How Tecovas is extending beyond cowboy boots to become a Western wear lifestyle brand

0:05Hello, everyone, and welcome to the Modern Retail Podcast.

0:30They've been around for a little bit, but they've been really on a growth spurt of late. I know they've been on a store opening spree. I want to talk about that with David. I also want to talk about the overall marketing strategy. We wrote a few stories earlier this year of Takovas being at some fun, buzzy places like Stagecoach and event activations. I'm always interested just to know about where you decide to place your brand if you're trying to get in front of the right eyeballs. And David's been at the company for a little bit now. And so I want to just talk about what the tenure has been like, what the focus has been, all that jazz.

1:02But how are you doing, David? I'm doing well. Thank you for having me, Kale. Absolutely. It's great to have you. So first, let's start with you, because correct me if I'm wrong, you joined Tecovas in 2022. And you were at a pretty well-known, also buzzy brand before that. Am I right? That's correct. So I just finished my second anniversary here at Tecova's and came from Decker's Brands, which is the parent of Ugg, Hoka, Teva, and Sanuk, where I was their chief operating officer for about eight years. Wow. You just love being part of really buzzy, on-trend footwear brands, don't you? It makes it more fun, that's for sure.

1:40I've been on the other side of things as well, which is not as fun. Yeah? Well, what's that? Well, when we first started at Decker's, or when I did back in 2015, we had activists all over us, and we needed to improve a lot of things, which we did over the subsequent years. That's not a reflection on me, necessarily. It's just the hard work that the whole team had to do to pull us out of improving operating margins and getting these buzzy brands going. Yeah, I think Decker's is one of those fascinating brands that has really, it's been around for so long, has so many brands associated with it, and now has just hit a zeitgeist.

2:16But we don't need to talk a lot about Decker's because I want to talk about Tecovist. So you were chief operating officer last. What made you decide to go over to a more startup-y type of role? Yeah, so Tecovist had been on our radar. We had a mutual board member. And so we had actually done an offsite with Tecovas, the Decker's management team. We saw they were doing some interesting things in performance marketing. And so we got to know the brand. I met Paul Hedrick, the founder of Tecovas, through that offsite. And then he and I kept in touch for the subsequent couple of years, just seeing how they're doing, how we're doing, if I could help them, et cetera.

2:56And at one point, I had heard, well, I got a call from them that they were starting a CEO search and would I be interested. And I said, sure, not thinking much of it. And, you know, about four months later, all of a sudden, here I am. Wow. So can you just give an abridged history of Tacovus? Because it's been around for about a decade now. Is that correct? Yeah, we're having our 10th birthday coming up in October. So it started in 2015. and at the start, Paul found this opportunity. He was a Texan living in New York and was wearing cowboy boots and wanted to start a company. So he looked at a number of different opportunities and landed on this one.

3:38I think initially it sort of was known as the Warby Parker cowboy boots, if you will, with the value proposition, kind of taking out the middleman and was very successful. The quality of the product, the premium nature of it, the materials they choose. So we've tried to sort of migrate the positioning of the brand into more of a premium lifestyle brand where we want to continue with that quality, authentic product, but delivering it through a very high level of customer experience that we call radical hospitality. So they had started to open retail back in 2019, and that has been a huge growth driver for us.

4:22And I can get into it a little bit here, but the brand sets itself up very well for a high-touch experience in-store. The sit-and-fit environment, the boots are a dead fit, so it's important to kind of try them on and get the feel for them. And then we've tried to really innovate on this retail experience with a lot of different features that we have now. Yeah, you guys have pretty, pretty cool stores, is my understanding. Yeah, so we try and, you know, we've got a liquor license in every store except for one. So we offer complimentary beverages. We've got a very talented and approachable sales associate team that are very educated on our products.

5:08We offer free boot shines, branding and customizations. So, you know, people like to come in our store and have fun. And again, we're very approachable. We're not just a wall of sea of boots that you kind of get walk into certain stores and you just get overwhelmed by a wall of boots. So the idea is get them drunk and then they'll buy maybe one, perhaps two pairs of boots? Absolutely. and get them out of the heat, especially this time of year. That's very true. So can you talk about 2022? Why were they doing a CEO search? Was it just trying to find someone to graduate into more scale mode? What made you decide?

