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When Crocs attack, an ugly shoe taleWith a battle plan based on ‘thinking bigger than you are,’ the maker of the world’s ugliest shoe takes the footwear business by storm.

By Diane Anderson, Business 2.0 Magazine

November 3 2006: 6:26 AM EST

(Business 2.0 Magazine) By now, you’ve probably heard the unlikely story of Crocs not the rugged skinned reptiles but the equally strange looking shoes that have become a global phenomenon.

It’s quite a tale: Three pals from Boulder, Colo., go sailing in the Caribbean, where a foam clog one had bought in Canada inspires them to build a business around it. Despite a lack of VC funding and the derision of foot fashionistas, the multicolored Crocs with their Swiss cheese perforations, cushy orthotic beds, and odor preventing material become a global smash.

WISHFUL THINKING: Ron Snyder at first thought he’d work a few hours a day when he started working for Crocs. Then people started buying shoes.

Celebrities adopt them. Young people adore them. The company goes from $1 million in revenue in 2003 to a projected $322 million this year. Crocs Inc.’s IPO in February was the richest in footwear history, and the company has a market cap of more than $1 billion.

But there’s more than luck to Crocs’s astonishing success. Its founders and especially the CEO they brought in two years ago, former Flextronics executive Ron Snyder made some shrewd and instructive business moves that proved crucial.

A plan to take it easy

Crocs’s founders Lyndon “Duke” Hanson, Scott Seamans, and George Boedecker almost blundered into their success. (Boedecker resigned this year, three days before being arrested for threatening to slit his brother in law’s throat; a personal settlement was reached, and the charges were dismissed.)

They leased their first warehouse in Florida “specifically so we could work when we went on sailing trips there,” Hanson says. “From the get go, we mixed business with pleasure.” The shoes were first sold to sailing enthusiasts but soon gained a word of mouth following among doctors, gardeners, waiters, and other people who have to be on their feet all day.

In fact, it was Snyder who really lit Crocs’s fuse. He was kicking back after a four year stint running Flextronics’s global division, where he helped the giant contract manufacturer grow from $3 billion in annual sales to $16 billion. Then the Crocs founders,
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old college friends of his, asked him to do some consulting for the fledgling company.

“I thought I’d work a few hours a day,” Snyder says. “I thought it would be restful.” Then he saw how fast sales were accelerating on mere word of mouth marketing and agreed to take on the CEO role. “Ron got us to start thinking big,” Hanson says. “He said, ‘You can be a worldwide force.'”

The accidental entrepreneur: a $10 Million Crocs tale

Snyder saw that Crocs were cheap enough $30 a pair that some customers bought multiple pairs for special occasions. “We’d get requests for red around Valentine’s Day and decided to make more red,” he says. “Then we decided to base our business model on this to deliver styles and colors customers want, and deliver them right away.”

An industry on its heels

Simple as it sounds, that turned the shoe industry’s distribution model on its head.

Usually retailers have to purchase their spring line of shoes, say, six months in advance and buy in bulk. With Crocs, they can reorder as few as 24 pairs and stock them on shelves in a matter of weeks. Best of all, they aren’t left with unsold shoes they have to discount so Crocs are always sold at a consistent price.

“They’ve surprised everybody,” says Jim Duffy of Thomas Weisel Partners. “Their replenishment system is unheard of in the retail footwear space.

It helped that in 2004, Snyder decided to buy Finproject NA the Canadian manufacturer that made Crocs and owned the formula for the special resin, called Croslite, that gives the soles their unusual comfort and their odor resistance. Until then Crocs had basically been ordering and distributing Fin’s product. Now it had control over manufacturing and timing.

Hanson calls it “the tail buying the dog”; Snyder declares it a “eureka” moment. “We had everything required to take the company to the next level,” he says. “Proprietary processes, proprietary material, intellectual property, and distribution.”

A one shoe company? Ask Al

The next level, of course, was nothing less than taking over the world. Snyder says the lesson he learned at Flextronics was “Think bigger than you are.” So he added manufacturing plants in China, Italy, Mexico,
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and Romania.