Case study:Vans Skating on air

Individual Assignment: There are a number of challenging issues for discussion in this case. Prepare some possible answers to the following questions: What was Van’s competitive advantage during its early days (1960s and 1970s)? What was Van’s value proposition to its customers? How has Van’s value proposition changed over time?Based upon the concept of hostile brands studied, what in your mind would be an appropriate growth strategy for Vans based upon the information given in the case keeping in mind: Which product categories should Vans participate in? What distribution channels? What promotional strategies / programs would you recommend in order to sustain growth? Is there a growth “ceiling” for this brand or is there no limit to Van’s growth potential?
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For the exclusive use of J. Yu, 2018.
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JUNE 22, 2002
YOUNGME MOON
DAVID KIRON
Vans: Skating on Air
Fourteen year-old boys have three things on their mind: sports, music, and girls. Our goal is to own the
first two . . . the third, we’ll let the kids handle on their own.
— Gary Schoenfeld, president and CEO of Vans
Early evening April 22, 2002: Gary Schoenfeld, the CEO of Vans, was standing in the middle of
the star-studded, invitation-only crowd that had turned out for the Hollywood premiere of Dogtown
and Z-Boys, a documentary about the history of skateboarding. Smiling, Schoenfeld noticed that
many in the crowd were wearing the specially-designed Dogtown shoes the company had sent to all
invitees.
Vans was best known for selling footwear and apparel to skateboarders and surfers; the company
also sold products for other alternative sports, including snowboarding, BMX bike-riding, motocross,
TM
wakeboarding, and supercross (Vans called these activities “Core Sports “; see Figure A for a
description of each sport). Vans had financed the Dogtown film at the request of one of its sponsored
athletes, skateboarding pioneer Stacy Peralta.
Now, as Schoenfeld looked over the crowd, he could not help but feel a sense of satisfaction.
After seven years at Vans, Schoenfeld had managed to turn the company around, revitalizing the
brand and transforming Vans into a $350 million business (see Exhibits 1 through 3 for additional
financial information). In a market in which the customers were notoriously fickle and few brands
ever topped $100 million in annual sales, this was quite an accomplishment.
At the same time, Schoenfeld was keenly aware of how fleeting success could be. Exactly 20 years
before, the company had gotten a big boost from another movie, a cult classic called Fast Times at
Ridgemont High. Eager to capitalize on the increased demand for its products, Vans had expanded
too rapidly and had ended up in bankruptcy. While Schoenfeld was determined not to repeat the
mistakes of the past, he felt strongly that Vans was at a crossroads:
I believe that at $350 million, we’re not maxed out. I look at Nike as a $9 billion brand. Can
we be 10% of what Nike is? Yes, that doesn’t feel uncomfortable to me. On the other hand, I’m
not running the business to become a $1 billion company. We’ve got to proceed incrementally,
so as not to alienate our core customer base.
________________________________________________________________________________________________________________
Senior Researcher David Kiron of the Global Research Group prepared this case under the supervision of Professor Youngme Moon. Authors
give thanks to Research Associate Brenda Cheng for her assistance. HBS cases are developed solely as the basis for class discussion. Cases are
not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2002 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,
photocopying, recording, or otherwise—without the permission of Harvard Business School.
This document is authorized for use only by Jialiang Yu in Strategic Marketing 2018_5500 taught by PETER BORTOLOTTI, Johnson & Wales University from March 2018 to September 2018.
For the exclusive use of J. Yu, 2018.
502-077
Vans: Skating on Air
Already, Schoenfeld had broadened Vans’ product assortment and expanded its distribution
system. The company now sold everything from women’s sandals to outdoor hiking shoes, in retail
outlets ranging from company-owned stores to mass-market chains such as Foot Locker and J.C.
Penney. The company was also involved in a number of entertainment-related ventures: In addition
to financing Dogtown, Vans operated a snowboarding camp in Oregon, it licensed content to
videogame developers for Microsoft’s Xbox and Sony’s Playstation, and it was in the process of
starting a record label. Schoenfeld commented:
The biggest question I’m dealing with today is how to drive that next stage of growth.
Which product categories should we participate in? Which distribution channels should we be
in? I know that lots of shoe industry people are wondering, why is Vans getting involved with
movies, with record labels, with videogames? But what they don’t realize is that our vision is
to integrate ourselves into the places our customers are most likely to be.
Figure A Vans’ Core Sports
Surfing
The sport of riding the surf
on a surfboard.
Wakeboarding
A short, broad water ski
ridden like a surfboard by a
person towed by a
motorboat.
