I have been partners for 20 years. The only business I’ve ever known is family, and especially always being in the watch and jewelry business. Watches and jewelry is an industry that is geared towards family businesses.

Most Difficult Moment:

I think to watch from the perimeter to see mistakes that others are making, and hate to be the first in to anything.

I don’t like the word ‘problem,’ it’s a ‘situation’ not a problem. Some of the situations we have… financing, even though we’re solidly financed. We could definitely buy 5x more than we have, but that’s a positive also. It makes you that much more of a better buyer knowing that you’re open to buy the amount in your check book.

The challenge, in general, is to get people to understand what ShopWorn is because it didn’t exist before, and it’s a hard thing to translate to people when they just land on your website—how do they know we’re any different than other watch sellers? So it is a challenge trying to explain to a consumer.

Customer Experience:

We want customers to receive the item, open it up and be thrilled. Go out to dinner on a Saturday night, have a friend say ‘I love your watch,’ and the first words out of his mouth are “I got a great deal on this.” That’s what everyone wants—the deal. That the excitement!

How do you motivate others?

Honesty, transparency, and knowing that once you’re part of the family, you’ll be taken care of. Telling the truth and sharing—sharing is a big part of it. If others share your vision, it makes your job easier.

Career Advice:

If you have the ability to source a product, and you have the customer to sell that product to, you have a business. If you don’t have both, you have nothing.

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