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.
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.
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.
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.
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.
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.