Skateboarding
A short board mounted on
small wheels
Motocross
A closed-course motorcycle
race over rough terrain.
.
Snowboarding
A board-like wide ski ridden
in a surfing position downhill
over snow.
Supercross
An indoor version of
motocross.
BMX
Abbreviation for bicycle
motocross. A cross-country
bicycle race over rough
terrain.
Source: Vans; casewriter research.
2
This document is authorized for use only by Jialiang Yu in Strategic Marketing 2018_5500 taught by PETER BORTOLOTTI, Johnson & Wales University from March 2018 to September 2018.
For the exclusive use of J. Yu, 2018.
Vans: Skating on Air
502-077
The Early Days
Paul Van Doren launched Vans in 1966 with his brother James and two partners. Steeped in the
techniques of footwear manufacturing,1 Van Doren set out to make the most durable and affordable
casual deck shoe in the market. The result was a rubber-soled shoe that was reinforced with clay and
was twice as thick as those produced by the competition. The upper canvas was double-stitched, and
the entire shoe was washable. At prices ranging from $2.49 to $4.99 a pair, Vans shoes were,
according to one industry observer, “built like a battleship.”2
Unlike other shoe manufacturers, Vans sold its sneakers directly to
consumers out of its own retail store in Anaheim, California. At the time,
industry insiders derided the unconventional business model because
“nobody had a store that sold only sneakers.” The skepticism didn’t dissuade
Van Doren, however, who opened his second, then his third, and then his
fourth retail outlet within months.
Source: Vans.
Promoting the stores was strictly a grassroots affair, managed almost entirely by Van Doren with
the aid of his children. Van Doren’s son Steve recalled, “When a new store was ready to open, my
dad would give me a bunch of flyers to pass out after school. The family was always involved that
way.” Steve also recalled how the senior Van Doren acquired customers—“one surfer at a time”:
I remember there was a surfing competition once, down near Costa Mesa where we grew
up. My dad, who was not a surfer, headed down to the beach to show the surfers our shoes.
He walked straight up to this really famous Hawaiian surfer, Duke Kahanamoku, and said,
“Hey Duke, I like your shirt. Why don’t you let me make you a pair of shoes that match that
shirt? All I need is some material to match it.” Duke grinned, turned to his buddy—who was
wearing an identical shirt—and made him take his shirt off and give it to my dad. My dad
took the shirt, used the material to make the shoes, and delivered them to Duke the next day.
That’s how we did business at Vans back then.
Surfers were not the only ones who enjoyed customized Vans. Because manufacturing was done
in-house, customers could choose from a “Baskin Robbins-like”3 assortment of more than 50 fabrics
and colors. Steve Van Doren—who more than 30 years later was still promoting Vans products,
albeit in a more official capacity as vice president of promotions—explained:
From the beginning, you could choose your own canvas fabric and color. No one else could
do this because nobody else had his own factory. The kids would come in and they’d say, “Oh,
I want green on this side, yellow on this side, blue on this side, make the tongue checkered…”
Or if one foot was a seven and the other was a nine, we’d accommodate that too, for a dollar
extra. By making only the shoes people wanted, we were able to avoid the inventory problems
that afflicted other footwear companies.
“At one point,” Van Doren continued, “every school in Southern California, the cheerleaders, the
drill teams and the marching bands, they were all wearing our shoes. We were the only company
that could match the school colors.” Vans was also a favorite of hard-to-fit customers, who required
1 Prior to launching Vans, Van Doren worked for 25 years at the nation’s third largest footwear manufacturer, Massachusetts-
based Randolph Shoe Company.
2 Ed Leibowitz, “The Ultimate Trendoid Sari Ratsula’s Job Is To Figure Out What Teenagers Will Embrace Next As A Fashion
Statement For The Feet. This Is No Joke. This Is Risky Business,” Los Angeles Times, December 8, 1996.
3 Baskin Robbins was a popular ice cream store chain in the United States known for its wide assortment of flavors.
3
This document is authorized for use only by Jialiang Yu in Strategic Marketing 2018_5500 taught by PETER BORTOLOTTI, Johnson & Wales University from March 2018 to September 2018.
For the exclusive use of J. Yu, 2018.
502-077
Vans: Skating on Air
non-standard widths and lengths. As a result, by the end of the 1960s, the canvas, easy-to-wash
shoes had developed a small but loyal following among the Southern California surf set.
