Charles Liberge, president of Klas Shoes—makers of Rotasole, Strolleez, KlasFit and Roc-A-Bouts—explains how rolling out four new brands in the worst of times turned out to be a smart move.
Most people would say that attempting to launch one brand—let alone four—during the worst retail climate in more than 50 year is flat-out nuts. But that’s exactly what Charlie Liberge and his two long-time industry partners, Frank Cammarata and Warren Kaplan, are in the process of doing. The team set up shop as Klas Shoes in 2008—and before you write their decision off as throwing several brands against a wall in the hopes of seeing one stick, Liberge asserts the strategy was quite the contrary, as he and his partners carefully analyzed the market first, keying in on niches of need and avoiding duplication. “There’s a lot of sameness in our industry, and that sameness is what helped our company launch four unique brands in such a tough time,” he offers. “We differentiated ourselves by picking spots that not everybody was playing in.”
Klas Shoes’ entry started with the Roc-A-Bouts kids’ brand, which hit stores last spring. “We felt that there was a void of a soup-to-nuts brand in the $19.99 to $39.99 retail price range,” Liberge says. A veteran of Stride Rite and E.S. Originals as well as the man who led the launch of the Lelli Kelly kids’ brand Stateside, Liberge knows the market and is also friendly with many leading children’s retailers. That experience allowed Roc-A-bouts to quickly grab hold of a little piece of the market—about 100 doors right out of the gate. “In the mid-tier, there are very few companies that offer total service in the children’s market, [much less] that carry stock and sell medium and wide widths,” Liberge says. “So we started out looking like Stride Rite, only in a more affordable price range.”
Industry connections led to Klas Shoes’ next introduction. At the WSA show in the summer of 2008, a friend introduced Liberge to Brian Goldberg, the son of the inventor of the Rotasole technology. (Rotasole features a pivotal disk in the forefoot that reduces torque on ankles, knees and hips due to sudden stops and direction changes.) “When I saw the technology, I was so enamored by the simplicity of it yet the impact that it could have,” Liberge says. A week later he met with Jack Goldberg in Boston, and a month after that the two were in a hotel lobby in China signing a global licensing agreement for Rotasole, the exec says, noting at the time he believed it would be strictly an athletic brand.
Around that time, a long-time industry associate—Southeastern sales rep Gary Nohe—contacted Liberge to discuss another underserved market niche: diabetic footwear. Liberge was skeptical and unfamiliar with that segment at first. However, the disease claimed his father’s life at the age of 57. “What I remember most was how my dad always told me how his feet hurt,” Liberge says, adding that he saw an opportunity to create a high-quality, government-approved line offering multiple widths at an attractive price. Thus, KlasFit was born. “There are more than 28 million diabetics in the U.S., and that figure is growing—and more than six million people receive a government reimbursement for their special shoe purchases,” he says.
While counterintuitive, Liberge has proof that one launch can help the launch of another. During a KlasFit presentation to Alan Beychok, the owner of the online and catalog retailer FootSmart, he happened to mention the Rotasole concept. “Alan just fell in love with the technology—but in addition to helping athletes, he believed it could help people who suffer from arthritis and other leg and hip injuries.” FootSmart began selling both KlasFit and Rotasole last fall. More importantly, that sales meeting opened Liberge’s eyes to the full potential of Rotasole, which now stretches far beyond the athletic realm. “The reaction by consumers to both brands has been spectacular so far,” he reports.
This leads us to launch No. 4: Strolleez. Liberge eyed an aesthetic niche at more affordable pricing ($69 to $99) in the rocker-sole wellness category. “We felt that the extreme rocker bottom wouldn’t be accepted by the masses and worn in everyday situations,” he says. Strolleez features a modified bottom that Liberge claims still offers much of the same toning benefits. In addition, the shoes feature an anatomically correct footbed, giving it a Birkenstock-like feel. The combination has received a favorable reaction from retailers in the sell-in phase, according to Liberge. Strolleez will make their retail debut with sandals this spring and will offer closed-shoe athletic and casual styles for next fall.
While some may say that rocker bottoms are anything but an untapped niche, Liberge maintains that this is just one segment of an emerging health and wellness category. He believes health and wellness is in its infancy in terms of overall category potential, and it stretches far beyond rocker soles. “Health and wellness is truly going to make an impact on our industry unlike anything in a lot of years,” Liberge maintains, noting the key will be providing long-term health benefits. “This category is going to spread across different generations by delivering products that answer their respective needs.”
With these four brands taking off, Liberge says Klas Shoes is expanding its backroom capabilities and adding staff. (It has more than doubled its workforce in the past year and is now partnering with seven outside sales agencies.) “We are beginning to ramp up to do the business that we know that we can do,” Liberge says. And focusing on these four brands is key, as Klas Shoes is turning down new pitches on a near-weekly basis. “Three years down the road, there may be a brand that comes,” he muses, noting there’s plenty of growth to be had within the existing portfolio. Liberge expects Klas Shoes will crush its initial sales projections by 150 to 200 percent for this year. “Our five-year plan is to grow the company into a substantial player in the footwear industry,” he asserts.
