On the heels of 40 percent gains this year, Philippe Meynard, CEO of Earth, says the company is at a tipping point for accelerated growth despite strong industry headwinds.
There are good tipping points and bad ones. The good kinds often act like snowballs, rolling downhill and putting a company on a path to greater annual growth through sheer size and momentum. Philippe Meynard, CEO of Earth, believes that’s the kind of tipping point his company is enjoying now. Sales are up 35 percent this year for the company (including its first-cost division) and 40 percent for Earth’s branded business. “This year will be the highest number this company has done in its 40 years of existence,” Meynard says.
Not bad at a time when flat has become the new up in retail, and down has become the new black. Even more noteworthy, Meynard says a large portion of Earth’s growth has come from the independent retail channel. You know, those dinosaur-like, brick-and-mortar businesses supposedly made extinct by online dealers. “Our sales in that tier have skyrocketed,” he says. “We’ve jumped from the number 10 or 15 brand to number two or three in a lot of those stores. Also, our Nordstrom and QVC businesses are up significantly—in our key accounts, business is up overall.”
Meynard says Earth’s across-the-board success has led the company to its current tipping point. He bases his assessment on statistical comparisons to other footwear companies that hit a similar volume, then saw sales take off. When asked where he envisions Earth in five years, he says the industry is in for a surprise. “I don’t believe people realize how fast we’ve grown and how big a company we are transforming into,” he says. “I believe in five years, we’ll be three times bigger than we are today.”
Leading the charge on Earth’s sales growth, not surprisingly, is the product. Meynard praises the company’s design team, led by industry veteran Angelo Romero and its China-based factory, as second to none. Looks are only part of the equation, however. Meynard cites Earth’s consistent fit across the line season after season as the difference maker. It translates to unbelievable comfort, even though he admits that’s an overused description. “Everybody says their shoes are comfortable,” Meynard says. “Comfort should be a given, and I think we’re doing well because we’re providing a consistent fit in very fashionable shoes. There’s a lot of cool-looking footwear out there, but women can’t wear it all day. Ours, they can wear all day.”
Another key ingredient to Earth’s recent success has been its sales team, which includes Steve Mahoney as vice president and Jenny Whitney in charge of key accounts. They joined this year from Clarks and Easy Spirit, respectively. “We’re looking more dynamic today than we’ve ever been,” Meynard says, adding, “We have the best sales team this company has ever had.”
In order to drive greater growth in the seasons ahead, Meynard says Earth is reimagining its merchandising and marketing strategies. Both are major works in progress, being reinvented to meet a rapidly changing retail landscape and consumer demographic. On the merchandising front, it’s about exclusivity by tier. “We’re not going to be selling the same shoes to Amazon, on our DTC site, and to our independents and specialty accounts. We have to diversify,” he says. “The entire industry has to.”
Otherwise, Meynard warns, sameness will perpetuate a race to the bottom on price, eroding brand images along the way. It’s become an industry-wide epidemic. One that Nike, for example, is tackling head on with its recent announcement of a trial partnership with Amazon (at the expense of other dealers selling the brand on the online giant’s third-party Marketplace) and plans for Draconian distribution cuts overall. Meynard believes diversifying goods by tier is the only sustainable way forward in the online shopping age, whether you’re Nike or a start-up. “If all the merchandise eventually winds up on Amazon and Walmart, why does anybody need to go anywhere else?” he says. He fears that if the issue is not addressed it may make selling shoes akin to toilet paper. “If you ask me today, I think we’re closer to selling toilet paper,” he says. “But if you ask me in a couple of years, hopefully that’ll have changed.”
Such a revolutionary merchandising strategy has not been easy to implement, Meynard admits. For starters, old habits die hard. In addition, the possibility that one channel wants what the other has presents a challenge. Meynard believes the company will just have to hold its ground—for the good of Earth and retailers overall. “We’re going to have to draw the line,” he says, noting that goal is to implement the new strategy in 2018.
Also being unveiled next year will be Earth’s new marketing strategy, which takes insights from the recent run of vertical brand startups that have reinvented the rulebook on how to break into the market—in record time, no less. “They are coming out of the woodwork,” Meynard says. “We’re taking cues on how they’ve been able to get into the marketplace so rapidly through social media and however else they’re doing it. We have to reinvent ourselves as a mature brand with a startup hybrid philosophy.”
Meynard cites the launch of Allbirds as a prime example. He’s been impressed by how the brand has become a name out of nowhere—something he witnessed firsthand after sporting a pair at a recent Lady Gaga concert and having a stranger give him props for his fashion choice. To Meynard, it was a wakeup call: “How are these guys marketing their brand? What’s their strategy compared to a more mature brand? How do we bring that type of marketing approach to Earth?” Meynard believes it’s about making a brand special—something he says can’t be achieved solely on Amazon or in a Walmart, where price is the overriding factor. Exclusivity and experience matter, he says, citing the new Adidas x Concepts brand experience store in Boston as another example Earth is studying for its new marketing approach. “The store’s a must-see,” he says, crediting his friend and Concepts founder Tarek Hassan for making it a reality. “There’s a lot of innovation, it’s exclusive product, it’s a unique experience…it’s a genius concept that breaks new ground, and there needs to be more of that type of retailing,” he adds.
