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HATTIE (In the studio): Hi, I'm Hattie Bryant. We're spreading the news, “Made in New York City,” with hang-tags like these, the Nicole Miller fashion house, on Seventh Avenue, is declaring to the world, “We've made it here.”

We all know about life's basics – food, shelter, clothing – all can be purchased in the US at many different places and at many different price points. Big retailers with big brands – Wal-Mart, Neiman Marcus, Macy's and Nordstrom dominate – but they do not create and deliver as many products and services as do small firms. And, where much of what we purchase from big retailers is manufactured offshore, their high-end lines are often made by small companies right here in the USA.

The fact is, “There are over 24 million small and privately held companies and only about 7,000 publicly traded companies.” Surprise. The big guys are really the little guys.

Now look at yourself. What are you wearing? Why? Clothes help to define us; they are an extension of our personality. This jacket was designed and made by one of the world's most well-known fashion designers, Nicole Miller. With her partner, Bud Konheim, the two have been building a growing business since the early eighties.

We'll take you now to Manhattan and you'll learn how they move ideas from mind to market.

NICOLE MILLER: That dress should be $275 and that one should be the same.

BUD KONHEIM: $275 – I would sell it for $275 and it will be a hot dress.

HATTIE: Bud Konheim and Nicole Miller started the Nicole Miller Company in 1982.

Today they have 165 employees working either at headquarters in New York City on 7th Avenue, in the warehouse or in the retail stores. There are 30 Nicole Miller Boutiques around the country – 15 owned by Nicole Miller and 15 owned by licensees.

Neiman Marcus, Saks Fifth Avenue, Nordstrom and other large retail operations also carry the line.

NICOLE: My clothes look ageless. I've always been against clothes that make you look old. And I think a lot of times expensive clothes tend to make women look older and more mature. And I've always been against looking older than you are. And I don't think you should be dressing like a teeny-bopper either because I think women shouldn't dress so that they look foolish. But I think they should always dress so they look youthful.

BUD: That is the business we are in. We're trying to make a product that makes somebody happy. If it doesn't make them happy, they are not buying it and your out of business. So the whole thing is about delivering a “feel good.” This is what it is all about. Now you get that feeling when you are dealing with a customer one on one and she is dealing with her customer who is in the store at the same time you are.

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HATTIE: The company has grown by creating fashions they love, by developing their own sales channel and by licensing Nicole's designs to 15 different firms who make handbags, travel accessories, socks and more. Nearly half of today's 130 million in annual revenue comes from the licensing of designs by Nicole.

BUD: The price strategy has to be part of the fun. If a customer is going to pick up a tag and say “This is uncomfortable for me, it's not fun.” So it doesn't have to be cheap – it has to be something that she expects it to be. I mean, I think that's probably the key. They come through a Nicole Miller awning knowing there is no designer price punishment. It's going to fun clothes – they are going to wear it and they are going to have a great time. It's as well made as anything – it's certainly original design.

We have runway shows just like everybody who charges 50 times the price. But, it's got to work for her the way she expects it. She expects to pay a certain price in there, and if we break that barrier, it is uncomfortable and she's likely not to buy it.

If you start out selling department stores, there's no feeling of anything. If there is a buyer there or a merchandiser or a controller, because you don't even have people selecting the merchandise anymore, you are selling into an office; you present and you don't know who the customer is.

The buyer half the time has no idea who her customer is because department stores deal in traffic. Where a small store deals in trade. She knows her customer, she knows Alice, she knows Mary, she knows Sally, she knows Joan and she buys for them. And that's a business.

This ambiguous stuff, where you just buy stuff for somebody or the trade or the people. There is no focus to that and there is no meaning to it. And it is much more difficult when you are buying by some sort of computer profile.

What Nicole Miller is today is absolutely flies in the face of everything.

It is a young looking line at better than young cheap prices. It is not really very expensive and it's also a little bit longer waisted. That's what we do. And when department store come in here, their big question is, “Who do you hang with?” Because all our missy stuff is still conservative, and all our trendy stuff, they call it contemporary (they change the names all the time) is all on this other thing – it's cheaper, and it's flashier and it's not well-made but nobody cares.

I say, “But, this is what we do. This is what we do.” We are in the middle of the whole thing and we are not like anybody else, and we have been very successful doing it.

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HATTIE (Voiceover): Every item carrying the Nicole Miller name starts with Nicole's sketch pad. She give the sketch to one of the drapers who then makes the creation out of muslin. Oscar, the pattern maker, uses the muslin pieces to make the pattern, then he cuts it out of the fabric chosen for the item. It is sewn here in this room in a size eight

NICOLE: --- but that point is too sharp.

