What If the Factory Was Next Door? With Elias Stahl | Fashion Made S4E6

Footwear, we make 24 billion shoes every year, and 1 out of 5 goes straight to landfill. And the reason for that is because we make far from our shores. 18 to 24 months is the development cycle from an idea to a shoe on the shelf. And because these are very highly labor-intensive products, they necessitate to be made in Vietnam or low-wage areas. And because they're high mix, you know, so many sizes and styles, it's impossible for brands to really predict What will be needed when?

Great to see you, Elias. Thank you for joining us. We got Elias Stahl. You've got— you wear a few different hats, but I want to talk to you about Helios, about Made in Old Town. I know that you're going to be joining us at our STRIDE event next week, or we're going to be joining you. We're doing our drinks reception in your office, right?

At Made in Old Town. We're really excited about it.

Cool, cool. So listen, really excited to talk to you about what you're doing because I think You know, if you're in the footwear space, most people will be aware of Made in Old Town, but for those who perhaps aren't, it would be great if you could give us a bit of backstory to what you're doing because it's a pretty major initiative.

Yeah, no, happy to. And really excited about the event and really just seeing the focused approach that PI takes to bringing the industry together on very concrete applications like this. So we're excited to host it. Little background maybe on Hi-Lows initially, so you can figure out how that fits into Made in Old Town. So I founded Hi-Lows about 6 years ago to change the way the world makes. Right now, especially in footwear and apparel, we make a huge amount more than we need. Footwear, we make 24 billion shoes every year, and 1 out of 5 goes straight to landfill. And the reason for that is because we make far from our shores. 18 to 24 months is the development cycle from an idea to a shoe on the shelf. And because these are very highly labor-intensive products, they necessitate to be made in Vietnam or low-wage areas. And because they're high mix, you know, so many sizes and styles, it's impossible for brands to really predict what will be needed when. So there's a lot of overproduction waste. And a really complex and fragile supply chain that supports and enables that. And in many ways, we're reaching the end of that road. We're reaching the end of license for polluting, or at least it's the end of really low-wage thriving sectors, which is a good thing. Um, and we're also hitting a moment where the markets are moving faster and faster and supply chains are getting thrown on their left heel. So the entire industry is rethinking not just how we make, but where we make, how we design for where we make in a really fundamental way that we haven't seen in decades. Now, at the same time, technologies are coming to market that are really exciting, whether it's generative design, 3D printing, and they allow us to reinvent how we make things so we can make things anywhere. And so designers can have full control from design through to the factory floor. So Hilos was created to leverage these new technologies to reinvent how we make footwear. So we can make an on-demand, zero-waste supply chain for footwear. Uh, we by happenstance ended up in Old Town Portland. Portland's the capital of footwear in the US. And we've got, you know, Nike was, is the original elephant in the room here, but we have Columbia, we have, uh, Under Armour, we have Adidas, we have Lululemon, Hoka, you name it. Anyone who wants to have a footwear team ends up coming to Portland because of the talent being so deep here. And Portland, like many cities, has a heritage of manufacturing. So both Danner and Keen have footwear manufacturing here. We used to have a lot more manufacturing here. Um, and we have a manufacturing district called Old Town, and most cities in America have an Old Town. And the story of Old Town is the story of American manufacturing. You know, from 1920 to 1950, it was humming. World War II was a huge push. Portland really grew with all the steel and shipbuilding. That came to Portland. And in the '60s and '70s, a lot of that manufacturing went away. So right now I am standing in what was a glass manufacturing building. In fact, my office is right where the— they would smelt the glass. There's 3 offices all in a row, and there are 3 furnaces right here. And as I look out in front of me, there was a production floor, and below was where they'd stoke the furnaces and a lot of coal. And we brought manufacturing back to this building and showed how you can take these, these buildings that were once thriving manufacturing sites. You're not going to bring back blast furnaces and glass melting, but you can bring, you can use new technologies to bring smaller footprint, more sustainable, high mix, high production manufacturing back. And as we began doing that, we began seeing this huge surge of excitement in the rest of the industry. We work with a lot of brands. A lot of factories, a lot of suppliers saying, we're ready to reinvest in ways to think differently about this, but we need physical proximity. Supply chains thrive on physical proximity. And as we looked around us, there are all these beautiful manufacturing buildings that were boarded up. This was a neighborhood that really hadn't seen life since the '70s. And so we— I was lucky to meet both an incredible architect and urban designer, as well as a developer. And the three of us came together and said, what if we were to build a manufacturing innovation campus right here in downtown Portland that acquired these old buildings and then that are currently not very highly valued, and then return them to their original purpose, but in a new way, 21st century manufacturing, and brought factories, suppliers, vendors, and the 500 brands that already call Portland their home all together. So they can do development, small lean react lines, and eventually scale manufacturing. And that really hit a, hit a core in an industry that was searching for ways to bring manufacturing innovation back. When you let manufacturing leave, eventually you let manufacturing innovation control of how we manufacture leave with it. So these brands are looking for a way to figure out how they can regain that control and how they can work with their suppliers more closely rather than send teams overseas. To just move product in line. And so that's what the main Old Town campus is about. It's a 10-building, 323,000-square-foot initiative to build the manufacturing innovation campus for footwear and apparel in the heart of Portland.

