The Shoe Saviour
Bruce Katz, CEO of Samuel Hubbard, on how the company’s old-fashioned approach to designing shoes and building a brand is a blast from the past that’s taking the market by storm.
Bruce Katz really had no choice but to get back into the shoe business after a near 30-year hiatus. You see, the cofounder of The Rockport Company was down to the last few cherished pairs of his favorite (Rocksport) style—the remnants of a 24-pair haul that he had taken with him upon selling the company to Reebok in 1986. Katz got to worrying about the “really sad day” that would soon arrive when he wouldn’t be able to retrieve another trusty pair from his attic. Not long after his father, Saul, passed away in 2012, Katz’s eight-year-old daughter showed him a shoe she had drawn and suggested they design shoes together. The two events got him thinking about his family’s rich footwear-making legacy.
“I didn’t know she had any idea that I had been in the shoe business, but I guess she’d gotten that information from my father (cofounder of Rockport) before he passed,” Katz says. “I started thinking about our family legacy and how my daughter would never know about it.”
Katz thought a lot about his grandfather, Samuel Katz, and Hubbard Shoes, the manufacturing company he founded in 1930 in Rochester, N.H. Katz’s father worked there for decades until the Asian sourcing shift forced it to shutter and put him on a path to sourcing shoes in Brazil that would evolve into The Rockport Company. Katz became enamored with the idea of reintroducing the factory’s name to the marketplace as a shoe brand. He also thought about his love of building businesses. (During his 27-year footwear hiatus, Katz’s startup ventures included fish farming, flavored teas, trash recycling, owning Esprit, designing mountain bikes, solar panel installation, home building and hotel ownership. He was also deeply involved in the technology sector, leading Internet startups and designing software.) But as fate would have it, Katz was between startups. Plus, the man who sailed around the world—logging 270,000 nautical miles post-Rockport—now had a family and was facing the prospect of being dry-docked until his daughter went off to college.
“I just love to build businesses, but I didn’t have one for a few years, and I’d been looking for one that I could sink my teeth into,” Katz says, noting that during this brief career lull he kept busy. “First I rebuilt our house, then I built a garden, but I was also tired of having so many different businesses.” Katz recalled some frequently offered advice from friends: “That I should make shoes again—do something that I at least know something about,” he says with a laugh.
That brings us back to Katz’s cherished Rocksports. Initially, he thought small: travel to Italy to have a craftsman replicate a batch for his personal wardrobe. But he decided to take it a step further and design a few styles that he would sell on his own website. Nothing big, he thought—just a small inventory and all very low key. “I started this with very modest ambitions,” Katz says. “I thought I’d sell them like grandma’s jam, out of the garage.”
That might have been the plan, but that’s not what’s happened since Katz introduced Samuel Hubbard to the world in 2014. The brand has caught on like wildfire, fueled by an extensive old-school print media campaign touting its premium, classic comfort styles offered in a broad array of colors. Katz reports that Samuel Hubbard has been growing at an 80-percent annual clip and is “way the hell ahead” of where he projected it might be just three years into the game. “It’s hard to grow a business much faster and keep up with all the internal systems,” he says. “We just redid our SAP installation, and we spent 10 months rebuilding our website.”
The company’s quick adaptation to a wholesale distribution model helped drive the rapid rise in sales, says Katz. He wisely realized this was the best way to get noticed as a new brand. As a result, Samuel Hubbard has become the new belle of the ball for hundreds of leading comfort specialty independents, upscale chains and apparel boutiques—retailers that understand its Portuguese-made qualities and learned that they can sell footwear priced in the low- to mid-$200s to their more discerning clients.
