Skechers: A Checkered Past-Will it have a Stable Future?
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Case Code: BSTR489 Case Length: 13 Pages Period: 1962-2015 Pub Date: 2017 Teaching Note: Available |
Price: Rs.600 Organization: Skechers USA Inc. Industry: Footwear Industry Countries: US, Global Themes: Business Strategy, Brand Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
In March 2015, Skechers USA Inc. (Skechers) emerged as the No. 2 player in the US sports footwear market, according to a study by the NPD Group. Skechers with a 5% market share managed to surpass Adidas AG's (Adidas) market share of 4.6%, while market leader Nike Inc. (Nike) had more than a 60% share. However, Skechers exhibited a higher market growth rate than Nike. In the first quarter of 2015, while Nike's retail unit sales rose by 10%, Skechers’ sales rose by around 19%. On the rising market presence of Skechers, Neil Schwartz, Vice President of Business Development for the market research firm SportsOneSource, said, “They’re not a poseur, they're a player."
Skechers, established in 1992, was the most successful business venture of Robert Greenberg (Greenberg). Greenberg, whose first business – in the early 1960s – was related to wigs, had started and exited various businesses over the years. He exhibited an uncanny ability to launch businesses that took advantage of rising market trends. In 1982, he started a company called L.A. Gear, Inc. (LAGI) to sell footwear for young women and teenage girls at low prices, under the L.A. Gear brand. Within a few years, LAGI went on to become a highly successful business and it came out with an IPO in 1986. By 1990, LAGI had sales worth US$ 820 million and a stock price US$ 50. However, Greenberg failed to correctly anticipate the change in market trends, and this resulted in the company's products going out of fashion. Soon, orders got cancelled, inventory piled up, and
LAGI descended into a financial mess. Greenberg was ousted.
Greenberg then went on to set up another shoe company called Skechers in 1992, which had a more diversified customer base – men, women, and children of all ages. To be up-to-date with trends, he hired a team of style spotters, who were tasked with recognizing upcoming trends and helping Skechers release products quickly in the market. He also paid close attention to marketing and advertised extensively. Subsequently, Skechers became a successful company, expanded globally, and even had an IPO in 1999.
In 2012, Skechers suffered a serious setback when its popular toning footwear product 'Skechers Shape Ups' was fined by the US Federal Trade Commission (FTC) 8 for false advertisements. The incident not only dented the company's reputation, but also led to a marked fall in revenues. Skechers then made a strategic move into the "performance wear" market to salvage its reputation and diversify its product line...
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