Crocs capitalizes on consumers' quest for comfort

By U.S. News & World Report

What if, in the name of comfort, you took the squishy foam used to cushion running shoes and, instead of sandwiching it between the foot bed and sole, you made an entire shoe out of the stuff?

Pretty simple, really. All you'd have to do would be to blend together the standard plastic resins supplied in bulk by chemical companies such as DuPont (DD, news, msgs) and Dow Chemical (DOW, news, msgs), add color and heat, and inject the resulting goo into a mold, say, shaped like a Swedish clog.

Tiny air bubbles would form, and then, within a few seconds, out would pop a shoe that was not only cushy and comfortable but form-fitting, too. It would weigh barely more than a Nerf ball.

And because of its closed-cell foam, it'd be both waterproof and odor-resistant. It would get great traction, too; it wouldn't even scuff.

Best of all, unlike conventional shoes, whose production typically requires that dozens of components be sewn and glued together, this shoe would have just one piece, making it about as easy to knock out as squeezing shapes from a Play-Doh Fun Factory. It would be so cheap to manufacture that you could price it at $29.99 a pair and walk away with a fat profit.

"It's the kind of simple genius that makes you ask, 'Why didn't I think of that?' " Robert Neilley, a longtime industry watcher and editor of Injection Molding Magazine, says about the idea.

It's also an idea that last year helped make Crocs (CROX, news, msgs) the most successful initial public offering in footwear history. The stock is now near an all-time high of $60 per share and has a market cap approaching $5 billion.

Introduced in 2002, the comfy, so-ugly-they're-cute plastic shoes have logged more than $1.2 billion in sales, three-quarters of which was earned in the past year. Profits are expected to more than double this year to $164 million, thanks to wide gross margins of 59%, a rapidly expanding line of more than 50 styles and a worldwide manufacturing and distribution network of 25,000 outlets and counting.

Crocs may be the quintessential example of how to profit from consumers' growing obsession with comfort, a trend that is fast turning not just the shoe business but also the entire fashion industry inside out.

It's the "latest step in our unending quest to dress as casually as possible," talk-show host Bill Maher recently complained of the Crocs craze. "You know, I used to wear flip-flops, but they're a little dressy. I want clothing I can hose down!"

Such caricatures of today's consumers may seem extreme, but "just go to the malls, and you'll see. It's pajama pants, hoodies and flip-flops," says Marshal Cohen, the chief industry analyst at the NPD Group, who estimates that the molded footwear business is now worth $2.2 billion a year.

And it's not just the kids. "Style used to be No. 1. But now it's all about comfort and value, and the people at Crocs have capitalized on that trend brilliantly," Cohen notes.

Not that the light bulb flipped on when Scott Seamans initially pushed the spongy clogs on his friends George Boedecker and Lyndon Hanson in 2002.

"At first, I just thought they were ugly," Hanson recalls of the day his longtime college buddy insisted he don a pair during a four-day sailing trip from Mexico to Miami. "But they were really comfortable."

Sporting perforated holes to drain water away and tiny "circulation nubs" to ease muscle strain under the foot, the shoe had been created by a small Canadian plastics company for use in day spas.

"But Scotty thought they'd make great boat shoes," Hanson says. A born tinkerer, Seamans had already begun tweaking the shoe, using medical rivets (the same kind used to secure torn ligaments) to attach a plastic strap around the heel, which added a certain sure-footedness needed to maneuver around a boat deck. By the end of their sailing trip, the three friends had agreed to start a business selling the modified shoe to boaters and beachgoers.

Continued: From hot to not almost overnight

 1 | 2 | 3 | next >