Handbags to hats to apparel for all ages ... Roots has leveraged local manufacturing, ingenuity and a silly looking shoe to build an impressive, vertically integrated retail network and cash in on Canadian culture.

What do comedians Robin Williams and Mike Myers and rap singer "Puff Daddy" Combs have in common with Prince Charles? They all appeared in the pages of the mainstream press this year donning the Roots Olympic "Poor Boy" cap. This hip piece of headwear - a part of the 1998 Canadian Olympic team uniform that was designed exclusively by Roots - quickly became a fashion icon following the opening ceremonies of the Winter Olympics in Nagano, Japan.

"The Olympics were incredible," recalls Roots CFO Alan Goldberg. "Literally, the day after the opening ceremonies, Roots garments were on TV everywhere, and we were in magazines and newspapers. The products just started to fly out of the stores. ... We had waiting lists of tens of thousands of people who signed up just to get a hat."

The deal to outfit Canadian Olympic athletes - an agreement that took company founders Michael Budman and Don Green more than two years to ink - truly was a feather in the cap for Roots, a Toronto, Canada-based apparel manufacturer and retailer. It significantly boosted worldwide recognition for the 25-year-old lifestyle marketing maven, a $100 million-plus, 1,000-employee company that has leveraged homegrown manufacturing and a deep-rooted Canadian heritage in building an impressive, vertically integrated retail network.

"The Roots philosophy is a combination of manufacturing a quality product and producing a comfortable product for the casual lifestyle," explains Marshall Myles, vice president.

Today, Roots' scope stretches from the Pacific Rim to the New York City streets of SoHo, where the most recent Roots store opened this past May. And despite the Asian flu, markets such as Japan, Taiwan and Korea are booming for the company. There are now 130 Roots stores globally, 25 of which are franchises. The company also has a successful in-store shop program with Eaton's, Canada's largest retailer, as well as a high-end premium incentive business that caters to the film and entertainment industries.

All this started in 1973 with a single entrepreneurial idea to make funny looking, recessed-heel footwear, dubbed by Budman and Green as the "negative heel shoe" and inspired by the American Earth Shoe. The Detroit, MI-born friends, who met while spending summers at Tamakwa, a well-known summer camp in Canada's Algonquin Park, started Roots after settling in Toronto during their 20s, investigating different businesses and unsuccessfully attempting to obtain the Canadian rights to sell the Earth Shoe. Not easily discouraged, they pooled their resources, designed their own version of the shoe and developed the Roots concept and name (which touts a logo of a beaver - a well-recognized symbol of the Canadian outdoors). Then they found a small shoe company in the Yellow Pages, Boa Shoes, that was willing to manufacture the unconventional product.

Alas, all good things must come to an end, especially in the fickle world of fashion. The negative heel was on its way out by the mid-70s, so Roots began to diversify into more conventional shoes, as well as jackets and other leather products. And by the mid-80s, athletic-inspired clothing entered the picture.

"Around 1985, the casual lifestyle became much more acceptable," says Myles. "It was the phenomenon of the sweatshirt. From 1985 to 1990, we did a tremendous amount of business. It has changed the focus of our company and put us heavily into the clothing business. ... We went from [being] a shoe company to a clothing company to a lifestyle company to a global company."

The transitions, as successful as they have made the company today, were not achieved without some setbacks. In 1979, for example, Hart Schaffner & Marx, which had a subsidiary named Roots in New Jersey, filed a trademark infringement lawsuit against the company that booted Roots products from the U.S. market. It cost Roots 10 years and $1 million in legal fees to win the case. There also was an unsuccessful real estate venture in the '80s (to develop a Roots ski lodge in Aspen, CO), and the early '90s found Canada in a retail slump.

Despite the snarls, Roots has focused on diversifying, and the approach has kept the company on a forward track. Walk into any one of the Roots stores today, and you'll find everything from leather jackets, bags, shoes and belts to athletic-inspired ladies' and men's wear. And there are infants' and children's clothes, domestics, eyewear and watches - all in the Roots brand. You'll also find a unique environment in each store that caters to the demographics of its location.

"The one thing we do differently than most retailers is that no two stores are alike in terms of product mix," says Myles. "When one of our customers travels to another Roots store, there may be new products just for that store, so it's exciting to go in. There is always a surprise."

