Chris Gallagher, president and CEO of Vionic Group, on why the comfort brand’s market-disrupter premise is drawing rave reviews to the tune of double-digit sales gains.
Chris Gallagher doesn’t like sitting in meetings. Specifically, the exec doesn’t like getting bogged down by corporate minutia that could slow down reaching the company’s 20/20 Vision goal, which is to cultivate “20 million raving fans by the year 2020.”
The term “raving fans” stems from the rave reviews Vionic so often receives from its rapidly growing customer base. The brand’s fans love the comfort and, more often than not, pain relief that Vionic’s built-in Orthaheel insole technology provides. “Many of the reviews are life-changing,” Gallagher says. “That’s what drives us and gets us out of bed every morning—creating this life-changing footwear that helps millions of people.”
Vionic’s life-changing approach to design starts from the insole out—the opposite of most footwear. Specifically, its Orthaheel technology, created by renowned podiatrist Phillip Vasyli, zeros in on the biomechanics of walking. Through decades of treating patients, Vasyli discovered that the majority of the population over-pronates. When left unchecked, this can lead to a number of foot, leg and back pains, especially as people age and if they gain weight or are very active. “The more weight and force that is going through your body, the more impact there is on your feet,” Gallagher explains. “Our Orthaheel technology helps realign the body into its natural, or neutral, alignment, which helps give you a better walking stride—better biomechanics—and less wear and tear on your body.”
The premise works, judging from the brand’s positive feedback. But Gallagher, who spent the first 20 years of his career in shoe retailing, knows that even the greatest comfort technology will have limited appeal if the rest of the shoe lacks style. Vionic’s extensive consumer research affirms that. “It comes straight from their mouths. They want pretty shoes,” Gallagher reports. “They want shoes that are on trend, with nice materials and some bling. They don’t want their shoes to look boring; they don’t want traditional comfort shoes.”
Boring shoes are exactly what Gallagher saw in 2004 when he was introduced to Vasyli, as the company was then named. At the time, he was general manager of a 250-store chain of Australia-based family shoe stores (then owned by Kinney Shoes). His initial reaction to Vasyli’s original styles: “So ugly.” But a buyer informed him that they were selling well in stores. In fact, consumers were asking for the shoes by name, which Gallagher says was rare back then. “They had a great technology and a great concept, but they didn’t know how to make shoes,” he says.
That’s when Gallagher decided to make the leap into wholesale. The timing was perfect. He had left high school at age 16 to start in the stockroom and spent 20 years steadily rising through the retail ranks without a break. He was now running a nearly $400-million store chain. But he needed a new challenge.
“It was a great experience, an amazing company with great people and we had a lot of fun,” Gallagher reflects. “I learned all about marketing, sales and customer service. I felt like I went through a 15-year MBA program.”
Gallagher put his retail experience to work right away in his new wholesale venture, beginning with style upgrades. An early success was the brand’s Tide flip-flop (still a popular seller today) that clearly showed the insole technology in an appealing design. It wasn’t as “medical-looking” as the earlier versions, and it gave the brand momentum. Each time Vasyli introduced stylish shoes with the Orthaheel function, the business grew stronger. Then, in 2007, Gallagher and his four partners sold another one of its brand concepts to Dr. Scholl’s and used the capital to move to Marin County, California, to take on the U.S. market under the new brand name, Orthaheel. This was amended last year to Vionic with Orthaheel Technology. Gallagher says the name is set. “It brings the focus down to one global brand that connects with the consumer on both a functional and emotional level,” he explains. “Vionic scored high with existing and potential consumers. It’s technical, easy to recognize, easy to pronounce and received well by women and men, so it’s a brand for both genders.” They decided to keep Orthaheel as a sub brand because of the equity the technology has built up with loyal consumers, Gallagher says. Plus, the name registers well with new consumers.
The company’s salad years have been marked by rapid growth, despite being smacked head-on by the Financial Crisis. “All of a sudden it was like, ‘What the hell are we doing here in America?’” Gallagher says of the dark days right after the collapse. “But we persevered.” He credits the survival largely to an unorthodox approach. For starters, the company had invested its capital in inventory at a time when many other brands were turning the taps off. “We had inventory in our warehouse, so customers didn’t have to pre-book,” he says. “I think we picked up a lot of market share in 2008 as a result.” Another smart, unorthodox move: The company’s initial distribution strategy focused on catalogs and online dealers. “They could tell our technical story better,” he explains. Key partners that helped the brand gain exposure to a mass audience early on included QVC, Zappos and FootSmart’s catalog. Another positive outgrowth from this early distribution approach, Gallagher adds, was that it forced the brand to basically be mapped price from the get-go. “We really needed to rein pricing in quickly and everyone has pretty much had a level playing field since,” he says.
