Ten years ago two 20-something friends had a bet over a beer and started a company. No seed capital, no investors, no nothing. Today they are debt-free and their line of premium streetwear and denim for men is carried by the best retailers in New York, Tokyo, London and Sydney.
Meet Leith Testoni, 35, and Jonathan “Jono” Yeo, 37, the faces and driving force behind Zanerobe. Theirs is a story of vision, the single-mindedness of youth and simplicity. No formal mentoring for them if Yeo has an issue that’s bugging him, he consults one of the entrepreneurs who’s also doing a workout at the gym. Fancy HQ? Oh no, a nondescript, brown-brick building in suburban Sydney is home to the team of just eight that run this outfit. To be fair, inside is pretty cool. Upstairs is the office, with exposed beams, foil insulation and chilled tunes. Downstairs, in what appears to be a converted garage, is the showroom which, for obvious reasons, doubles as a walk-in wardrobe.
The pair started in IT for big companies during the tech boom. The money was good, they say, the firms were offering starting salaries A$15,000 above others in the graduate market and, as Yeo says, signing up “was a no-brainer”.
He did a Bachelor of Business and Marketing and worked at a few boutique dotcoms before joining Colonial First State as an IT project manager.
“The money was good, but it wore thin after four to five years,” Yeo says. “It cemented in my mind that I didn’t want to be in the corporate environment.” When he met Testoni through a mutual friend in 2000, Yeo didn’t have responsibilities such as a mortgage or children, so was open to options.
Testoni did a degree in environmental engineering, part of which was done at a university in Colorado. When he graduated be became a strategic IT consultant with Accenture in Sydney for three years. He then did a few terms as an independent IT consultant in Japan and London before returning to Sydney, where he took jobs with AMP Capital and Commonwealth Bank of Australia before he shed the corporate clothes and started to wear his own label.
It all started when the pair saw a guy dressed “in a hideous striped shirt” and Yeo bet Testoni that he couldn’t design a better shirt. Testoni made a good fist of it and their new career was born.
“Within a week we had a name and an idea of what we wanted to do,” Yeo says. “We started to speak to local factories about a [fabric] sample range for our very first sample set. So it was a quick transition from thinking about an idea to actually having something on the go.”
Adds Testoni: “At the time the market wasn’t very mature. There were lots of gaps.
“Over the past five years there have been so many players that have been introduced into the market, whether it be overseas or Australia, because Australia has become a financially attractive market.”
Zanerobe started life with collared shirting after Testoni had been in Japan looking at streetwear and style.
“We realised there was a gap in the market for luxury poplin shirting and we were really intrigued by Japanese fabrication like a poplin with a burnout or embellishment or embroidery, because at the time it was all vertical stripes, multicoloured and even angular stripes,” he says.
They found a mill in Japan through a fabric agent in Sydney, who had a bundle of Japanese materials that no one was using.
“So we came out with all these, and some florals, charging an absolute bomb,” Yeo says. “I don’t know how we got away with it,” chimes in Testoni.
The pair imported one or two rolls of fabric and took it to outer-suburban Bankstown in Sydney, where all the business shirt manufacturers were based.
After their day jobs back in corporate land, Testoni and Yeo travelled out to Bankstown to work on their new career.
“We were working for Zanerobe for three to four years before we left our jobs,” Yeo says. “That first roll, I remember going to an ATM and pulling out A$300 for a roll of fabric. It was all pretty organic, from salary to just doing after-hours stuff.”
After four years of the long hours and kicking in A$10,000 each (Testoni borrowed from his mother, Yeo took out a personal loan), the business had enough traction for them to resign from the office and step full-time into the rag trade.
Within three to four years, the label experienced its first success, its first Fashion Week and its first order from a top-shelf retailer (David Jones) in Australia, and they began looking overseas.
That’s an ambitious move for two IT guys in their mid-20s. Amazingly, though, they had no business coach and can’t quote from any Harvard how-to guide to business.
“It was trial and error,” Testoni says. “We never thought it was going to fail. You work it out as you go and we’ve made our fair share of mistakes, but we’ve learned from them every time.
“We’ve stage-contained things: if something was risky we looked at the outs and we knew what the contingency was around it. We still do that to this day, but now we have more of a network that we can draw on for advice and these guys are seasoned.”
The guys they mention are executives at beachwear group Surfection and jeans retailer Glue, with whom they struck retail partnerships that shored up their footing in the Australian market, along with the strong relationship they formed with department store David Jones.
“We know what we’re doing and it’s a logical progression, rather than always sitting down and asking someone what the next step is,” Yeo says.
“If you’re doing that, save it for the big questions the big strategic stuff. If you want to roll out retail, go big!
“If you want to penetrate a new market overseas, ask someone on the ground.”
WE DO EVERYTHING AT LOW RISK. WE’RE NOT GOING TO PRODUCE 100,000 UNITS OF PRODUCT, SHIP IT OVER AND HOPE IT WORKS. Jono YEO
When entering a new retail market their modus operandi is simply to approach the best retailer in it and ask them how they can join as a partner, simple as that.
