Shinola lays off employees, plans to outsource some operations

Detroit-based Shinola has always prided itself for hiring Detroiters and for the high-end watches they create. Now though, they've laid off nine employees and plans to outsources some of their operations.

The luxury goods retailer confirmed to FOX 2 that it is laying off nine employees and outsourcing leather design and product development in an effort to remain competitive in a fast-changing retail landscape.

Matthew Roling is the interim chair of the accounting department at Wayne State Mike Ilitich School of Business. He says Shinola is discovering how expensive it is to create their high-end watches.

"It all comes down to whether or not the perception to the consumers will survive the maturation of the company as they try to right size the cost structure," Roling said. "There's a reason that most of our retail goods are made in the developing world: labor is a lot less expensive. I think they've found it very difficult to make those products here in the U.S. and make a profit."

Shinola says the move to outsource leather design and product development will help put the company on a path to profitable growth while still making high-quality leather goods.

"I think they've really tried to position themselves as a luxury brand, it just might feel kind of foreign to your average person in the Midwest or someone who does come from a vulnerable economic background," said Roling.

Last sumer, Shinola rolled out a more profitable and colorful collection of watches but many of its products are fairly pricey with bags and watches costing more than $1,000.

Shinola says production of its watch straps will remain in-house and the cost-cutting efforts will not impact the watch strap factory.

This round of layoffs is separate from the restructuring plan announced in July in which 30 employees were let go.

Shinola says it's donating the machinery it no longer needs to Pingree, an organization that employs veterans in Detroit.

The company also says it's helping those laid off workers get back on their feet with outplacement initiatives.

Shinola released this statement regarding the layoffs:

"In an effort to remain competitive in the current retail landscape-specifically the massive leathergoods market-Shinola will begin outsourcing our leather design & product development to partners with extensive experience in the field of leathergoods. This will allow us to continue streamline & strengthen the organization on our path to profitable growth-and produce leathergoods of the highest quality at scale. As a result, our internal leather team has been reduced. Our watch strap factory will continue producing watch straps in-house.
Shinola has already begun working with affected individuals on outplacement initiatives-including partnering with Jen Guarino, who is now President & CEO of ISAIC, an organization dedicated to career development in the apparel manufacturing sector. Shinola will also be donating machinery to Pingree, an organization that employs veterans in Detroit, which we hope will significantly impact their business growth.
We want to acknowledge all of the incredible work and contributions these employees have had over the years as we developed our comprehensive leather business, and we will continue to support them in any way we can. This decision was not made without extensive discussion, and we will continue to remain transparent to our consumers on the state of the company."

LONDON, UNITED KINGDOM - MAY 23: A display of watches inside the Shinola company pavilion as part of the Clerkenwell Design Week in London, United Kingdom on May 23, 2017. (Photo by Ray Tang/Anadolu Agency/Getty Images)