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In the spring of 2002, the Vans brand had reached monumental success that outpaced most brands within their industry and transformed them into a $350 million business. The rapid growth of the company and increase demand created a need for a new strategy to guide the brand’s future growth plans. Van’s CEO and president, Gary Schoenfeld, felt strongly that the brand was at a crossroads and that, while they were pleased with the current success, they had not yet maxed out their potential.

His question was not whether or not growth was needed, but rather how best to drive the next stage of growth. Given the unique brand and culture that the Vans brand embodied, he was interested in figuring out which product categories s to participate in and which distribution channels to be in. Key Characteristics of the Firm and the Competitive Environment The Vans brand began as a shoe company in the 1960’s that was geared towards the Southern California surfing and skateboarding culture. The company designed durable and affordable shoes that served an unmet need in a niche market.

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Being a small, local, grass roots company allowed them great flexibility to experiment with many different designs and patterns in ways that the large traditional shoe companies could not. They focused on incorporating the surf and skate lifestyle into their brand early on and were very much a part of what was seen as a subculture movement during that time. Because of their attention to customers, as well as their affordability and flexibility, Vans instantly became a favorite amongst the skate and surf communities.

They had found a niche market and offered a differentiated product offering that the larger shoe manufacturers had not yet penetrated or who lacked the expertise and understanding to compete. Vans had created a loyal following and became as much part of skateboarding culture as skateboarding culture was a part of their brand. Because of this entrenchment and attachment to skateboarding and their other Core Sports, Vans became more than a shoe company by expanding their product mix to include skate parks, competitions, festivals, endorsed athletes, and now even music and film ventures.

Vans was able to achieve great success by listening to their customers and spending a great deal of time evaluating their brand personality and market perceptions. Currently, they are experimenting with a few new product offerings including entertainment such as film and music, and footwear lines including sandals and outdoor wear. The athletic footwear market had become fairly stagnant by 2002, but the market for skateboard shoes was growing rapidly and had become an estimated $800 million market.

With the market for skateboard shoes outpacing the overall shoe market, Vans faced increased competition from three distinct groups of competitors. The first group of competitors was the larger companies such as Nike and Adidas who were characterized by their massive marketing and production budgets and brand recognition, but were not finding success in this market because of their mainstream image that clashed with the counterculture of Van’s Core Sports.

The second group of competitors was the medium sized companies like Airwalk and Skechers that were trying to compete with Vans in various mass distribution channels but struggled with their brand perceptions. Airwalk for example was disliked for “selling out” to department stores and becoming too mainstream and Skechers was seen as possibly too fashion forward and attracted a mostly female following. The third group of competitors was the smaller skateboard specific brands such as DC and Etnies that competed directly for the loyalty of diehard skateboarders.

Segmentation, Targeting and Positioning of the Firm The most recent success at Vans stemmed from identifying their key customer base and aligning their products and strategy to better serve them. Vans knew that their customers were both hardcore enthusiasts and occasional athletes who participated or enjoyed alternative sports and wanted to create a proprietary branding platform that could build on their unique heritage that would give them a long-term competitive advantage.

They started by identifying which alternative sports fit their brand best and created a list of “Core Sports” that included Surfing, Skateboarding, Snowboarding, Wakeboarding, BMX, Motocross, and Supercross. They knew that other brands could outspend them, so they instead focused on the authenticity of their brand and integrating themselves into the lifestyle and culture of these Core Sports. Vans adopted a unique promotional strategy that was very different than the large budget traditional advertising campaigns that their large competitors had relied on for years.

They instead focused on four distinct avenues in their promotional mix. The first method of promotion was through their ownership of the international “Triple Crown Series”, a competition that drew athletes from around the world and was broadcast nationally on NBC networks. This brought global exposure to the Vans brand and furthered their authentic integration into the culture of their Core Sports. The second promotional method was a traveling festival known as the Vans Warped Tour that featured local skate competitions, lesser known bands, and brought together the Core Sports community.

In addition to brand promotion, the events brought in substantial revenue of their own. They had found a way to make money and effectively promote their brand at the same time. Vans also invested in skateparks as part of their promotional mix. They offered a safe and clean place for skateboarders to practice and gather while increasing exposure to their brand. The skateboards brought in some revenue, but helped further cement the Vans brand into skate culture. The final promotional avenue prior to 2002 was the endorsement of athletes.

Vans identified a broad range of athletes to sponsor and this allowed them to diversify their brand image. They sponsored a variety of athletes that each had different personalities, experiences, sports, and styles. They tailored products to fit the individual athlete so not only were they building brand credibility, but the athletes helped Vans appeal to build bridges to new customer markets. Vans also differentiated itself from its competition through a very intentional distribution mix.

They began with one proprietary retail store and continued that model through 2002 with 65 retail stores and an additional 62 outlet stores. They supplemented several stores with skate parks as well. They had three tiers of wholesale distribution channels and each provided a different benefit for the brand. The first distribution tier consisted of independent specialty skate stores that were unique to their customer base. This ensured they were reaching the hardcore enthusiasts and skate professionals and represented about 10% of their domestic wholesale business.

In these channels they competed mostly with small niche hardcore brands like DC and Etnies. The second distribution tier included mall specialty stores, high end department stores, and sporting goods stores. The competition in this tier included many mainstream brands and represented about 35-45% of their domestic wholesale business. The third and final wholesale distribution tier was the moderate department stores and family shoe stores such as Mervyn’s, Kohls, and Famous Footwear. This tier represents about 45-55% of their domestic wholesale business.

