Footwear brand Crocs has undergone significant organizational and management changes in the last 18 months as it works to reverse years of stagnant sales and declining profits. Founded in 2002, Crocs impressively reached $1 billion in sales within its first 10 years of operation. However, that growth trajectory has slowed considerably in recent years. The retailer posted sales of $1.2 billion in it most recent fiscal year.
Part of those aforementioned changes have been a re-evaluation of Crocs' international business. In an interview at the Demandware XChange Conference in Hollywood, Fla., last week, Harvey Bierman, vice president of e-commerce technology and operations at Crocs, discussed how scaling back the retailer's digital operations across the globe has yielded positive results.
At one time, Crocs had 22 websites operating on the Demandware platform across the globe in most major continents, including Australia, North and South America, Asia, and Europe. In the “post hypergrowth years,” Crocs has focused more on the core markets of its business, downsizing to 12 websites on its platform, which are focused on six markets: United States, United Kingdom, Japan, China, Korea and Germany. The reorganization was completed by January 2015.
This change in strategy has resulted in a nearly 30 percent comp growth in e-commerce revenues for the last three quarters, which followed two years of flat revenue. What these results tell Bierman is that “just because you can with the platform doesn't mean that you should. The platform makes the launch of websites around the world not a technology problem; it makes it an operational and business problem, which a lot of companies aren't used to addressing.”
Bierman cited a couple of reasons why select Crocs' international e-commerce sites weren't up to the brand's standards. One, after the global shared services team built the sites, they would walk away and the regional teams that were left to run them didn't have the expertise necessary. And two, in some markets there just wasn't the maturity for a brand like Crocs to have a stand-alone e-commerce business – e.g., Taiwan, Hong Kong, Poland.
Digital as a Barometer
The inroads Crocs is making in its turnaround are being realized first on the digital side of the business. That's not surprising, considering the ability to quickly make changes in e-commerce.
“E-commerce is great because it reacts so much faster to these types of changes,” Bierman noted. “New leadership and strategy comes in, we start executing on that strategy and the next day you see it in e-commerce. With retail and wholesale it takes a little longer.
“Digital has been a great barometer for the quickness and success of the turnaround, and now we're just waiting for the more traditional parts of the business to show those types of results as well.”
Bierman outlined several factors Crocs weighed when deciding which markets it would maintain an e-commerce site in, and which it would pull out of:
- Was it a key market? That took care of five websites right there, Bierman said.
- Was it a market that could be leveraged in some way? For example, Canada by the U.S. site, and Holland. Crocs' offices are in Holland, and all of the company's e-commerce team is Dutch, so it was easy to have a Dutch website.
- Can we handle it from another website? For example, Austria is often taken care of by the German website. There's not much of a reason to have an Austrian website when they all speak German, they all go to German websites, and we can make the Austrian domain reflect our German website, Bierman noted.
- How big is the market? That took care of France and Finland, Bierman said. They were pretty significant businesses that were standalone justifiable.
- What's the opportunity going forward? That's what made Korea a keeper for Crocs. It's the fifth largest e-commerce market in the world, and while Crocs hasn't yet tapped into its full potential, it sees value in having a presence in Korea.
- What's the operating income and cost of running the site, as well as the advocacy for Crocs in that market?
- Is there an alternative that makes sense? For example, Crocs has suppliers in Italy, Poland, Hong Kong and Taiwan that it could do business with, and therefore didn't feel there was a need for dedicated e-commerce sites in those countries.
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