Converse: We Love You, Chucks

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The first Olympic basketball team wore them; they dominated the basketball courts—amateur and professional—for more than 40 years; Dr. } made them famous; Kurt Cobain died in them. What are they? Converse All Stars—more particularly the famous Chuck Taylor All Stars, known around the world as Chucks.

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Converse: We Love You, Chucks!

 

The first Olympic basketball team wore them; they dominated the basketball courts—amateur and professional—for more than 40 years; Dr. } made them famous; Kurt Cobain died in them. What are they? Converse All Stars—more particularly the famous Chuck Taylor All Stars, known around the world as Chucks.

Compared to today's marvels of performance engineering, Chucks have always been very basic shoes. The first Chucks were introduced in 1923 as high-top canvas laceups with rubber-covered toes in black, white, and red with a blue label on the back that read "Made in the U.S.A." More than 80 years and 750 million pairs later, that formula has changed very little. They may be basic, but they are also downright affordable. A standard pair of Chuck Taylor high- tops still costs only about $38.

Converse invented basketball shoes, and by the mid-1970s, 70 to 80 percent of basketball players still wore Converse. But by the year 2000, the company's market share had dwindled to only about 1 percent of the total athletic shoe market. In 2001, Converse declared Chapter 11 bankruptcy and was purchased by an investment group. In 2003, Nike bought the wavering company for $305 million. What would a behemoth like Nike want with a bankrupt brand? Before dealing with that question, let's look at Converse's history.

THE LEGEND BEGINS

Converse was founded in 1908 in North Reading, Massachusetts by Marquis. In 1917, the company introduced a canvas, high-top called the All Star. By 1923, it was renamed the Chuck Taylor, after a semiprofessional basketball player from Akron, Ohio. After his basketball career ended, Charles "Chuck" Taylor became an aggressive member of the Converse sales force. He drove throughout the Midwest, stopping at playgrounds to sell the high-tops to players. Some consider Taylor to be the original Phil Knight, Nike's CEO, who also started out selling his shoes at track meets from the back of his van. Throughout the '30s, '40s, '50s, and '60s, Chucks were the shoes to have.

By the early 1980s, with a secure hold on the basketball shoe market (it thought), Converse branched out, introducing both tennis and running shoes. This strategy appeared to be successful, helping to boost revenue in 1983 by 21 percent to $209 million. By 1986, however, Converse's fortunes had taken a turn for the worse, and it was acquired by consumer products maker and retailer Interco for approximately $132 million. By the late 1980s, Converse had been overtaken by a host of competitors. In 1989, the top four athletic shoe companies were Nike with a 26 percent market share, Reebok with 23 percent, L.A. Gear with 13 percent, and Converse with 5 percent. Strangely, while Nike was grabbing basketball shoe sales at a rapid clip, Converse was still the official shoe of the NBA, which gave it the right to use the NBA logo in its advertising.

By 1993, an ailing Converse had changed its positioning strategy. Instead of focusing on basketball and Chucks, it aimed at capitalizing on an image that was both sexy and streetwise. Converse launched a provocative, edgy ad campaign where nothing was sacred. And without the aid of advertising, the venerable Chuck Taylor All Star was dissociated from basketball and given new life as a fashion statement. Candy Pratts, fashion director of shoes and accessories at Vogue, used high-top canvas sneakers on models in numerous layouts. The best part, according to Candy, was that this trend didn't come from advertising, but from the kids on the street.

But financially, things only continued to get worse for Converse. In 1992, it was forced to abandon the treasured "Made in the U.S.A." label, sending manufacturing to India in order to cut costs. In 1996, Converse restructured, cutting 594 jobs from a little over 2,000 and reorganizing its product line into four categories: basketball, athletic-leisure, cross-training, and children's. (Notice the absence of tennis and running shoes, although Converse had once been big in those areas.) To boost its basketball shoes, Converse put the famous Chuck Taylor signature patch on a new line of performance wear—the All Star 2000 collection.

