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
Excerpts
The Comeback
Greenberg refused to take his expulsion from LAGI as a personal failure and later said, "I walked out of L.A. Gear so rich. You call that a failure?" 18 When most industry observers had written off Greenberg, he went about investing US$ 13 million to set up a new shoe business called Skechers in 1992. The term 'Skechers' in teenager lingo stood for someone who was restless and couldn't sit still. Michael said, “We wanted to get back in the shoe business. It was a business we understood, and we have lots of friends in the industry. So, here we go again."...
Skechers' Product Strategy
Each year, Skechers released hundreds of shoe styles – more than 1,500 – including athletic shoes, boots, basic shoes, trendy platforms, steel-toed sneakers, fuzzy slippers, and even shoe skates. Analysts pointed out that this was quite a high number considering the fact that most shoe makers indentified with a particular category of shoes and had a collection limited to 100 or 200 styles. The company offered the wide range of styles, so that it could mitigate the negative impact of a slump in demand for a particular style. The company claimed that no style comprised more than 5% of its gross wholesale sales during 2013 and 2014...
The Setback
In 2009, Skechers made its foray into the emerging ‘toning footwear’ category, which was widely believed to have a market potential of US$ 100 million and a market base where women made up 90%. 'Toning footwear' promised to exercise the muscles in the legs and back, providing a range of benefits. Industry observers opined that the demand for the particular footwear came from the changing lifestyles of people with many of them walking to work, giving up the lift, and taking the stairs, apart from wearing fitness shoes to run errands, to go to office, and to do household chores. Speaking about the trend, Matt Powell (Powell), a footwear analyst, said, "It's still emerging at this point, but it's starting to feel like it’s going to be a really big deal....
The Rebound
The fading of the 'toning footwear' fad put Skechers in a very tight financial position, with unsold inventory and cancelled orders from retailers. Skechers not only experienced a marked drop in revenues, but its stock price also took a hit. The company immediately took measures to salvage its brand reputation and market position. It decided that it would no longer be subject to the boom/bust cycles in the footwear industry and would exhibit greater control over its business. Skechers learnt important lessons from the debacle of 'Skechers Shape Ups'. It believed that the lack of proper inventory management was the key reason for the debacle and hence it took measures to avoid inventory buildup by closely monitoring weekly retail sales...
The Road Ahead
As of 2015, Skechers' product lines included lifestyle brands (Skechers USA, Skechers Sports, Skechers Active and Skechers Sport Active, and BOBS from Skechers), performance brands (Skechers Performance), Skechers Kids, and Skechers Work. Its products were available through retail stores in more than 160 countries and territories through its global network of distributors, apart from subsidiaries in Asia, Europe, Canada, and South America. As of 2015, the company owned and operated 119 concept stores, 146 factory outlet stores, and 98 warehouse outlet stores in the US, apart from 51 concept stores, 33 factory outlet stores, and three warehouse outlet stores internationally...
Exhibits
Exhibit I: Skechers Financial Performance (2010-14)
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