HATTIE: and several days a week, there are fitting meetings where Nicole and the team see the piece on a real person for the first time.

NICOLE: -- it goes up too high on the sides? Right?

HATTIE: Costing is calculated by the production department based upon labor, fabric and trim. The sales department decides the best price to be competitive and the garment is scheduled for production. Up to this point, everything has been done by hand – sketching, draping, pattern-making. At the factory, patterns are sized and created by computer.

NICOLE: Well, the first thing I do is plan a color story for the season -- and I just do that totally instinctively. And then I look for the fabrics and I try to find new fabrics and then I try to continue some fabrics that have been successful for me in the past. And, then I start to just map out kind of a game plan, sort of like an outline of the direction that the season is going to go in. Then I'm always sort of trying to find a concept – what the concept is – what “the girl” is going to be for this season. And you know sometimes the inspiration comes like that – I will just see something walking down the street and I'll go “that's it.” And some years I can't find an inspiration, so I have to turn everything upside down.

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HATTIE: According to the fashion center website, New York City's garment district is comprised of 34 million square feet extending from Fifth to Ninth avenues and from 35th to 41st streets. Over 100,000 people work in the garment district and the Nicole Miller company is proud to say – their clothing is made, from an idea to finished product – in New York City.

BUD: Is this where we are going?

HATTIE: Production manager Kimberly Lee and Bud walk a few blocks to Styletrend where their creations are in mass production.

HATTIE: Kimberly speaks Cantonese and English. She is the right person at the right time for Nicole Miller. Over the years, sewing shops have been owned by immigrants and today many are owned by the newest wave from China. Special orders are priced right and shipped more quickly than if the sewing was done offshore. Bud and Nicole are committed to keeping the sewing jobs in New York City.

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BUD: We were in another business – Okay -- Nicole and I. I was managing director of that business and Nicole was the designer.

HATTIE: You were not the owners?

BUD: No – It was a conglomerate actually. One division – we were very profitable, we were doing very well. And, we decided to go out on our own. And, we actually went out on our own with the blessing of the guy who was the head of the conglomerate because he was a friend of mine and it was great. I went to him and I said you have 12 divisions here – I am just one division of this thing. Nicole and I are going to go start our own business.

He said, “Well, I kind of would expect you to.” It was not a big surprise to him. I said, “I'm not going to do anything to undermine you.” So he said, “Look, I tell you what, if you would get me out of your inventory. And get me dollar for dollar for your inventory -- I will not only give you my blessing, but I will – I know you are going to Hong Kong to do some business -- I will pay three weeks of the salaries of the place while you go to Hong Kong. And then you come back and you can flip your thing – take all of the people you want – close the business – but you get me out clean.”

And that was the deal, and it was all up front and he was a great guy for that.

HATTIE: So the company you were in actually helped nurture the launch of Nicole Miller. Why was it so successful from day one?

BUD: Well, day one was not exactly day one. Day one was a change of name as far as the customers went. What we did was we had, in a three week period that my employer was paying the salaries and wishing me well, we had our sales people informing all of the customers that everything they had on order was going to be shipped as of June 1st, 1982 – they were going to get their shipments on time, just the way they ordered them – but the name on the label was going to be Nicole Miller. And they were going to get an invoice from Nicole Miller and they were going to pay Nicole Miller. We were just switching the names.

And there wasn't a peep.

Everybody went along with it because all they wanted was the merchandise – it was fine. Our first month we shipped $600,000. It was wild – we will never be that profitable again because we had absolutely no start-up costs - we had nothing. It was lucky in a way, but we had prepared for the luck. It was like – we gave luck a chance to happen.

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HATTIE: When you launched the ties, were you thinking that my women customers are going to grab a tie for their boyfriend or their husband and that will be an extra sale? Was that the motivation.

NICOLE: No -- actually we just made them as like a joke. And - we gave them away initially. We just gave them to all our friends and everybody started saying, “Oh my God – I got so many comments.” And then we ran out, so we made like a hundred more and then we just hung them in the retail stores.

HATTIE: So what turned – what was a joke turned out to be a new revenue stream.

NICOLE: Yeah – it turned out to be a great business.

HATTIE: So is that a piece of inspiration for any business owner. If you have a gut feeling, you should do something -- try it.