Encouraged by the successful relaunch of the All Star 2000, the company chose to launch another new line called Dr. J 2000. A remake of a '70s shoe, it was backed by heavy advertising. Dr. J was chosen because kids told Converse researchers that Dr. J was cool enough to have a shoe. The campaign tagline was "Take the Soul to the Hole," and ads consisted of a cartoon Julius Irving performing his famous moves to a Stevie Wonder soundtrack. Unfortunately, the Dr. J 2000 produced disappointing results.

At the turn of the century, nostalgia was in. Jimi Hendrix was on Rolling Stone and the VW Beetle was a hot-selling car. Consumers were looking for "retro," so companies were redesigning classic products. And no athletic shoe was more classic than Chucks. So Converse introduced an updated black shoe, the EZ Chucks.

In addition to this bump from the nostalgia trend, classic Chucks enjoyed a counterculture following that dated back to the punk rock movement of the '70s and '80s. In the 1990s, street kids had begun wearing Converse because of their affordability. In 2000, Converse capitalized on this segment and introduced a line of shoes for skateboarders. The company became a favorite of the antiestablishment, anti-corporate crowd, fueled by the unfortunate fact that it had such a small market presence and did very little advertising. Converse also appealed to the antiflash group, tired of polyester and synthetic, Michael Jordan-endorsed shoes. This segment wanted "antibrands" reflecting its antiglobalization perspective. Punk rocker Joey Ramone wore Chucks in the 70s. Molly Ringwald's record-store clerk wore them in 1986's "Pretty in Pink." And in 1994, Kurt Cobain donned a pair when he committed suicide.

NIKE TO THE RESCUE

Converse was hanging in, but only by the skin of its teeth. In 2001, the company had 180 employees and sales of $185 million. But Converse had global brand recognition and strong brand equity in the market. The question was, "Could the company make the products to back up its reputation? Enter Nike and the buy-out. Initially, Nike left Converse management alone to implement its own business strategy. It also allowed Converse products to go without the famous Swoosh, unlike other acquired brands such as Bauer hockey equipment (now Nike Bauer Hockey). But Nike did help Converse with advertising dollars. In 2001, Converse had spent a mere 163 500 on promotions. In 2004, Nike poured more than $4 million into advertising for Converse, quadrupling promotional expenses in 2005 to over $17 million.

After nearly a decade-long absence from TV advertising, Converse produced ads with the tagline "The first school." The focus was on basketball, not famous players. The ads featured a basketball being dribbled and shot, but no player. They were "narrated" by Mos Def. "Before Mr. Taylor taught 5" the world to play. Before fiberglass. Before parquet. Before the word 'doctor' was spelled with a J. And ballrooms were ball courts where renaissance played. Before the hype and before the dunk. After the rhythm, but before the funk. Before the money and before the fame. Before new and old school. Before school had a name. There was only the ball and the soul of the game." The ad ended with shots of the Converse logo or the Chuck Taylor All Star.

So, back to the original question. What does a megabrand like Nike do with a fading icon like Converse? Converse's new parent gave that question considerable thought. Some observers believed that Converse should become a second-tier brand. Nike could use Converse to sell millions and millions of shoes in Wal-Mart and Target—a sort of "Sam Walton meets Chuck Taylor" scenario. But Nike filled that void in 2004 when it bought Exeter Brands Group, the maker of the lower-price Starter line of apparel and footwear that now sell in Wal-Mart.

Instead, Nike has taken Converse in two different directions. After many years without the endorsement of a professional athlete, Converse is back on pro basketball courts as a performance shoe. The "Wade," named for Miami Heat superstar Dwyane Wade, hit the shelves of athletic footwear chains in 2005. So far, sales are promising. Converse now offers a $175 two-pack featuring the signature Wade bundled with a special edition of the classic Converse Pro Leather. Originally made famous by Julius "Dr. J" Erving, it features a sockliner map of Dwyane Wade's hometown of Chicago. And, it comes only in blue and gold, a nod to Wade's days at Marquette University where he led his team to the Final Four.

