Skechers U.S.A. Inc. History

Address:

228 Manhattan Beach Boulevard, #200
Manhattan Beach, California 90266
U.S.A.

Telephone: (310) 318-3100
Fax: (310) 318-5019

Public Company
Incorporated: 1992
Employees: 863
Sales: $372.7 million (1998)
Stock Exchanges: New York
Ticker Symbol: SKX
NAIC: 316213 Men's Footwear (Except Athletic) Manufacturing; 316214 Women's Footwear (Except Athletic) Manufacturing

Company Perspectives:

The Company's objective is to become a leading source of contemporary casual and active footwear while ensuring the longevity of both the Company and the Skechers brand name through controlled, well managed growth. The Company strives to achieve this objective by developing and offering a balanced assortment of basic and fashionable merchandise across a wide spectrum of product categories and styles, while maintaining a diversified, low-cost sourcing base and controlling the growth of its distribution channels.

Company History:

Founded in 1992, Skechers U.S.A. Inc. is one of the fastest growing footwear companies in the United States, focusing on trendy, casual styles aimed primarily at men and women from the ages of 19 to 40. With 1998 sales at almost $400 million, the company designs and markets more than 900 different styles of shoes, which are sold in major department stores such as Macy's and Nordstrom as well as in 38 of the company's own freestanding boutiques. Skechers's shoes are produced overseas at factories in China, Mexico, Brazil, and Romania, which allows the company to keep the prices of its designs below those of its competitors, and are designed to appeal to younger, active, fashion-conscious consumers. Skechers devotes much of its creative energy and revenue to flashy, highly visible ad campaigns--a strategy that has helped the company grow within a matter of years to a multimillion dollar business.

The Company's Beginnings: The Early 1990s

In 1990 the hottest selling shoe brand among young American women was called L.A. Gear, a label created and owned by a veteran of the retail industry named Robert Greenberg. Founded in 1983, L.A. Gear by 1990 was grossing more than $900 million in sales and, with its neon tennis shoes and overtly feminine image, seemed to be an unstoppable and unique presence within the industry. After a series of missteps, however, L.A. Gear took a sudden turn for the worse, and by 1992 Robert Greenberg, along with his son Michael, found himself without a job, forced out of the company he helped to create.

Greenberg was no stranger to the unpredictable vicissitudes of the retail trade, however: The executive began his career in the 1960s selling wigs to beauty shops in Boston and by the next decade he had moved on to importing designer jeans to sell at the department stores Filene's and Jordan Marsh. At the end of the 1970s Greenberg moved to Los Angeles, where he founded a chain of roller skate stores, his first entré into the footwear industry. His first big break came in 1982, when Greenberg licensed the image of the film character E.T. to appear on shoelaces--a move that netted him $3 million in less than two months. This success gave him lasting clout and recognition within the retail trade, and it was with that revenue that Greenberg founded L.A. Gear.

After Greenberg's departure from L.A. Gear in 1992, he immediately founded Skechers. Originally intended to be a distributor of Dr. Martens shoes, a British label made by R. Griggs Ltd., Greenberg within a year began to focus on designing and marketing his own brand. Utilizing the experience he gained through L.A. Gear, Greenberg began marketing Skechers primarily to young, hip consumers, although unlike L.A. Gear the focus was this time not on women's athletic wear but on casual, stylish street shoes for men. In addition, although Nike had a firm hold on men's athletic wear, there was no large, well established company against which Skechers had to compete in the market for men's street shoes, and this provided Greenberg the opportunity to help create and support a new and burgeoning niche market.

Aside from being the largest distributor for Dr. Martens shoes, Skechers in 1992 also owned and marketed the labels Cross Colours, a brand that helped put urbanwear on the retail map, as well as Karl Kani and So. ... L.A. Although all three of these labels were successful, by 1993 Greenberg saw more financial opportunity in the development of his own label, and so he began consolidating his fiscal and creative resources to focus on Skechers. As a result, the labels Karl Kani and So. ... L.A. were discontinued by 1995; Cross Colours was discontinued not long after that and was sold a few years later.