This past year Vionic’s sales grew 20 percent, despite a soft retail climate and a new brand name. Vionic is now available in all doors at Dillard’s and in Belk, on Nordstrom.com and in thousands of independent stores. “It’s been a fun and enjoyable ride,” Gallagher says. “I don’t think we’ve missed too many deliveries over the past five years. We’ve got a very agile and innovative team that is always looking at how we can improve.” To that end, Gallagher believes it’s only the start of reaching Vionic’s full potential. He says the healthy shoe concept and athleisure trends bode well for the brand going forward. Vionic’s ultimate motivation factor? Offering relief to millions of consumers who resign themselves to foot pain because they think it’s an inevitable part of aging. “It’s not only about styles, comfort and revenue—that’s just a byproduct of our product,” Gallagher says. “The bigger we get, the more people we help.”
Is Vionic comfort, wellness, medical or all of the above?
I get a lot of my data from how others perceive us. Many of our raving fans and retail partners tell us that Vionic is leading the way with technology that can really help relive pain and combines that with style. In our opinion, we are re-defining comfort footwear.
Many comfort brands make similar claims, but it’s not always the case.
It isn’t. I think it’s hard when you are a large traditional comfort brand and have been in the market for a long time to move away from that core look. For starters, it probably represents a large part of your business. But the problem is you can end up with everything looking pretty much the same. That’s why we believe this market could use some freshness.
How do you think Vionic stands out?
It’s easy in spring and summer because the shoes are mostly open and our Orthaheel insole technology stands out. It’s unique. We have been moving more into closed styles the past few fall seasons, which our consumers have been asking for, and have developed some styles that have been well received. Our retailers report that the repeat purchase on Vionic is extremely high. And customers aren’t buying just one style, either. We are not just selling running shoes, for example. The technology is available in flip-flops, running shoes, walking shoes, boots, casuals—customers shop us for their entire wardrobe.
What exactly are your customers raving about?
Putting an orthotic inside a shoe is not new. But putting one in a shoe that looks great is what they are raving about. They can now feel normal. When they go out with friends they don’t have to wear big, clunky shoes. And it’s built-in. They don’t have to make an additional purchase.
Who is the Vionic consumer?
We have our core consumer who has either experienced or is experiencing some type of foot, lower leg, knee or back pain. They often find us through research they did themselves, their doctor’s recommendation or a friend. They are generally north of age 40 and need our product. They are also the ones who are most likely raving about our brand. Along those lines, there are two things that generally motivate people: pleasure and pain. If you are suffering from a headache, you take a pill and the pain goes away. That’s similar to what our product does. And then there’s the secondary customer base, which I believe represents a bigger opportunity: people who seek superior support in their footwear as well as style. That’s men and women of all age groups.
Just how big of a customer base are we looking at potentially?
That’s one of the questions I’m asking myself now: How can we be a niche brand if we are a top four brand in most of our retailers? So we are about to embark on a comprehensive brand study to dig deep into what that real market opportunity is. People might be surprised that we are already over $100 million in annual sales. We’ve overcome a lot of hurdles and the challenge now is where do we go from here?
So Vionic is not a niche brand?
It’s not, even though most people think of biomechanical footwear as a niche market. And it is, currently, a small part of the footwear industry. Of the total footwear sold in America, the percentage with an orthotic built inside is probably less than 2 percent. That’s why I think there’s huge opportunity for Vionic and our retailers to educate many more consumers that there’s an alternative. Many people put up with pain, thinking it’s normal. I’m getting old, my knee is creaky, my feet are sore…So they buy soft, spongy “comfort shoes.” But that doesn’t necessarily address the biomechanical issues causing the pain. We address the cause rather than just the symptoms.
Where are we at in terms of consumers making that leap of understanding?
It’s our job to educate consumers. It’s why, for example, we offer a 30-day comfort guarantee. Anyone who buys our product from any of our retailers can try it for 30 days wearing it anywhere and, if they don’t like it for any reason whatsoever, they can take it back for a full refund. Having grown up in retail, I know most return policies stipulate that the shoes must only be worn on a carpet or definitely not outside. But you can wear ours on a trip to Europe for a month and, if you aren’t satisfied, we’ll give you your money back. Ever since Phil was a podiatrist, he offered the same service to his patients. It’s a culture within our company. We believe in our product.
We get less than 1 percent returned. We don’t want people to be unhappy. We’d rather give them their money back and thank them for trying. But with less than 1 percent return, it’s a great opportunity for retailers to get their customers into a brand with no risk.
How critical has your retail experience been in Vionic’s growth to date?
It allows me to see the business from a retailer’s perspective. I understand retail dynamics and financials. We don’t offer propositions that aren’t going to work because if they are not profitable or healthy, then we will not be either. It has to be a true partnership. It’s also a part of the Australian culture to go deep. Meaning, once we are in business together, we are in it to win together. And that stems from the fact that Australia has a population of only 24 million people—there are more people in California. So it’s a relatively small market and you have to have a really good product and partnerships to be able to succeed over the long term.
Any of your retailing tenets that still ring true today?