Schoenfeld’s goal has always been to increase overall market penetration and has steadily increased the availability of Vans across all tiers, resulting in Vans being sold at over 12,000 domestic locations and 600 core skate shops in 2002. Vans adopted a customer centered and dynamic product mix that was the result of constant feedback from athletes, merchandisers, and retailers. Schoenfeld felt that the product mix was an area that Vans needed to focus on and be a leader in the products they bring to the market.

Their product strategy was tied closely to their distribution strategy and they focused on making products that corresponded with the segmentation of their various distribution outlets. This resulted in four core footwear lines: Signature Collection, Pro Series Collection, Skate Performance Collection, and Skate Casual Collection. The Signature Collection was designed to match their endorsed athletes and were distributed in Vans stores and specialty skate shops. Their Pro Series Collection included highly technical products and was distributed to limited skate shops.

The Skate Performance Collection appealed to a broader youth market ad was distributed more widely. There was also the Skate Casual Collection that had more mass appeal and was sold to third tier wholesale distributors. In addition to their four core footwear lines, they had their infamous classics collection that was sold throughout all retail channels and some new more experimental lines such as sandals and outdoor wear. Strategic Alternatives Schoenfeld’s focus was on determining which product categories to focus on and which distribution channels to be in to best shape future growth for the Vans brand.

He contemplated a reorganization of the brand that would help better segment their product offerings and brand strategy. Currently, Vans is organized into three business units including retail, wholesale, and international. Given the wide range of product offerings and segments that Vans now serves, he is considering reorganizing around the general product offerings and segments of the brand. These include Men’s Footwear, Women’s Footwear, Kid’s Footwear, Apparel, Entertainment, and Hard Goods.

Vans was focused on continuous improvement in all areas of business, but he was able to identify a few areas that would require attention in the next fiscal year and would be crucial to their growth strategy. The first area was footwear, specifically the Women’s Collection and the Outdoor Line. Schoenfeld believed that women were an underdeveloped segment in the core sports community and currently only represented 15% of the company’s sales. The Women’s Collection operated differently than their typical 15-month product development cycle and they had difficulty keeping up with changing trends and the short product life cycles in that segment.

The Outdoor Line was designed to capitalize on the idea that their customer base didn’t work out in traditional work out facilities or shoes and would be interested in a Vans product for trails and hills that they are more accustomed too. However, the line hasn’t caught on and sales are unimpressive. Schoenfeld attributes this to a need for more time and believed that this was a good investment for Vans in the long run in order to broaden the universe of what Vans products look like.

The second area was entertainment, with the recent success of their film debut, a newly announced record label, and potential for growth in the video game industry. While these were exciting opportunities, many outsiders and investors questioned the strategic direction of the company with so many new projects that appear on the surface to be unrelated to a traditional shoe brand. The movie venture was an organic creation from one of the endorsed athletes and ended up being a tremendous success for the brand. While Vans was not particularly experienced in this area, it was an opportunity that it within their brand strategy. Vans recently announced the creation of their own record label as well in an attempt to develop and distribute music for artists involved in their Core Sports communities. They have some experience with the music industry through the Vans Warped Tour, but this is also fairly unfamiliar territory for Vans. The final frontier in the entertainment segment is video games. Vans has had some success in producing video games and believes that this is a powerful medium for reaching customers. Recommendations

Schoenfeld has done an incredible job of understanding, developing, and communicating the Vans brand and maintaining a clear and consistent focus on their Core Sports. He has positioned Vans at the forefront of the Core Sports lifestyle and as a result Vans has evolved from a footwear centered brand of products to a well-known and established lifestyle brand. Their core competency is no longer in producing shoes, but in understanding and servings the wants and needs of a prominent subculture that is tied to their Core Sports.

Vans has learned from their own history the risks of expanding outside of their core competencies and they are aware of the risks they could face by becoming too main stream or “selling out” as many of their competitors have done. These factors lend themselves to a strategy that focuses on increasing their share of the customer’s wallet and not on increasing their target markets or trying to expand into new market segments outside of the Core Sports culture. First and foremost, reorganization makes a great deal of sense and would allow for more autonomy and a more direct focus on specific product segments that need more attention.

By separating Women’s Footwear from Men’s, for example, they could implement different product life cycles and design strategies and that unit could be more sensitive to the unique needs and wants of that segment. The Women’s Collection appears to be a good area to seek growth. Given the competition and Vans brand strengths, the focus should be on customer centered and responsive designs and an increased presence of this collection in second tier distributors to compete directly with Skechers for market share. In regards to the Outdoor Line, this line oes not appear to be as directly connected to their Core Sports and customer base needs and wants. They run the risk of losing their credibility as an expert and specialized skate shoe company by offering generic and nondescript product offerings in other segments. They also run the risk of appearing more interested in making profit and less invested in Core Sports by offering shoes outside of that segment. In other words, this is positioning them back as a shoe company instead of a Core Sports lifestyle company.

Another advantage of the reorganization would be the development of an entertainment division that could specialize more in promotions and incorporating Vans further into the Core Sports lifestyle, resulting in a greater share of their customer’s wallets. Films, music, and video games are prominent elements of any subculture and Vans is uniquely positioned to profit from these segments being that they have access to athletes, host a large music festival, and are well connected within the Core Sports culture.

Because film, music, and video games are all pieces of the greater Core Sports culture, there is substantial opportunity for cross promotion in their retail stores, skateparks, competitions, festivals, and through their endorsed athletes. These entertainment products will help further cement Vans as an authentic and credible brand dedicated to their Core Sports base while increasing opportunities for further growth.

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