Within a year of Skechers's signing of a licensing agreement with R. Griggs Ltd., the makers of Dr. Martens shoes, the two companies had a falling out, with Skechers accusing R. Griggs of failing to deliver on orders for its increasingly popular merchandise. Skechers filed a complaint against R. Griggs for breach of contract, and a complicated array of countersuits ensued. By 1993, only one year after the two companies had formed a partnership, Skechers no longer served as a distributor for the Dr. Martens brand and had to rely on its own label for survival.

Skechers U.S.A. had its first big break under its own label in 1993, with the introduction of a design known as the 'Chrome Dome.' Appealing to both sexes, this shoe was an urban street boot that reflected the increasing popularity of the 'grunge' look among younger consumers: the 'Chrome Dome' shoe was made to look well-worn and scuffed at the heel--much like the stone-washed, pre-torn jeans that were so popular at the time--and presented an image of tough androgyny. The 'Chrome Dome' design proved Skechers to be a company well aware of the quickly changing trends among young consumers, and the label soon was picked up by such stores as Foleys and Nordstrom.

Expansion: The Middle to Late 1990s

By 1995 the two-year-old Skechers was a vibrant, growing company, reflecting the many years of retail expertise of the company's CEO Robert Greenberg as well as that of the company's president, Greenberg's son Michael. In March of that year Skechers was ready to branch out, and it signed licensing agreements with the companies Genova Incorporated and Signal/American to produce casual boys' and menswear. Created under the Skechers label, the clothes were intended to appeal to the same customers who bought the company's shoes, with an emphasis on style, wearability, and comfort. The clothes, primarily fleece tops, t-shirts, and jeans, were sold at major national department stores and were produced both overseas and domestically by Genova and Signal/American.

Two years later, in 1997, Skechers was doing well enough to expand its customer base to overseas markets. That year, the company began selling its footwear in Southeast Asia, where most of Skechers's products were made, and in Eastern Europe. Because the company kept a watchful eye on the trends of the youth market, the label sold well internationally from the beginning and by 1998 accounted for 15 percent of the company's sales.

By 1998, only six years after the company's inception, Skechers had 2,200 accounts, including Genesco Federated, the May Company, Dayton-Hudson, Dillard's, Nordstrom, Woolworth Corporation, Foot Action, and Finish Line. The company also had opened more than 30 of its own stores, though it continued to focus on accounts with national department stores for the majority of its revenue. That year, demand for Skechers's products was so high the company made the unusual decision to stop opening new accounts altogether, choosing instead to focus on the expansion and quality control of existing accounts. Although the company already had begun to make its mark in women's footwear, the company at this time began to aggressively expand its womenswear line, producing funky, high platform sandals and boots that appealed to teenagers and young, urban women. With the company's new emphasis on women's shoes, as well as its introduction of a children's line, its design team increased output from 600 styles of shoes to 900 in the span of only one year.

In April 1998 Skechers revealed plans that would place the company in direct competition with such footwear powerhouses as Nike and Reebok. In an aggressive move, the company rented a 54,000-square-foot exhibit space at the World Congress Center in Atlanta, which had been occupied previously by Nike. Promising a new focus on athletic footwear, Skechers utilized that space to showcase a flashy, hip image influenced in equal measure by hip-hop, urbanwear, and sports. The exhibit space occupied by Skechers was the largest space at the Center, and the Skechers image was a ubiquitous presence at that year's trade show. The company spent $2 million on light shows, dancers, and models wearing new Skechers designs, as well as video screens flashing picture after picture of the Skechers logo. Interestingly, Nike was nowhere to be seen that year, indicating to some in the industry that there was a shift in emphasis in athletic wear from performance-based shoes to designs that concerned themselves more with style and appearance. Indeed, while Skechers began to produce more athletic shoes, the company made no secret of the fact that it did so not with athletics in mind so much as the fact that athletic shoes were becoming more popular as streetwear.