Vision and strategy, for any business, is key. And I find the 7 Ps of retail (People, Product, Price, Promotion, Process, Positioning and Place) to still be very relevant. You create a strategy around those points in order to improve customer experience. I know the buzzword now is omnichannel, but that’s really about creating a seamless way for the consumer to access the brand across multiple touch points. Unless you get all 7 Ps right, it doesn’t matter. You can have the best distribution in the world, but if you don’t get those other ducks in a row or if you start chopping off in any of those areas, the business will deteriorate. But if you can get all seven of them right, then you can have a great business.
Did you learn this on the floor or in your MBA program?
Both, actually. The good thing about practical experience is that it’s practical. From trial-and-error you learn theory on what works and then you can teach others how to do it. Knowledge is power, of course, but it’s even more powerful if you can actually share that knowledge with the people that can help your business grow.
What is your take on the retail market right now? Are we in the midst of a massive revolution where traditional stores may soon become relics?
Personally, I love to shop, so I would hate to see the demise of stores. I love to feel the fabrics, look at shoes…It’s magic when a store does it really well and it all comes together. I get a real buzz out of that. It’s why I think that aspect of retail will remain relevant, because people like to touch and feel the product. I understand that a lot of brick-and-mortar retailers have been focused on what they have been losing to online dealers, but in the reverse of that there are also plenty of consumers who go online to do research and then go into a store to shop. The challenge for those retailers, outside of service, is range and selection. If they had access to allow customers to buy anything from a particular brand they are carrying and could be delivered later presents another opportunity for them. We’ve been listening to the retailers on our advisory board on this matter and we’ll soon be introducing an idea that should help address some of those issues. And while businesses like Amazon offer next-day and even same-day delivery, I see the traditional retailer as immediate delivery. One of the aspects I was always focused on as a retailer was knowing my customer better than my competitors so I could deliver the product that they wanted and needed right then.
Where do you see the traditional shoe store in five or 10 years?
Who knows what it’s going to look like in 20 years, but I don’t think it’s going to go away in at least the next five years. One aspect that I wish for is, no matter where you buy Vionic, you could take it back to any of our retailers and they will fulfill exchanges similar to the way car companies do with recalls and repairs. Everybody should put the needs of the customer first. Granted, it’s a very difficult proposition to align inventories and service. But think about the basic mentality: delivering what’s best for consumers. Everybody wins when you do that. You are building the brand and you are adding a service element, so you become something different. I don’t think there’s anything in retail like that now with the exception of vertical retailers like department stores. They are taking advantage of the omnichannel aspect because you can buy a pair of shoes online from Dillard’s and if they don’t fit you can take them to your local store to exchange them.
Where do you see Vionic in, say, three years?
I foresee us fulfilling our journey of creating 20 million raving fans. The challenge to achieving that is distribution. What is the right distribution to help us get there? And, obviously, it’s also product, sourcing and company culture. We want to be one of the most agile and innovative comfort footwear companies. We need to act like a $100-million start-up.
I think so. We have an advantage of being based in Southern California where there are a lot of entrepreneurs and Silicon Valley is not too far away. Many of these people are young and think differently, which enables us to learn. Someone was visiting our offices recently and said it feels like a tech company—the set up, the culture, etc. We are trying to be the tech company of the footwear world. We see ourselves as a market disrupter. Over the history of our company, we’ve taken risks and done things a little bit differently where other companies may not have. Fortunately, more often than not, it has worked. In order to stand out in the crowd, you do need to be a little different. There are lots of ways you can differentiate your company, and culture is one of them.
How would you describe Vionic’s culture?
It’s a blend of Australian and U.S. cultures, which I think is great. We’ve tried not to become just another “American corporate company.” By that I mean, we don’t want to be so bureaucratic. We let all of our people have an opinion and while we work hard, we also like to have fun. For example, American companies normally offer only two weeks vacation a year and in Australia everyone starts out with four weeks. And when our employees go on holiday, we want them to switch their phones off and really go away and spend time with their families and recharge their batteries. What’s the point of having a day off and getting annoyed all day by work-related issues? I’m not saying it doesn’t happen, because the people here are very passionate, but we don’t encourage it.
You just might get a flood of resumes now.
Well, we’ve won a couple of workplace awards and what really pleases me about the recognition is that they are anonymous, third-party surveys. It’s more meaningful that this is what our team thinks of working here rather than what we think it’s like. And some of our employees have really grown professionally with us. One, for example, started as a receptionist temp, became a full-time receptionist and six months later works in product development because she had a design background. She found a way—she has the right attitude, is willing to learn, is goal-driven and fits our culture. I think she is going to have a great career. I love seeing people given an opportunity like I was and encouraged to move up the corporate ladder. If I can help give that back in some way, it’s very rewarding.
People often paint retail as a dead-end but there are examples where it has been quite the contrary.
Definitely. I had dinner recently with Joe Brennan (vice president shoes for Dillard’s) and he started like I did at 16 in the stockroom of one of their shoe departments. I think there are lots of examples of people working for retail companies who have worked their way up but people just don’t know about them. People should be proud of that, because I think it inspires others to do the same.