Croc-Stars: How Comfy Clogs Took Over | 6

0:08They are everywhere, on the feet of your cool Gen Z neighbors. Your grandma's got a pair, too. Your kids refuse to take them off. Heck, you can even spot them on the red carpet. We are talking about Crocs. These lightweight, water-resistant clogs have perforations at the toe box and a handy strap at the back, and a backstory as unique as the people who wear them. Crocs first launched in 2002, but it wasn't until the pandemic hit that they had stratospheric sales growth. And today we're digging into how the company capitalized on stay-at-home orders and strategic collaborations to transform its product from dorky to cool.

0:46Crocs embraced its status as ugly and became not just trendy, but downright fashionable. Its devoted fans now range from rappers and fashionistas to big-time NBA stars. Come as you are to me simply means being as comfortable as possible. And with my Crocs, I'm comfortable. I'm CJ McCullough. I love Crocs. I love Crocs. But unlike other brands that saw their fortunes rise during the pandemic, only to crash down to earth a few years later, think Peloton or Zoom, Crocs hasn't seen any dip. In fact, just the opposite. They're kind of like a weird cousin at the family picnic that you're just like, ah, why did we invite them?

1:35They're here, but we still accept them and love them anyway. Stay with us as we investigate how this humble footwear managed to crock the world.

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3:27From Wondery, I'm David Brown, and this is CrocStars. How Comfy Clubs Took Over.

3:55Now allow me to introduce you to Doogie Sandtiger. Favorite thing I like to wear is I take baby Crocs and I put them on gold chains. You might know him by his nickname, the Croc King. Got to make sure the Croc fit is swagged from top to bottom, you know. When we spoke to Doogie, he was sporting a necklace strung with mini Crocs, a yellow Croc crossbody bag, and a pair of exclusive Disney Parks clogs, all with the accompanying gibbets, of course. Mickey Mouse-shaped burger. They got like a Minnie Mouse lollipop and stuff they offer at the parks. It's really cool. This is just one of Doogie's 3 ,387 pairs of Crocs, hence that nickname, the Croc King.

4:38It has transcended my life at this point. They're everywhere. Everywhere you look, there's Crocs. Doogie got his first pair in 2007 when he was 16 years old and living in foster care. Growing up in the system, he never actually learned how to tie his shoes. And it eventually got to the point where I got older and I was, you know, middle school, high school, and I couldn't get away with wearing Velcro shoes anymore or, like, light-up slip-on shoes. So Doogie began seeking an alternative. And that's when he noticed what his neighbor had on her feet. There was this old woman gardening in these really cool, like, lavender purple Crocs.

5:19And I'm like, they still weren't really popular back then, but I was like, okay. They have a strap, no laces. They're silly like me. And they have the holes where you can customize them. That's real cool. So I went out that same day. I went to Kohl's, got my first pair, plain black pair. And it just went from there. What was a reputation Crocs had when you first saw those cool lavender purple Crocs? I mean, were they seen as old lady shoes or not so much? It was mostly either old ladies or people who were into boating or in the medical community, like nurses, doctors, etc. And I remember when I was in high school at that time, like, there was only a couple kids that wore Crocs.

6:08And if you wore them, like, you got made fun of and you were silly. But I was like, I'd rather get made fun of for being the class clown wearing Crocs than not knowing how to tie my shoes, which was more embarrassing. Crocs have been the odd man out since the beginning. We'll get back to Croc King Doogie a little later, but first let's dive into the lore of the brand itself. It all started in 2002 with friends Scott Siemens, Duke Hansen, and George Boedeker. Duke was going through a tough time, so the three pals went on a sailing trip in the Caribbean. It was there that Scott Siemens introduced them to foam clogs from Canada that he claimed would be the perfect shoes to wear on the boat.

6:47though not necessarily because of the looks. And at first when we looked at the original shoe with holes in it, we thought that's not something that would sell. We didn't think, but he was very sure that it would. He said, you guys, just try the product on. It's a wonderful product. And over a couple of days of us wearing them on the boat, we agreed with Scott. That's co-founder Duke Hanson speaking in an interview from 2011. The three men had backgrounds in tech, fast food franchising, and even inventing, but no retail experience. But once they saw the clog's potential, they decided to give it a shot and start a shoe company.