I love it. I love it. I love, I love what you're doing. And we said this when we first spoke. I just think it's really like there's something quite visceral for anybody, whether you're in footwear or not, that kind of understand the purpose of what you're doing, the modernization, the homogenization of the old world and the new world. And, um, I also think it's quite exciting. I mean, certainly in North America right now, you'd be a hot topic in terms of onshoring. And there's a nationalism that's flowing across America, but around the world. And so I'd be interested, which I don't have an opinion on whether it's a good or a bad thing, but I do think that manufacturing closer to source, I don't think there's anybody on planet Earth that wouldn't agree that that makes a lot more sense for the environment, for the people, for the companies, for the culture. So I think it's really exciting what you're doing. I'd be interested to find out, I mean, obviously it's early days, but do you have plans to kind of take this model global? Are there other, like other verticals within fashion? Certainly footwear is an obvious one, but are there plans to make this more of a blueprint for fashion and footwear?

Absolutely. I mean, I'm, I'm going to stay focused on Portland and footwear personally, but Matthew Claudel, who leads the architecture practice in the development of Maine Old Town, um, he has a PhD from MIT specifically on this exact topic— how we can, how cities reinvent themselves with new technologies. And every city has this heritage of manufacturing. Every city has an urban doom loop problem right now. COVID had broke downtowns. Single-use office space doesn't work. Portland was one of the hardest-hit cities in America. Our downtown is the highest vacancy rate of any city in America. So it's almost no surprise that the city and the state are invested in really dynamic and innovative ideas like this. But we see Portland just leading the way because every city has a heritage of manufacturing, whether it's bikes from Dayton or soap in Western Connecticut Or you go all the way across the pond to England, has such rich heritage of manufacturing across all these what are called second-tier towns, but they're not second-tier by any means. And increasingly the unaffordability of London makes those towns really appealing to highly educated, upwardly mobile middle-class families. So there's, there's a stigma that I think is being broken. Um, and we see the, the, the, the saying goes, once supply chains leave, they'll never come back. This is a way for us to show how you can bring back supply chains, reinvent urban downtowns, and change manufacturing for the better.

Yeah. Yeah. And I was, I was obviously thinking about the UK because I was reading an article yesterday about how the UK has decimated its economy and the energy issues that we're having. And, and it did occur to me that towns like Sheffield and Liverpool and Manchester and, you know, would make a lot of sense here and in other parts of southern and northern Europe. So I think it's super exciting. And let me ask you another question then, Elias. So we've got brands that compete, you know, very, very, in a very real way. And we're gonna bring them all together next week at STRYD. So of course there's always, you know, a bit like politicians when you see them in the hallways, whether they're Conservative or Democrat or Labour or Tory, they're all in the same game. And it's the same in any sector. And I know the same is true for footwear and fashion. How do you, though, see the collaboration occurring when, you know, if they're using it as a hub, is there a risk of homogenizing the competitive advantage by all accessing the same tech and the same tech partners and the same innovations?