NICOLE: I think you know sometimes the best things that happen are flukes, you work really hard and sometimes you can make your luck, but a lot of things are just flukes. (music)

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BUD: Having our own stores at Nicole Miller is a funny story. I was fighting the idea of a fashion show – a runway show -- forever. Nicole's argument was that department stores only get to see a few things – they only pick a few things – my customers only get to see a few things that department stores pick out of my line. Nobody gets to see the range of what I do – I need to have a runway show. My argument was a runway show was a waste of time – you'll be making things for editors that need to take a picture of a costume because if they take a picture of normal clothes -- where is the news? Those are things that are nice to wear but there is not news. They need to have some flamboyant thing – that's what they want the picture of and we will never sell it and we will go out of business. Back and forth we argued this. And finally Nicole said, “Okay, I want to show my whole collection – let's open a boutique.” And I said, “Okay, opening a boutique with a chance of making money in the boutique. It kind of makes sense.” So we found a boutique on Madison Avenue, we opened a boutique. It was success from day one. It was terrific, it was great.

LB

HATTIE: Shari Grossman started as an intern and worked her way up to director of licensing.

SHARI: I think that the partnership between Bud and Nicole is very different than anything in any other company of this magnitude and I think that definitely drives the business. I think the philosophy of opening our own stores as opposed to distributing heavily in department stores has also made a big difference. The way our distribution scheme is wholly different than any other designer. So we have gained a very big customer loyalty through that.

BUD: But a partnership is not meeting somebody 50 / 50. A partnership is meeting somebody 90 and let them meet you 10 – but they won't – if they meet you 90 then you've got a locking thing that is like this, it's great.

HATTIE (In the studio): What happens when two people have a singular focus?

The power of two is the root cause of success at Nicole Miller. The partnership started with clearly defined responsibilities. Nicole was to design the new and Bud was to get it made. Now they both admit they could almost switch roles.

The Nicole Miller company wants to move us all up the clothing chain – you know, stop wearing Wal-Mart and start wearing fashion. They want us to stop thinking clothes and start thinking style. They want us to attend to aesthetics. They are chipping away at their goal, working in harmony, and bringing to bear nearly 3 decades of experience. While most fail in this highly competitive and sometimes fickle industry, this pair and their extraordinary team persists, yes even thrives, yet at the heart of it all, the power of two prevails.

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HATTIE: Just one block from the Pacific Ocean in La Jolla California, on palm tree lined Prospect Street, the New York home office team visits the shop owned by Stephanie Lyons. The tiny space is full of style and most important – it is full of customers.

HATTIE: What do you think you are doing right?

STEPHANIE:It's the La Jolla customers that we have. La Jolla, Del Mar Rancho, Santa Fe – they are fabulous customers. They are really “with it” as far as style goes – they understand Nicole. They like the whimsical, they like the funky, they like the classic too. And she really offers that for everybody.

NICOLE: Everybody just loves Stephanie and they come in here to see her. And while they are here to see her, she talks them into all kinds of clothes. But they must like them because they come back. Stephanie just does really well – she does great business here and I want to support all my best stores. So, I am always happy to come out here. They go “Stephanie wants you to come out.” I go, “Absolutely.”

HATTIE: So what do you think about the future?

STEPHANIE:I'm loving it. We just signed another five-year lease here in La Jolla, the same spot, this is a perfect location for us. It has just been great, her collection gets stronger and stronger every year. Customer: Isn't it precious? Oh!

BUD: So America is built on selling each other a whole bunch of stuff that we don't actually need to live. We don't need it. But what are we doing, we are selling each other the stuff because it makes us feel good.

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HATTIE: Fashion. It's tough. Dog eat dog. Squeezing profits from seams. The business is unrelenting and unforgiving, but somehow Bud and Nicole have built a place where people want to work.

NICOLE: Everybody I have here now, started as an intern. I have taken a lot of people from Rhode Island school of design, which was where I went, I have two girls from there. I have another girl from Parsons. I have so many interns passing through here that if somebody I think is really good – then maybe when they get out school, I hire them.

NICOLE: “so let's take that one.”

HATTIE: So when you see her sketches, you probably know what she is thinking. Taty: Yes, I am supposed to.

HATTIE: Do you have fun doing this – is this fun for you?

TATY: Yes – I love it – I love my work.

HATTIE: you are the person who says, “this works with this fabric or it doesn't”

SUZY: Right. HATTIE: Is it fun?

SUZY: It is – I enjoy. For me, this is like my home and my co-workers are like my family.

NICOLE: So everything else on this chart is pretty much done.

JUDY: It is your life and you are here working more than anything else you do in your life.

HATTIE: Judy Scarpola is senior vice-president of Sales

JUDY: My thing is always about opportunity. I came here as like the fifth wheel in the sales department and 15 years later I am senior vice-president and it is a new title that has never been given to anyone. This is on a silk knit – so we don't want to duplicate the idea with the georgette. As far as Bud, you know -- he is an amazing person to work for. He's better than a dad and he is better than a husband. Well, I usually go in and tell him the ten things I need him to do. And he says, “Oh, all right, I'll get to it.” “You need to put pressure on this person because they are not doing this.” It's not always about money for people, it's uh – again, it's the freedom to do it. To have the opportunity to see it from A to Z.