Manufacturing Muscle

At first you might think: impressive, but not overwhelming. Certainly there are other companies out there, such as Eddie Bauer, that also have been successful in developing and promoting the lifestyle concept in one form or another. But if you compare apples to apples behind the brands, you'll find that Roots has its manufacturing roots firmly planted in its own soil - 95 percent of the entire product line is produced in Canada - a claim that most of today's North American branding behemoths just can't make.

It's also an issue of control, says Myles. "We have done everything we can to build the brand over the past 25 years. Part of that is having control over the goods we manufacture, designing our own products and seeing them come off the line every day."

The job of overseeing the day-to-day production at the 225-employee leather operation falls on Richard Kowalewski. The plant is divided into sections - bags, shoes and jackets - and much of the sewing is done in teams. It's a flexible environment, he says, and one that can handle quick turn times and frequent style changes.

"We have the philosophy that no quantity is too small. I wouldn't want to make one key ring, but we will do very small orders," says Kowalewski, who notes that higher-priced jackets and bags often are produced in lots of less than 100 units.

Having production in-house also provides Roots the ability to do custom leather orders - sometimes within days, according to the manager of Roots' 6,000-square-foot store in downtown Toronto. It's not a promoted service, but when customers have special design or fit needs, Roots is willing to go the extra mile. It gives the company a competitive advantage against importers, not to mention more satisfied customers. And in terms of price points, Roots gets a lot of mileage out of the leather goods, so it's worthwhile.

Speaking of mileage, the Roots Explorer, which Ford introduced in Canada this summer, will come equipped with a custom CD and storage bag designed and produced by Roots. A large quantity of the bags rolled out of the plant this past May. It's not unusual for large orders, such as the Explorer bags, to run side by side with small custom jobs throughout the production floor.

Not too far down the street from the leather operation, which is a part of Roots' headquarters, is GreenBud Manufacturing Ltd. The two and one-half-year-old garment manufacturing division, Roots' first foray into casual wear manufacturing, is proof positive that with the right product and the right approach, it is possible to buck the current North American trend to divest brick and mortar - and to do it profitably.

"Roots is unique with the strong image and identity it has in Canada," says Richard Green, who heads up the division and is cofounder Don Green's brother. "Obviously our manufacturing costs are higher than they would be overseas, but the 'Made in Canada' label, the quality control and the quick turnaround have made it worthwhile.

Since its inception, GreenBud has grown to 200-plus employees. The facility, which now produces 50 percent to 60 percent of Roots' athletic apparel, deals mostly in 100 percent knits and fleece and is cutting approximately 20,000 meters of fabric per week. Two 45-station INA unit production systems (UPS), along with a 30-operator off-line sewing unit for samples and small orders of less than 300 units, currently are churning out about 20,000 garments per week.

The venture has been so successful that this summer, Roots doubled its 45,000-square-foot production area, which also includes a washing department and a Lectra-equipped CAD room. After some equipment shuffling, including expanding and moving the cutting room to the new addition, another 45-station INA line will be added.

The washing department, on the other hand, will not see any growth, notes Green. "We are moving to pre-washing the fabric before it is cut, which has many advantages. For example, we don't have to worry about shrinkage differences in marker making."

Looking at the final steps in the manufacturing process, embroidery - a crucial design element of most Roots garments - is handled in-house for both the leathers and GreenBud. This facility, which is located next to Roots' headquarters, also houses the company's warehousing operation, which usually ships merchandise to stores the same day it is received.

Reengineering Retail

Controlling a vast stretch of the supply chain has put Roots in a unique position to break down barriers between retail and manufacturing. But to stay on top of today's high-stakes retail game with 130 retail stores that have unique product mixes, Roots realized that it had to start looking at improving its information technology (IT) applications. Spearheading this ongoing project is Darlene Goren, director of corporate operations and technology, a retail industry veteran who joined the company in July 1997.

"Retail is the biggest part of our business, and it needs the most work right now," says Goren. "When we took a look at where we were from a technology standpoint, we knew we were behind the ball. The company wants to grow and expand, and we have to be able to meet those demands."

Goren emphasizes that there's a fine line between just installing systems and really using technology to change business practices. "Technology is great, but there has to be a need for it. You don't look at the technology and say, 'How do we fit this in?' It may be a great piece, but if you don't need it, what's the point? You just end up frustrating people."

