Smiling, Condescend noticed that many in the rood were wearing the specially-designed Dogtrot shoes the company had sent to all invitees. Vans was best known for selling footwear and apparel to skateboarders and surfers; the company also sold products for other alternative sports, including snowboarding, BMW bike-riding motocross, TM wisecracking, and suppressors (Vans called these activities “Core Sports “; see Figure A for a description of each sport). Vans had financed the Dogtrot film at the request of one of its sponsored athletes, skateboarding pioneer Stacy Parietal.
Now, as Condescend looked over the crowd, he could not help but feel a sense f satisfaction. After seven years at Vans, Condescend had managed to turn the company around, revitalization the brand and transforming Vans into a $350 million business (see Exhibits 1 through 3 for additional financial information). In a market in which the customers were notoriously fickle and few brands ever topped $100 million in annual sales, this was quite an accomplishment. At the same time, Condescend was keenly aware of how fleeting success could be.
Exactly 20 years before, the company had gotten a big boost from another movie, a cult classic called Fast Times at Ridgepole High. Eager to capitalize on the increased demand for its products, Vans had expanded too rapidly and had ended up in bankruptcy. While Condescend was determined not to repeat the mistakes of the past, he felt strongly that Vans was at a crossroads: believe that at $350 million, we’re not maxed out. Look at Nikkei as a $9 billion brand. Can we be 10% of what Nikkei is? Yes, that doesn’t feel uncomfortable to me.
On the other hand, I’m not running the business to become a $1 billion company. We’ve got to proceed incrementally, so as not to alienate our core customer base. Senior Researcher David Akron of the Global Research Group prepared this case under the supervision of Professor Younger Moon. Authors give thanks to Research Associate Brenda Change for her assistance. HOBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary’ data, or illustrations of effective or ineffective management.
Copyright @ 2002 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing Boston, MA 02163, or go to http:// www. Hobs. Harvard. Du. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means?electronic, mechanical, photocopying, recording, or otherwise?without the permission of Harvard Business School. 502-077 Already, Condescend had broadened Vans’ product assortment and expanded its distribution system.
The company now sold everything from women’s sandals to outdoor hiking shoes, in retail outlets ranging from company- owned stores to mass-market chains such as Foot Locker and J. C. Penny. The company was also involved in a number of entertainment-related ventures: In addition to financing Dogtrot, Vans operated a snowboarding camp in Oregon, it licensed content to videotape developers for Microsoft’s Oxbow and Sonny’s Palpitations, and it was in the process of starting a record label. Condescend commented: The biggest question I’m dealing with today is how to drive that next stage of growth.
Which product categories should we participate in? Which distribution channels should we be in? Know that lots of shoe industry people are wondering, why is Vans getting involved with movies, with record labels, with videotapes? But what they don’t realize is that our vision is to integrate ourselves into the places our customers are most likely to be. Figure A Vans’ Core Sports Us riffing The sport of riding the surf on a surfboard. Wisecracking A short, broad water ski ridden like a surfboard by a person towed by a motorboat.
Skateboards Eng A short board mounted on small wheels Motocross A closed-course motorcycle race over rough terrain. Snowboarding A board-like wide ski ridden in a surfing position downhill over snow. BMW Abbreviation for bicycle motocross. A cross-country bicycle race over rough terrain. Source: Vans; caseworker research. 2 Us process An indoor version of autocross. The Early Days Paul Van Doreen launched Vans in 1966 with his brother James and two partners. Steeped in the techniques of footwear manufacturing, 1 Van Doreen set out to make the most durable and affordable casual deck shoe in the market.
The result was a rubber-soled shoe that was reinforced with clay and was twice as thick as those produced by the competition. The upper canvas was double-stitched, and the entire shoe was washable. At prices ranging from $2. 49 to $4. 99 a pair, Vans shoes were, according to one industry observer, “built like a battleship. “2 unlike other shoe manufacturers, Vans old its sneakers directly to consumers out of its own retail store in Anaheim, California. At the time, industry insiders derided the unconventional business model because “nobody had a store that sold only sneakers. The skepticism didn’t dissuade Van Doreen, however, who opened his second, then his third, and then his fourth retail outlet within months. Source: Vans. Promoting the stores was strictly a grassroots affair, managed almost entirely by Van Doreen with the aid of his children. Van Dodder’s son Steve recalled, “When a new store was ready to open, my dad would give me a bunch of flyers to pass out after school. The family was always involved that way. ” Steve also recalled how the senior Van Doreen acquired customers?”one surfer at a time”: I remember there was a surfing competition once, down near Costa Mesa where we grew up.
