Airwalk Footwear Pres. Lee Smith stated that most of his company's growth is in skate-influenced products and not in its shoe lines. Smith believes that manufacturers need to continuously reinvent themselves if they are to fuel demand for their products. He views Nike's entry to the skateboarding, snowboarding and mountain biking market as a positive development as it will help boost the legitimacy of these particular segments.
ALTOONA, PA - Having nearly tripled its sales consistently for the past three years and predicting steady gains for '96, Airwalk president Lee Smith finds himself not only at the helm of a $240 million organization, but at the epicenter of the action sports trend that has grown to become a sizeable chunk of traditional sporting goods retail. Skate-influenced shoes, Smith says, is not a fad - it's here to stay, and it's indicative of a larger shift toward lifestyle-influenced casual footwear. SGB caught Smith on the phone during his company's annual sales meeting last month - and he opened up on Airwalk's growth, the competition and what it means now that Nike's jumped on board. See more other articles: Tony Hawk Aims High
SGB: With any category that sees growth like skate has, retailers always worry about a backlash. Do you see the demand flattening off at all?
SMITH: No, not at all. For us, skateboarding shoes - technical skateboarding shoes - actually haven't grown. Skateboarding as far as participants is not going up - we're selling about the same amount of technical skate products that we always have. What people are misunderstanding is our active casual line, hat has some skate influence in it - that's where we're really seeing tremendous growth. And we feel very good about it. I really believe our retailers think of this whole active casual movement as a new category. And I think it's here to stay. I don't see it going away. There are some good companies driving the business that really want to take it to the next level. There's us, and Simple, and now Nike and adidas.
SGB: So what do you think manufacturers need to do to keep fueling the demand?
SMITH: You have to keep reinventing yourself. That's something we've learned from the pure athletic companies that constantly reinvent themselves in consumers' minds. There's the Air Mada, the Air Mada Buck, the Air Mada II, the Air Mada Bubble Walk. Every two months there's some new look so it's evolutionary. Every once in a while they come out with something revolutionary, but they stay fresh in the consumer's mind by pretty much reinventing their company. The other thing is you have to grow new categories. We're taking active casual to new categories - active casual with an outdoor influence, active casual with a mountain bike influence, or active casual with a golf influence. So it's not just skate. We take the same type of concept to technical mountain biking shoes that we use in our technical best skate shoes.
Then we make a mountain biking influenced line for the mainstream. We make technical snowboarding boots and we only sell those in snowboarding shops; then we make snowboard influenced shoes to be worn casually as a kind of after snowboarding boot. You have to continually search for new categories of footwear that can do something unique for youth in those categories. This spring we're coming out with a new line of boat shoes. And you can say, well, what does that have to do with skate? Absolutely nothing. But we just thought that was a dead category that needed to be reinvented. Nobody's doing anything cool. A sixteen-year-old might go, "Oh that's rad. I think that's cool because that's for me. If I wanted a boat shoe that's what it would be like." Kind of weird and different.
SGB: Boat shoes with an Airwalk spin?
SMITH: Exactly. And then we approach our retailers with it and say this is what we think. I think we have a pretty good dialogue with the consumers and we use that to help us drive our business.
SGB: Nike's been making skateboarding shoes for a few seasons now. What does it mean that Swoosh skate shoes have entered the market?
SMITH: I think it's the best thing that could happen. I have a lot of respect for Nike and I've said that they could out-design us, out-develop, out-market, out-finance us and out-produce us. They could buy us with spare change if they wanted to. For them to recognize skateboarding, snow-boarding and mountain biking, I think it's fantastic. They will help legitimize the whole category. One of the biggest sporting goods retailers said recently they want to make action sports as legitimate as tennis, as basketball, as running. To me that's phenomenal, and I think if we're there and if Nike's there and if another major vendor's there it gives the whole category more legitimacy. This isn't just a fad. It's something new. It's like what cross- training was ten years ago or what aerobic was fifteen years ago. It's big. And I don't think we should necessarily fear the competition. If they do a better job at marketing and reaching the youth then they win. That's their right. If we do it, then we win, and that's our right.
SGB: There are quite a few players in the skateb that weren't there a few years ago. How concerned are you with competition?
SMITH: I think as far as technical skates, the new companies that are out there, the Etnies, the Duffs and those types of people - I think there's some good things that they're doing. And I'm excited about what Nike's doing. But the biters - I don't want to name names but the people who just suck off it and then knock it off for ten bucks less and just kind of bite off the industry - they have an opportunity to wreck the whole thing. If the retailers support the efforts of the biters and the knock-off people then we have a problem.
SGB: When and how did you first enter traditional sporting goods stores?
SMITH: I think it was in '93 that we began to approach retailers. We had good support from some mall casual shoe stores. On the athletic end, it took a lot more effort. There was a lot of education, a lot of direct mail, a lot of knocking on doors, and a lot of getting thrown out.
SGB: So you had to twist their arm to get them to give you a chance.
SMITH: Yeah. And there was a lot of support we had to give them to get them to test us at first. But once we got the tests in and we found there was a demand for the product in those types of outlets, then it snowballed rather quickly.