7:29And in 2002, they created their own prototype, unveiling it at the Fort Lauderdale Boat Show. They sold all 200 pairs. It was so fun to go back to our boat where we started the company and enter credit card orders. I dialed them in on a cell phone one digit at a time for hundreds of orders that we had taken during the day. We were up all night just trying to put the credit cards through on a little cell phone. At that point, one time about four in the morning, I said, I think we're on to something. When coming up with a name for their new product, the guys wanted to pay homage to the shoe's amphibious nature.

8:08The term gator was already taken by the University of Florida's football team, so Duke, Scott, and George turned to crocodiles. And it was just a stroke of genius because of the amphibious nature of the shoe, the way that the shoe works on both dry land and in water. Even when you pick them up and you look at them, and from the side you can see a little snout. So it became a very, very catchy name for our product. In 2004, they acquired Foam Creations, the Canadian company that invented the material for Crocs, also known as Crossline. Then they went from earning just over$1 million in revenue in 2003 to a little over$13 million in 2004.

8:53But still, lots of folks considered the shoes just ugly. In fact, in the film Idiocracy, which was shot in 2004, the costume designer intentionally chose Crocs as the standard-issue footwear for the dim-witted dystopian future portrayed in the film. Here's director Mike Judge speaking on Joe Rogan's podcast in 2023. But it was a small company, and she goes, look at these horrible plastic shoes. She said, we could really save a lot of money, just put everyone in these things. And then I said, well, what if, but what if by the time the movie comes out, what if everyone's, what if these become popular and people are wearing them?

9:29She said, oh, these are never going to become popular. No one would ever wear these things. They're horrible. But to everyone's surprise, Crocs had taken off dramatically by the time the film hit theaters in 2006. Everyone from Jack Nicholson to your five-year-old niece was seen wearing the clogs, and of course, 16-year-old Doogie, right? And at$30 a pair, well, they were pretty affordable. Jivets, those charms you see filling the holes of many pairs of Crocs these days, had also hit the scene in 2005. Sherry Smeltzer, an early Crocs customer from Colorado, was trying to entertain her three kids with a little arts and crafts project.

10:09And here we were just sticking all this stuff in the holes of the Crocs shoes. By the time Rich got home from work, we just stood at the front door and said, look, honey, we've accessorized our Crocs. And you could just see this little light bulb go off over his head. Her husband patented the idea and called them Jibbets, a playoff of Sherry's nickname. And a year later, they sold the business to Crocs for a cool$10 million. In 2006, it was time for Crocs shoes to go public. They opened on Wall Street that February, trading at around$13 a share. They had a$1 billion market cap, the most the footwear industry had seen up until that point.

10:47Stores popped up in airports, malls, and even Manhattan's trendy Soho shopping district. The growth was happening really fast. A little too fast for the up-and-coming brand. By 2008, Crocs started to croak. A lawsuit in Georgia alleged that the shoes were unsafe for kids after a four-year-old's Crocs strap got caught in an escalator seriously injuring his foot. Crocs settled, keeping the details confidential. Their stock price fell to just$1 per share in 2009, and they owed millions of dollars. Katie Couric clobbered the clogs as part of her Notebook segment on CBS. It seemed for a while you couldn't cross the street without catching a glimpse of those plastic clogs like a rainbow army of Muppet feet all around you.

11:36More than 100 million of them were sold, and the company borrowed millions of dollars to produce more. Trouble is, the shoe that was flying off the shelves two years ago became, well, very two years ago. In 2009, Crocs closed multiple factories, cut a third of their workforce, and shed inventory that piled up during the 2008 recession. When the 2010s rolled around, the brand was peaking at about$30 a share on a good day. They tried experimenting with new styles and pushed their classic clogs to the back of the stores, But none of this gave them the comeback they needed. Jordan Holtman is a retail reporter for The New York Times.

12:16In 2017, 2018, Crocs was seeing a lot of turnover in the executive suite, which is always a sign that, you know, the strategy that's taking place now is not the right one, that the board is not happy. It's also a sign of falling sales and just needing to revitalize it in some way. And even the idea that somebody might see a sign for your brand and say, oh, they're still around. Not ideal for a company trying to sell things to people. In 2017, Crocs promoted Andrew Reese to the role of CEO. He had served as the company's president since 2014 and had 25 years of footwear experience under his belt.

