Sometimes All Roads Should Not Lead to China

Thursday, September 4, 2008 9:00

Last year I read the book Tipping Point by Malcom Gladwell where he talked about Vans, a very popular shoe company in the late 80s/ early 90s.  In the book, he detailed the rise and fall of this company.

In short, it was a niche player that relied on its customers (skaters) and its retailers (small skate shops) heavily.  It was one of those brands where a popular shoe could run out very fast, and after a few years, Vans reached their tipping point.  Sales took off, the company sold out to the market, and within a couple of years they had lost their base of consumers – their source of innovative ideas- and sales began to plummet.

Eventually, Vans came back, but only after a bit of soul searching and coming to grips with their reality.  The soul of their company was skaters, and their destiny was to be a dominate niche player, not Nike.

A proudly American shoe company ships jobs to China, brings this story to mind as they too are a niche player who has recently understaken a step that I feel will only have dire consequences.

They are moving to China.

A move many have done in the last 15 years in the footwear industry, a footwear firm moving to China should not come as a surprise.  In fact, the CEO admits the move should have come earlier.

Reading through this article, I cannot help be reminded of the fact that some firms need to assess why they are coming to China and honestly ask themselves what the reactions of their core consumers will be.  Something this firm recognizes as well.

Even after accounting for shipping and other costs, he says, a pair of Chacos can be made for at least $4 to $5 less in China than in Colorado. That translates into roughly a $16 to $20 difference for consumers, he says, and while some might be willing to pay such a premium out of patriotism – or regional pride – he doubts that loyal core could support the company.

Many longtime customers, local and otherwise, are also disappointed by the decision, and the customer services department has handled more than 100 critical e-mails. “People say, ‘You were the last ones doing it right, and now you’ve sold out,’ ” says Paigen. “If I can sit down and talk with somebody, they’ll usually understand that our choices are limited. But it often takes a long conversation.”

In my mind, this is a firm that should have spent more time on developing a Made in the USA – Made in Colorado campaign.  Sure, margins may have been squeezed and materials may have been more difficult to come by, but gets back to what the soul of the company:

Since company founder Mark Paigen invented the sandals in his spare room almost 20 years ago, Chacos have caught on among river guides, kayakers, and weekend warriors, and the company has grown from a one-man operation to a 145-person business with a catalog of styles and an international clientele. Through it all, the sandals have been designed, made, and proudly worn here in tiny Paonia.

Maybe I am being a little nostalgic, maybe a bit naive, but for me this company will find that its tipping point is not a matter of cost, but a matter of moving to China.  Its core buyers are very conscience of where these items were being designed, and what it meant in purchasing these items… and this move to China could lead them to a similiar experience as Vans.

If nothing else.. .they are going to have a really difficult time with their commitment to sustainability

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2 Responses to “Sometimes All Roads Should Not Lead to China”

  1. Silk Road International Blog » So, how’s the economy in China doing? says:

    September 9th, 2008 at 11:35 pm

    […] and cons to production no matter where you are located. One story from Richard Brubraker is here. For more examples look at the new about ASEAN countries: Thailand is in the middle of political […]

  2. Richard Gould says:

    September 10th, 2008 at 9:02 pm

    That $4-$5 less per shoe does not take into account the diversion investigations Vans will need once gray market Vans and Chacos start popping up in wholesale markets in South China.

    Also, you cannot estimate the potential costs of the problems that will arise if Vans’ suppliers are caught flouting Vans’ CSR policies. If anyone ever finds a 12-year-old making Vans, there goes the loyal core.