Yeah, I mean, it's a really important topic. And so there's two answers to that. There's where collaboration exists and where things are really confidential and separated. And collaboration is really important, but in pre-competitive spaces. So one of our partners in this effort is the Footwear Collective, and the Footwear Collective has signed on to Target, to VF— I mean, the list of brands is really expansive— specifically to collaborate in the pre-competitive supply chain space around sustainability. So to work together on projects and pilots that will allow them all to think about takeback, recycling, new component compounding, And sustainability is one of the bright spots of pre-competitive right now, where brands can really work together because it's going to take an industry, not a single brand, to really make it work. On the other end, everything from design forward is pretty competitive, very competitive. And it's important that brands that are members of the Campus have complete confidentiality and security. So this Campus is set up similar to an army base, not in a threatening, hostile way, but in a way where if you've ever been on a military base, Some areas are kind of open to the public once you get in the gates. Some areas are a little bit more confidential and some areas are highly secure. And there are just visual cues and certain protocols with each of them. So one of the real challenges and that our architecture firm had with designing this campus is how can we have really great collaborative space, shared spaces, educational spaces, and then how can we have really secure confidential spaces where actual IP is being created? And so we've been able to walk that line by creating these different zones on campus. And again, the, the center of the campus is the Hub and the Tower. So that's the place where the most mixing happens. The Hub is a membership model where right now only two brands in the Oregon area have the ability to make samples. So rather than prototype, samples are functional, factory-level samples, something that has all the finish, something that essentially you can sign and say, now make 10,000 of them. Right? So it's more than just an internal prototype. It's made with all the final ingredients in the way a factory would make it at scale. Only Nike and Adidas have the ability to do that today. It's very expensive for brands to be able to achieve that. So they send their teams every 6 weeks overseas to T1 development sites that are often shared between brands. This allows them to come and access that right here in Portland and to reserve that time. So it's completely confidential for them. And then opposite that is a tower, which is 7 floors of a supplier and vendor ecosystem that they'd be able to pull on immediately and bring into the sample floor or bring materials or technologies. And then there's another 7 buildings that are specific to T2 and T1 manufacturing growing around that hub and tower, which are much more closed down when you start doing read and react and small level production. So one of the benefits is right now brands go to their T1, their factory partner, and develop everything with them. And that locks them in because that T1 has certain vendors they like, certain ones they don't. If they develop something with them, they have to make it with them. This allows brands to make independently and bring in the different partners they want, have a lot more control in the collaboration process, but doing it securely.

Yeah, it's really exciting. It's really exciting. And one of, one of the things that I think new technology, it's often overlooked because of course when we're starting new ventures or new companies or changing if when there's a sea change in how things are made and sold, often our focus is on the billion-dollar enterprise brands. But do you think that a facility like this is going to somehow maybe democratize what it takes for you and I to start a brand and for us to have access to, to those shoppers in North America? Do you think that there's, you know, in terms of the social impact of of this technology kind of revolution that we're witnessing? What do you think that's gonna do in terms of the up-and-coming new generation of designers and business owners?

Well, there's no question that this will accelerate just by reducing the barriers in terms of affordability. When you're on campus, and we're very, very focused on making it affordable for everyone, so we wanna make sure that there's a, you know, $5,000 a month option for startups to be able to access complete sample-making capabilities, world-class vendor and suppliers. OIA was one of the partners we announced, which is the largest logistics provider in the industry. And they specifically focus on helping small brands as well, because they can consolidate small brands' orders with big brands, save them money. They can help them navigate a very globalized and complex supply chain. So there's a huge value there. I also look at, I mean, Portland is full of small brands starting up. People leave Nike, they start brands almost every month here. So how can we help them do that? But then how can we train the next generation of talent? Because there's a talent gap in the industry right now that's significant. We don't realize how new most of these outdoor brands are, like Columbia and Nike. These are brands who the founders are still alive. The, the current executive suite was there in the very early days and they're all retiring. And a lot of knowledge for actually building these companies and the supply chains and why things are the way they are is leaving with them. And the new talent that's coming in doesn't have a familiarity with manufacturing or supply chains to the same degree. And that's a real, real cause of concern, because they're not going to know how to navigate it and how to improve it. So we have a fellowship program on campus that will take kids out of school and put them for one year on the sample floor working across all the brands' innovation teams, getting factory-level experience, and then having a familiarity with all the brands, vendors, and suppliers in the industry. So after a year there, you'll leave with more than what 7 years at Nike could have given you.

