PHOTo / Tim greenway
Wells Lyons, creative director and general counsel for Rogue Industries, holds an RFID-blocking credit card shield in his office in Portland.
March 4, 2013
Rogue industries builds a better billfold
By Matt Dodge
Some companies are tempted to embellish the story of their roots, but for local wallet and accessory manufacturer Rogue Industries, the backstory is just that: a back story.
When Michael Lyons, founder of the Standish-based company, visited his chiropractor in the early 2000s complaining of back pain, the doctor made a quick assessment based on the bulging leather seat cushion that Lyons called a wallet.
“He said 'You've got to get rid of that thing,'” says Wells Lyons, Michael's son and the creative director for Rogue Industries.
So the elder Lyons set about tinkering with his own design and soon produced the first Rogue wallet, a uniquely shaped billfold designed to be stored in the front pocket.
The pared-down design of the wallet drew some early interest, and customer feedback led to the company's next big idea in 2008: wallets and card sleeves using technology to protect users from identity theft.
“We kept hearing about it from customers and started doing some research into it. Now it's our best seller,” says Wells Lyons.
Radio-frequency identification, a wireless system using magnetic fields to transfer data between objects, has been growing steadily: RFID tags are embedded in everything from credit cards to house pets, and Walmart now mandates that all of its 15,000 suppliers attach RFID tags to their pallets for inventory-control purposes.
But wherever there is data in the air, there is a risk of exposing personal and financial information.
That's a potential problem for consumers and a business opportunity for Rogue Industries. Along with an expanding line of standard cases and wallets, the RFID wallets helped the company break the $1 million revenue mark in 2011.
Rogue more than doubled its revenues in 2012, posting $2.6 million thanks to robust online and wholesale sales. The company recently signed its 130th retailer and is poised for further growth as it eyes deals with financial institutions and government sales, including a recent contract to supply U.S. military post exchange stores.
The market for RFID transponders, readers, software and services increased by $900 million in 2011, according to industry analyst ABI Research. It's expected to see year-over-year growth of 20%, generating a potential $70.5 billion in sales from 2012 to the end of 2017.
With identity fraud ranking among the fastest-growing crimes in the U.S. and an estimated 1 billion RFID-enabled credit and debit cards expected to be online by 2016, Lyons set out to design a wallet to protect sensitive personal information from emerging RFID “sniffing” technology employed by some identity thieves.
At least one electronic-privacy expert sees merit in that idea.
“The strength of an RFID document — its ability to be remotely read — is also its weakness, so a practical solution is to provide some type of shielding,” says Mark Rotenberg, executive director of the Electronic Privacy Information Center.
The redesign of the U.S. passport in 2006 brought the issue of RFID-related security to the forefront, as the State Department mandated that every new passport include an RFID chip containing the citizen's personal information, which Rotenberg says presented the risk of being easily identified as Americans abroad.
“We pushed back very hard and had people sending aluminum foil (a makeshift RFID blocking material) to [Secretary of State] Condoleezza Rice and in the end that's almost exactly what happened — the State Department agreed to include some metallic sheathing within the jacket so the RFID could not be read unless the passport was open,” he says.
Expanding its product lines
As Rogue grew to include a line of cases, sleeves and wallets, Michael Lyons drew staff from his Standish-based Tower Publishing to staff the company.
“All the customer service, sales, that infrastructure was there. [It] was really just changing the product, building a website and coming up with a brand name,” says his son.
Wells Lyons came on as creative director in 2008, then left for law school and returned to the company full time in 2011, adding “general counsel” to his job title.
Since its inception, the company has had particular success with its Made in Maine Collection, produced by a contract manufacturer in Lewiston.
“Initially, trying to find places to work with in the U.S. was really hard because the leather goods industry in New England has totally collapsed. A lot of those skills take 10 or 15 years to learn,” he says.
While the work force might not be easy to come by, its local nature has been a big selling point for the company, according to Lyons. The Made in Maine line now accounts for 60% of sales. In 2012, the company had its website professionally redesigned, which led to a significant increase in sales, he says.
“There is a huge plus right now to anything that's made in the USA, and that's the direction we're moving toward,” says Lyons, who recently attended a fashion and lifestyle trade show in New York City as part of Fashion Week.
“I talked with buyers from boutiques and retailers, and no one cared a bit about the imported products, they only wanted to know about the Made in Maine line,” says Lyons.