The duo are also risk-averse. “We do everything at low risk. We’re not going to produce 100,000 units of product, ship it over and hope it works,” Yeo says. “We explore the market, we visit and talk to the locals, get their advice, see if they want to get on board to sell the product.”
They’ve managed to win over Nordstrom, Bloomingdales, Nieman Marcus and Saks in the US as well as Barneys in Tokyo, but Testoni and Yeo are particularly grateful to David Jones in Australia for supporting them from the start.
The business appears to run like a well-oiled machine. Yeo heads a team of designers, leads the online marketing operations, oversees production management and physical design trade shows, the showroom at HQ and store in stores. Testoni is sales, operations and legal, and keeps an eye on the designs.
As for the books, Zanerobe has a set of figures many businesses would be proud of mostly because they are debt-free.
From 2004 to 2007 they doubled sales units every season. In 2008-10 that growth rate fell to 20 per cent increases each season. Over the past three years revenue has averaged double-digit growth. Overseas markets account for about 40 per cent of sales.
“We keep overheads pretty low. It means we’re nimble,” Testoni says.
“We don’t have physical retail stores which, during tougher periods, is a good thing, but you’re also missing out on opportunities.
“We would like to look at retail at some stage, but we’d probably partner up with someone, a retail expert.
“We launched our website early on and got excellent traction. What we’re finding now, though, is that the key is to partner with the right multi-brand online retailers because people don’t want to go to a mono-brand store online. I’m not delusional and think someone is going to wear Zanerobe head to toe. It makes sense they put it together online and they get it delivered.”
“We do our own online and we wholesale to online, and that has shifted as well,” says Yeo.
Testoni says online accounts for about 10-15 per cent of sales perhaps a lower figure than you might expect for the demographic they appeal to. “We still have strong bricks-and-mortar partners ... coming in to summer, that will go up again because of the nature of the product,” he says.
“Online isn’t our focus, our focus is design and wholesale,” Yeo says. “If we were online retailers we’d have another team in here doing integrated marketing plans, banner ads. We do a lot of social media from a branding perspective and if that converts to an online sale, great, but as a wholesaler and a designer all the social media is for branding.”
The home page on the Zanerobe website is not a catalogue for their latest line, but a blog about who they’re working with and which bloggers they’re following that’s social media at work.
When asked how important social media is to their marketing plan, Yeo replies: “It is the marketing plan. We don’t bother with magazine titles anymore or take out ads. We do a couple of initiatives with key retailers, but it’s always because it’s part of their marketing plan, not ours.
“For us it’s also ambassadors and referential stuff that is real, not just a glossy magazine title.
“Traditional above-the-line marketing is not really our thing,” agrees Testoni.
Over the past year they have reassessed their global operations with a view to consolidating their strengths and avoiding spreading themselves too thinly.
Says Yeo: “We were quite ambitious about opening up in Europe and the US, but you don’t really get the full picture of those markets until you’re at least halfway into the relationships like understanding the geopolitical sales environment in Italy is never discussed upfront. The little nuances in countries are uncovered over time.”
“London is difficult to get a good price because of VAT, and their mark-ups from wholesale to retail are huge,” Testoni adds. “We’ve all but pulled out of Europe because financially it’s very difficult for us. The only markets where there’s still a lot of interest for us are Scandinavia and Germany.
WE’VE ALL BUT PULLED OUT OF EUROPE BECAUSE FINANCIALLY IT’S VERY DIFFICULT. THE ONLY MARKETS WHERE THERE’S STILL A LOT OF INTEREST FOR US ARE SCANDINAVIA AND GERMANY. leith TESTONI
“You put something out in the print media and you say, ‘did that work?’. But online it gets liked, retweeted, commented on and at the end of the day, statistics talk.”
“One of the things we’ve got better at is saying no,” he says. “We get a lot of interest from a lot of different markets from South Africa to South America.”
There are key questions about financial viability, who they deal with and what else do they do.
“The funniest [person] was a South American sugar farmer. He had a banana processing plant and a sugar mill and something else and he wanted to get into retail!,” Testoni says.
They both laugh a lot, but has anything given them a fright them over the years?
“No, we don’t take many risks, we don’t do the boom and bust thing,” Yeo says. “This is a lifestyle for us. People see the hours we do and say, ‘Man, you’ve got to take a break’. And I say, ‘Break from what? We love this, it’s good fun’.”
The story behind the name
The unique name was a joint decision between the boys: Zane, from Leith’s longing to be called it as a child: and “robe” as Jono’s reworking of the archaic French word garderobe, meaning wardrobe. In just over a week their business name was registered and Jono designed the logo.
Leith and Testoni appeared in CPA Australia’s The Naked CEO, which offers students insight into the life of a leader and shows them what it takes to become a successful leader in business. Watch the interview with CPA's CEO, Alex Malley, here.