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How a trendy shoe nearly lost its footing

By Jim Spellman, CNN
updated 11:02 AM EDT, Sat March 17, 2012
Colorado-based Crocs had to reinvent itself after suffering a $200 million loss in 2008. Now, the company is creating more than just its signature plastic clogs. Colorado-based Crocs had to reinvent itself after suffering a $200 million loss in 2008. Now, the company is creating more than just its signature plastic clogs.
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Crocs reinvents itself
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Crocs reinvents itself
Crocs reinvents itself
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Crocs reinvents itself
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STORY HIGHLIGHTS
  • Colorful plastic Crocs clogs became wildly popular
  • Colorado-based company reported $850 million in sales at its peak in 2007
  • Then, the company was hit hard by the 2008 economic collapse and a saturated market
  • "We had to innovate our way out of the situation we had put ourselves in," Crocs CEO said.

Niwot, Colorado (CNN) -- Crocs, the distinctive colorful clogs loved and hated in equal measure, first hit stores in 2004 and were an immediate hit. By 2007, the Colorado-based company was selling 50 million pairs a year, reaching $850 million in sales. Then it all went south.

The economic collapse in 2008, combined with a saturated market, created what Crocs CEO John McCarvel described as a "perfect confluence of events."

"Too many people have the same product, selling it to the same consumers, and just our inability to evolve as a brand caused a turn of fortunes in the business," he said.

The company was hit hard. In one year, it went from a $200 million profit to a $200 million loss in 2008. There were too many Crocs in too many stores, and some people had grown weary of the comfortable, but not exactly fashion-forward, design.

By early 2009, the company was almost out of cash and struggling to make payroll. It needed to find a way to attract new customers.

"We had to innovate our way out of the situation we had put ourselves in," McCarvel said.

Crocs make a comeback

In other words, the company would have to expand beyond its classic clogs if it was going to survive.

"I think you do get to the point where maybe everybody has a red and a blue and a black pair and they are looking for something else, and that was part of the strategy," said Christy Saito, the company's vice president of product design. "We need to offer different looks for people because they can't wear the same thing every single day."

While Crocs clogs were undeniably popular, they were also scorned by fashionistas and people tired of seeing the colorful plastic shoes nearly everywhere. One hater started an I Hate Crocs blog, and another launched a Facebook page called "I Don't Care How Comfortable Crocs Are, You Look Like a Dumba**" which has more than 1.6 million "likes."

McCarvel is familiar with the criticism of the original Crocs design.

"When I first wore the shoes home ... my wife says to me, 'What are those? Those are the ugliest shoes I've ever seen,' " he said. "And you know there's a certain truth to that."

But within the company, there was a notion that perhaps even critics could find something to love about Crocs.

"A lot of the haters didn't like the way other people looked in them, but they did maybe resent a little bit the comfort those people had and that they had the courage to go ahead and go out in public and wear them," explained Dale Bathum, Crocs' senior vice president of product.

The company is even creating boat shoes (pictured here), sneakers and winter boots.
The company is even creating boat shoes (pictured here), sneakers and winter boots.

So the company set out to create a new line of shoes -- flats, wedges, sneakers, boat shoes, even winter boots -- that would be as comfortable as the clogs, but would appeal to more style-conscious consumers.

"It's so funny, someone actually stopped me in a mall and said 'Where did you get those shoes? I love them,' and I said, 'These are Crocs,' " Saito said.

"[People] say, 'Oh my God, where can I buy these?' That's the normal reaction we get from people," she said. "There has been hardly any resistance."

Crocs still sells plenty of its old-school clogs, but the new designs now account for 54% of the company's sales.

"Our main focus today is getting new customers to understand that we're no longer just a clog," McCarvel said. "I think this is our biggest challenge as a brand today ... getting people to take a look at us in a different way."

To showcase the new shoes, Crocs has opened 120 stores in the United States and hopes to open another 100 stores this year. It is also expanding into new overseas markets, which now account for 65% of sales.

With the new designs leading the way, Crocs is back in the black. Last year, the company make $150 million in profits and $1 billion in total revenue.

"We're a very young company, we're barely 10 years old," Saito said. "[These] ups and downs have taught us about how to compete and how to have a comeback."

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