By decade's end Skechers had skyrocketed to a conspicuous prominence within the footwear industry, producing hundreds of casual and trendy styles for men, women, and children. In September of 1998 the company was successful enough for Macy's to offer the label its own space within the national department store's central New York location. While other, less prominent labels had to compete in Macy's shoe department side by side, the Skechers brand was presented in its own small boutique, giving the company a status usually reserved for such brands as Coach and Fendi.

While the trajectory of Skechers's sales arched continually upward, the company did have to face some unforeseen problems: with such increased prominence and popularity came copycat labels and designs, the nature of which threatened both the Skechers image and the company's revenue. Along with the company's initial difficulties with R. Griggs--a battle that

1992:Skechers is founded.

1993:Skechers develops its first successful shoe, the 'Chrome Dome.'

1998:Skechers enters the field of athletic footwear, taking over Nike's space at the Atlanta trade show.

1999:Skechers goes public.

continued into the late 1990s--Skechers in 1998 also filed two complaints against the labels Candies and Payless Shoe Source for copying original Skechers designs. By approaching the protection of its label and designs with such aggressive, proactive tactics, Skechers made it clear that it was not only willing to play an innovative role in the retail industry, but was also capable of fighting to keep that role.

Marketing Know-How: Skechers at Millennium's End

An element intrinsic to the success and rapid growth of the Skechers label was the company's marketing strategy, which was designed in large part by Robert and Michael Greenberg, the father-and-son team behind Skechers. In an interview in Footwear News, Michael Greenberg told Simon Butler, 'If we spent a billion dollars a year in marketing, it wouldn't be overkill. There's no limit to creating brand awareness.' It is that sentiment that drove the Skechers philosophy, both in terms of marketing and design, from the company's beginning. After decades in the apparel industry, the elder Greenberg was aware that, regardless of the quality or originality of a product, without the right image and ad campaign to sell that product a company would never survive in the relentlessly competitive world of retail. Indeed, a common utterance used by both Greenbergs was the laconic mantra, 'Unseen, untold, unsold,' a phrase that underscores well the aggressive marketing of the Skechers label.

Aside from using the typical media of print ads in fashion magazines and men's periodicals and, a few years after the company's start, television, Skechers also availed itself of some rather experimental forms of marketing. After the company's success in 1998 at the Atlanta trade show, where Skechers turned the exhibition into more of a nightclub than an exhibit space, the label formed a partnership with Nordstrom and Sprint to develop a promotion aimed directly at teenagers. In 1999, using the phrase, 'Skechers hooks you up from head to toe,' the company offered a free phone card (compliments of Sprint) worth 15 minutes of air time with purchase of any of Skechers shoes from Nordstrom. The promotion, which was followed later that year with a similar offer of a free Motorola pager with purchase, reflected the extent to which the company was willing to go to maintain its appeal to younger consumers. The partnership between those companies and Skechers also emphasized the way in which the retail industry, particularly labels devoted to trend-conscious customers, was increasingly melding itself to the world of technology.

In spring of 1999, ever aware of its customer base's changing tastes, Skechers launched a dressier, high-fashion line of men's shoes called Skechers Collection. The line, priced slightly higher than Skechers's more casual styles, was designed to appeal to young, professional but fashion-conscious men, and was slated to be sold through Skechers's high-end accounts, such as Nordstrom, Macy's, and Foleys.

In June 1999 Skechers was doing well enough to go public, with an initial public offering of seven million shares costing $11 each. The IPO raised more than $88 million for the company, with the Greenbergs continuing to own more than 60 percent of the company. After going public the company continued to do well and was able to increase its name recognition through larger, more expansive ad campaigns, the budgets of which required more than 20 percent of Skechers's revenue. In an industry notorious for its high turnover and fiercely competitive environment, Skechers's skyrocketing success has caused some in the trade to speculate over how long such growth can last. With the retail-savvy Greenbergs managing everything from the company's marketing to its design, however, the Skechers label was by decade's end becoming a formidable and stable force within the footwear industry.

Principal Competitors: Nike, Inc.; R. Griggs Ltd.; The Timberland Company.

Skechers U.S.A. Inc. History

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