SGB: Do you worry about alienating your core consumer who doesn't necessarily want to see Airwalk in a Foot Locker? In other words, can Airwalk ever be too big to be cool?
SMITH: I think we definitely fear alienating the consumers that we've been working with over the past 10 years. I think you have to be careful of that. I think if we're not truthful and up front with them they can smell it. If we didn't make the best technical product and support it with the best team, yeah, we'd alienate those people. But when Nike went from just running shoes to basketball shoes I don't think they alienated runners. I think runners that played basketball were probably pretty stoked that now they had a good basketball shoe. I think that basketball retailers, or running retailers had to adjust - that's where the segmentation and trade channel distribution comes in. On the other hand, there have also been brands who have just blown it and really lost focus. Someone who's good in aerobics per say or women's fitness and says hey, we're going into men's basketball. It's the same concern. I think you have to keep your authenticity and stay true to what brought you to the dance. From there you can go anywhere. I mean, if Nike made bowling shoes they'd probably be technically excellent performance bowling shoes. And if we did bowling shoes we'd want them to be really cool bowling shoes that a seventeen-year-old would think is cool to wear casually. So I think you just have to be true to your heritage. Our whole focus is on youth casual and making products that they want to wear.
SGB: You outsold Burton in snowboard boots last year, and this season will introduce boards. How much do you intend to expand your presence in snowboarding and how important a role will it play in Airwalk's future?
SMITH: Snowboarding was growing at about 50% per year and I think now they're saying about 36% per year. So it's still a rapidly growing sport. For us it's very important. Binding technology is the limiting factor in snowboarding right now, so I think our most important development is the Quad System which is a step-in, non releasable binding system. We've been working on it for almost four years and we're finally bringing it to market. And we think it's right. The convenience alone I think will open up the sport to new consumers who perhaps don't want to sit down in the snow and strap in or don't want to use hard boots. So that to me is very exciting. And then we went into boards because we believe the system changes some of the dynamics, and we had to change some of the board dynamics to maximize our binding interface. And then we just threw in clothing as a kicker. I think the brand name is pretty strong.
SGB: What role do you think snowboarding will play in sporting goods retail going forward?
SMITH: Personally, I think it will go the way the ski industry has gone. Right now with the way snowboarding it is marketed and the size and the type of equipment it's possible that as it gets more and more technical, it will go more the way of ski where you have stand alone ski shops. You have stand alone snowboard shops now. And then you have sporting good shops that have ski areas. But that's just a prediction.
SGB: Any plans to expand on apparel?
SMITH: We're not planning on expanding in apparel per se, but we do want to do limited accessories like t-shirts, hats, bags or socks just to really support the footwear. We don't want to be a clothing company. We have no desire to. But our retailers are really pushing us for add-on sales. They really want to merchandise the footwear with the hats and the t-shirts and mix them, blah, blah, blah. We did our own apparel back about five years ago and we didn't do very well. We had clothes and pants and shorts and jackets and shirts with zippers and all kinds of stuff, and we just didn't do very well in it. I believe our focus is footwear. Airwalk's 10 years old in footwear and we're a division of a 22-year old-footwear company. That keeps our plate pretty full.
SGB: Your advertising efforts this year will make Airwalk the fourth largest footwear advertiser in the U.S. Obviously this is a key strategy for you.
SMITH: We're at a point now with our advertising that our reach is tremendous and we can really affect how the winds blow. Plus, that money is focused on a narrow consumer base. We don't have to go from cradle to grave like Nike does. For us, it's 12 to 22. Since that dollar amount is just focused like a laser beam right on them, the effect is multiplied. It's just opened up new opportunities for us I guess. We still put a total of three percent into local store marketing in a variety of co-op and local store marketing and funds for our reps to do promotions and events.
SGB: What about an IPO?
SMITH: Possibly. I don't know. I'm not an owner, so it's not up to me. I guess we'd consider all options. People keep a pretty close eye on our numbers.
SGB: You joked that Nike could buy you with spare change. Do you ever think they would?
SMITH: They're doing it all themselves. They're making snowboarding boots next year and they already have skateboarding shoes at retail. We're kind of the anti-Nike. We're almost like a backlash to the technical performance, Just Do It, blah, blah, blah. It's a whole casual, I-don't-have-to-be-performance-driven attitude. There's a time when I just go out to the movies and don't want to look like a basketball player. See more: how to hang a skateboard
SGB: What will be Airwalk's major focus for 1997?
SMITH: We've expanded quickly over the past few years, and now we're looking at growth - and there's a big difference. We think the brand is established; we think we have a pretty good dialogue with consumers. Now we're putting the things in place that we need to be a successful company rather than just a successful brand, What we really want to focus on now is being an excellent company internally and really filling in the infrastructure. We're putting a tremendous investment into a new computer system. We're overhauling the entire customer service sales support area of our company. But I think we're through with the rapid expansion. We had to get to a point quickly while we had the share of market and the advertising dollars to now go to the next level. We're going to keep the fresh product coming. For spring we have a lot of new stuff coming out new concepts and some patents that we did that are going to be a lot of fun. I think people will be pretty surprised. I'm excited. I get excited over product.