Would you describe Klas Shoes as a wellness company?
No. Our company’s mission is to create a stable of brands that deliver what we call “true worth” to retailers and consumers. It involves five distinct criteria that we run each of our brands through before we ever move forward. It culminates in the design, development, production and sales of products that take into account the changing economic environment and the changes in consumer demographics and the retail marketplace to ensure each brand exceeds the needs and expectations of our customers. Thirty different companies about launching their brands, but we have refused most of them because we didn’t feel they would deliver something unique to the marketplace. The sameness is what is making it so difficult for companies to survive today. It also makes it very difficult for a retailer to try and attract a customer. Our company is focused on offering brands that fulfill an expectation of the consumer and make an impact. And that could be in any category—adults’ or kids’—down the road.
Even though you’re not a “wellness” company, what is your take on this category’s potential?
I believe the wellness category is going to be far more than just a fitness footwear craze. I look at the extreme rocker soles as kind of a fad diet that consumers will jump on but then will quickly move away. However, authentic wellness products are here to stay. That said, they are going to need to have long-lasting effects, because consumers are looking for far more from the products that they purchase today. Developing muscle tone or helping with body alignment is simply not enough. The product must combine health benefits with great styling, quality, comfort and affordable pricing. The brands that last in the wellness category long-term will meet all of these needs while delivering benefits that will last a lifetime.
It’s safe to say that wanting to be healthy is not going to go out of style.
That’s why I believe it has the makings to be a huge category. But it is one that I don’t believe most retailers have wrapped their minds around yet. I don’t think consumers really know that the footwear industry has come into health and wellness. A few know, but our industry has yet to tell the story well enough to get more to understand this category. If I were a retailer, I would be screaming this in my store. I would have a whole portion of my store devoted to health and wellness and I would be offering other products and services beyond footwear. It could even be a brochure. I think wellness offers an enormous opportunity to bring new consumers into their store.
Why the lag time?
Unfortunately, many retailers have narrowed their vision of how to grow their business due to the economic climate. Retailers have to begin to reexamine how they drive consumers into their stores. I believe the health and wellness category is an enormous opportunity to do that, whether you are Nordstrom, Finish Line or The Tannery. As the baby boomer consumer ages, I always say to my retailers, “We are not our dads’ 50.” I’m 51, and my dad was a far older 51 than I am. I think the baby boomers are looking for products that not only make them look younger but feel younger and healthier as well.
Would you describe Rotasole as a wellness brand?
Rotasole is becoming a true wellness brand as we realize the technology works throughout every category of footwear.
Who is the Rotasole customer?
That’s hard to define compared to most brands. With Rotasole, it’s any age, because this technology can apply to anyone who does activities that put stress on their ankles, knees and hips. The athletic product will probably sell to a younger consumer. There is so much pressure to perform—especially with young athletes—that injury levels continue to skyrocket. Rotosole offers one way of helping to prevent or at least [stave off] some of these injuries.
Do you believe Rotasole has huge potential?
Yes. Most retailers will play it polite and say a new brand sounds good, but when they want to put a pen to paper and consumers react immediately, that’s when you know you’re onto something. We’ve been on the market for four months and the sell-through of our sandals has been over 30 percent in some locations. Rotasole has already taken on a life of its own. At the WSA show, we had interest from 13 countries and we will probably sign agreements with five countries in the next four months. The word is spreading. We are now the sponsor of a Fox Sports TV show called “Athlete 360.” It’s hosted by Dr. Martin Adickes, a 12-year NFL veteran who graduated from Harvard Medical School and is now one of the leading orthopedic surgeons in the country. He wears our product every day—in and outside of the operating room. He also suggests our product to everyone at the Houston Medical Center where he practices. We are also the new footwear sponsors of the ECAC, the organization that oversees 279 Division II and III colleges and 120,000 student athletes. We also have an NCAA basketball referee endorsing the brand, as well as testimonials from more than 500 individuals that span athletes to trainers to rehab patients to coaches.
How much will one pay for the Rotasole footwear?
The retail price range is $89 to $149, depending on the product category. Rotasole will be a premium brand worldwide. But we also think the technology could possibly be licensed to other brands. We are looking to add it into our KlasFit brand, and a large service shoe company has already approached us about a licensing opportunity. We will eventually put it into our Roc-A-Bouts line as well.
How did Roc-A-Bouts perform during its first year?
It blew out in some places, and overall it did OK. We are now in about 300 doors and continuing to grow. But we haven’t done a lot of consumer marketing yet. We’ve let the brand grow on its own.
It appears 2009 was pretty good year for Klas Shoes.
It was an interesting year. We started out planning to launch one or two brands and ended up launching four. But that was a good thing, because it would have been very difficult to be a one-brand launch, unless you had $50 million to throw behind it. Launching a multitude of brands allowed us to grow in a multitude of places. We also do a big private label business—especially in children’s—which helped us get over the hump.