Dogtown and the Birth of the Z-Boys
The 1970s ushered in a wave of anti-establishment, anti-Vietnam, anti-war sentiment among
American youth. It was within this context that—in a depressed area of Santa Monica, California (a
place dubbed “Dogtown” by its inhabitants)—a talented group of disenfranchised teenagers began
creating a new style of skateboarding that ultimately ended up redefining the sport. This group of
self-described misfits (the “Z-Boys”) took pride in pushing the limits of conventional skateboarding,
becoming the first to replicate complex surfing moves on asphalt park embankments and the upper
lips of empty swimming pools. (See Figure B.)
Figure B The Z-Boys in Action
Source: Vans.
For these skateboarding rebels, Vans quickly became the sneaker of choice. The vulcanized
rubber “waffle” soles were ideal for maintaining a solid grip on the skateboard, and the doublestitched canvas was perfect for withstanding the wear and tear associated with the reckless sport.
Tony Hawk, a skateboarding icon who grew up idolizing the Z-Boys, recalled, “I would climb walls
in them, [the shoes] were so grippy.” In addition, the price was right. Glen Friedman, who grew up
skating with the Z-Boys, put it simply: “We wore Vans because they were seven bucks, end of
story.”4
In 1975, the Z-Boys dominated the first national skate competition in Del Mar, California, wearing
matching blue Vans deck shoes and T-shirts emblazoned with their team name, Zephyr. Their
innovative moves overwhelmed both competitors and judges, who had no categories for judging
their style. In the words of Zephyr member Tony Alva, it was clear “we were a step above.”5
Word quickly spread, and skaters around the country began emulating Z-Boy skating techniques.
A number of skateboarding magazines were launched, and dozens of outdoor skateparks began
opening all over North America. Skateboarding was on the verge of becoming a $400 million
4 Maureen Tkacik, “Nike nips at skate-shoe icon Vans as extreme becomes mainstream,” The Wall Street Journal, April 24, 2002,
p. 1.
5 G. Beato, “The Lords of Dogtown,” Spin Magazine, March 1999.
4
This document is authorized for use only by Jialiang Yu in Strategic Marketing 2018_5500 taught by PETER BORTOLOTTI, Johnson & Wales University from March 2018 to September 2018.
For the exclusive use of J. Yu, 2018.
Vans: Skating on Air
502-077
business,6 and Vans—whose sales had risen rapidly—appeared to be ideally positioned to take
advantage of its close affiliation with the radical sport.
Just as quickly, however, the market began to decline. By decade’s end, the infatuation with
skateboarding had been replaced by a fascination with other alternative sports (such as BMX riding),
dozens of skateparks had closed as a result of the skyrocketing cost of liability insurance, and
skateboard manufacturers had suffered tremendous losses. According to one skateboarding
historian, by the end of 1980, “skateboarding [had] died.”7 That same year, Paul Van Doren turned
the company over to his brother James.
Topsy-Turvy
The ensuing eight years were turbulent for Vans. In 1982, a youth-oriented movie called Fast
Times at Ridgemont High featured a teenage surfer dude named Jeff Spicoli (played by actor Sean
Penn) hitting himself on the head with a pair of black-and-white checkerboard Vans slip-ons. The
movie catapulted Vans back onto the national scene, creating virtually insatiable demand for its
shoes.
James Van Doren responded by broadening Vans’ product mix in
an effort to grab share from Nike and Reebok in the (then) rapidly
expanding athletic shoe market. Soon, Vans was producing shoes for
baseball, football, soccer, basketball, wrestling, boxing, and even
umpiring. But the move backfired: High production costs at its
California-based factory, strong competition from mainstream
brands, and an unreceptive market led first to debt, and in 1984, to
bankruptcy.
Source: Vans.
Paul Van Doren returned to revitalize the company. “We just put it back on the same road,” he
explained. “To hell with fashion trends.”8 Things started to look up again, as Paul managed to get
the company out of debt, pay back 100 cents on every dollar owed, and then sell the company in 1988
to a private equity firm, McCown, DeLeeuw Co.
The rollercoaster ride continued into the early 90s, however, when a variety of factors thwarted
Vans’ struggle for growth. A deep recession hit the nation in 1991; the Gulf War followed in 1992.
Oil shortages led to higher rubber costs, which led to higher shoe prices and lower margins.
Meanwhile, “grunge” fashion trends and “urban chic” replaced the surf-and-sun look.
By the mid-90s, the company had closed one of its two factories, had laid off 1,000 workers, and
had replaced a number of its company-owned stores with off-price outlets to move $10 million of
slow-moving inventory.9 In short, the volatile currency of “cool” no longer favored Vans.