Along those lines, Meynard is also taking a page out of his late father’s playbook. Michel Meynard, the founder of the company, was widely regarded as an industry pioneer, innovator and risk-taker. The elder Meynard viewed the status quo with skepticism, preferring to carve out fresh ways to increase potential. Likewise, Meynard says, “We want people to look to Earth as a leader, and to do so means we have to add more risk in the way we approach product, merchandising and marketing. We can’t all be doing stuff the same way and expect to be successful.”
New products, new sales team, new merchandising and marketing strategies…Lots of new stuff at Earth.
Yes. The remarketing and rebranding began a few months ago and should make their debuts next year. I’m just very pumped by the way we’re going to bring back this brand. It’s going to be a whole different level, and I think once we make the change all eyes are going to be on us.
Will the new marketing strategy target a different customer?
We are going after more of the older Millennials. They are hitting 35, so they are not that young anymore. Part of that effort involves reintroducing Kalso by Earth for Fall ’18, which will be positioned as originals that were first introduced in the ’70s with, of course, updated comfort features. For example, we are bringing back the original Powerpack insole, which has been updated with the latest technologies. In fact, the insole will find its way into every shoe that we make eventually.
Where will Kalso by Earth be sold?
It will be distributed in select specialty stores and DTC. It will not be available on any online marketplaces. It’s not about the volume as it’s intended to bring back the DNA of the brand so people know who we are and what we’re about. It’s more of a fashion statement. We are using Kalso to come back to our roots the same way Converse, Nike and other brands that have reintroduced their iconic shoes from when they first started and then took off as brands. It’s important that we don’t lose that piece of the brand.
Is it fair to say Earth is defying current industry sentiment that meaningful growth is not possible in the independent tier?
We’re proof that you can—if you have the right products, sales team and relationships. I also believe there just has to be a revival of that tier. What’s going to happen, otherwise? Everyone is going to buy their shoes at either Amazon or Walmart? I just don’t believe it. More than 80 percent of all shoes are still sold in brick-and-mortar locations. What’s more, people are going to need to get outside. Technology is great but it’s also a distraction and can monopolize your life. There has to be a change that comes about. Japan, for example, estimates that one percent of its younger population literally doesn’t go out of their homes. Their job is online, they get their food delivered, they shop online, etc. The government is very concerned. It’s not healthy physically, mentally or socially. There has to be a change, right? We can’t all come down to living like that. I mean, it’s getting out of hand.
Well, when shopping became all about the lowest price at the expense of service, selection and ambiance, you might as well go online, especially with free shipping and returns.
First of all, the free shipping and returns are not going to last. Amazon, in a sense, is already charging with its Prime membership. It’s also not sustainable, especially if the company is primarily selling shoes because the rate of returns is just too high. That aside, I agree that there has to be an entertaining experience aspect to shopping in a store or what’s the point? For example, I have a home theater in my basement, but since a super-luxe theater opened not far from me, where the seats recline the whole way and they serve drinks and food, I don’t go into my basement to watch movies anymore. The point is that theater reinvented itself to get people to come again. And since it opened, I haven’t gone to a different theater either. I refuse. I will not sit in some uncomfortable chair and hurt my back.
How can shoe stores replicate that kind of reinvention?
Carrying products that you can’t easily find anywhere else is one way. They are also going to have to come out with technologies to make shopping for shoes more entertaining. I believe the fitting piece will also be a huge aspect of this. Scanning your foot, for example, makes it more experiential, not to mention provides a better fit. Feeling more comfortable—literally—after buying a pair of shoes can be a huge experiential draw.
The ability to customize shoes in-store is another way.
That too. And while not every store has to have a coffee bar, making shopping more inviting in general is a must. Stores have to become destinations or people will not go—like they stopped doing with regards to a lot of malls that got stale. The Chestnut Hill mall, for example, seemed as though it didn’t have a soul in there except the Apple store for the past six years or so. Now, they’ve put in new restaurants and higher-end retailers, and there are more people in there. I’m not sure they are buying a lot, but at least traffic is up. Everybody needs to go through these types of transitions. Shopping has to be entertaining.
Drop-off and pickup services, localized assortments, in-store events, charitable tie-ins-—you have to engage with the local community.
Absolutely. Many retailers are beginning the process, and they have no choice but to reinvent themselves. Department stores, in particular, may have to work the way some do in Europe and China, where brands essentially own the inventory and tell a story within those stores.
What’s your general assessment of the retail disruption witnessed this year—has it been beyond what you anticipated?