A DIFFERENT KIND OF CHUCKS?

But while Converse is currently retesting the waters of the performance shoe market, it is springboarding off the Chucks' trendy roots and doing a cannonball dive into the fashion shoe market. The current line-up of the longest- selling athletic shoe includes the classic high- and low-top canvas Chucks. But pricey variations include gold-metallic Chucks ($72), knee-high shearling-lined Chucks ($175), tattooed Chucks ($52), and customer-designed Chucks ($65 and up); there's even a "limited edition" snakeskin high-top going for $1,800. In all, Converse currently offers more than 1,000 different types of Chucks in outlets ranging from retail chains such as Foot Locker and Journeys to upscale stores such as Saks, Bloomingdales, and Barneys. This may seem like a big order for the tiny 12-person design team at Converse. But Nike has opened the doors to its creative labs, giving the team access to its designers, engineers, and biomechanics experts.

As if this weren't enough, Converse has enlisted the talent of designer John Varvatos to not only design a line of Chucks, but to put the "C. Taylor" label on a full line of men's and women's clothing that includes blazers, merino wool hoodies, military coats, jeans, and T-shirts. Prices range from $55 to $125 for T-shirts and from $295 to $795 for outerwear and jackets.

But this new fashion strategy begs an interesting question. Can the affordable, antiestablishment image of the Chuck Taylor All Star survive what can only be viewed as the antithesis? Some of the Converse old guard are not pleased with Nike's handiwork. One skate-shop manager says the new Chucks don't have the same vibe as the classics. "What's happening is that Converse has now gotten greedy. That's why those are not as cool."

Converse may well lose some of its devoted Chuck Taylor customer base. But given that U.S. sales of Converse footwear hit $400 million in 2005, it may not care. That's still only 1.5 percent of the market, but it's more than double the company's revenue from just four years earlier. And sales are continuing on an upward trend. Converse plans more fashion variations for the Chucks line, asserting that the possibilities are endless. And encouraged by the success of the Wade, Converse is set to launch "All Star Revolution," a shoe with the Chuck Taylor look but performance features and technology. In light of this drastic turnaround at Converse, it appears that Nike may have once again demonstrated its magic touch.

Questions for Discussion

      1. What are the core, actual, and augmented product benefits of the Converse Chuck?
      2. When Converse outsourced production of its shoes to India, it entered into a licensing arrangement. What are the benefits and risks of that action? Do you think it has helped or hurt the company? The brand?
      3. What are the sources of brand equity for both Converse and Chuck Taylor All Stars?
      4. Analyze the Nike-era direction of Converse, (a) Assess the benefits and risks of the fashion and performance strategies individually, and of the combined two-tiered approach, (b) What targeting and positioning would you recommend for the Converse brand in the future?

Sources: Stephanie Kang, "Nike Takes Chuck Taylors from Antifashion to Fashionista," Wall Street Journal, June 23, 2006, p. Bl; Michelle Jeffers, "Word on the Street," Adweek, May 16, 2005; Hilary Cassidy, "Shoe Companies Use Body and Sole to Track Down Sales," Brandweek, June 21, 2004, p. S.50; Lisa van der Pool and David Gianatasio, "Converse Hearkens Back to Roots in New Campaign," Adweek, August 4, 2003, p. 10; Jennifer Laabs, "Converse Will Restructure and Cut Jobs," Personnel Journal, January 1996, p. 12; Kevin Goldman, "Converse Sneaker Seeks Statement of Fashion Instead of Foul Shots," Wall Street Journal, May 6, 1993, p. B8; Brian Bagot, "Shoeboom!" M&MD, June 1990, p. 89; Donna Goodison, "Converse is Convert to Designer Clothing," Boston Herald, May 16, 2006, p. 30; and "From Court to Street, Converse Kicks It Double Time with Dwyane Wade Signature Product in Two- Pack," PR News wire, February 13, 2006


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