'We do hope this inspires others,' handbag CEO says about making masks for workers, consumers

• Handbag maker Caraa is one of dozens of retailers, including Nike and Canada Goose, that have re-tooled machinery to make personal protective equipment to defend against the coronavirus. 
• Caraa is also selling its non-medical-grade masks online. 
• Caraa co-founder and CEO Aaron Luo walks CNBC through the decisions that the company has made over the past few weeks. 

Caraa is producing face masks, for health-care workers and consumers, out of excess scraps from its handbag production.

Source: Caraa

Handbag maker Caraa is one of dozens of retailers, including Nike, Ralph Lauren and Canada Goose, that have retooled machinery, seemingly overnight, to make personal protective equipment like masks and gowns for health-care workers to defend against the coronavirus. 

But unlike most other companies, Caraa is also selling its non-medical-grade masks online, where consumers can pay $25 for a pack of five. Shoppers can also buy a pack to donate. 

The Centers for Disease Control and Prevention now recommends using a cloth face covering to protect against the coronavirus. The recommendations were updated following new studies that some infected people can transmit the virus, even without displaying symptoms of COVID-19. 

The pivot by the CDC led many consumers scrambling for masks. There are now 20,000 shops on Etsy selling face masks, for example, as its sellers began to see "overwhelming demand" for masks last week, CEO Josh Silverman told CNBC. 

Caraa co-founder and CEO Aaron Luo explained why the brand decided to buy five new machines for mask making and open sales to the public, and how the production is coming together. Caraa's manufacturing process offers a glimpse at what other companies, like Gap, Neiman Marcus and Eddie Bauer, are dealing with, in their own races to get PPE to the front lines. 

"It has been a Herculean effort," Luo said in an interview. "In this fight, the biggest challenge we have is time. How do we produce quick and get it there quickly? We don't have time. People are dying." 

By early- to mid-March, Caraa's sales started to "take a cliff dive," in terms of how fast they were falling, he explained. 2020 was supposed to be a major growth year for the company. Caraa was preparing to open its first stores, having grown its business entirely online and through a handful of wholesale partners. But all of those growth plans were abruptly put on pause. 

"Then, we started thinking, 'How can we contribute to this fight?' ... We looked to ourselves and said one thing that differentiates us really well is our nimble supply chain." 

So, confronted with this new reality, within a matter of days Caraa bought five new machines, which it will eventually be able to use again for its core handbag business. And it converted another seven of its existing machines at a manufacturing facility in China to pump out masks, Luo said. 

It acquired some extra materials, like elastics. And it found ways to use excess fabric cuttings of Caraa bags, which would have otherwise gone to landfills, to make the non-medical-grade masks. 

Luo wants people to know that Caraa, and likely many other retailers, are not doing this to make money, though a portion of donations can be written off on taxes. He said the company decided to open up for sale to the public so that Caraa could scale its production, which would help the economics of the project. 

"This is a huge expense. The payback is definitely very low," Luo said about the production process. "We are not just redeploying resources. We are making investments in [equipment] on the balance sheet. We are buying these automated machines." 

"We hope this inspires others to ... maybe do something good in this fight," he added. "We are not going to make a dollar in this." 

Luo said the goodwill associated with these efforts is what helps him sleep better at night, despite the sales declines that his company is suffering. "We are potentially, and hopefully, saving someone's life by flattening the curve." 

Three other retailers that have started selling their masks online are Buck Mason, Reformation and Alice and Olivia. Shoe maker Rothy's has said it is looking to launch a similar initiative for consumers.