Reebok International Ltd. held its annual Investor Day event at corporate headquarters in Canton, Mass. last week, unveiling a number of new initiatives and introducing a number of new players that are expected help the company achieve its goals. Company chairman and CEO Paul Fireman is again clearly at the helm of the Reebok brand and went into great detail about his vision for putting the brand on the map again. Fireman hinted at failed leadership over the last few years that enabled the Reebok brand message to become muddled and unfocused in many global markets. Based on his comments, Mr. Fireman again plans to be much more directional in how the Reebok brand is developed, presented, and ultimately, perceived.
The recent deal to sell the Ralph Lauren Footwear license back to Polo Ralph Lauren, along with a solid cash position that saw $565 million in the bank at year-end, provides RIL with resources to continue making acquisition deals not unlike the acquisition of The Hockey Company last year. The company apparently sees value in acquiring companies that provide a broader opportunity to build on the existing brands in the RIL portfolio. The THC deal is a great example where the Reebok brand was able to quickly enter the hockey market, a sector where the brand never played prior to the acquisition. Other hardline companies would apparently be seen as key opportunities.
The biggest shift in strategy appears to be the move to what Fireman referred to as a “pull” process to selling product rather than the “push” process that the company has been employing for some time. The idea of the pull process is basically the same formula used by Nike and Under Armour to place product based on consumer demand rather than negotiating price with retailers to sell in product. The idea, not a revolutionary one in most segments of the market, does require a new line of thinking for the company. Fireman cited one example where a retailer requested a deeper discount on Classics that werent moving through as well as planned. Fireman said he declined, preferring to hold the product for later delivery rather than discounting the goods. The planned shift, if executed in its purest form, would alter a great deal the way the company is forced to do business today and will take a major shift in thinking to enforce it as part of the selling process.
“We are going to change things, definitely in the process of distribution. There will be some changes,” said Fireman. “I don't think they are going to be dramatic. I think it's just the question of how we operate; what we stand for, how we operate, what we believe in and what we are willing to do or not to get an order.”
The shift in strategy will force the company to put a stake in the ground as they attempt to re-build brand image by limiting the promotional frequency on Classics while developing compelling product and marketing imagery that drives more targeted core consumers to retail to request the product. The shift from push to pull is not expected to happen overnight, and it will be interesting to see how patient Wall Street will be with Fireman as he embarks on the new strategy.
Mr. Fireman did not forecast backward movement for the brand, but did intimate they may move “sideways” a bit as they implement the strategy. “I'm not reckless,” he said. “I'm not going to foolishly go out and do something stupid. We're going to transition into a pull environment. As I said from the beginning, transition means thinking out a plan, standing for what you believe in and moving forward.”
Part of that shift will have to come from the product side and more importantly, the establishment of a real technical platform for the brand. Fireman, based on his comments, is ready to bet the farm on the Pump technology, a technology he expects will “change the industry”. “We're changing the fundamental principles of a shoe, or at least an athletic shoe,” he said.
What may help Fireman achieve his goal is a solid team of senior managers that appear to have the energy and talents required to right the ship.
Gene McCarthy, who came to Reebok to run footwear after a 25 year stint at Nike, the last five running the Jordan brand, is now a key player. He clearly laid out his priorities, with the elevation of design being the top goal for his group. Secondly, he said they need to “explore the outer limits of technology and style,” hinting at a direction not unlike the road taken by adidas.
“Technology has been somewhat limited to something that's in the middle or the bottom of the shoe to protect your foot and in some cases maybe even enhance your performance,” said McCarthy. “And then of course with us, technology is on tops and around the side of the foot through Pump. But there are other ways that we can get the technology, and we have to go from the idea of a smart shoe to an intelligent shoe.”
As an example to his commitment to achieving these goals, McCarthy said he made two key hires in the last thirty days. The first was the addition of Dan Williams, who was formerly the head of advanced concepts for Motorola, and before that the head of design and creative for the company. Williams is expected to be the access point to other companies that are on the “horizon of new breakthrough technologies” and how those technologies can “affect performance and the human experience.” The other key hire highlighted was Michael Schafer, formerly the creative director at Puma. He is expected to help fuse fashion, color, and technology.
Not surprising, McCarthy said he will focus on running to establish the technical platform for the brand, with the Premier program the centerpiece of those efforts. “The whole idea of Premier is to go after the real runner, not the inspirational runner, the real runner,” said McCarthy.
McCarthy said they have expanded the penetration of the running specialty channel from about 30 doors a few years ago to more than 300 today. Still, the brand only holds a market share of roughly 3% to 4% in the running category, far below the leaders in the group. The company does not find it unrealistic to push for share in the low- to mid-teens in the near future. He described Premier as the “north star” for what they do in running.
The other key area of focus for the footwear group is basketball. McCarthy said they must market to an emotion versus a person. He laid out a product strategy for basketball that had the RBK product targeted to athletic specialty and urban independents, while brand Reebok product focused on the sporting goods retailer. He emphasized the companys commitment to the category by highlighting five shoes at $100+ in the RBK line-up. The brand Reebok product is priced in the $70 to $80 range.
From a brand marketing perspective, Reebok has initiatives across a number of channels and consumer segments. They launched a skate shoe under the DGK moniker that will debut exclusively at Journeys. They will continue to focus on their efforts merging music and footwear by coordinating their artist-associated product launches for Tuesdays when CDs are released. Entertainment chief Mike Parker, also a recent transfer from Nike, hinted that Reebok would expand channels of distribution for this type of product as well. “We're going to go in places where we aren't right now, but at the same time we're not going to compromise our existing channel distribution, so that's a key point to keep in mind,” said Parker. Parker also suggested they will “actively partner up a brand outside our industry to create some unique and special products that goes after another consumer segment.”
Reebok will also focus on the Hispanic consumer, especially the Mexican-American market. The company is launching a new site, rbklatino.com and will focus other efforts in key western markets. They see using their relationship with the Chivas soccer team and music artists like Belinda to customize the message just for key west coast markets.
>>> We can already sense the rolling of the eyes both inside and outside the company. Most will interpret the move from push to pull as yet another effort to get off the promotional addiction
>>> Interesting to note that Fireman said they had their first meeting to discuss the shift the night before. Doesnt sound like all the pieces — or people — are in place just yet
>>> Cant think of one retailer or Reebok employee who wouldnt love the product to pull through for them…