Amazing, amazing, amazing. So it sounds like from the ground up you, you've kind of thought through exactly how— and let me ask you, where, where is it now then? Where are we at with Made in Old Town? How many residents are there? Is it, is it finished? Is it, is it all good to go, or are there still things needing to happen?

So, uh, broken into two phases. Phase one is the first three buildings, um, which is the Tower, the Hub, and there's one what we call the Engine, which is specifically for a T1 or T2 Manufacture on campus, and that's a $15 million project. It was begun with a $2 million state grant that we received last summer, and that was just joined by another $7 million loan from the city. Um, so together we've already raised and closed around $11 million of that $15 million, which has allowed us to purchase all 3 buildings and begin buildout and construction to open later this year. We've also already leased entire floors in the towers and began completing supplier ecosystems for that. So we're about to announce what that looks like. Stay tuned. I think that story is breaking next week. Um, and we're already hosting events like yours at the tower. So your event will be in the ground floor of the tower and going through the entire ecosystem. And that's where we really want— for us partnering with events, like we had a partnership with the Functional Fabric Fair, partnering with Stride. Is part of our reason to be, right? We want to make sure that the industry and events like this can happen in a really organic, consistent, constant way with access to all these new suppliers that might not know about Stride or brands that might be brought in, then have an idea, meet someone there and build something new. So that's, that's the current phase. The second phase is the other 7 buildings that will be fully purchased by 2028 and stabilized by 2030. So it's a very big project, but doors open on it. Later this year.

Amazing, amazing. So, well, listen, we're, we're delighted that we can come and support it. And, um, I, I'm interested just on a personal level, what, what's your— what trainers do you run with? Do you a runner?

Of course, yeah.

What's your brand?

Uh, I was Addie for quite a while. Right now I'm running with some Salomons. Uh, okay. But I mean, like, I was climbing. I did Half Dome a few months ago, and everyone— I saw so much Brooks. So I, so I made sure the Brooks team knew it. I was like, you guys are killing it on the mountain right now. Keen also, like my hiking boots are Keen. They're really great. So there's just a lot of good quality out here.

In the UK, in the place I live in London, if you're, if you're doing, if you're semi-wealthy and you're doing outdoor fitness, you're wearing Hoka. That's what everyone's wearing. OK, yeah, it's a hot brand here in London. I'm still Nike. I've always been Nike and I always will be. I don't know why. I've got brand allegiance to Nike.

I don't think—

no, I'm not, am I?

No.

But, but yeah, I think we're— listen, we're really excited to meet. And I'm just ashamed I can't be there, but I will meet you at the next one, I'm sure. And, um, yeah, looking forward to kind of working with you over the coming years and maybe even running the event there next year. Let's see, let's see if we could make that happen.

We would love that. And I mean, and for all, all your listeners as well who either are working at a footwear brand or as a supplier or vendor or just looking to break in, maybe younger talent looking to navigate the industry, um, this is a big tent. This is by the industry for the industry. My role in this is sitting on the board together with Noel Kinder, the former Chief Sustainability Officer of Nike, and Eric Liedtke, the EVP of Brand at Under Armour. And we really focus on providing an opportunity for brands or vendors to come and build what they want on the campus. So the first question we ask is, what do you need? What can you give? And I can provide, you know, I want to provide last development. If I'm Jones Vining and I wanted to host my last seminars on campus, If I'm OIA, I want to make sure that smaller brands have access to things that only big brands currently do, whatever it might be. And then what do you need from us? You want talent, you want recruitment, you want sample-making capabilities. And we want to make sure that oftentimes what's most exciting is when a supplier comes and brings the entire ecosystem with them. Like, I want to build a color lab, I want to build a biomechanics lab, and I'm only one part of it, but I know the other four, and together we're a whole ecosystem. And that just shows one of the kind of pieces of magic in this industry. For some reason, when you're— when you start in footwear, you never leave. There's just such specialized knowledge, you never leave. So everyone knows everyone, they have these really close relationships. And for a $365 billion industry, it's relatively small. And so there's a lot of power in that community. And it just hasn't really had that third space to be harnessed yet. So there's open call to action to be a part of that.

Amazing, amazing. And we, and, and we want to be part of that as well, you know. And so I think we, you know, together we're, um, we're helping. Although we haven't had to make a $125 million investment, uh, to run Stripe, but we're part of that movement. So listen, thank you for the roadmap for, for—

maybe you can kind of share a little bit of what's, what's coming later this year with all the different PI events.