It’s a refreshing success story.
We are kind of an anomaly in the industry right now. It’s incredibly difficult to launch a brand—any brand—in today’s market. You need to have what I call the three Ps: product, people and, most of all, patience. If you don’t have patience—and the money to have patience—it is very difficult. We haven’t tried to sell to too many retailers right away. We haven’t even begun the true selling process of our Rotasole and Strolleez brands. We started off with basic lines: just sandals in Strolleez and athletic styles in Rotasole. The full launch for both of those brands won’t really happen until Spring ’11. Our goal is to capture a little bit of shelf space and then show retailers what we can do from a customer service standpoint. And hopefully we can maintain that shelf space. We are not looking to own entire sections of stores. If we can own a little shelf space in a lot of stores, then we will grow the brands to be profitable. Once we reach that level, we will focus on delivering our customers new products and offer excellent service that hopefully allows us to stay there.
What’s your take on the overall retail market for the rest of 2010?
I don’t think the recession is over by a long shot. But there are signs of an improvement. Again, retailers have to look within in regards to their mix and figure out what is drawing consumers to their stores compared to their competitors. The biggest thing that has happened over the last couple years is that consumers have changed their buying habits. They use to have a buy-now, wear-later mentality. But with the economy the way it is, people now want to buy goods in March to wear in March. Retailers haven’t caught up to that shift yet. The majority are still bringing in products early, and because consumers aren’t buying then, they wind up marking them down and subsequently losing margin. Then they are going back to the wholesalers to make up some of that lost margin, which hurts manufacturers. Discount retailers are benefiting because they get the closeouts and sell them in March, when the consumer actually wants to buy those seasonal goods. That’s why those discounters’ stock prices have gone through the roof over the past year and a half.
Sounds like a common sense analysis. Why is this problem not being addressed more?
As an industry, we are usually slow to react, and human nature is to be against change. But in my opinion, those retailers and wholesalers that react to these changes will be the most successful in the short term and probably the ones that last in the long term.
How do you buck the system, considering that a lot of brands offer price incentives to retailers that commit early?
I think you start by saving a portion of your buy for goods shipped later in season. There’s no reason to go to extremes. Instead of bringing all of your sandals in by January, bring some in March and see what happens. The key for retailers and wholesalers is margin, and right now our margins are getting killed. But we are trying to force consumers to purchase the way we purchase as an industry, and it’s not translating. Consumers are saying no. The other part of the problem is that everyone is manufacturing in virtually in one place: China. The demands that are being set by where we manufacture is causing the cycle to become longer and longer. It’s our job as wholesalers to try to change that cycle as well. While we may not be able to change the 120- or 90-day cycle, what we need to change is when we offer certain products. Maybe trade shows become a little more of an in-season as well as a futures opportunity. I think many of the companies that are doing well today are ones that offering open-stock programs. I also believe companies need to start looking at manufacturing elsewhere—like in the United States. There are so many advantages to such a shift. We are currently working with Babson College on a feasibility study, aggressively seeking to do just that. We are probably going to start with our diabetic brand, because relatively it’s not a huge volume and it’s a simple construction, where we believe we can source 99.9 percent of the components in the States.
You’ll save on the costs of shipping and have shorter lead times, but won’t it all be cancelled out by paying for American labor?
The real reason manufacturing left was that the process became so ancient. The factories within the United States wouldn’t modernize because the unions were trying to protect jobs. Those jobs are now all gone. If you dramatically change the process, then you dramatically change the number of employees. And when you do that, you dramatically impact the cost structure. So our labor costs would be way down.
You sure are presenting some bold ideas. Would you describe yourself as a rare optimist among a crowd of pessimists?
I’m absolutely an optimist. I think that 2010 can be a very positive year for the footwear industry as a whole. We have to step away from sameness, get back to being creative and look for opportunities that are unique to one’s company. The more uniqueness and the more opportunistic development that happens, the better off we will all be down the road. For our own survival, we have to all look at the positives and help each other as an industry. We need to come together to find ways for all of us to be successful long-term.
What are some of those positives?
There are new opportunities in the marketplace—like the health and wellness category. We just need to figure out how to present it to the consumer effectively. There are also new products retailers need to give more attention. There are brands that are fresh but don’t have a lot of money, so they aren’t getting the view time that maybe they deserve. And like I mentioned, wholesalers and retailers have to work on the timing of products so we can maximize margins. The other big positive is that wholesalers have to understand it’s a global marketplace today, and it’s smaller than ever before. If you are trying to do business solely in the U.S., it’s going to be very difficult without spending a ton of money. Sometimes you can go outside of the U.S. and bring demand back to this market.
What do you love most about your job?
I love being an entrepreneur. I love the fact that every morning I get to sit with my partners and do virtually anything we can to make our business better. This also allows me to be in close contact with my retailers, and I love talking to them about their businesses. I have worked alongside many good people in my career and I utilize that experience every day. When I visit retailers, it isn’t just about my products; I also talk at length on ways we can improve the business overall.-Greg Dutter