Not really, unfortunately. The year before was just the beginning of that process and the disruption continued more so this year. And we’re still going through massive changes, or uplifting, of the entire industry. A year ago, these behemoths were starting to consolidate, and now it’s like we’re left with Walmart and Amazon. So many have been gobbled up by those companies, while many others have downsized or closed altogether. That’s why I believe brands must step up and merchandise properly. We need to decide how we’re going to show up on these massive platforms and how we show up on DTC and in the independents that are left, which also need to reinvent themselves, especially with some of these startup brands that are coming out with DTC models.
What’s your take on DTC going forward?
Looking at the industry overall, I expect DTC will become more important. But we envision that channel more as a partnership with our independents. For example, certain products may only be available on DTC and in our independents, but not available on the larger online dealers. It goes back to that whole merchandising piece.
What prevents a customer from buying a shoe on your site instead in a store?
Our DTC price will not be lower, for starters. And if they come to our site but want to try it on first, we’ll direct them to stores near them. Also, we’re not pursuing the brick-and-mortar piece of DTC. We don’t have stores like Nike and a lot of other brands and, at this point, we don’t intend on having any. We still want to push customers to our retail partners. We are working hard on this effort, holding lots of trunk shows, for example. In addition, we’ll be coming out with POP reflective of our new marketing strategy that I think will benefit our retailers greatly. We’re very excited about it. Let me add that we consider our independent retail partners, in particular, to be the backbone of our brand. We spend more money—around 60 percent of our entire sales effort—on that channel because we believe we have to have them. They are the only ones that actually talk about our brand at the point of sale.
Any danger of a tipping point to a handful of behemoths and a bunch of brands selling DTC?
I don’t think so. I believe there’s a younger generation coming up that will reinvent the independent store concept. If anything, I see department stores as more likely to go down the tubes than that tier and, as they do, independents may grow in replace of them. I’ll give you an example: The other day I wanted to meet someone for coffee and all I could find were Starbucks and Dunkin’ Donuts shops. Finally, I found a little shop near our office and thought how cool it was. I’m just sick and tired of going into all these cookie cutter shops. It was such a refreshing change, and I think more and more people are going to want to experience this type of change. Things go in cycles where everybody swings one way and then they swing the other. I believe that’s why we’re getting this revival of smaller brands popping up. People want something different, and independent retailers can help provide that experience.
Of the need to offer exclusives, better service and entertaining experiences, is one more important?
The whole merchandising piece is extremely important, but also challenging. The ability to manufacture shoes in smaller quantities is key, and that’s still a big challenge for the industry. We often have great styles that we have to drop out of the line because we can’t reach the minimum on pairs. We might have sold a couple of thousand pairs of a new cool bottom, but it’s not enough to get production done the way manufacturers are structured today. But factories are starting to introduce 3D printing and robotics that should allow us to make smaller quantities yet keep the price in check. It’s just a matter of time where we’ll be able to make as little as 500 pairs, if we wanted. How cool would that be?
Smaller quantities coupled with quicker lead times and more frequent deliveries, correct?
Absolutely. I think the idea of fall and spring lines is becoming obsolete. It’ll slowly merge into a monthly new product cycle. We’re not there yet, but that’s where I see the industry going, and I think retailers are going to love it because every month it’s going to be fresh merchandise on their shelves. That’s another way to get consumers back into stores, by the way. Today, they see the same stuff sitting on the shelves for three or four months. That’s why logistics, technology and manufacturing are going to be huge investments for Earth going forward. We’re going to be spending a lot of money updating our systems so that we are ready.
At the very least, smaller quantities made closer to market should reduce error margins as well the carbon footprint.
Yes. I’ll be visiting a couple of domestic factories over next few months that are fully automated. However, 3D printing of all types of components is still another three years or so away. Another issue is no one in the U.S. manufactures components, so you still have to fly all those pieces in. But don’t get me wrong, it’s coming and if they are able to start 3D printing every component in a shoe, that changes the entire game. The technology is evolving fast and brands with the big bucks like Nike, Adidas and New Balance can really help move that process along.
Many of these changes will benefit the entire industry—those that are able to survive the disruption, that is.
Yes. I even read about an expert who is predicting that, within 15 years, we’ll be selling shoes the same way as iTunes sells music. You go online, see a cool shoe, click on it and you then download a file to your 3D printer at home that will create that shoe for you. Perhaps the shoes will also be in a store where consumers can try them on and them make the download. I believe that this will happen in some form.
Does such a possibility make you feel good about the future of the industry?
It’s too far in the future for me to worry about right now. (laughs) The thing that concerns me more now is the gap in pricing at retail. The $120 price point is working strongly and there’s a sprinkle of $200 points but then it jumps up to $600 to $800 and beyond. There’s little in between. I find that worrisome. The middle piece, much like the Middle Class, is disappearing.
What do you love most about your job?
That it’s continually changing, and I’m learning every day. One thing that I’ve realized in life is that we learn every day. We never know it all.