The Strategic Move of Crocs, Inc.
By Jennifer von Briesen, Founder & Principal, Frontier Strategy, LLC
Crocs, Inc. Overview
Crocs, Inc. is a U.S. based shoe designer, manufacturer, and retailer that launched its business in 2002 selling Crocs™ brand casual plastic clogs with straps in a variety of solid, bright colors. Love them or hate them, the tremendous popularity of Crocs™ shoes is an undeniable business success story. Crocs’ bold strategic move allowed it to break out of the red ocean and achieve both differentiation and low costs to create a blue ocean. The result was rapid growth and global expansion to reach US$847 Million in revenues and US$168 Million of profits in 2007, just six years after launch. Crocs store in Boston, MA. © J. von Briesen, Frontier Strategy, LLC (2009) Unfortunately, after that, instead of remaining true to the principles of blue ocean strategy, Crocs started to compromise on the very foundation that made it a success. It lost its focus on a few simple styles and started offering a wide range of complicated styles and expanded too aggressively. The result was declining performance and higher costs. In the rest of this article, the story of Crocs’ strategic move will be explained and will conclude with some perspectives on the company’s current situation.
Crocs Entered A Red Ocean Industry When It Launched in 2002
The U.S. footwear industry in 2002 was $49.3B in annual sales1, split about 60%-40% between fashion and athletic. Within the fashion footwear segment, categories are well established with shoes representing 55%, sandals representing 25%, and boots and other 20%2. The industry prior to Crocs' strategic move was mature, growing between 1.5%-3% a year, and competition was extremely intense – a red ocean. The marketplace was nearly all imports, with only a relative handful of U.S. firms continuing to manufacture domestically. In 2002, import penetration for all footwear was 98%3. As a result, successful U.S. shoe manufacturers differentiated their products from imported low-cost footwear on the basis of specialization (e.g., sizes/widths, hand sewn features, etc.), quality, exclusive retail channels of distribution, customer service, and brands4. Footwear manufacturers designed, marketed, and produced products based on their target demographic customer segments and fashion trends. Actual production of footwear was typically achieved through a variety of contract manufacturers, often based in Asia. Footwear materials, mainly leather, represented about 50% of the costs5, and shoes were mostly assembled by hand (e.g., cutting, gluing, and machine assisted stitching). The majority of
© Jennifer von Briesen, Frontier Strategy, LLC 2009.
manufacturers worked with traditional limited color palettes, materials, and textures, and created footwear specifically for women, men, and/or children. Large manufacturers invested heavily on building their brands and advertising, and the large athletic shoemakers used paid celebrity endorsements from star athletes such as Michael Jordan (Nike). Retailers were typically required to buy their shoes from manufacturers months in advance and buy in bulk. Products that didn’t sell over time would be marked down to clear out their stock6.
How Crocs Challenged Conventional Assumptions of Competition To Create A Blue Ocean Crocs challenged key industry assumptions and conventions by creating a brand new type of casual shoe, a clog that was partly a shoe and partly a sandal. It used fun, whimsy, and imagination to create a blue ocean by making brightly-colored, comfortable and lightweight clogs with the perfect balance of functional and emotional appeal.
Crocs™ Features with Functional Utility & Appeal
Material has a cushiony feel for long‐wearing comfort
Bright Colors for Emotional Appeal
Holes increase airflow
Heel straps hold feet in or can be folded in front for easy slip‐on and off
Material is odor and bacteria ...
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