Lyons said he was initially surprised by the demographics of his customer base, assuming that a younger generation of digital natives would be the early adopters of RFID-blocking products.
“But a lot of our customers were 50 and older, which surprised me,” says Lyons. “It turns out younger people are less interested in a wallet that prevents back pain or identity theft. Their mindset is, 'You want my student loans? Go for it.'”
Targeting younger consumers
Early sales were driven by specialty goods retailers such as Orvis and Brookstone, but for Rogue, which wanted to follow the Henry Ford model of making its products affordable to those producing them, there was often disagreement over how to price the products.
“We need to look at finding ways to help retailers understand that the margin might not be quite what they expect from a made-in-the-USA product. A lot of vendors were saying this needs to be a $95 wallet (they retail for $40 to $50) and that we were leaving money on the table,” says Lyons. The company is now considering a line of higher-end, more expensive wallets.
So far, Rogue's strategy has been to emphasize quality of materials and design as its selling points over competitors who focus solely on functionality.
“Ours is more fashionable compared to a lot of the other RFID-blocking products out there, which are not that different from a vinyl pocket protector in terms of design,” says Lyons.
Lyons' arrival at Rogue brought an increased emphasis on design throughout the product line as he tried to get a younger generation of consumers interested in the brand, expanding the line to include women's accessories, journals and a toiletries bag while latching onto design trends like waxed canvas, tweed lining, and unique leathers like alligator and bison.
The company is experimenting with using recycled materials in its wallets, and hired local designer Erin Flett to produce patterns for the expansion of the women's line, “to help us get away from everything being leather,” according to Lyons.
But fashionable features of Rogue's RFID-blocking products can overshadow their role as security devices, making consumer education an important part of the business' marketing strategy.
“One challenge is letting people know exactly what's in them. Some consumers think it's just a piece of paper,” he says.
While Rogue's products meet the government's standard for data security, Lyons says pitching the products requires a certain amount of show and tell.
“We've been experimenting with different ways to communicate with consumers that even though they can't see the technology, it's very much there and doing what it's supposed to do,” he says.
The RFID technology in Rogue's wallets uses three layers of material to create a Faraday cage of electromagnetic interference that blocks any transmission within the 12.56 megahertz range, the standard frequency for credit and access cards.
While Rogue currently leases the patent for the RFID-shielding technology in its products, Lyons says a homegrown patent of the same nature is on the way. The company already holds a patent on its distinctive wallet shape and, thanks to Lyons' legal background, has successfully sued more than a dozen foreign companies producing knock-off versions of Rogue products.
Creative economy in action
For Nathaniel Huckel-Bauer, an attorney with Drummond & Drummond and the president of the Portland Regional Chamber's young members group PROPEL, the Rogue venture is a heartening example of Mainers returning to the state and infusing new technology into its legacy industries.
Rogue was one of five companies recognized with PROPEL's entreverge awards in 2012, given to local entrepreneurs whose businesses exhibit a scalable vision and long-term commitment to the state.
“That was really embodied by Rogue Industries because they are manufacturing design-focused products here and building on the state's traditional strengths with a modern twist,” says Huckel-Bauer.
The PROPEL president says he was particularly impressed by Lyons' decision to return to his home state and leverage the infrastructure of Tower Publishing, his father's established legal and business publishing company, to help grow the new venture.
“What stuck out was Wells saying 'My dad's been a publisher for a long time and I would like to do something new and different that builds on some of Maine's traditional strengths in manufacturing and sewing,'” Huckel-Bauer says.
Huckel-Bauer says the early pivot toward RFID-blocking technology was key to the success of the enterprise.
“Focusing on ID theft protection is going to be huge for their growth,” he says.
While he says Maine can seem isolated for some entrepreneurs, Huckel-Bauer thinks that companies like Rogue stand to benefit from Maine's manufacturing heritage — just call it the “L.L. Bean effect.”
The renowned Freeport outdoor products retailer is a tantalizing prospect for Lyons, who heard the name more than once during his recent NYC trip.
“We think it would be such a good fit,” he says, but it's not the only expansion opportunity on the company's radar.
Rogue is talking with credit unions in hopes of getting them to adopt the sleeves as gifts or promotional items for members, and is working with some major retailers to sell the line of credit card sleeves as a point-of-purchase display item.
That, along with direct-to-government sales, “would be a game-changer for us,” says Lyons, who declined to cite specific retailers pending an announcement.
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