5:50What was so exciting about the idea for you? Yeah, so I had seen the brand continue to do well. I was intrigued by kind of the value proposition, not only of the company itself, but the values that Paul had set forth. There are things that in this day and time I think are important, things like genuine, authentic, welcoming, hard work, integrity. And these are values that are sort of Western values that I think we stand for. So between that and the quality of product, Paul is a great partner for me. He's very creative. and so what intrigued me about it was the demand side continued to be very strong.

6:33It's a sizable market. The cowboy boots alone are probably$4 billion and that doesn't include any apparel and it doesn't include any kind of ancillary type product or footwear. What they needed was to start laying some tracks for scaling on supply chain, distribution center capacity, production line capacity, and then just the, you know, sort of the rigor of having a go-to-market process that was repeatable, you know, with key milestones. You know, as you get bigger, it's hard to just throw out onesie twosies on products. You have to have a product pipeline. So it was putting a lot of that infrastructure in place, which also included gross margin improvement by, again, planning better, procuring materials in a more sophisticated way, if you will.

7:20So it was those kind of things that a lot of my background, I knew I could handle pretty easily. And I have had a learning curve on the front end of the business, which has been fun for me as well, you know, in retail and marketing and things of that nature. But, you know, but the key is surrounding yourself with quality people, which I've done. And I think we've got a terrific team to take it to the next level. Would you say, you know, usually when a new chief executive comes in, there's a strategic shift. It sounds like what you're talking about is more supply chain, back-end, P &L type stuff.

7:55Was there any other strategic shift afoot, or was it just the front-end stuff is working well, the brand is resonating, let's streamline these other parts? I think that's accurate to say. I would say the positioning that I kind of talked about a little earlier, meaning moving, migrating to more of a premium positioning with, you know, where we need to be very solid middle in the fairway on operational excellence and, you know, kind of a frictionless experience for consumers. But where we really wanted to continue is that premium positioning, you know, the out-of-the-box comfort on the product to make that a very consistent experience as well.

8:34When you start to scale and adding new production lines, adding new factory partners, it's hard to keep that consistency. And so that's a big part of it. But I'd say that it's accurate that what I want to do is kind of keep what was working, keep it going and don't screw it up, but make sure we've got the scale to keep it going in a consistent manner. And how do you operationalize premium at scale? I know we can talk about luxury houses do that, but especially when you're on a relatively smaller company, is that just the contacts that you have working with the right warehouses? Or what did you put in place so that you were able to maintain that without diluting the product or the brand?

9:18Yeah, I think things like, you know, if you take a product that's being made in one factory and you move it to another factory, you know, you've got to make sure you've got tech packs and, you know, things that all the specifications outlined. And you need to train the factory on the way in which your product is being done. So while we outsource manufacturing, you know, we've hired a lot of shoe dogs that really know what they're doing and that are in the factory. It's about picking and procuring the top materials that you can find in leathers and making sure that craftsmanship is being done, even though you're producing a lot more units.

10:01And so we've beefed up our commercialization team, product integrity, which includes fit and quality. So it's an effort to, but again, you get the right people in there and willing to spend the money to do it. And that's been critical. Got it. And so let's talk about the stores. You hinted at this earlier. Just for can you give a sense of the how many stores you have now and how many you had, say, a year, year and a half ago? Sure. So we've been kind of working at a clip of about 10 to 12 stores per year. We finished 23 with 33 stores. We'll add another 11 this year. We're in about 20 states at this point.

10:45We just opened our first store in the Northeast in Philadelphia and King of Prussia Mall. We just opened San Diego in California. And we're funding these through free cash flow. So we're watching our capital very closely. But these are critical investments. The payback has been terrific. The unit economics in our stores are fantastic. And so we think it's a big part of our strategy, as I said before. But the good news, the unit economics are also working out very well, including the brand expression that we want people to kind of see and feel. It's also a very sensory brand. You walk into our stores and you can smell the leather.

