The Decline of Crocs

The inception of Crocs traces back to three founders who discovered a unique boating clog from Canada’s Foam Creations while sailing. The innovative material, known as Croslite, intrigued them. After modifying the design and acquiring the rights to the foam production, they launched Crocs in 2002 with a model called “Beach,” initially aimed at being a spa shoe. This design closely resembles the iconic Croc we recognize today.

In its inaugural year, Crocs sold around 75,000 pairs, and within four years, the total exceeded 50 million pairs, generating extensive media attention and a love-hate dynamic with consumers. In 2006, they bought their Canadian manufacturer and achieved the largest IPO for a footwear company in U.S. history, raising $200 million. The hype surrounding these quirky shoes seemed unending.

However, in 2008, the company faced a significant downturn due to the financial crisis, suffering a $200 million loss. This led to drastic cost-cutting measures, including the closure of 158 stores, multiple factories, and the elimination of 2,000 jobs. The dire circumstances even prompted shareholders to initiate lawsuits, and by 2009, Crocs' stock plummeted to a mere $3, down from a peak of $70 in October 2007.

One factor contributing to the brand's struggles was its diluted image stemming from an expansion of retail partners. Once sold in upscale fashion boutiques, Crocs found themselves in convenience stores like 7-Eleven and Hallmark, which conflicted with their brand identity. Erin Murphy, a research analyst, remarked on this awkward shift in an interview, emphasizing that such widespread distribution undermined the brand's exclusivity.

The controversial design of Crocs also played a significant role in its challenges. Even when the shoes were initially considered trendy, many viewed them as a fashion faux pas. Tim Gunn, a fashion consultant, famously criticized them as a “fashion monstrosity” in his 2010 book. The shoes became a statement of anti-fashion, which did not help their reputation during the economic downturn.

By 2009, Crocs teetered on the brink of bankruptcy, struggling to meet payroll. Despite the challenges, the company adapted by diversifying its color offerings and introducing new styles. By 2011, they had around 250 shoe styles and opened numerous new stores, achieving $1 billion in global sales for the first time. However, by 2013, they consistently fell short of revenue targets, prompting consideration of going private.

In 2014, a $200 million investment from Blackstone, a private equity firm, provided a necessary lifeline, leading to the appointment of Gregg Ribatt as CEO. Ribatt initiated a turnaround strategy, which included enhancing manufacturing, closing underperforming stores, and focusing on revitalizing the brand's image. His successor, Andrew Rees, who took the helm in 2017, continued this vision, striving to restore Crocs' “cool” factor.

Reinventing Crocs through Collaboration and Customization

In the late 2010s, Crocs aimed to reclaim its relevance by increasing celebrity collaborations, including a musical advertisement featuring Drew Barrymore in 2018. This campaign, “Come As You Are,” acknowledged the stigma surrounding Crocs wearers, reinforcing the brand's commitment to comfort and individuality.

Targeting a younger demographic, Crocs partnered with Post Malone in 2019 for a limited-edition “custom Croc,” which sold out in under two hours. The brand has continued to collaborate with celebrities, including Justin Bieber and even KFC. In 2019, Crocs joined TikTok, rapidly gaining 100,000 followers within a week.

The company also focused on user customization. In 2006, Crocs acquired Jibbitz, a maker of small charms for personalizing Crocs. By evolving Jibbitz into a secondary product line, Crocs capitalized on the trend of customization, generating significant recurring revenue. In 2020, Jibbitz accounted for 4.4% of total revenue, more than doubling from the previous year.

The resurgence of Crocs gained momentum as celebrities like Ariana Grande and Pharrell were spotted wearing them, attracting a new youthful audience. In late 2020, sales surged 750% on StockX, a popular shoe marketplace, with Crocs selling for an average of 125% above retail price.

The pandemic provided an unexpected boon for Crocs. While many footwear brands faced declining sales, Crocs thrived as consumers sought comfortable shoes for remote work and home life. According to the Wall Street Journal, Crocs was the only brand among the top 30 tracked to see sales growth in March 2020, with a 14% increase compared to March 2019. Consequently, Crocs reported $1.386 billion in annual revenue for 2020, a 12.62% increase from the previous year.

The Future of Crocs

As the world emerges from the pandemic, questions linger about whether Crocs can maintain their newfound momentum. In an August 2020 interview with CNBC, CEO Andrew Rees expressed confidence in the brand's continued relevance, citing a solid foundation of collaborations and marketing efforts. He emphasized the numerous opportunities ahead, projecting optimism for Crocs' global future.

Rees's perspective was echoed by the New York Times, which proclaimed that Crocs had “won 2020.” Lyst’s report ranked Crocs as the eighth-most-wanted item globally, while Vogue highlighted the brand's newfound fashion credibility, suggesting it was an ideal time to embrace Crocs.

Elinor Bock from Who What Wear remarked on the shoes’ appeal despite ongoing critiques, indicating a growing acceptance among consumers. Indeed, 2021 proved to be another successful year for Crocs, and 2022 followed suit, with 2023 showing equally promising signs. The brand's market cap exceeded $6.7 billion, with revenue reaching $3.779 billion for the twelve months ending March 31, 2023—a remarkable 50% year-over-year increase.

Crocs has undoubtedly regained its footing. Similar to the resilience of the footwear itself, the Crocs brand has shown durability, skillfully navigating the fashion landscape while leveraging its controversial image. Rather than merely surviving the pandemic's retail crisis, Crocs emerged thriving and continues to flourish.

Whether viewed as a beloved staple or a fashion faux pas, Crocs has certainly made a lasting impression on the footwear industry, and its journey illustrates a company willing to embrace its unique identity.