My dad, who was not a surfer, headed down to the beach to show the surfers our shoes. He walked straight up to this really famous Hawaiian surfer, Duke Kinkajou, and said, “Hey Duke, I like your shirt. Why don’t you let me make you a pair of shoes that match that shirt? All I need is some material to match it. ” Duke grinned, turned to his buddy?who was wearing an identical shirt?and made him take his shirt off ND give it to my dad. My dad took the shirt, used the material to make the shoes, and delivered them to Duke the next day.
That’s how we did business at Vans back then. Surfers were not the only ones who enjoyed customized Vans. Because manufacturing was done in-house, customers could choose from a “Basking Robbins-like”3 assortment of more than 50 fabrics and colors. Steve Van Doreen?who more than 30 years later was still promoting Vans products, albeit in a more official capacity as vice president of promotions?explained: From the beginning, you could choose your own canvas fabric and color. NO one else could do this because nobody else had his own factory.
The kids would come in and they’d say, “Oh, I want green on this side, yellow on this side, blue on this side, make the tongue checkered… ” Or if one foot was a seven and the other was a nine, we’d accommodate that too, for a dollar extra. By making only the shoes people wanted, we were able to avoid the inventory problems that afflicted other footwear companies. “At one point,” Van Doreen continued, “every school in Southern California, the cheerleaders, the drill teams and the marching bands, they were all wearing our shoes. We were the only company that could match the school colors. Vans was also a favorite of hard-to-fit customers, who required 1 Prior to launching Vans, Van Doreen worked for 25 years at the nation’s third largest footwear manufacturer, Massachusetts- based Randolph Shoe Company. 2 Deed Leibniz, ‘The ultimate Trendier Sari Ritual’s Job Is To Figure Out What Teenagers Will Embrace Next As A Fashion Statement For The Feet. This Is No Joke. This Is Risky Business,” Los Angles Times, December 8, 1996. 3 Basking Robbins was a popular ice cream store chain in the United States known for its wide assortment of flavors. Non-standard widths and lengths.
As a result, by the end of the sass, the canvas, easy-to-wash shoes had developed a small but loyal following among the Southern California surf set. Dogtrot and the Birth of the Z-Boys The sass ushered in a wave of anti-establishment, anti-Vietnam, anti-war sentiment among American youth. It was within this context that?in a depressed area of Santa Monica, California (a place dubbed “Dogtrot” by its inhabitants)?a talented group of disenfranchised teenagers began creating a new style of skateboarding that ultimately ended up redefining the sport.
This group of self-described misfits (the “Z-Boys”) took pride in pushing the limits of conventional skateboards MGM, becoming the first to replicate complex surfing moves on asphalt park embankments and the upper lips of empty swimming pools. (See Figure B. ) Figure B The Z-Boys in Action For these skateboarding rebels, Vans quickly became the sneaker of choice. The balkanized rubber “waffle” soles were ideal for maintaining a solid grip on the skateboard, and the doublethink’s canvas was perfect for withstanding the wear and tear associated with the reckless sport.
Tony Hawk, a skateboarding icon who grew up dolling the Z-Boys, recalled, “l would climb walls in them, [the shoes] were so grippe. ” In addition, the price was right. Glen Friedman, who grew up skating with the Z-Boys, put it simply: “We wore Vans because they were seven bucks, end of story. “4 In 1 975, the Z-Boys dominated the first national skate competition in Del Mar, California, wearing matching blue Vans deck shoes and T-shirts emblazoned with their team name, Zephyr. Their innovative moves overwhelmed both competitors and judges, who had no categories for judging their style.
In the rods of Zephyr member Tony Alva, it was clear “we were a step above. “5 Word quickly spread, and skaters around the country began emulating Z-Boy skating techniques. A number of skateboarding magazines were launched, and dozens of outdoor skaters began opening all over North America. Skateboarding was on the verge of becoming a $400 million 4 Maureen Attack, “Nikkei nips at skate-shoe icon Vans as extreme becomes mainstream,” The Wall Street Journal, April 24, 2002, p. 1. 5 G. Beat, “The Lords of Dogtrot,” Spin Magazine, March 1999. Business,6 and Vans?whose sales had risen rapidly?appeared to be ideally sectioned to take advantage of its close affiliation with the radical sport. Just as quickly, however, the market began to decline. By decade’s end, the infatuation with skateboarding had been replaced by a fascination with other alternative sports (such as BMW riding), dozens of skaters had closed as a result of the skyrocketing cost of liability insurance, and skateboard manufacturers had suffered tremendous losses.
