Tumi may be an upscale luggage brand today, but back in the ’70s it appealed more to former hippies who loved handcrafted leather bags. Charlie Clifford, now 70, founded the company in 1975 after a stint in the Peace Corps introduced him to Peruvian crafts and sparked the itch to become an entrepreneur. When the U.S. economy slowed in the early ’80s, Clifford decided to tailor Tumi to business travelers, pairing ballistic nylon with modern design. Today the company, now public, is one of the largest global sellers of luggage; it had 2013 revenues of $467 million and profits of $55 million. Clifford’s story:
I grew up in Midland Park, N.J., where activities like high school sports were at the center of life. My father worked for the New York Central Railroad, in the department that set freight rates. My mother was a homemaker.
I attended Seton Hall University for my freshman year. I wanted to go out of state and attend a bigger school, so I moved to Indiana University to study English. I liked to read and write, which opened up avenues to learn about different people and ways of life. My senior year, I decided I wasn’t going to go into education or be the next great American novelist. A friend suggested I look at business school, so I stayed on at Indiana and got my MBA in 1967.
One day I was in the placement office and talked to a friend who’d decided to go into the Peace Corps. Stanford Business School had worked with the first graduate business school in Peru, and they were recruiting MBAs to go there and work in the Peace Corps.
Back then, the Vietnam War was going on, and I had a 1-Y deferment because of a medical condition, so I wasn’t going to be drafted. I liked the idea of being part of the Kennedy initiative, and belonging to a new generation doing good around the world. At first the Peace Corps wasn’t going to take me either, because of the medical condition, but my doctor and I persuaded them it would be okay.
I’d always been interested in international affairs. The opportunity to go overseas, learn a useful language, and challenge myself sounded great. My wife, Cricket, and I had gotten married in 1966, and she was an elementary school teacher. She loved the idea of going too.
We ended up being assigned to Chiclayo, on the coast of northern Peru. It was a dry and dusty developing city with huge haciendas where sugarcane was the main crop. I consulted with small businesses and helped the local chamber of commerce set up a committee to develop an industrial park.
Peru was a life-changing experience. There’s a level of humility that comes when you have limited language ability and arrive in another country. The living conditions were basic. We learned how to cook over a kerosene stove. We had a modest living allowance, but while they only paid us enough to live on and feed ourselves, we got two days a month leave to travel to neighboring countries. We went to Brazil, Uruguay, Argentina, and other parts of Peru. I’d never traveled outside the U.S. before.
I learned to speak Spanish, but the most important thing I learned is that there’s a whole wide world outside the United States, and that while the U.S. is in a leadership position, there are other points of view in developing countries. I learned that if you aren’t willing to listen and learn from others, you won’t be able to do much. It was a lesson that later served me well in business.
Returning to the States, my first job was with the Grand Union Co., whose principal business was supermarkets. I ended up in an industrial marketing role with a subsidiary company that made storage racks and conveyors.
After almost five years in the corporate world, I realized I had entrepreneurial instincts. The Peace Corps work had given me confidence to know I could succeed at something new and different. So in 1974, I invested $5,000 in a little import company called Llama Line, run by a friend of a friend from my Peace Corps days. Llama Line sold indigenous crafts from the Andean countries, like wall hangings, rugs, sweaters, and costume jewelry.
After a few months I decided to leave and concentrate on the leather category. I had no business plan. I optimistically thought we’d figure it out as we went along. I met a gift importer named Seth McQuillan and invited him to join me as a partner. We each put in $5,000 and were able to get a line of credit. I suggested we name it Tumi, after a godlike figure that was the symbol of the Peruvian [state] my wife and I had lived in.
The first year, sales were about $630,000. We sold natural leather bags that were rugged and casual, with a handcrafted look, to leather stores and gift stores. Our price for a 20-inch duffel bag back then was $59 retail. Today that would cost several hundred.
Travel bags were a stable part of the market, and I thought doing leather travel bags would allow us to build a product line. I didn’t have any conscious thought about more people being able to travel when airline prices were deregulated in 1978. It was just good luck, and we profited from it.
The company grew organically for the first few years. But in 1983 we hit a serious recession, and business became very tough. Inflation was 16% to 17%, and it was a terrible time for small businesses. We lost money for the first time, and the bank become nervous, putting us in their workout department.
I realized we needed to develop a brand that consumers would go to the stores to look for rather than products that were non-branded and just a good value. Since business travelers could pay more, we decided to develop features appealing to them. Jeff Bertelsen, our designer, came up with Tumi’s wide-opening U-shaped zipper and organizational pockets. We then decided to make bags in ballistic nylon to make them more durable. We weren’t the first to use ballistic nylon, but we were the first to build a collection around the material, which had an up- scale feel to it. Others then followed us.
Sunny Outlook NFIB’s Small-Business Optimisim Index is at its highest level since 2007Graphic Source: NFIB
Back then there were probably nine to 10 upper-end luggage companies. There was a lot of competition, and all of us were selling through the luggage specialty store channel because they had salespeople trained in selling more expensive products. As companies moved into department stores, Bloomingdale’s became the leader in selling expensive luggage, and their flagship store became a showroom for us.
By the mid-’80s our garment bag had become the bestselling garment bag. I noticed that owners of luggage specialty shops had started carrying our soft briefcases and luggage to the trade shows. They had their pick of luggage and were choosing our brand.
Seth and I had different visions of the future, so after a couple years of talking, I bought him out in 1985. Our revenue that year was $4.3 million.
By 1990 I started to think about developing the international market. Our products were unique, expensive, and unknown in Europe. Distributors wanted brands that were already known, so we decided to sell it ourselves.
I began spending a lot of time in Europe in the ’90s and set up an office in Germany and a distributor in England. Black on black was our signature look, and German travelers were fond of all- black products, focused on quality, and willing to pay more. In London we got into Harrods and eventually opened a Tumi shop-within-a-shop there.
We planned to bring in private equity in the fourth quarter of 2000, but didn’t close the deal. After 9/11, the travel industry was hit hard, and we had a recession in 2001 that clobbered us. A number of luggage retailers went out of business or sold to more stable companies. In late 2002 we brought in Oaktree Capital, and I became a minority shareholder. It was the right thing to do for the company because we were struggling. The next year we came back to a semblance of normal.
In 2004, Doughty Hanson & Co. expressed interest in the company. It was an appropriate time for me to retire, so I left in June 2004 and sold my remaining shares. Now I’m working with Larry Lein, formerly my executive vice president at Tumi, on Compass Partners, which markets European brands like Knomo, Lipault Paris, and Knirps in the U.S.
I’m proud of putting together the top-notch team that built Tumi. I’m still amazed when I see all the Tumi bags people carry. It’s part of an executive’s uniform today.
My Advice: Charlie Clifford Founder of Tumi and Compass Partners
DON’T ADVERTISE until your product is ready for primetime. We advertised in the New Yorker magazine in the late ’70s, but didn’t get any results from the ads because our products weren’t sufficiently distinctive yet.
BE INCLUSIVE Tumi didn’t become a successful brand because I sat in a room coming up with a game plan by myself. Our management meetings grew to 20 people overtime. Decision-making by consensus slows the process down, but in the end, the decisions are sounder.
BE ORIGINAL Our designs were modern for their time and highly functional. It was a strong statement that made traveling executives and professionals want our products.
This story is from the August 11, 2014 issue of Fortune.