Samuel Hubbard’s offerings have since expanded into dress casuals, performance hiking boots and the new sneaker-esque Hubbard Fast collection. Katz believes the brand is on the verge of an even bigger introduction: its first women’s-specific line. He expects to deliver the shoes in coming months—when they’re ready and not just to make a trade show. “It takes us a long time to get our shoes just right—the constructions, materials and fit can’t be done fast,” he says. Katz is confident that when the new styles make their debut, they will generate the same “wow” response previous collections have. “The shoes feature about five different types of materials. It’s a very difficult construction, but it makes for an elegant interior,” he says. “The women wear-testing in Portugal are saying, ‘Wow!’ And while we don’t try and set the world on fire with far-out fashion, I think women here will love them.”
Samuel Hubbard is on a roll, and Katz is enjoying the ride—again. “I’m having fun with this, although sometimes I remember why they call it work,” he says. “I start at 5 a.m. and put in about 12 hours a day, but I’m fortunate to be working on a boat in Martha’s Vineyard right now and my family is with me. With a laptop, a cell phone, skype and DHL—it all works pretty well.”
Samuel Hubbard, however, wouldn’t exist if it weren’t for a fortunate trade show encounter about a year before the launch. Katz, still in reconnaissance mode, attended the Las Vegas show to get the lay of the land. He was “stunned” to discover how little had changed and was about to bag the idea altogether. “When you’ve been through 14 years of building a shoe company to 300 employees, adding all the systems and gone through all the headaches, I thought, ‘Can I face all that again?’” Katz says, noting that a shoe company is quite different from, say, an Internet startup. “Building a shoe company is a bit of a moose; it’s really complicated,” he says. “A software company needs an office, desks, computers, a whiteboard and then you figure out what to do. It’s not like trying to get a shoe to fit and then made consistently. That’s so much more challenging.”
But Katz happened to run into an old friend in the show aisles. The two were reminiscing when they spotted Werner Wyrsch, the former head of Rockport manufacturing. Katz showed them his beloved Rocksport style and floated the idea of designing a new shoe. Wyrsch was intrigued and took the shoe back to Portugal, where he had his own sourcing company. He and Katz communicated through Skype over the ensuing months and Katz then visited Wyrsch, who happened to be based near a factory that had once made Rockport shoes. It would be the first of several trips during which Wyrsch and Katz tweaked and re-tweaked their design. It got to the point that Katz says the Portuguese factory partners suspected the venture would never get off the ground. But the duo persisted and—16 months later—they had their first shoe: the Hubbard Free. “We finally had a shoe on the table where I said, ‘That looks good,’” Katz says, noting the plain toe style got its name from a marketing concept. He gave away 5,000 pairs to brand evangelists, including about 200 influential retailers, 800 podiatrists and 1,300 executives attending a TED conference. “The shoe was essentially free,” he says. “But it’s also free in terms of the roomy fit that’s liberating for your feet. It all fit together.”
The rest, you could say, is Samuel Hubbard history in the making. It’s a startup success story that blends old-fashioned footwear brand-building basics with fresh designs and innovative strategies that run counter to current industry wisdom—like not selling on Amazon or other digital-only dealers and never marking down any of its shoes. It’s a tale with plenty of amusing anecdotes and surprises. And while much has changed in the industry since Katz’s return, there’s still one constant: great products sell. “If you put a better product on the market, consumers will eventually recognize it, talk about it and want it,” he says. “That’s the grassroots, evangelistic, word-of-mouth process that drove Apple.” It’s why Katz is bullish on continued growth for Samuel Hubbard, a brand that he views as a refreshing throwback in a sneaker-dominated world. “We’ve taken a different tact,” he says. “We make conventional shoes that look and feel great with lots of colors, and it’s getting people excited about wearing shoes again. We’re helping revive the ‘shoe’ business.”
No markdowns, no digital-only dealers, premium priced shoes made in Europe…Samuel Hubbard is bucking many current industry conventions and doing quite well. What gives?
I don’t know. I think I must have come back at exactly the right moment when my notion of current was everyone else’s idea of retro perfect. Because if I told you that we would lead with bright colors in a traditional style most people would have said, ‘Good luck.’ But it turns out people love it. Our shoes look good with jeans or chinos. It’s fresh. People aren’t used to seeing men in regular shoes, except for some accountant wearing beat-up Allen Edmonds that he’s been polishing forever. And the comfort completely sells them. It’s like a wrap for your feet. We’ll put ourselves up against any other shoes in the store. And I believe that we’re proving that if you give consumers really good product available in sizes and widths and take care of your retailers, you can grow a healthy business. It’s already much more of a business than I was expecting it to be.