According to one skateboarding historian, by the end of 1 980, “skateboarding [had] died. “7 That same year, Paul Van Doreen turned the company over to his brother James. Top sys -Tu raw The ensuing eight years were turbulent for Vans. In 1982, a youth-oriented movie called Fast Times at Ridgepole High featured a teenage surfer dude named Jeff Spicily (played by actor Sean Penn) hitting himself on the head with a pair of black-and-white checkerboard Vans slip-ions. The movie catapulted Vans back onto the national scene, creating virtually insatiable demand for its shoes.
James Van Doreen responded by broadening Vans’ product mix in an effort to grab share from Nikkei and Rebook in the (then) rapidly expanding athletic shoe market. Soon, Vans was producing shoes for baseball, football, soccer, settable, wrestling boxing, and even umpiring. But the move backfired: High production costs at its California-based factory, strong competition from mainstream brands, and an unreceptive market led first to debt, and in 1984, to bankruptcy. Paul Van Doreen returned to revivalist the company. ‘We just put it back on the same road,” he explained. “To hell with fashion trends. 8 Things started to look up again, as Paul managed to get the company out of debt, pay back 100 cents on every dollar owed, and then sell the company in 1988 to a private equity firm, Moocow, Del_ewe Co. The reallocates ride continued into the early ass, however, when a variety of factors thwarted Vans’ struggle for growth. A deep recession hit the nation in 1991; the Gulf War followed in 1992. Oil shortages led to higher rubber costs, which led to higher shoe prices and lower margins. Meanwhile, “grunge” fashion trends and “urban chic” replaced the surf-and-sun look.
By the mid-ass, the company had closed one of its two factories, had laid off 1 ,OHO workers, and had replaced a number of its company-owned stores with off- price outlets to move SIS million of slow-moving inventory. 9 In short, the little currency of “cool” no longer favored Vans. 6 G. Beat (1999). 7 Michael Brooke, The Concrete Wave: The History of Skateboarding (Toronto, ON: Warwick Publishing, 2001 8 Leibniz (1996). 9 Kelly Barron, ‘Vans–No Loafing’: The Orange Company must restore its image and a series of financial and management upheavals,” The orange county Register, June 11, 1995. The Turnaround In 1 995, Gary Condescend took over operations at Vans; two years later he assumed the mantle of CEO. One of Snowfield’s first moves was to close Vans’ remaining factory, effectively eliminating the company’s manufacturing vision. He explained: For more than 25 years, Vans’ competitive advantage was its U. S. Manufacturing with a cycle time of 19 days from receipt of order to completion of finished goods. Yet by the imides, anyone could go to Asia and make stuff cheaper and with a far greater range of styling. There were no barriers to entry.
Fortunately, the brand was strong. When you mentioned Vans to people, they knew what the name meant: young, fun, Southern California, beaches, skateboarding, and surfing. So our point of difference was going to be our heritage, our connection to this new generation of sports, he kids who played them, and their lifestyles. In the late-ass, it was estimated that about 25 million Americans, mostly between the ages of 6 and 24, participated in some kind of alternative sport. This number included an estimated 7. 8 million skateboarders, 4. 7 million snowboarders, 2. Million washboards, and 3. 7 million BMW bikers-10 “Extreme sports” were believed to be more popular among boys aged 12 to 15 than Major League Baseball or the National Hockey League, 11 and more teenage males watched the X- Games on ESP. than the Superpower. 12 Vans’ customer base included both hardcore enthusiasts as well as occasional athletes. The former tended to spend hours of their free time practicing their sport, while the latter tended to exhibit a broader range of interests. By far, the most popular of Vans’ core sports was skateboarding.
The average Vans customer was a white, skateboarding male between 12 and 18 years of age who lived with his parents in the suburbs. His interests typically included punk or hip-hop music and videotapes, and he most likely held skateboarder Tony Hawk in much higher esteem than Michael Jordan. 1 3 Condescend believed that the company’s key challenge Was maintaining a legislations with these unpredictable, fashion-conscious kids, so he actively solicited input from his young staff members (many of whom were skateboarding aficionados) to figure out a way to reach this youthful demographic: One of my most important jobs was to listen.
