By Charles Lam
By R. Scott Moxley
By Taylor Hamby
By Matt Coker
By R. Scott Moxley
By Charles Lam
By LP Hastings
By Taylor Hamby
He's right. Among the popular promotional decals that circulated at the Action Sports Retailers convention in San Diego last summer was one that savagely denigrated K2, a ski company that recently introduced a line of skateboard shoes. "FucK2: You can't buy your way in," the stickers read. Similarly, megabrands like Nike and Reebok have been unable to penetrate the market.
No wonder the expansion of Vans is a success story that Schoenfeld would prefer you refrain from calling a burgeoning empire, even through sales have soared from $80 million in 1994 to $117.5 million in 1996 to $174.5 in the 1998 fiscal year. He gets uncomfortable when you mention Nike and Vans in the same breath.
"The reality is that Nike has reached a 46 percent market share in the United States. Vans is at 1 percent," says Schoenfeld, who seems to keep such statistics on the tip of his tongue. "So we've got a long, long way to go before we get to that scale." He pauses. "And we don't aspire to get to that scale."
Vans stockholders may eventually have a different opinion about that. For now, however, there's no reason for them to quibble about how small Vans says it is, so long as the company keeps growing the way it has. "I think we can grow our market share," allows Schoenfeld, who in other published interviews has permitted himself to savor not-too-distant annual sales of a half-billion dollars. "If we can hit 3 percent to 5 percent, we could have a lot of fun."
Meanwhile, Vans' company line is one of unwavering loyalty to the so-called small niche market that its surveys and focus groups-and rising sales-indicate is still striking a nerve with its young customers. "Every day, we are focused on the 10- to 24-year-old customers, on being a part of their lifestyle," Schoenfeld emphasizes. "They know what's going on. They're smart. Let's face it: this generation is a lot smarter than any of us were. The thing about Vans being 32 years old is we are kind of the umbrella that has been a part of this from before any of these kids were born."
However, the Vans heritage and tradition that Schoenfeld touts aren't quite as pure and authentic as they sound. The Van Doren Rubber Company, the factory that Paul Van Doren and his family established in Orange in 1966, was acquired by the Menlo Park-based venture-capital firm of McCown DeLeeuw & Co. in 1988. These days, Vans answers to quarterly reports and the quick-profit pressure of stockholders on the NASDAQ exchange rather than the enduring business ethics of its founder. Van Doren's original dream was to manufacture shoes and sell them directly to the public, rather than going through a middleman. But in the 1990s, Vans has positioned itself squarely in the middle, opting to be a marketer rather than a manufacturer.
During the past 10 years, Vans has restructured its operation in the style of just about every other shoe giant, following dance steps almost identical to those Nike invented to waltz to the top of the world. During the past five years, Vans has gradually subcontracted more and more of its production to foreign countries, primarily South Korea and southern China, because of cheaper labor and because Benzene, an environmentally hazardous solvent used to produce the shoes in Asia, is intensely-and expensively-regulated in the United States.
Vans' fight against a union-organizing effort in 1994 and 1995-the average employee earned $5.75 per hour and could not afford the required co-payments for the company-sponsored healthy insurance-was so zealous that it racked up numerous charges of federal labor-law violations from the National Labor Relations Board (NLRB). In May 1995, a month before a second NLRB-ordered organizing election, Vans closed the original factory in Orange, which at one point had 1,500 workers and was still-with about 400 employees remaining-the single-largest manufacturing employer in Orange County.
Three months ago, Vans closed its other U.S. factory, in the northern San Diego County city of Vista, where 300 people worked. The company moved production to Mexico and Spain.
"It was the right thing to do," says Schoenfeld, who insists that this restructuring is consistent with Vans' legacy. "It has freed us up even more to make a commitment to our customers, to concentrate on what they want."
For all his talk about the company bloodline, however, Schoenfeld has only been with Vans since 1995. Since joining the company, he has been quickly promoted from chief operating officer to executive vice president to CEO; he inherited the company presidency from his father, Walter, in 1996. But even the richest company bloodlines aren't very impressive if they are bleeding, which Vans did for several years as it fluctuated in and out of bankruptcy in the mid-'80s, finally emerging out of it in December 1986. During his watch, Schoenfeld has concentrated on Vans' bottom line, which has gotten blacker and blacker as sales have quadrupled. And by recycling those profits into marketing, he insists Vans' customers have become truer and bluer than ever.
"We're just going to stay close to these kids, just keep doing things better. And as we grow, we'll make sure they feel they're benefitting," Schoenfeld says. "It's working. I think the feelings about Vans today have probably never been more positive in 32 years."