JUDY: They all sold and we didn't have to close it out. BUD: It is a baseball story. If we have nine players and they are all good and we like them all and we have been playing with them for a long time. And we are up against a team that has 8 good players and one great player – we lose. So, we have to – and that's a serious consideration. And when we are looking at the people here, we have got to have the greatest people to win this game. We are up against a lot of big businesses. We are not a big business, but we are up against a lot of big businesses. And everybody here doesn't have to do their job – they have to do more than their job. (Meeting discussion)

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BUD: And I did an organizational chart, but it's circular. It's not top to bottom -- it is a circular chart because we learn from everybody in the business and they contribute. And it is not that I -- I am the CEO and what I say goes – I don't do that. I don't tell it, I sell it. And if I can't sell it – maybe it's not such a good idea. Because if I believe that I have only good ideas, then I am in big trouble.

In '82, when we started, everything was a hand system. We were hand-billing. And there was one time in the showroom where we were billing out $50,000 in one day and everybody was sitting there writing hand bills to all of these customers. It was a nightmare, it was unbelievable – we never thought we would get through the day. And I have my – my son is a computer genius -- and says “ you don't have to hand write all of this stuff. You can get a computer to do it.” This was 1982.

HATTIE: Bud has plowed money into systems since then and has run the numbers on an AS400 for years and his philosophy of early technology adoption, took him to the web ahead of competitors.

BUD: We're very big on the internet now. The internet is absolutely, probably the best communication system that has come along because we email each other here instead of getting on the phone and getting voicemail and all of that type of stuff. We send pictures to Japan of the fabrics that we digitally take now and send it out over the internet. Retailers call up a customer and say, “Are you at your desk? Take a look at this dress, I am sending you a picture of it. I've got your size in stock, I could send it to you.” We have a shop on the internet where you just click on and buy the stuff. It's a great thing.

NICOLE: There are so many loose ends at a clothing company because ideally, everybody has a great idea and you make a nice dress. But then you have to get the fabric, then the fabric might be late, the fabric might come in damaged, the fabric might shrink --

BUD: I get paid for taking Excedrin at the end of the night because if I – if in this business after 46 years – if I don't go home with a headache because of all the problems that I've heard during the day, I go home with a bigger headache because I know that the problems are there and I haven't heard about them. So, you have to have – the CEO has problems, that's what they are bringing to him. I always tell everybody, “I want to hear all of the bad news, the good news will take care of itself – don't tell me the good news, I don't need to hear that. Give me the bad news because that is what I am here for.”

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NICOLE: You know, licensing is not as easy. Everybody thinks, you know, I will get some licensed products and I will make tons of money. It does cost us and it does take a lot of time and a lot of work and it takes a lot of nurturing to get these licensed products. I have to say about this business, that it only gets harder. Because – I think when you start out a business it is all so simple – there is one person that does this and one person that does that and one person that does that. And then before you know it, there is like a hundred people and five of them are doing this and you don't know what people are doing anymore. And you are saying, “like – how did we manage when we just had one person in this position?” And you would like to go back to that and simplify everything and you just feel like you've built all of these layers. And then you're – it's just – you know the longer you are in business, the more problems that develop.

BUD: There was a time in 1988 when I said to my wife, “If I get out of this – I am some kind of hero.” And you know what, I wasn't scared – I was excited about the idea that I could get out of the problem we had after the crash of '87. We got into – really – a whole bunch of stuff that was really bad. And we worked it out, we worked it out and everybody was on board. I didn't keep a secret from everybody, everybody knew it was. We got down to eight people. Everybody was – we would stay here at 8 or 9 o'clock at night to make a four dress sale to some boutiques out in the hills. It was unbelievable. And we pulled it off. And it was great. So, those things keep -- those things keep you excited through thick and thin. It is almost more exciting when there is a challenge than when it is just rolling in. What people are always asking us is, “What is your vision – what's the – where's the end game?” – you know, it's always. The end game is “Come to my funeral.” That is the end game. (laughter) So – anyhow – the end game is if we can do it right today, it's going to dictate the end game. If we could just get it right today.

HATTIE (In the studio): Partnerships are like marriages because they begin with good feelings, respect and admiration. However, they are different because when the business succeeds, it is because the partners focused all of their energy on one thing: making the business work. It's strictly business. Emotions often have to be set aside, played down. For a business to grow and prosper over years, means the partners have to hold on to good feelings, respect and admiration. In the case of Nicole Miller, the power of two prevails.

We'll see you next time.