12:56According to Jordan, his first priority was revitalizing the brand. I think Andrew Reese definitely needs to get a lot of credit for the growth that we're seeing at Crocs right now. He ushered in basically cleaning up house creatively about the partnerships, thinking creatively about how advertisement would show up in the years to come, and then also getting a management team around him who understands direct-to-consumer selling, that understands how to have more strategic wholesale partnerships, that is thinking globally. Part of the cleanup effort included shuttering the last of the Crocs manufacturing plants in Italy and Mexico in 2018.

13:37The company said the closures were an effort to increase efficiency, as those factories only produced about 10 % of their products. They shifted production to third-party manufacturers, but it was a move that left many questioning whether Crocs was truly out of the swamp. Crocs Incorporated says it will be closing its remaining manufacturing facility and its chief financial officer will resign. Now, this all despite a report from an increase in profits. Crocs insists it's not going out of business, but it has not said how it plans exactly to continue manufacturing its products. But at the same time, Crocs began planting the seeds for a comeback.

14:17CMO Terrence Riley, the marketing genius behind the second coming of the viral Stanley water bottle, began exploring collaborations. In 2018, a former intern showed him a photo of Post Malone wearing the clogs. And she said, you know, this could be something for Crocs. And so I reached out to the folks that manage Post Malone. A few months later, the first celebrity collaboration with Crocs was born. And I think it broke the Crocs website when they went live. We had more people waiting than we could handle. That's Terrence Riley on the Harvard Business Review podcast. Those custom Crocs sold out in just one day.

14:58We didn't have an awareness problem with Crocs. we had a relevance opportunity. And so Post Malone was that real quick injection of relevance. The relationship continued, with Post Malone dropping another pair in 2019. He even gave them out for free at the fast food restaurant where he worked as a teen. More than a thousand of his adoring fans stood in a long line, wrapping around the parking lot to get their hands on the Posty Special, a box of chicken and fries for six bucks and the Crocs as a gap. With Post Malone as the poster child, things were certainly looking up for Crocs, but no analyst could have ever predicted what was about to happen next.

15:38Right now, four o 'clock, fast-moving developments in the coronavirus emergency here in Southern California as the World Health Organization officially declares the outbreak a pandemic. The first COVID-19 death just reported today in L.A. County. Plus, more cancellations, more changes to big events, including March Madness basketball games, without any fans. The pandemic hits. Suddenly, people were doing everything at home, and comfort was king. And Crocs was right there, like, hey, we're the most comfortable shoe out here. Why don't you try us again? And boy, did we ever. More on the Crocs' comeback when Business Wars returns.

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18:59Welcome back to Business Wars. We're talking about Crocs. And you know, the pandemic, as challenging as it was, turned out to be fantastic for Crocs' popularity. Head-to-toe athleisure was what everyone from Gen Z to baby boomers reached for while stuck at home. New York Times reporter Jordan Holman is still shocked at how incredible the turnaround was. So one stat that is a bit mind-blowing to me as a business journalist is looking at Crocs' stock price. So if you look at it from January 2020, so before the pandemic, to now, their stock has increased about 267 percent. And when you think about, you know, a lot of retail consumer brands saw growth during the pandemic, but that's since fallen off as the world gets more normal.

19:51Crocs is still in the up and up. And even when you look at this year so far in 2024, they're up 65 percent. So like their stock is still really hot. Then when you look at the sales, they're still growing sales on their Crocs brand, which is also a very difficult thing to do because they're growing on top of really big numbers that they put up during the pandemic. In 2021, Crocs added to their portfolio by acquiring the brand Hey Dude for$2.5 billion. Hey Dude, did you try the Hey Dudes? Did you try the Hey Dudes? Have you tried the Hey Dudes? The brand's flagship shoe features a longer toe box and small, mostly decorative, loose laces.

20:34Also known more for comfort than style, Hey Dude slip-ons are another polarizing product that people tend to love or hate. One TikTok creator cited them as a fashion red flag for men. How about, uh, Hey Dudes, don't wear this shoe. Hey Dudes. If he shows up to your date and he's wearing these, dinosaur runner. For Crocs, the fact that the Hey Dude brand was already so renowned, for better and worse, was a plus, says Jordan Holman. They were already a brand unto themselves, and then Crocs acquired them. And they did that because they saw that as a growth opportunity, that under Crocs they would be able to expand that brand and grow it into, I believe it was a$1 billion brand that they saw.

