Death Of A Noble Tailor May 4, 2008
Last Friday brought the premature death to the well regarded life of Nau, a clothing company.
Nau made fashionable clothing from sustainable & eco-friendly materials, and exclusively distributed them online and through retail stores in various U.S. cities. Their ethos resonated corporate social responsibility.
The preliminary autopsy report according to their press release pointed to a dissolution following an inability to procure additional capital investment, citing a risk-averse American financial market.
This week, I will gather my notes taken from a recent university seminar and will write about their story and operations.
As a fitting eulogy, I leave you with a small brochure that outlines their philosophy and can give you a personal glimpse into the company that was. May their energetic and caring spirit be carried on…
If they were not able to continue their business, perhaps they need to rethink their understanding of the words “sustainable” and “responsible.”
Businesses, no matter how well intentioned, are inherently immoral if they are not profitable. This cannot be lost in the equation of being otherwise eco-friendly.
Being profitable allows a business to hire employees. To reduce poverty. To reduce the financial burden of aging by providing a steady and reliable stream of income to future and current (if a public company) retirees.
No need to worry, though. It won’t be long before someone comes to take the empty space they left in the marketplace. Their failure can be someone else’s lesson.
Aw man, I definitely hear the moral capitalist in some of your writing and it’s so cool
I can’t really cast any judgment on them without data. Had thought about speculating on potential woes that befell them, or circumstances that contributed. I would really like to learn more down the road, and get a balanced HBR-style case study analysis.
Being that this is now the comment section, I will proceed.
Upon scanning their styles, SKUs, and price points, it appeared to me that many items lacked the fashionability to justify their premium retail prices. In the seminar I attended, it was noted that their fabrics alone were 15-20% more expensive than competitors. With a higher COGS (Cost of Goods Sold), it becomes imperative to have very lean operations. I suspect that was very much the case, because my impression was operationally efficiency as a top priority.
This then makes me wonder about their sales and cash flow; obviously very proprietary information. What would their quick or acid test ratio look like? An additional consideration, and the one Nau points to, is funding. Here, we’re looking at debt and equity. Do we have enough to operate? How does the path to profitability look? Where are the owners’ limits and conditions upon which they decide to dissolve the firm, whatever the financial situation?
That last question is morally important because a firm should let itself die responsibly, without causing extended injury and pain on its stakeholders and publics. That’s enlightened selfishness. To pull the trigger at the right time, for everyone’s best interests. Profitability is important for all the reasons you pointed out Cam.