The product is that good?
Well, I want to make really good shoes. At Rockport, we made shoes as well as we could and always chose the best materials. It’s the same with Samuel Hubbard. When I go to the Lineapelle show, for example, I never ask the price of the leathers. Werner will ask eventually, but I’m just looking at whether the feel, texture, color and smell are all the best. I picked out a shearling lining recently for a chukka boot that was the most expensive you could buy, but it was gorgeous. It was like genuine teddy bear. So that’s how I’ve always gone about making shoes. Our lining leathers are nearly as expensive as our uppers. I also wanted to get people out of sneakers because there’s a lot to be said as to why a shoe is actually a better all-day wear. Sneakers can be super comfortable for running, but wearing them all day can get pretty squishy and stinky. Our shoes are cool and dry, because leather breathes, and we don’t put any glue between the lining and the upper.
Quality can be a difference maker on many levels.
Yes, but it wasn’t an easy sell to retailers at first. We would show them the line, they would love how it feels and looks, but then they’d often say they could never sell a $200-plus shoe to their customers. They’d say, “Men don’t want to spend that amount of money on shoes.” Then, at the end of the conversation, they’d ask for a pair.
Why were they wrong initially?
While I was away from the business, the Asian sourcing boom lowered all the price points from where they would have been had it not been for that cheap labor. Men got used to the lower prices. And now a lot of retailers claim they need at least 58 points or a discount to make a profit because their fixed costs have kept going up. That’s the heart of the story that no one is really talking about: A lot of retailers have gone out of business not just because of big box chains and Amazon, but because the price point of shoes has gone down while their fixed costs have gone up. Yet consumers, especially men, aren’t necessarily buying three pairs because they are cheaper. That’s why I believe retailers are much better off selling a full-price shoe at $220. They are so focused on the percentage. I say forget that. Besides, do you want to sell everyone a Chevrolet? There’s nobody in your town who’s a veterinarian, lawyer, banker or doctor—anybody who could possibly want more than that lower-priced model? It took us a couple of years to prove our case, but now many have discovered that they do have those customers. In fact, one customer recently bought 14 pairs in a store in Iowa, and there are many reviews on our website of customers also buying multiple pairs. Yet many thought no one would buy the first pair. That’s until customers realized they never knew what a quality shoe felt like on their foot.
And that’s without selling online-only dealers. Why steer clear of them?
The main reason is that we didn’t want to turn our brand into a price football. Even marked down by $1, we don’t want them to do it. We took this approach a step further last August when we gave our retail partners 90 days to stop selling our shoes on Amazon Marketplace or we would stop shipping them. I had one retailer who was drop-shipping 500 pairs on the site, and I thought he would go ballistic, but he ended up agreeing that we were doing the right thing by our brand. Same goes for Nordstrom: When they asked to feature our shoes in their anniversary catalog, we said no. We want to have one consistent price, and we’ve managed to do that. We have never put a shoe on sale on our website and never will. And our retailers haven’t marked our shoes down either, because they haven’t had to. They are basic styles and just need to be filled in and they continue to sell.
But your brick-and-mortar retail partners can sell the brand on their sites. Correct?
Yes, we are happy to work with retailers who want to carry our brand on their own sites. I’m working on systems that will enable them to offer the whole catalog to benefit from a larger selection. I have some software ideas on how to do that. I’ve been thinking about them for two years because I believe, in the end, shoe stores need a hybrid business model. I see no reason why a store can’t be a combination of a store as we know it and a pop-up showroom. I also believe that a store could easily become a concierge service for customers looking for certain kinds of shoes. For example, a woman in need of a three-inch, navy blue pump can ask a retailer to find it for her. Now some consumers will go to Zappos, buy 12 different variations of that style and return 11 of them. But nobody makes any money in that scenario.