Yeah, I mean, we have, um So, I mean, basically, as an events organizer, when we put on our events hat, we have obviously Pi Apparel has its roots actually in design and development. So for 12 years, we've been running basically the who's who of design events in Milan, although in Europe we move it around. That runs in April. It's been in Milan for the last couple of years at La Commerciore and then in New York. And that brings together, you know, C-suite and director and SVP level design, development, innovation, and some IT folk from predominantly enterprise brands, although we're trying to change that and trying to be more inclusive and less Soho house and more, you know, something a bit more rugged, bit more made in Old Town. So we have those two events. We also run events that are highly focused on merchandise planning. So there's smaller events with 100 people in New York and in London bringing together the merchandise planning community. I'm most excited actually about an event we're running at the end of the year in Hong Kong. So we've been working in Hong Kong for 8, 9 years and we built up a reputation as bringing together the who's who of sourcing, right? Because of course it's a sourcing hub and production, but predominantly sourcing. This year what we're doing is we're trying to pull together the extended value chain of fashion. So we're calling it Design Make Sell. And as it says on the tin, this will be a 500, 600 delegate event in terms of brands, retailers, and production. We'll get production from China. We'll get the enterprise brands. We'll get the local brands, the Asian brands, design, development, supply chain sourcing, retail, marketing, UI/UX. It's going to be— basically a way in November of us tying all of our events together and producing a big show that is a nod to, to the extended value chain. Um, we also have an event called Retail Rebels, uh, which will run in New York, um, which is focused on marketing, UI, UX. Um, and rather than, um, which we, we all know about, your NRFs and your Shop Talks, these are great events, but I think They take a toll on the industry, they take a toll on your body, and we wanted to do something that focused on senior-level decision makers and focused just on the human, the customer. So the event is going to be around the customer, and I think that's one of the biggest challenges for most marketeers at the moment is understanding, first of all, understanding who their customer is and should be, but more importantly, understanding how to retain, how to communicate, how to how to nurture prospects, because it has changed a lot and it's changing very, very fast. So yeah, that's, uh, that's what we've got coming up this year, amongst other things.

I mean, I love the very focused and specific nature. That's why I'm excited for Stride, because it's a really curated and focused bunch of attendees, and you know that everyone you talk to is going to be relevant and you can have really focused conversations. Not like So what do you do? It's more like, hey, what did you think about exactly this one thing that I'm focusing on right now as well?

Yeah, yeah, exactly. And I think that's really, you know, our strapline moving forward is the future of fashion is digital, let's build it together. And, but just pulling off 100 people or 200 people who live and breathe, as we were talking about before, footwear, right? Okay, so you live and breathe footwear, But if you're working in design or you're working in UI/UX or if you're working in supply chain, you may have slightly different functions, but there is camaraderie amongst that shared passion for footwear. But if you pull together all of the designers and all of the developers and you put them in a room, you find that magic will happen. And yes, people are looking for jobs, and yes, people are seeing old friends, but we know that that is really the secret sauce of Py Apparel is being ultra-focused highly niche and having the ability and the history and the kind of credibility to pull together these events across the value chain in the right places in the right times, you know?

Yeah, well, we're really excited about it. I spoke at many events before, like the FDRA and the Sustainable Shoe Summit, all the rest around really the impact of on-demand, zero waste. And it's always been this kind of holy grail. How can we ever make on-demand work? It's always so expensive. Is the technology ready yet? But one of the things, and this is why it's exciting to have a really design-focused conversation, one of the things we found over the last year, we would go to our partners and say, here's all the different ways we can take, you know, design, make it 3D on demand, more local without the kind of waste. And the biggest question we get was from designers. How can I design within your capabilities? What can I do? What can I do? And so we had a host of these digital tools that we built custom in-house to translate design directly into 3D. And we realized we need to give these to designers. We need to put them in their hands directly. There's no sense us standing in the middle. They need to live within that— they need to have the access to both the control and the creativity that that provides. And so we bundled them together into a tool we call Interplay. And Interplay is a no-code design tool that allows a designer to go from any 2D to a manufacturable 3D with cut views, with all the 2D information they need and are used to, to change. So now a designer isn't relying on someone else bringing their idea to life, which is always the big bugaboo for designers, right? I'm— a tech pack is 90% hope, right, at the end of the day, because they're going to give it to a developer, gives it to an engineer, gives it to a 3D engineer that's modeling CAD, gives it to a sample maker. How can you allow them to make directly, go from idea directly into 3D that can be manufactured and that has all the logic and manufacturing and then bring in other sources of information together with that. So if you have testing data or training data or market data, to your point, that is often siloed and distinct with a very changing consumer. How can you bring that directly into the designer instead of an 18-month lead time? They can have an 18-second lead time, how they think about taking that input and bringing it into design. And that change that conversation entirely. Instead of talking to supply chain about on-demand, you're talking to design about control and the benefits that leads to becomes on-demand. And design— this is a design-driven industry. This is where design really needs to be empowered to change. And if you're going to change the rest of the industry but not include design, it's not going to have the same impact.