11:29You pick up the product and you can tell the handmade craftsmanship that goes into it. So it's a very sensory brand and just important for people to get in there and really understand the product better. Can you talk a little about how you choose where you're going to open your stores? because Western where, you know, people have associations with regions of where that is, it's very big in Texas, which is where, you know, it came from. I was talking with someone the other day and they mentioned HEB, which the grocery store. And I think that's really interesting because it's one of the biggest grocery stores in the country, but it's pretty much only in Texas, maybe a little bit.

12:09And so, but you're going to San Diego, you're going to Philadelphia, which people might not necessarily associate with being a Western ware outpost or where people would search for that. So how are you thinking about where you're opening, especially if it's not a place like Austin, like Nashville, etc.? Yeah, it's a good question. So we look at the size of the market, MSA. We look at our e-com traffic and transactions. But one thing that is interesting, and I've said this before, but in nontraditional Western markets, you still have and look at how many people are listening, for example, to country music.

12:49The amount exceeds pop, exceeds other genres. And these are also in regions that are non-traditionally Western. And so that's also kind of something we look at as sort of a proxy. When we see even concerts and entertainers that are performing in country music to go around the country, our stores in places like Charlotte or Denver or Cherry Creek really pop. And so we believe that Western is kind of becoming, and we don't believe it's just a trend or fad, but it's just becoming more of the American lifestyle. And we're seeing that play out with these stores that are really in more less traditional markets like Texas.

13:35The other interesting thing is the amount of people that are migrating to these more traditional areas. You know, a lot of people moving to the Sun Belt states, moving to Texas. So that's kind of working in our favor as well. We're going to take a quick break and we'll be right back. You mentioned the unit economics a little bit, but do you have, for lack of a better word, a formula? Like if you open a store, does it need to reach a certain level of profitability by X amount of time in order for it to be deemed a success? Or how are you thinking about it so that it works within the overall mix and you're not just throwing money away at an area that isn't resonating with customers?

14:16Yeah, we look at both as a fleet review. So we want to make sure the fleet in its entirety is hitting the economics that we need. But we'll also keep an eye on individual stores. We know that certain stores that we open might be a larger footprint. Our Our sweet spot's probably 3 ,000 to 3 ,500 square feet. If we have a store that's 4 ,000 and it's going to be more investment, both capital expenditure to get the store up and running, we understand the payback may be a little bit longer. But we also do view these as awareness and a marketing play a little bit. But we don't want to just solely say chalk it up to marketing and don't worry that it's losing money.

15:01So we look at four-wall profitability. We look at cash on cash returns on the store and our just general revenue per store as well, among many other things. But, yeah, it's important to constantly do a fleet review. Over the years, we have closed a couple as we continue to open. So we're always going to be evaluating the fleet and be pretty diligent about that and understanding why it may not be performing. Is it management? Is it the assortment? Is it the way we're merchandising that store? So there's a lot of factors that go into it. Does e-com lift play into this? Or like, I feel like when you talk with, especially a lot of newer brands, they always mention, maybe the stores aren't doing as great, but then when you look at the general areas, we see a huge e-com lift.

15:48Is that something you've witnessed? Do you care about it? Or it seems like the stores, as a center, you want them to sell the products, right? Well, we do. We just think it's a better brand experience and we'll get people coming back. So we do look at things through an omni lens and we look at the entire lift of a market, regardless of channel. And typically we see a lift both in e-com as well as the store. So from an omni standpoint, we're definitely seeing a lift. But as we look at traffic and we purposefully drive traffic to our stores, we just think basic things. The fulfillment cost is less.

16:25The returns are less. people really understand the brand better. So there's just a lot of intangible factors as well on why we want people in those stores. Returns are less for store purchases? Correct. Just for fit. You know, people can walk out knowing that I've got the right right boot on or right footwear on. That makes sense. Yeah. You mentioned the focus on making it a premium brand and making it a lifestyle brand, which especially companies that launched years ago, that seems to be what a lot of them say is that we're a lifestyle brand. With yours, it makes sense because you are talking to a very specific lifestyle and culture, but it still is a difficult jump to go from we make boots to we make something that speaks to an entire thing.