Not to mention the enormous carbon footprint that type of “shopping” leaves behind.
I was amazed when I was in Aspen around Christmas last year and the local Fed-Ex store was stacked to the ceiling with Zappos boxes being returned. That’s why I believe the brick-and-mortar retailer can serve as the shopping expert, and they should be the experts because their life is this business and they know what customers will want and need. They’ll field a request, get the shoes and send them to their house, if the customer prefers. Nordstrom probably has 6,000 SKUs and Zappos has 20,000 SKUs. Who has time to look through that? Curation and concierge services could be a way for traditional retailers to compete. We’re also working on programs where if a customer orders two sizes, the order goes to our customer service center; they’ll write back stating that our shoes fit true to size and ask what other brands/sizes the customer is wearing so we don’t have to send multiple pairs and deal with the returns.
Where are you in terms of your overall distribution plan?
By the end of this year we’ll be in about 500 doors, which, starting from nothing, is pretty good. Now I don’t know if there are another 500 of those types of doors to be had, but we’re finding them and they are steadily coming around to us. Nordstrom, for example, is accelerating with us and we are reportedly way ahead of plan. Another tier that looks to offer a lot of potential is outdoor specialty. Consumers generally don’t usually buy ski boots, skis or hiking boots online. They like to touch and feel the product, and they like the whole vibe of those stores. We now offer fantastic leather-lined hiking boots that I believe are equal to any German-made mode, l and we are developing more products in that category. Personally, I like to hike, and that type of footwear is more natural for me to think about from a design perspective. The category presents a good growth opportunity for Samuel Hubbard.
As does your women’s-specific collection that’s soon to be introduced?
I believe we’re really onto something there. While we’ve offered our original collection in women’s sizes, it’s a man-tailored look. There are women who swear by them, but I don’t believe it will ever be a huge business. So we set out to make women’s shoes that, when women put them on, they’ll say, “Wow!” It’s taken over a year, and it’s been daunting because you have to make them in a range of patterns, silhouettes and heel heights. We don’t always get it perfect right away. We’ve had shoes where we changed the last three times. We’d get 1,000 pair into the market and then decide we could do better. It’s like a running trial. First, we try it on 10 people, then 1,000 as we keep trying to get to a perfect-fitting last.
Do you plan to keep production in Portugal for the foreseeable future?
Yes. The Chinese make a fine shoe, but for some reason when you take them out of the box they smell like Saran Wrap. A European-made shoe has that fantastic, genuine leather smell. It’s also just how I prefer to make shoes. I know a lot of brands are about volume and pricing. In fact, it wasn’t until I came back to the business that I learned a new manufacturing term: de-specifying, which basically knocks out features and benefits to make it for less. I just believe a lot of consumers don’t want to buy that type of product. They can feel, smell and appreciate our difference—and they are willing to pay more for it. Besides, what’s the difference between our shoes and a $160 pair from another brand? It’s like the cost of two Chardonnays. Is that such a big deal when it’s something that you wear every day and makes you feel and look good?
Any advantages to being privately owned in this industry climate?
Public is good if you are on a great growth ramp and if you need capital. But a lot of businesses have died from indigestion—too much capital—rather than starvation. How many dot-com businesses had no conception of trying to make a profit and were over-capitalized? So far, we haven’t needed more capital. Now if we wanted to open 100 stores, we would. But we have no plans to open stores. I’ve no experience being a retailer and that would present a whole different set of problems. I’m also keen to explore the hybrid model where we partner with existing retailers, like creating shop-in-shop programs. I’m concerned about many of these retailers because we need good partners with these points of presentation.
Is the state of retail as bad as it’s reported to be?
