The rebirth of an iconic American manufacturer

From corporate execs to hipsters: How an American fashion icon reinvented itself

History

Founded in 1922 in Belgium, Wisconsin, Allen Edmonds (AE) is a shoe company rooted in American tradition. The shoes are a direct product of the Midwestern values that define the company – hard work, humility, honesty and trust. With an emphasis on hand crafting, traditional design and premium products Allen Edmonds has weathered the Great Recession and WWII and has stood as a symbol of American longevity. In fact, they have been the shoes of choice for Presidents Reagan, George HW Bush, Bill Clinton and George W. Bush on their respective inaugurations.

The Problem

While the company withstood economic downturns in the past, the financial crisis of the late 2000s pushed AE to the brink. The company lost significant market share and revenues from 2007 to 2009 sank from $94 million to $72 million. While the financial crisis exacerbated the decline in sales, it wasn’t the root cause. AE moved away from its core identity and lost touch with its core customer. Giving into pressure from distributors, it spurned its traditional American designs for European fast fashion designs. The loyal customers were not thrilled as this muddied the brand’s appeal and product quality.

AE was in desperate need of new management. The help came in the form of Paul Grangaard, who had joined the board in 2006 when his private equity firm Goldner Hawn Johnson and Morrison acquired AE.  Grangaard became CEO in 2008.

The Business Model

Grangaard wanted to reestablish AE as the great American shoe company. He had to recapture the loyal customers while expanding to a younger fashion forward customer. At its core, AE would need to reestablish itself as the the premium men’s shoe company rooted in quality American manufacturing.

The Operating Model 

Product: introducing old favorites with a twist

Grangaard’s first reintroduced the “Timeless Classics” – the four top selling shoes that would reengage the loyal customer. The shoes were introduced at a slightly lower price and provided quality shoes at a time when its core customers were concerned about financial security.

Introducing traditional favorites in new colors and variations with the same quality manufacturing, AE also began to appeal to a younger demographic. They also introduced a new line of after work and weekend shoes to broaden appeal. AE was perfectly positioned for the post recession recovery.

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Revamped designs

Legacy of Quality

AE recommitted to manufacturing shoes in Wisconsin. 90% of the shoes would be handcrafted in Wisconsin using its traditional 212 step process. AE emphasized it’s made in the USA heritage and develop marketing around the nostalgia of American manufacturing. At a time when 98% of all shoes purchased in the US are manufactured overseas, AE chose to stay home. AE’s labor costs are nearly 3x those of its peers that manufacture in China – but it’s an operating decision that reflects an understanding of it’s market position.

 

Customer Experience

Given the brand and product refresh, AE knew it had a small window to recapture market share. It developed concept stores and expanded to cover a wider geographic base. The stores provide a premium customer experience with top notch customer service.

AE also invested in software that helps deliver a personalized consumer experience. The software tracks customers and their purchases such that when customers call in, the support team has a complete profile of the caller’s buying history and potential issues.

E-commerce

AE redeveloped its website and developed a user friendly e-commerce experience to optimize for the modern consumer. AE also proactively reached out to it’s core of 240k customer via email campaigns and have experience email hit rates of 4-5% (compared to 1% for most consumer campaigns). E-commerce sales are growing at 60% a year.

To engage it’s growing younger consumer, Grangaard spent 8 hours on Reddit answering questions about shoes, professional dress and general career advice. This drove millennial consumer engagement and led to strong increase of traffic to the site.

Supply Chain

Working with Fed-Ex, AE has been able to create a shipping program that is tailored for it’s continuous need of premium leather goods. Sourcing from Germany, Italy and India, AE has complete control of it’s raw materials shipments (which arrive 2x per week). To support it’s ever expanding e-commerce business, AE has partnered with FedEx Home Delivery and Express to ensure that the customer has complete transparency of the shipping process.

The results and the future:

AE was on the brink of bankruptcy but is now prospering as “a great American company”. Annual revenues now exceed $150M a year and the company is expanding to China to capitalize on it’s “Made in the USA” and strong e-commerce identity. A strong business vision with the proper operating model has saved this American icon.

 

Sources:

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3 thoughts on “The rebirth of an iconic American manufacturer

  1. Very interesting post about the ups and downs of AE!
    Beside the e-commerce channel, they have also relied on small premium stores worldwide to sell their high quality shoes. This was a supplementary way to ensure capilarity to their business model. Additionally, they have expanded their portfolio to incorporate clothes and accessories.
    In brief, they are moving from their core business — which was selling shoes in the US — to sell shoes, clothes and accessories worldwide. Do you think this expansion is crucial for their growth trend? Or are they increasingly distant from the primary identity of their brand (again)?

  2. I enjoyed reading how Allen Edmonds competes against outsourcing of production within an extremely competitive part of the retail space. Often in TOM we’ve focused on improving production processes themselves but AE gives a great example of how it can be equally important how a company is able to market the superiority of their manufacturing process to create value for their products. In response to Cristiana’s point about the company moving from their core business, I wonder about their longer-term operational model being well positioned to capture value beyond a hipster trend of dress shoes referenced by “old favorites with a twist”. I think that their movement overseas and into clothes is an astute effort to maintain longer-term growth post-hipster fad.

  3. I love Allen Edmonds! I own two pairs and can attest to the level of craftsmanship and quality that goes into their shoes. It’s interesting to see a case where a company uses elements of their operating model as marketing collateral. Each pair of shoes on the AE website has a detailed description of the materials and manufacturing process for each shoe. In fact, I only buys shoes that are built on a specific “last” that determines the dimensions of the shoe. Do you see a threat from an overseas manufacturer that decides to replicate AE’s quality at a lower price point? Is the interwoven business, marketing and operating model too well-aligned to be easily overcome?

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