For Rebecca Matthias, Motherhood Is a Fulltime Job

In 1982, when Rebecca Matthias was pregnant with her first child and working as an architect, she couldn’t find maternity clothes that were appropriate for a professional woman.

 

Thus was born a business niche, one that she and husband Dan Matthias went on to develop into Mothers Work, the largest maternity retailer in the U.S., with 1,000 stores and 2002 sales of $453 million. The company, headquartered in Philadelphia, also designs and manufactures its clothing lines in contract factories across the world.

 

In an interview during a visit to Wharton’s campus, Matthias says all entrepreneurs need to start with a business they understand, then find encouragement along the way when, inevitably, they want to quit. “I tried to quit many times, but there was always some reason or a person that didn’t allow it,” she says.

 

Matthias started the business as a catalog, investing $10,000 in savings and making $3,500 back. “That was not a winning combination. I was ready to quit right there. It was my husband who said, ‘No. Look at what you know. Nobody does it right the first time out of the gate. Go back and do it again.’ He was the one pushing me to stay with it. You need a partner or spouse or friend who will tell you to get back in the game.”

 

Matthias had another incentive to continue. “Once you have a decent chunk of your savings in [the business], psychologically you can’t walk away from it. That’s the best [reason] for anybody to stay because in the end that’s what it’s all about … If your money is in there, you don’t want to walk away without it.”

 

Today, she and her husband own 17% of Mothers Work. The company operates three retail chains: Pea in the Pod, with exclusive designer clothes, Mimi Maternity for high-end professionals and Motherhood Maternity stores and outlets geared toward the moderate-priced market. Mothers Work also has an on-line retailer, iMaternity, and leases maternity departments in Macy’s, Lazarus and Babies R Us stores.

 

Matthias thinks the drive to become an entrepreneur is inborn, but needs to be cultivated. She compares business entrepreneurs to artists who bring passion and talent to their work, but still attend art school to learn technique. “It definitely comes from within,” she says, “but there’s also a lot of development that can be taught.”

 

Another key to entrepreneurship is maintaining relationships with investors, says Matthias, who has had long-term backing from Meridian Venture Partners, a Philadelphia venture capital firm. “You truly are partners because you both share the equity. That’s what makes the difference between a banker and an investor – the equity. A banker will get his assets out. An equity partner will go down the drain with you or [follow you] on to glory.”

 

A Major Misstep

Mothers Work has indeed experienced both glory and gloom. Much of the company’s volatility, says Mathias, is due to its dramatic growth since going public in 1993 when it logged only $19 million in sales. The company has also completed four major acquisitions of chains that were all losing money at the time Mothers Work bought them. “When you slow down your growth you get more stable, predictable results,” she says. “For anybody growing as much as we’ve been growing, you have to expect some volatility.”

 

Matthias’s biggest business disappointment was Mothers Work’s 1996 acquisition of Episode, a chain of high-fashion stores for women who were not pregnant. The chain closed in 1998 after Mothers Work recorded an after-tax loss for the year of  $11.9 million on sales of $73.9 million. “Our one major misstep was when we went out of maternity,” she says.

 

Mothers Work had entered the high-fashion business because, at the time, it specialized in high-end maternity and thought high fashion in general was the obvious route to growth. “We thought we didn’t have that much room to grow in maternity.”

 

Company executives – who considered Mothers Work’s core competency to be its vertically integrated apparel operation, from design to retail – believed they could transfer those skills beyond the maternity segment into the larger apparel market, Matthias recalls. But the competition was also bigger. “It’s not a niche,” she says. “We understand our niche. We understand maternity. It wasn’t as transferable as we thought. Also, it took more capital than we had. We needed to take a step back and that was very, very hard.”

 

Meanwhile, in 1995, the company had acquired a more moderate-priced chain called Motherhood Maternity, which eventually became Mothers Work’s biggest retail segment. “We didn’t realize when we took the prices down with Motherhood that there would be a big market,” says Matthias.

 

Playing Up Pregnancy

After 20 years in the apparel business, Matthias has had to adapt to trends in fashion and broader cultural changes.

 

When it comes to style, pregnant women have been following the lead of celebrities who are playing up pregnant bellies, says Matthias. “Maternity has gotten to be more ‘Let’s show it off’ instead of ‘Let’s hide it.’” At the same time, a more casual approach to the office and the fact that more people work from home have brought changes at the company, which was once identified strongly with business wear. “There are no longer a casual closet and a career closet,” says Matthias. As a result, all Mothers Work stores sell casual and career clothing.

 

Matthias says entrepreneurs today mirror some of these trends, leaning toward businesses that allow them to work yet control more of their personal life. A few years ago, money seemed to be the bigger motivator for entrepreneurs. “The whole flex-time issue of wanting to combine work and family is so geared toward entrepreneurship and not corporate America,” she says. “It’s a lifestyle issue as much as being money-driven.”

 

At the moment, Matthias is wary about the U.S. economy. “Overall, I do not think we’re witnessing a comeback in the economy yet. It’s stable.” But she suggests that the luxury market – hit hard by the stock market meltdown of 2000 and the 2001 terrorist attacks – is finally regaining its strength.

 

Another challenge to retailers such as Mothers Work comes from the moderate and lower-priced markets where fierce competitors like Wal-Mart and Target drive apparel-price deflation. “They do such a great job that they are making it very tough for department stores and people in the middle,” Matthias says. “That’s tough. You have to keep pushing down costs and being better every year.”

 

The U.S. birthrate, a critical data-point for Mothers Work, is stable at around four million a year, says Matthias, adding that the rate will begin to rise again in a few years when the children of the baby boomers begin to start families. Mothers Work estimates the total market for maternity apparel at $1.2 billion.

 

In the Business of Building Alliances

Going forward, Mothers Work is contemplating two new strategies to extend its reach. First, the company is considering alliances with financial firms looking to interest pregnant women in life insurance or other investment products. “Our customer base is at the beginning of a major point in the product lifecycle – family formation,” says Matthias.

 

The company is also planning to license its names, starting with Motherhood, to manufacturers of non-apparel items – such as cribs – to build on the value of its brands. “We have a very intense relationship with our customers for a relatively short period of time. It would be nice to extend that in some way without getting into those businesses ourselves,” says Matthias.

 

Even as the business grows, Matthias still thinks of herself as a small entrepreneur. On weekends she visits Mothers Work stores in the Philadelphia area and once every quarter she travels to another region of the country to see what is going on in the malls. “We don’t want to become a dinosaur. We want to stay quick – to act big and think small.”

 

She also acts as the public face of the company, reaching out to investors and the press, as well as focusing on planning and budgeting. One of her most important roles is as a recruiter, she adds. She is president and COO and her husband is chairman and CEO, but Mothers Work has been trying to build depth into its executive offices.

 

The company is developing succession plans, but they do not include any of the Matthias’ three children, including the baby who inspired the business who is now 21. “They want to do their own thing,” says Matthias.

 

And while she had tried to quit early on, Matthias has no plans to step aside now. “We’re just getting started. We finally have the resources to really do what we want. We finally have some scale. It’s just getting interesting.”

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