We have lots of people within the company who are part of the lifestyle… They live it, embrace it, lead it. They were the experts, not me. I never pretended to be the target customer. So I spent a lot of time sitting with athletes, talking with Steve Van Doreen and a number of young people in the company who were passionate about core sports. Some of these discussions involved debates about which sports could “legitimately’ be considered “hardcore. In recent years, a number of alternative sports?including snowboarding, BMW bike riding, rollerblading, and so on?had grown in popularity, and it was not clear which of TM these should be included under Vans’ “Core Sports ” umbrella. As Condescend remembered, “We considered each of these sports very seriously. Over time, we decided to officially add five sports 10 American Sports Data, Inc. , based on 1999 estimates. 11 Teenage Research Unlimited. 12 Based on a Guide report (June 1998), John J. Channel and Paula Islands, “Vans, Inc. Wells Fargo Van Gasper, February 8, 2001. 13 Based on a survey by Alloy Inc. , cited in Attack (2002), p. 1. 6 [see Figure A], but we also rejected a number of sports?like rollerblading and skiing?that we didn’t believe were consistent with our message. ” More generally, Snowfield’s in-house listening sessions led to the development of a revamped marketing approach. The centerpiece of the new approach was the sponsorship of a number of carefully-selected, alternative sporting events and related forms of entertainment.
As Condescend put it: Our goal was to create a proprietary branding platform that would build on our unique heritage and give us a long-term leadership position. We always knew a Nikkei or Rebook could outspend us, so we focused on furthering the authenticity of our brand and connection to the lifestyle associated with core The Promotional Mix Triple Crown Series One of the first events that Vans sponsored emerged Out Of a suggestion from Steve Van Doreen who, as vice president of promotions, spent much of his time cultivating personal relationships with prominent skateboarders.
Van Doreen suggested that Vans create a world championship of skateboarding as a mechanism for recognizing skateboarding elite. The inaugural event was a humble affair?nothing more than a couple of ramps set up in a parking lot in Newport Beach, California?but the response “from the street” was astonishing: Over 1 0,000 kids jammed into the parking lot to witness the two- day competition. Van Doreen marveled, “ESP. ended up airing the event 8 to 10 times and we got tons of magazine exposure, which meant we spent a paltry $50,000 for publicity worth 7-figures!
At that point, we knew we were on to something. ” The following year (1998), the company recast the competition as the “Triple Crown of Skateboarding. ” This time, the competition consisted of three efferent events (street skating, bowl riding and vertical ramp riding) designed to reflect the various specialties of the top professional skateboarders in the world. Around the same time, Condescend learned that the owner of a Habituated competition called the “Triple Crown of Surfing” was retiring and was willing to sell Vans the rights.
Condescend recalled, Once we owned both the Triple Crown of Skateboarding and the Triple Crown of Surfing, a light bulb went on in our heads and we said, “Why don’t we create the Vans Triple Crown Series? ‘ We then added two more sports [snowboarding and wisecracking], along with a couple more sponsors. The final Step was taking the extravaganza to ESP. and convincing them to televise it. By 2000, the Triple Crown Series had become so big that NBC outbid ESP. for television rights.
Two years later, the competition had grown to include seven alternative sports and 21 events, and a number of major sponsors (including Ford, Mountain Dew and Microsoft) had become involved. Moreover, the competition had become a global attraction?Triple Crown Champions hailed from several continents, including North America, South America, and Europe. (See Exhibit 4 for Triple Crown Series attendance data. ) Vans Warped Tour In 1 996, Vans signed on as one of the sponsors of the Warped Tour, a series of concerts that traveled to various cities, showcasing up-and-coming punk, hip-hop, and hard rock bands.
Condescend explained: The philosophy behind the Warped Tour was to feature acts like Blink 182 and Green Day before they hit it big. It was a very grassroots, low-priced, kind of music event that fit well with our image. Most of the kids who attended the Warped Tour were between 13 and 20 years old; they spent their day wandering between six different stages featuring dozens of smaller bands. The approach was totally different from other concert tours like Lithe Fair and Allophone, which focused on well-known acts.
When we got involved, we added things like a “reverse daycare center,” where parents could hang out while their kids had fun. It was at this point that my father had an idea. He suggested that, since our Triple Crown Series was really for professional athletes, we should create some kind of amateur event, where kids around the country could compete for a chance to become the Amateur Champion of Skateboarding. Steve Van Doreen took the suggestion a step further by reposing that we combine the amateur competition with the Warped Tour.