Yeah, I couldn't agree more. I couldn't agree more. And also, I'm quite excited to see like specifically in footwear, what it means for end products in 4 or 5 years. I'm interested to see what it looks like, what we're going to be wearing because, of course, fashion changes and ebbs and flows. But I'm also interested to see what real agility and real speed and real democratization of design actually means for the end user, for you and I, and what we end up wanting to buy, what our choices then become. I think that's quite exciting as well.

Yeah, I don't know if I told you this when we first talked, but in the early days when we launched our first concept lines, we thought of it as a big test. And so we had 63 sizes, 4 narrow to 14 wide in a woman's run. And we allowed customization, like you could put your name on the bottom of the shoe, it'd be printed, debossed out. And we found that there's— I think naturally everyone finds eventually that there's a real kind of optimization curve with options. How much does someone really want to design their own shoe versus personalize it? What are too many choices? When we offered the ability to customize shoes, we had about a 20% adoption. The moment we started charging for it, we said, okay, 20% adoption is when it's free. Let's charge $20 for it. It went down to 2%. And so we saw, okay, there's not really a huge customer value unless you— it's a bridal party, then it was crazy. Adoption was really high. But how much— and it's the same with democratizing footwear, which is also when you talk about democratizing design, how many people want to design their own shoes versus curate a designer's look? How much do— how many do people— how many people trust themselves to design? We have Nike ID, which is really just color selection. And so I think there's a huge opportunity to think about what is the right blend of how much control you give a customer. You can give them more control now than ever. How much do they actually want? How do they make it their own? Look at what Balenciaga is doing with like more bespoke in-store. They'll have someone actually kind of sign and autograph different things and do some kind of like graffiti look on your shoes. So I think the experiential and kind of personalization approach is really hitting a stride, but it's an open territory. And that's, we've learned that it's not as, not as simple as just offering unlimited choice. Which is, I think, a good thing.

Yeah.

But, there's a huge opportunity there. When people think about 3D footwear, they often think about, you know, mono-printed kind of cube-like clunky TPU socks, right? And, when we first launched our shoes, they didn't look 3D printed at all. We wanted to hide the technology almost too much, I think, just to show that you can make something commercial that wasn't obvious. It wasn't about it being 3D printed, it was about it being made on demand, being made faster, with more control. Um, that's changed a lot over the last year. There's a huge, I think a lot because of Yeezy. Um, there's a huge, like design language around generative design. That's introducing a really compelling set of cardinals, right? We could have something really geometric or really biological looking. And if you ask me what, like if 30 years from now, what the biggest difference, if you step into that future looks like, I think it's the world around us is a product of industrialization screws that have to always be the same, right? Imagine a world where everything was generatively designed and then additively made. The design language is completely different. And so we'll start living in this really interesting, I think, kind of pseudo-futuristic, protopian world where there's a blend of both and people kind of carry it accordingly.

Yeah. Very exciting. Well, listen, on that note, I'm going to let you get ready for Stride. And I'm going to thank you for your time. Really, really interesting to talk. And genuinely, I really think what you're doing is amazing. So I'm looking forward to coming and seeing it myself.

And yeah, we're sorry to miss you next week. I wish we could have you, but—

conflict I can't get out of. But I definitely will be back. I'll probably be back this year. So, so yeah, I'm looking forward to meeting you properly. And thank you so much for your time. Really good to meet you. And yeah.

Likewise, Stephen. Thanks so much for having me.