After a careful evaluation of the business, the first IT implementation Roots made was a new point-of-sale (P.O.S.) retail software system from Datavantage. The Windows[R] NT package, which was piloted in March and installed last month, links the stores to Roots' headquarters. Additionally, new online forms automate custom orders and eliminate the need for fax machines, and the system will be used to collect point-of-sale data and drive forecasting.

The merchandising module, which will replace a 4-year-old AS/400-based system, will be supported by a new wide area network (WAN) and will handle functions including inventory control, purchase order management, event management, customer profiling and sales tracking. It also has the ability to handle information at the style level, which allows for dynamic stock management.

"One of the things that differentiates Richter's product is its database architecture," explains Elliot Schiller, vice president of Richter. "It stores data the way a buyer wants to look at it. For example, the first question a buyer wants answered is: 'What styles sold?' The next question is: 'What colors are hot?' Our system can deliver that information in a matter of minutes.

"From a replenishment point of view, the question becomes: 'What do I want to send the stores at the size level?'" Schiller continues. "Think about it. If Roots' average price point is $50, the stores are open 365 days a year, and the company could sell one more garment per day [in each store] because the right sizes are available - that's another $2.4 million dollars."

Roots' management sees eye-to-eye with Schiller on the issue: "If you don't have the right size and the right fit, then it's difficult to get customers to come back," says Goldberg. "And when one of our logos is hot, they want to be able to get what they want when they want it. So we are looking to really beef up the sophistication [of Roots' replenishment] with the Richter system."

"The goal is not to change what really works well here," says Goren. "It's to improve. The company is growing, and we want to keep the momentum going."

RELATED ARTICLE: Roots Defined

As the Roots brand has developed over the years, different businesses have evolved under its umbrella. And like the legs of a chair, the different components of the Roots portfolio have worked to support the collective brand image.

"Roots is a brand," says CFO Alan Goldberg. "So all of our strategies revolve around the brand, and that is the way we are moving forward as a company."

This philosophy has resulted in the development of distinctive business strategies:

Retail and Franchises: With 95 company-owned retail stores and 25 franchises spanning North America, Europe and the Far East - and more on the way - Roots is focusing on the global expansion of a regional, Canadian image. On the home front, the company has developed a successful in-store shop retail business with Eaton's, Canada's largest department store chain.

"Franchises operate their businesses independently, but they have the same standards as Roots-run stores," adds Goldberg. "When you walk into a Roots store, you can't tell whether it's a franchise or a corporate store."

Licensing: To offer a broad base of product categories through its stores, Roots has developed a strong licensing business that includes fragrances, eyewear and watches, as well as a jeans line that was introduced this month. Roots keeps tight control over its licensees, and each line is handpicked and approved by company founders Michael Budman and Don Green.

Premium Incentive: A marketing masterpiece, Roots' high-end premium incentive business has catapulted the company into the public eye. Catering to the entertainment and movie business, Roots garb has made its way onto the backs of actors, musicians and other high-profile entertainers. Companies frequently film in the Toronto and Vancouver areas, and Roots has made a point of wooing their business.

Roots has used the dividends of this business to build relationships and market the Roots brand. For example, comedian Dan Aykroyd, singer Robbie Robertson and a long list of other celebrities have brought awareness to the brand by participating in advertising campaigns and simply wearing Roots products. (Budman and Green started building celebrity ties in the '70s, when Toronto and its social scene gained popularity with the entertainment industry.) Moreover, to support its athletic image, the company supplied the official 1998 Canadian Winter Olympic uniforms and has signed on Olympic medal athletes as official sponsors, including skater Elvis Stojko.

"We have really been lucky in that we have been able to place so much of our product strictly on good will," says Marshall Myles, vice president. "The Olympics were a great example of that. The athletes were only required to wear the [Roots] jackets when they were accepting a medal and to wear the full outfit during the opening ceremony. But if you look at all the interviews with the athletes on television and in the media, they were wearing Roots clothing all the time because they wanted to wear it."

Manufacturing: The "Made in Canada" label is essential to Roots' brand image. The company owns two manufacturing facilities in Toronto. One manufactures all of its leather products (except furniture), while the other, GreenBud Manufacturing Ltd., produces 50 percent to 60 percent of Roots activewear. With the exception of 5 percent, the remaining production is outsourced to contractors in Canada.

Lisa C. Rabon is editor in chief of Bobbin.