I do think a lot of retailers are in serious trouble. You can go to Amazon and just click and buy and you don’t have to drive and park. Why bother? But when people take the time to make the store an experience, the salespeople are informed, the atmosphere is nice and they make you feel that it’s nice to buy something…then I think you can still be successful. There’s a wonderful men’s clothing shop in San Francisco, The Hound, located in the Financial District. The owner put three barber chairs in the back of the store and gives haircuts. Men are coming in all day for the cut and while they walk through they pick up a shirt and/or shoes. It helps drive traffic. I thought our shoes would be perfect for that store and now he’s selling like 500 pairs a year. I believe retailers who think like that will have a place and those who think that they are going to buy the same ol’, same ol’ and put it on a dusty shelf and wonder why business isn’t better are probably going to go away.
Thinking outside the box, going the extra mile…it’s the only way to compete in the age of Amazon.
I agree. Last fall we sent out a mail order catalog, but a couple of styles didn’t make it into production in time. I knew we would get at least a few requests for shoes we wouldn’t have in stock, so we created a waitlist. The waitlist grew to more than 4,000 names, of which about 1,200 might have had to wait five or six weeks. I was worried we would lose the orders and someone on our team suggested we send them a letter and include a discount coupon. Well, one aspect of my religion is we don’t give discount coupons or put shoes on sale. Then I thought of Harry & David and decided to send them a note apologizing for the delay and, in the meantime, here’s a gift basket. We ended up buying 1,000 Harry & David fruit and cheese baskets. Instead of giving a discount, we gave them a gift in advance of purchase. Now I never checked to see how many of those customers ultimately bought a pair of shoes, but I think it was a pretty high percentage. It’s that kind of approach we take to the business in terms of taking care of people, and our retailers can do the same.
At the same time, you adhere to a lot of old-school business basics.
Absolutely. We call on stores, we do training and trunk shows and we take people to lunch. We take care of our retail partners, so we’re old-fashioned that way. Our reps are in-house and they are on commission, and we pay all their travel expenses—we’re old-fashioned that way, too. A lot of people coming out of business school were taught that it’s all about market share, price and the need to grow fast. But they’ve lost the fact that this used to be a people business. It was all about relationships and trust. We worked together and told each other when things weren’t working well.
Now it’s lots of ultimatums and threats. It seems like the divide between retailers and wholesalers has never been greater.
Yes. I remember giving a speech at Rockport at a point when we were doing very well and I said, “You sow the seeds of your failure in the height of your greatest success.” I reminded everyone that when we started we were on our hands and knees begging for an order and a chance. Now there’s a certain moment where your shoes are doing so well that the merchants need you, but that’s the point when you have to be most humble. The retailer wants to feel like they are the buyer, and it’s their decision. Once you start giving demands, minimums, rules…It’s just so arrogant that the merchants resent you and are waiting for you to fail.
Yet brands still do it.
Why does arrogance come with wealth? Because you think you are the king of the world. You can’t come into the booth unless you have an appointment. We aren’t opening any new accounts. On it goes. I am completely in the other direction. No discounts, no special deals, no pre-show extra margins. I just sell the shoes and that’s it. But we try to be nice to our partners and make sure that we can both make money. It’s just old-fashioned. I mean, I’d rather send fruit baskets as gifts.
What does your daughter think of you being a shoe executive again?
She’s 13 now and living in her own world. I said you wanted a shoe company and now we have one. “Ok, Dad, you do that.” I’m not sure she’ll ever join the company, but what’s really satisfying is to have taken my grandfather’s name and his factory’s name and turned them into a brand. It’s been fun and it almost brings me to tears. It’s like going back to the future and rewriting history, making Hubbard a brand that it never was.
What do you love most about your job?
I love just creating the whole thing. I also love the reviews we receive, which are often funny and endearing comments from customers having a love affair with our shoes. I had that experience once before with Rockport. While people wrote letters about how they liked the philosophical concept of my Republic of Tea venture, very few people get to make a product that people have a strong personal reaction to. Would it ever occur to you to write to the maker of a toaster about how the toast is exceptional? There’s just a lot of stuff that gets made that people have no attachment to, so it’s very satisfying to make a product that people love so much that they take the time to write about it. •