21:17Hey Dude hasn't reached those estimates yet. They're facing some falling sales right now. But that is one strategy that Crocs is trying to do to expand beyond what we think of Crocs. But Hey Dude is getting close to that$1 billion mark. Currently, they're valued around$950 million. Here's former Crocs CFO Ann Melman talking about the Hey Dude outlook earlier this year. But I will say last year, the footwear market was a little bit challenged overall. And Hey Dude picked up 200 basis points of market share. according to the circana um circana database so i think overall um we're really excited about the brand but we've definitely had a little bit of growing pains just with making sure we have the right product in the right place in the right distribution as of july crocs hit a market cap of almost eight billion dollars and is showing no signs of slowing down so just who exactly is keeping these buoyant shoes afloat?

22:16Well, in 2022, CEO Andrew Reese told CNBC that 80 % of consumers were adults, with kids comprising 20%. I would say the kids business has been growing nicely. It's really growing off the big kids, right? So the teenagers have been a very strong market for us over the last three to four years, particularly girls and now increasingly boys. And then the Little kids want to be like their big brothers and big sisters. So we see that growing nicely as well. You know, I cannot go a day without seeing a teenager wearing Crocs on the train or just walking around the street. In fact, for the past few years, Crocs has been ranked consistently as one of the top 10 brands for teenagers in a survey from the investment bank Piper Sandler.

23:02I think part of it is the comfort, like thinking about my time as a teenager, just rolling out of bed and like just wanting to put clothes on and just go like Crocs is perfect for that. Slip your foot in. I think also if all of your friends are wearing it, why wouldn't you? And the last thing is the personalization of Crocs. Teenagers love to be able to express themselves through their clothes and personalize it. And Crocs, through the different partnerships and colors and designs and gibbets, you can very easily do that. But the younger generations aren't the only ones getting excited about their Crocs.

23:41They're the kid consumers and the kid-at-heart consumers, like Croc King Doogie Sandtiger. One of their biggest slogans is come as you are, which translates to just be you and let your personality flourish and shine. Part of why Doogie loves Crocs is because they aren't afraid to lean into the silliness of it all. Take some of their most recent collaborations, for example. They did a collaboration with Kentucky Fried Chicken, which sounds insane to think about. And that pair came with these massive gibbets, and they were shaped like actual chicken wings and chicken legs, and they were scented.

24:22Scented like chicken. Fried chicken. And from there, they just kept building the brand, and they, again, they played off that silly factor. Former Croc CMO Terrence Riley spoke about the inspiration for this one with a Harvard Business Review. I was in Asia and I saw the popularity of Kentucky Fried Chicken in Asia. And I reached out to the CMO of Kentucky Fried Chicken via LinkedIn while in Asia, asked him if he'd be interested in a Crocs KFC collaboration. And sure enough, you can go online today. You'll see those for$300,$400 in the secondary market today. So that kind of hype became something that had its own inertia.

25:07and then there were the Pringles boots. That is another one of the silliest ones that they've created. And yes, I do have them. They did multiple pairs actually of Pringles and one of the best versions that they did was called the Pringles Crush Boot. And that boot, it's a massive platform boot that has leg sleeves that pull up and they go close to knee high and they have all these attachments on them. And the best part is they come with their own flavor of Pringles that you cannot get in store. The only way you can get them is if you buy that pair. Other collaborations have included McDonald's, Hello Kitty and Disney, of course, among others.

25:54The Lightning McQueen Crocs were one of the most shocking Crocs success stories, but not with the same demographic that watches the movies. Instead, it was Gen Z and millennials that ate these up, explains Doogie. They're connecting both to A, the kids now, but B, the adults who were kids when a lot of these characters came out. And people may find it silly, but like a perfect example is they came out with this Disney Lightning McQueen from Cars. It lights up and you'd think adult wouldn't wear that. But guess what? It was one of the biggest selling pairs in their entire history. Internet culture also plays a big part in this phenomenon.

26:35For the past few years, Crocs has been extremely attentive to its online community of fans, where Croc memes just might become reality. The Shrocs were one popular example of this. I'll just let Doogie explain. There was a meme of Shrek Crocs, and the internet community had rallied around those for years, since 2019, 2020. they wanted Shrek Crocs and the meme just kept getting viral and posted over and over of these Shrek Crocs and finally last year lo and behold Crocs dropped the Shrek Crocs what we call now the Shrocks so they have that green hue of Shrek's skin and then his his ogre ears that point out they have the massive gibbets that just like poke out and then they have his big ogre nose And then the funniest part is the back strap is covered in this big fuzzy material that mimics his outfit.