Allen Edmonds: An American Revolution
SHOES
Company Background
Launched in 1922, Allen Edmonds found success selling shoes through their innovative design which provided extra comfort by eliminating the need for a metal shank in the sole. The brand continued to flourish through WWII, providing shoes for military officers.
By 2008, Allen Edmonds began struggling as revenue dropped 30% and was unable to keep up with its debt payments. Salvation came in the form of a $10M capital investment from a private equity shop. This capital not only helped the company avoid bankruptcy, the investment also gave other lenders confidence in the company’s ability to turn itself around.
Business Model
Allen Edmonds has built a brand that prides itself on three things: classic American styling, shoes made in America, and shoes that are built by skilled craftsman. The brand motto “An American Original” captures what the Allen Edmonds brand means to its consumers. Revenue comes from selling shoes and accessories in Allen Edmond stores, other retailers, or online. They also provide a recrafting and shining services for customers.
Operating Model
Allen Edmonds struggles in 2008 were due to both the economic recession and the lack of alignment between the operating and business models. Allen Edmonds built its brand around shoes crafted through traditional manufacturing processes by skilled labor in the United States. This classic operating model makes sense when selling classic styled dress shoes; however, in the early 2000’s Allen Edmonds cancelled many of these classic styles in an attempt to break into the fast fashion market. The brand moved towards European fast-fashion and away from what made it successful: American styled, high quality products made in the US.
After Goldner Hawn invested $10M to save the company from bankruptcy and Paul Grangaard took over as CEO, the company had one goal: to align its business model with its product line. It did this in three ways.
First, Grangaard brought back the classic American-styled products. Models like the Strand became wild successes after the re-release.
Second, the company had to cut costs. Since the traditional manufacturing process depended heavily on skilled labor, much their product costwas in labor. Additionally, availability of labor trained in crafting shoes is limited, so maintaining a proper balance of cutting costs and retaining enough skilled labor was Grangaard’s priority. In the end, 8% of the workforce was cut, an amount chosen carefully to allow Allen Edmonds to retain its traditional crafting process.
Lastly, the company launched its internet platform. The site was setup to track previous customer purchases and interests, allowing salespeople to better understand the needs of each customer. This information allows the Allen Edmonds sales force to reach customers in a personalized way online, similar to how the traditional sales force has been reaching customers in stores since 1922.
Effectiveness
These actions have perfectly aligned the business model, which provides customers with high quality, American styled shoes, with their operating model, which crafts shoes in America and provides customers with high quality service. This alignment has positioned Allen Edmonds as a leader in the market, boxing out any US competitors in their price point with their established brand name, scale, and loyal customer following. Since 2009, the company has more than doubled its revenues and their employment has increased over 85% in the United States.
The next steps for the company include a recently launched clothing line. The unique business model of Allen Edmonds allows them to enter the clothing market in a similar fashion as their shoe business. Allen Edmonds should leverage its current business and operating model for shoes to create a high quality, American styled, and American made clothing line.
Here’s the problem I see with Granaard’s execution of the clothing line. The clothing companies that have found success have done so through the proper alignment of business and operating models. As Kanye West and many others have found out the hard way, the clothing industry is difficult to break into. For this reason, I am of the belief that Allen Edmonds’ only chance for success is to copy its bulletproof shoe business model. The issue is that the current line of Allen Edmonds clothing is outsourced, directly contradicting its brand’s tagline, “An American Original”. Time will tell how successful this new product line will be for Allen Edmonds.
Sources:
http://www.allenedmonds.com/our-story/heritage.html
http://www.jsonline.com/business/allen-edmonds-recrafts-its-business-model-d971guh-171860131.html
http://www.bloomberg.com/news/videos/b/c2dcc8ca-2b16-4332-907c-4b18cb2ae4eb
http://www.forbes.com/sites/kimberlywhitler/2015/05/03/ceo-paul-grangaard-on-the-allen-edmonds-turnaround-a-great-american-comeback-story/
I couldn’t agree more that they should stick with shoes and maybe branch out into accessories like belts but stop there. Clothing is very difficult to break into and maintain an edge in as you have pointed out. Also, I love the Kanye West tag. Classic.
I feel like this company is definitely in an enviable position with its history of American made shoes. This could not be more important today as more and more people are concerned about the origins of products they buy. I feel like though I very well may have seen and tried these shoes on in a store, I have no aided brand awareness. Are they trying to keep this product as a more luxury product since it is more expensive?
I also agree that clothing is not a great place to go. I mean if they cannot even make the clothing themselves, they are totally breaking their origins as a company!
I have two pairs of shoes that I wore to work for the last 4 years, both of them from Allen Edmonds. I think there is something special about shoes that isn’t really that important in other clothes. the biggest selling point for me, wasn’t necessarily the “American Made” in particular but the love and care they seemed to put into their product all around, they are really nice solid shoes that just feel high quality. They also have great customer service! A few years ago, I bought a pair of shoes in a Chicago Allen Edmonds store that were a size too small, wore them to a wedding, and then swapped them out for a different size when I got back to the Boston Allen Edmonds store! Amazing.
This type of service wouldn’t be that important to me for say a dress shirt. Definitely agree with James: stick to shoes
I have to agree with the above comments regarding being wary of entering the clothing market. I’d be curious to understand if Allen Edmonds will try to go after a new consumer or leverage the existing customer base. Both customer bases present significant challenges that will require a superior product (there are a fair amount of other men’s clothing lines that are “made in America” or offer something unique) and significant investment (new suppliers, factories, distribution centers, etc.) to product. Additionally, the new customers will require significant investment to both acquire and then retain. This will likely take away from the profitability and focus on their core business, which they have just gotten back on track. It seems as though Allen Edmonds succeeded by being a first mover in this category at this price point offering a unique product that engaged emotionally with the customer. In my opinion, they are too late to the game for men’s apparel to replicate the business and should focus on their core business.