6 G. Beato (1999).
7 Michael Brooke, The Concrete Wave: The History of Skateboarding, (Toronto, ON: Warwick Publishing, 2001).
8 Leibowitz (1996).
9 Kelly Barron, “Vans–-No Loafin’: The Orange Company must restore its image and a series of financial and management
upheavals,” The Orange County Register, June 11, 1995.
5
This document is authorized for use only by Jialiang Yu in Strategic Marketing 2018_5500 taught by PETER BORTOLOTTI, Johnson & Wales University from March 2018 to September 2018.
For the exclusive use of J. Yu, 2018.
502-077
Vans: Skating on Air
The Turnaround
In 1995, Gary Schoenfeld took over operations at Vans; two years later he assumed the mantle of
CEO. One of Schoenfeld’s first moves was to close Vans’ remaining factory, effectively eliminating
the company’s manufacturing division. He explained:
For more than 25 years, Vans’ competitive advantage was its U.S. manufacturing with a
cycle time of 19 days from receipt of order to completion of finished goods. Yet by the mid90s, anyone could go to Asia and make stuff cheaper and with a far greater range of styling.
There were no barriers to entry. Fortunately, the brand was strong. When you mentioned
Vans to people, they knew what the name meant: young, fun, Southern California, beaches,
skateboarding, and surfing. So our point of difference was going to be our heritage, our
connection to this new generation of sports, the kids who played them, and their lifestyles.
In the late-90s, it was estimated that about 25 million Americans, mostly between the ages of 6 and
24, participated in some kind of alternative sport. This number included an estimated 7.8 million
skateboarders, 4.7 million snowboarders, 2.7 million wakeboarders, and 3.7 million BMX bikers.10
“Extreme sports” were believed to be more popular among boys aged 12 to 15 than Major League
Baseball or the National Hockey League,11 and more teenage males watched the X-Games on ESPN
than the SuperBowl.12
Vans’ customer base included both hardcore enthusiasts as well as occasional athletes. The
former tended to spend hours of their free time practicing their sport, while the latter tended to
exhibit a broader range of interests. By far, the most popular of Vans’ core sports was skateboarding.
The average Vans customer was a white, skateboarding male between 12 and 18 years of age who
lived with his parents in the suburbs. His interests typically included punk or hip-hop music and
videogames, and he most likely held skateboarder Tony Hawk in much higher esteem than Michael
Jordan.13
Schoenfeld believed that the company’s key challenge was maintaining a relationship with these
unpredictable, fashion-conscious kids, so he actively solicited input from his young staff members
(many of whom were skateboarding aficionados) to figure out a way to reach this youthful
demographic:
One of my most important jobs was to listen. We have lots of people within the company
who are part of the lifestyle. . . they live it, embrace it, lead it. They were the experts, not me. I
never pretended to be the target customer. So I spent a lot of time sitting with athletes, talking
with Steve Van Doren and a number of young people in the company who were passionate
about core sports.
Some of these discussions involved debates about which sports could “legitimately” be
considered “hardcore.” In recent years, a number of alternative sports—including snowboarding,
BMX bike riding, rollerblading, and so on—had grown in popularity, and it was not clear which of
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these should be included under Vans’ “Core Sports ” umbrella. As Schoenfeld remembered, “We
considered each of these sports very seriously. Over time, we decided to officially add five sports
10 American Sports Data, Inc., based on 1999 estimates.
11 Teenage Research Unlimited.
12 Based on a TV Guide report (June 1998), John J. Shanley and Paula Kalandiak, “Vans, Inc.” Wells Fargo Van Kasper, February
8, 2001.
13 Based on a survey by Alloy Inc., cited in Tkacik (2002), p. 1.
6
This document is authorized for use only by Jialiang Yu in Strategic Marketing 2018_5500 taught by PETER BORTOLOTTI, Johnson & Wales University from March 2018 to September 2018.
For the exclusive use of J. Yu, 2018.
Vans: Skating on Air
502-077
[see Figure A], but we also rejected a number of sports—like rollerblading and skiing—that we
didn’t believe were consistent with our message.“
More generally, Schoenfeld’s in-house listening sessions led to the development of a revamped
marketing approach. The centerpiece of the new approach was the sponsorship of a number of
carefully-selected, alternative sporting events and related forms of entertainment. As Schoenfeld put
it:
Our goal was to create a proprietary branding platform that would build on our unique
heritage and give us a long-term leadership position. We always knew a Nike or Reebok could
outspend us, so we focused on furthering the authenticity of our brand and connection to the
lifestyle associated with core sports.
The Promotional Mix
Triple Crown Series
One of the first events that Vans sponsored emerged out of a suggestion from Steve Van Doren
who, as vice president of promotions, spent much o …
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