17:10I know you guys have expanded into apparel. Can you just talk about how you have approached this jump into being more or less a lifestyle brand or something that people don't just associate with you, these are my Tachovas boots and that's that? Yeah, it's a good question. I think it is important that, and when we say lifestyle, a couple of meanings to it, but I kind of mean head to toe and where we are doing apparel and accessories, luggage, socks, belts. In retail, it's important to be head to toe. I think it's much more, the assortment's important on how you merchandise that store. The company has been doing apparel for not since inception, but not far after getting started, a very successful jeans business.

17:55So we're looking at the right strategy and mix for apparel. It's roughly 20 % of our revenue at this time. So it's not immaterial. We do think it's a big opportunity. And I think the men's strategy will be a little bit different than the women's. I think men's will look more of the basics, jeans and shirting. I think women are going to come to us more for a little bit more specialty items, whether it's denim dresses or skirts or things that they can wear with boots, but they don't already have their basics covered with some other brand. So we feel like the women's opportunities, a little more specialty items where the men's will be a little bit more basic.

18:36Of that 20 % of apparel, is it a clear 50-50 break between men's and women's, or is there one apparel side that seems to be leading more? Well, women's is behind men's. We started with men's earlier. So men's is definitely more than the women's right now. And the women's business on the boot side is growing tremendously. That too didn't have quite the assortment that the men's business did until a couple of years ago. Our women's business has grown like 40 % year over year. And I think going to be an important part of the brand. But both genders are, needless to say, critically important. Yeah.

19:20In terms of the marketing, especially as you're pushing the non-boot stuff, do you try to present Takovas as a head-to-toe brand? Do you do a lot of marketing specifically on, for example, the jeans? How are you trying to grow that on the tactical marketing front? Yeah, it's a little bit of both. I think right now what we're seeing is that we sell more apparel in retail because I do think people, we're not known for it yet. And so people kind of fall into it a little bit as they go into our store and see. And as they're shopping for boots and experience and the other things I've talked about, they'll grab a pair of jeans or shirt.

20:00So they're kind of falling into it a little bit. We haven't spent a ton of our capital allocation marketing to the apparel yet. I want to make sure we're kind of nailing that strategy, product strategy first, and then we'll start getting behind it a little bit more. Got it. And what would make you know that you are nailing that product strategy? Well, I get a little bit back to consistency on fit, on materials, on what is it the consumers want from us and making sure we're not throwing a bunch of stuff against the wall, that we're very thoughtful about where we have permission and where we're seeing things resonate that we know we can double down on.

20:43Got it. Can you talk a little bit more broadly just about the overall marketing strategy start I mentioned? Like, I know you guys have been at like events, music festivals, that type of stuff. Is that always been, have you always tried to do those types of very specific activations reaching people? Is that relatively new? How do you approach the brand storytelling on that front? Yeah, that's relatively new. I think historically leaned on like a lot of direct consumer, digitally native brands, a lot of paid social and paid search. we are understanding that these days given the cost of acquisition the reduction the ROAS associated with that that it's important I believe to go back to kind of this full funnel approach we do believe event activations are very important this year we were the exclusive boot sponsor at Stagecoach we believe that lift and awareness from that activation which was very well executed by the team was tremendous.

21:39Our Rancho Cucamonga store going into the Stagecoach event and even coming out of it to this day has had a huge lift. And we're seeing that in our newly opened San Diego store as well. We also did Opryland in Nashville. And so events, we're doing another festival in Bend, Oregon coming up this month, the Farewell Festival. And so these are important. We want to be associated with music. And there are other events, I think tailgating, college football, those types of things we want to lean into as well. But we're doing everything from video to podcast to just partnerships. uh you know we'll look to lean into some ambassadors as well and that type of thing including product collaborations so we you know we're getting back into a little bit of linear tv actually because we do have some traditional consumers that that are consuming uh media through that uh through linear tv and so we think that's an important part of upper funnel as well got it can you talk with the event strategy specifically do you view that as a potential strategy that can scale?

