he famous colorful, comfortable foam clogs that break almost all fashion rules and evoke divisive and visceral reactions from customers and critics, are back from the dead. Crocs that was once the target of everyone's jokes, described by a wide variety of critics and commentators as “the ugliest shoes ever invented” - and actually named one of the 50 worst Inventions in 2010 by the TIME Magazine - it was the only major shoe brand in the spring of 2020 to experience an increase in sales.
On Tuesday, 27th April 2021, Crocs reported that sales surged 64% in its first quarter, to U$460 million. The company also raised its 2021 sales forecast, saying it now expects revenue for the year to increase between 40% and 50%, up from its previous guidance of a 20% to 25% increase.
The fall from grace
In 2008, during the financial crisis, the company suffered a huge loss of U$200 million, forcing massive cost-cutting measures, including the closure of 158 stores and several factories, also the loss of 2.000 jobs. The situation became so dire that shareholders filed lawsuits alleging maladministration. The company hit rock bottom in 2009 when its stock price fell to a record low of U$3 from a high of U$70 in October 2007 (currently the stock price is U$ 100,21). Crocs was on the verge of collapse.
One of the reasons for the brand's difficulties during the financial crisis was the dilution of its image by expanding its number of salespeople and points of sale. Believe it or not, Crocs have already been sold in high-end fashion stores like Nordstrom and at the same period in shops like 7-Eleven and Hallmark.
In 2014, Crocs received a lifesaver in the form of a U$200 million investment from private equity firm Blackstone, which brought shoe executive Gregg Ribatt as CEO. He started the Crocs turnaround. In 2015, the founders were fired and Andrew Rees, who replaced Ribatt as CEO in 2017, continued to drive the company forward. Rees' strategy was simple: improve manufacturing, close underperforming stores, build a new team of footwear experts, focus on clogging, and most importantly, make Crocs “cool” again.
So, it was only in 2017 that the company went back up “in high heels”. By closing an exclusive partnership with the luxury brand Balenciaga, Crocs saw its name return to the headlines and the feet of influencers and people of interest.
When Balenciaga, one of the biggest high fashion brands in the world, comes to you and wants to collaborate, they are doing it not because we are the largest shoe manufacturer in the world. They are doing this because of the polarized nature of the brand and the turmoil it will generate. It is a situation that everyone wins, says Rees.
2020, the year that Crocs will remember for a long time
Crocs CEO Andrew Rees attributes the company's success in 2020 to a defensive and offensive business strategy. The defensive, he says, involved the cancellation of domestic production and the diversification of the supply chain. The task was easier said than done. The brand's supply chain has been disrupted due to quarantine measures worldwide, especially in Vietnam, where a significant part of its clogs is manufactured.
But Crocs' business was not just about defense, especially when it comes to opportunities in China. At the end of April, all Crocs stores and its nearly 350 partner stores in China were reopened. In the same month, Crocs broadcast a live event on Alibaba’s Tmall platform with Chinese actress Yang Mi, where she shared tips and tricks on how to style Crocs in different outfits. In June, a new concept was also launched in stores in Shanghai, which allows customers to customize their Crocs in the store. Crocs told investors in October that "its reach and engagement [in China] increased by 50% month-on-month in June".
At a time when people are wearing sweatpants and slippers instead of suits and high heels, Crocs also focused on consumers who are now valuing more comfort. Another important strategy was to market Crocs as the ideal shoes for frontline healthcare professionals, betting on those characteristics: easy to clean and inexpensive to replace.
In October and November 2020, Crocs saw a 750% increase in sales at StockX, a popular market for shoe sellers, with a pair being sold at 125% above retail value, on average.
"Some of our collaborations are designed to attract new customers and to be able to market them in the future," said Crocs CEO Andrew Rees. "And some of them are designed to be kind of interesting and buzzworthy. In 2021, we will do more international collaborations."
The brand often teams up with several artists and brands, including Post Malone, Justin Bieber, and fast-food chain KFC, on special edition collections. Its glow-in-the-dark collaboration with Latin trap artist Bad Bunny quickly sold out after its September launch last year. This past Sunday, musician Questlove was pictured wearing a pair of custom gold Crocs at the Oscars.
In one of the collaborations between Crocs and Drew House (brand owned by Justin Bieber), on his Instagram, the singer posted a photo some days before the collection launch, in which a pair of controversial but undeniably comfortable sandals appears floating in the pool of his mansion and captioned the image with just a "Soon". Investors bet on Bieber's potential as a sales lever, so much so that right after the posting by the singer, Crocs shares traded on the NASDAQ electronic stock exchange rose more than 11%, which translates into an increase in the market value of U$300 million to U$3.1 billion.
The demand for shoes of dubious taste is such that the last collection, signed by singer Justin Bieber, sold out in the first 90 minutes after being launched, on Tuesday, October 13th, 2020. Sold for U$60, Crocs created by the Canadian artist are now traded on online auction and resale sites, such as eBay, for more than double of their original value.
Crocs are far from being unanimous among fashionistas and it is part of its strategy to be so. As the company president, Michelle Poole, says:
People love us or hate us and that's okay because it means they're paying attention.