Like Peloton, Etsy and Zoom, Crocs saw its business boom during the early days of the coronavirus pandemic. The company’s aesthetically questionable but easily slipped-on clogs were the perfect footwear for Americans puttering around their homes, gardens and kitchens during quarantine.
But while many people got off their exercise bikes, cut back on D.I.Y. arts projects and resumed in-person meetings as a sense of normalcy returned to the world, they have kept their Crocs on.
Maggwa Ndugga of Raleigh, N.C., bought his first pair in 2020 and now has five. And he is spreading his enthusiasm, giving his parents and sisters each a pair for Christmas.
“They’re not the most appealing things to look at,” Mr. Ndugga, 25, said, but they offer support to his flat feet and can be worn whether he’s working at his standing desk at home, running errands, hiking on the weekends or lifting weights.
“I roll into the gym with my Crocs on and everything, and people ask, ‘Aren’t you going to change shoes?’” Mr. Ndugga said. “No, this is how I’m going to live life for now.”
Fans like Mr. Ndugga — along with celebrities like Questlove, who has been known to sport the clogs at award shows — have helped Crocs emerge as a rarity in the business world. It is a pandemic winner whose success might outlast pandemic shopping behavior.
The stock prices and sales of Peloton, Etsy and Zoom have dropped since their sharp rises in the pandemic, but Crocs’ stock has soared 167 percent since January 2020. The company’s annual sales have increased 200 percent since 2019.
At a recent conference in New York held by the wealth manager UBS, Andrew Rees, the chief executive of Crocs, said he often heard from the investment community that “Crocs was a pandemic beneficiary and it’s going to return to its norm.”
“There is very little chance of that happening, quite honestly,” Mr. Rees told a room of investors and analysts.
Last month, after announcing that quarterly sales rose 61 percent, Crocs said it anticipated another record year of growth. Its management team laid out an ambitious business plan that promised more robust profits and revenues when many in the retail industry are trying to temper investor expectations. (Part of the surge in overall sales is coming from the company’s acquisition of the footwear brand Hey Dude.)
Crocs said in November that it expected revenue from its namesake shoe line to reach more than $5 billion in three years, a nearly 90 percent increase. It sees its adjusted operating margin staying around 26 percent even as other consumer companies are feeling a squeeze in their profits.
Of course, the company, which is based in Broomfield, Colo., might not reach these goals. Fashion is notoriously fickle, and footwear is a category that relies on the popular apparel of the moment, such as the latest jean cut.
But the reason for the optimism, company executives and analysts say, is a steady stream of new products and shrewd marketing, especially on social media, where Crocs has cultivated a devoted customer base. It has 165,000 followers on Twitter and even more on TikTok (920,600), Instagram (1.6 million) and Facebook (6.9 million).
Over the years, the brand has developed a distinctive online voice through its use of emojis and memes, making shoppers feel that its aim is creating a community rather than just getting people to buy more clogs.
The company is adept at seizing cultural moments, as it did when it tweeted about Questlove wearing black Crocs on the Oscars’ champagne-colored carpet this month. And during the pandemic, it drove customers to its mobile app with the promise of discounts, which it called Appy Hours.
“It’s not like people haven’t heard of using social media to create brand awareness and brand relevance, but this management team is just doing it better,” Jay Sole, a retail analyst at UBS, said.
Crocs has steadily become more popular among Generation Z shoppers, a coveted demographic for any retail brand. In the fall, teenagers ranked Crocs No. 5 on a list of footwear brands, according to a biannual Piper Sandler survey. In 2017, it was No. 38. Hey Dude also cracked the top 10 in the most recent survey.
The more obsessive customers collect Crocs, which often sell for $49.99; it’s not uncommon for someone to have a dozen pairs or more. They can be accessorized with Jibbitz, the personalized trinkets pushed into the holes of Crocs clogs.
Adreanna Alleyne, who has at least 60 pairs, is the kind of loyal customer Crocs is counting on to spur future growth. She likes the look of the sandals and the wedges, is active in a Crocs Facebook fan page and sees the brand as a way to connect with others.
“My Crocs are part of my self-care,” said Ms. Alleyne, 33, of Roanoke, Va. “I’m not going to give up my therapy because the economy is going to crap. You go in for the shoe, but you stay for the community.”
Her 8-year-old son is now hooked, too. He owns 20 pairs and recently received a pair from his father, who lives in Kuwait. (Ms. Alleyne and her son have a long way to go before catching up to Doogie Lish Sandtiger, whose 2,100 pairs of Crocs are reputed to be the most.)
This type of customer loyalty is cost-efficient because a company has to spend more money and time on marketing to win over a new shopper.
“The chance of them buying another one is high,” Mr. Sole said of customers who buy into Crocs’ community aspect. “That means you don’t have to remarket to them.”
To reach its ambitious sales targets, Crocs will rely on sandals and lightweight Hey Dude shoes in addition to its classic clog.
“Like any large company, the meteoric growth of the early years becomes more and more difficult to replicate,” said Matt Powell, the founder of Spurwink River, a retail consulting firm. “They recognize that the clog is the most important product. They’ve worked really hard to diversify away from that to take some pressure off of it.”
Crocs’ sandals carry lower profit margins than its clogs, but people generally buy sandals more frequently than other types of footwear. And a person who buys a pair of Crocs sandals, Mr. Rees said, is one who can be converted into a clog wearer.
Crocs’ sandal business had $310 million in sales in 2022, and the company is projecting $400 million this year. Mr. Rees says he and his team have more work to do overseas, noting that sandals are a $30 billion global category. They hope to increase sales in India and countries throughout Southeast Asia, where many people wear sandals year-round. Currently, North America accounts for 60 percent of all sales for the Crocs brand.
Hey Dude has its own devoted following. On average, a typical customer owns four pairs of its shoes. The brand has expanded under Crocs by tapping into the company’s marketing resources and relationships with national retailers. It is on track to reach $1 billion in sales this year.
During times of economic uncertainty, companies often spend less money on marketing. Crocs said it would continue to lean on its slate of influencers, brand partnerships and digital advertising campaigns. It invests about 7 to 8 percent of its sales into marketing, and the company said it would spend more than $200 million on marketing initiatives this year. That will include rolling out more celebrity and big-name partnerships targeted toward specific regions around the world, and having a presence at live events like the Houston Livestock Show and Rodeo.
This wasn’t a push that emerged during Covid. The company’s marketing strategy started to change when Mr. Rees took over in 2017. The focus became all digital — no more TV ads, for example — and celebrities like Post Malone, Zooey Deschanel and Bad Bunny were signed to endorsement deals.
The elements of Crocs’ current expansion plan are not all that dissimilar from what the company tried to do under previous management teams. After its debut in 2006 as a publicly traded company, it released leather boots and golf shoes and bought Jibbitz. It opened hundreds of stores, from fashionable neighborhoods like SoHo in New York to dowdy airports.
Executives said that initial expansion had come at a high cost. Without a cohesive global marketing strategy, the company lost focus on the classic clog as new merchandise flooded the market. The brand lost relevancy.
“They were selling everybody and weren’t delivering to very many people, at least consistently,” Mr. Powell said.
Crocs faces the risk that the cultural winds can shift away from them. Customers could start falling in love with another type of shoe. But analysts say its management team has shown that it can pinpoint consumer behavior and use those insights to sell even more shoes that customers like.
“They found a way to get into the better market — the more fashion-forward market,” Mr. Powell said. “They really are really hitting on a lot of the right notes right now.”
Source: Read Full Article