22:51Or is that you are looking for individual one-off events that will have an impact at that moment in those regions? No, I think it's something that's scalable and that we want to be kind of associated with, not just one-offs, but kind of consistent. And so I think these are just, especially the activations where you can have a boot shining, a customization, branding. We had lines, long lines at Stagecoach, but people having fun in the line and willing to wait to get their boots branded and things like that. So it's a fun, I think, again, experiential aspect to the brand and something we do want to scale for sure.

23:34Got it. And you mentioned a few things that they seem to rise and fall in popularity depending on what year it is and what the average CPM is on Facebook. But you mentioned podcasts, you mentioned Linear TV. Can you just talk about those are both kind of difficult to attribute? You know what I mean? I do. And so are you seeing success with those sometimes more expensive, not as attributable, but still higher awareness plays? Or how are you thinking about that as you grow? So it's, you know, it's almost getting back to the old marketing thing, you know, where you spend money. It's like 50 percent was right on.

24:17We just don't know which 50 percent. I think it's a little bit back to that, although these days there's tools that you can monitor, you know, awareness and things like that. But I think if we just see that we're doing like paid search and social, we do see the upper funnel not feeding that enough. And so we started to see dips in traffic and things like that, depending on these different tactics. And we're monitoring it daily. But to your point, you can't, it's not as easy as just it used to be where performance marketing, you put it out there and you know in two days whether or not that worked.

24:57So we just have to be comfortable with the team allocating dollars and keeping an eye on awareness, traffic. At the end of the day, it all comes down to customer acquisition, customer retention, and customer development. And so whatever those tactics are, but you've got to focus on, to me, those three things. Got it. You mentioned potential collaborations. Have you done collaborations in the past? We've done a couple. We did one with Thomas Rhett, which was a boot drop. We did about three styles. And then we did a collaboration on dresses with Chris Brock, a designer out of Southern California, a very talented designer.

25:41We've learned from those, you know, what's important, what's not. And so we want to do more of those product collaborations. I think sometimes I think these days are a little bit overdone sometimes. So we want to make sure if we do them, they're worthwhile because they are time consuming. And we were pleased with those. But there were some learnings that will apply to the next collaborations that we're doing. You know, you have your site, you have the stores. Have you thought about entering other channels? Like, are you on Amazon? Are you thinking about doing wholesale elsewhere? How are you thinking about that so that you get more of a reach?

26:19Yeah, so we, given, again, that customer acquisition cost and the cost, as I said, we're doing 10 to 12 stores a year, but I think more distribution points are important. I look at how Hoka went through its rise, and they really leaned into run specialty to start. And there were stores that, again, had a lot of point of sale service, had a sit and fit environment where people could be educated about the product. So you're taking a little bit of that cue. We are going into some what I would call pioneer accounts that are more traditional Western. And so independents that might have one store, they might have seven, eight.

27:02so we are definitely wanting to get into wholesale but make sure that these accounts are kind of part of our ecosystem we want to be in a position where we can drive traffic to them and really both see the the that it's a win-win so we're going to do it in a very strategic manner both in location depending on where our stores are as well as you know partners that we think will will show the brand well. Got it. Yeah. And so we're sending some of our key retail folks out to help work with them and train them on our product and how we want to show up in their stores. And so these would be probably more boutique-y or like one-off stores that have a very specific clientele and you're able to really train their staff.

27:48That's the idea? Yes, but more Western. So not necessarily boutique-y, but some are 12 ,000 square feet, et cetera. But it's more in the independence as opposed to the larger distribution points like a boot barn, at least for now. Got it. Got it. We're just about running out of time. I have a million more questions. But I guess we've talked a lot of, you know, we've hit on what's going on this year. But I just want to make sure I didn't miss anything strategically. You got a lot of store openings, some new activations. What else has been the main focus for this year that you've been trying to accomplish?