Greenberg, Robert

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Greenberg, Robert

(1940-)
Skechers Shoes

Overview

The "trendy" know to be seen in Skechers shoes; L.A. Gear is passé. What the trendy do not always know is that Robert Greenberg is the founder of both. The creative, mercurial entrepreneur, who likes to refer to himself as "Captain Marvel," is busy building his second blockbuster company within two decades, both of them dealing with the nation's hottest name in footwear. The company's 2001 revenues were flirting with $1 billion—a 42–percent increase from 2000, and Greenberg hopes to double that by 2005.

Personal Life

Greenberg was described in a 2001 Forbes article as "a gregarious, diminutive man with a deep California tan, a thick Beantown accent and an overdeveloped sense of showmanship." All five of his sons work in the business, and his second eldest, Michael, has been groomed to take over. Greenberg still owned 44 percent of the company stock in 2001; Michael had a 5 percent interest.

Greenberg was born into a tough, hard–working Boston family in 1940. As a boy (and the only son), he worked in his father's fresh produce stand. To toughen him up, his father insisted that young Greenberg not wear gloves at work in winter. When he graduated from high school, Greenberg opted for a softer career: hair styling school.

Career Details

In 1962, young hair stylist Greenberg opened his first beauty salon, called Talk of the Town, in Brookline, Massachusetts. Within a few years, he started selling hair wigs in his salon. Surprised that he could sell $50 wigs for $300, he was struck with the idea of wholesaling and opened his second business, wholesaler Wig Bazaar in 1965. Three years later, Greenberg sold Wig Bazaar and opened up a shop called Wigs 'n Things. Now he was on a roll. When he discovered that $3 women's bangs hairpieces could double as toupees, according to the Forbes article, he ran ads for $59.95 toupees in the National Enquirer and began a mail–order business.

Greenberg sold Talk of the Town in 1969, and within 12 months had bought The Europa Group, which became a holding company for his other businesses. In 1971 he bought a publicly traded company called Medata Computer Systems and renamed it Europa Hair. Two years later, he was importing antique clocks from South Korea, buying them for $16 each and selling them for $129. He was hooked.

In 1974, Greenberg sold Europa Hair and started buying men's jeans. He sold them to department stores under the brand name Wild Oats. His next big venture was Removatron, a company that sold electronic tweezers as hair removal devices. He moved to the West Coast in 1978, and within 12 months, had opened up Roller Skates of America, a roller skate sales and rental shop in Los Angeles. He attributes this with leading him into the shoe business.

Always trying to stay one step ahead with a gimmick or "in" item, Greenberg paid $10,000 for a license to sell shoelaces printed with the image of "E.T." in 1982, and grossed $3 million. With some of the earnings, he opened up a trendy women's apparel shop in Los Angeles in 1983 and started importing simple canvas sneakers for his shop. When Reebok cashed in on the aerobics and fitness craze of the early 1980s with its simple black and white sneaker, Greenberg copied the style but attached the name "L.A. Gear" to it. To compete with the big boys, Greenberg relied on his personality and stunts to grab attention. He showed up at a footwear trade show in a 1956 Thunderbird convertible covered with different colored versions of his "L.A. Gear" shoe. When sales took off, he closed the apparel shop to concentrate on shoes full time.

In 1990, L.A. Gear's sales topped $800 million, making it the third largest sneaker vendor behind Nike and Reebok.

Parallel with this development, Greenberg was trying to close the gap that separated him from industry leaders, and he started a habit that became a signature trait. He began to hang around at trade shows, lurking in rivals' booths and studying competitors' shoes. He listened to the sales talk used by competitors, then would try to produce and sell his own version of what he saw. Snooping into competitors' marketplaces became so important to him that he avoided having his picture taken for years, and actually sued an in–flight magazine when it published a picture of him, according to Forbes.

Trying to stay in front of the avalanche of sales he inspired, Greenberg made the fatal mistake akin to so many other success stories: market over–saturation. He struck licensing deals for watches, T–shirts, jeans, and other paraphernalia brandishing the L.A. Gear logo. Soon, his goods started piling up in discount stores and warehouses. Retailers with backlogs of merchandise started canceling orders. Desperate to bolster sales, Greenberg signed a $4.5–million promotional deal with Michael Jackson, but that failed miserably.

Moreover, when Greenberg tried to push into men's performance shoes, one of his brand shoes fell apart on the court during a televised college basketball game. L.A. Gear's stock came apart like Greenberg's shoes, dropping to $10 a share (one–fifth of its value the previous year). Worse yet, a 1990 shareholders' lawsuit was settled for $54 million, and L.A. Gear began to default on its business loans. In 1992, Greenberg sold a 34–percent controlling stake in L.A. Gear for $100 million to Trefoil Capital Investors. Four months later, they pushed him out, although he left with $55 million.

Meanwhile, his son Michael, a shoe salesman who was national sales manager for L.A. Gear, telephoned him to say that he also had been terminated from the company his father started. Soon, the two had decided on the next business: they would form a distributorship for Doc Martens shoes. Starting with $13 million in capital, they sold $40 million in Doc Martens the first year. However, by 1993, relations with the company that owned the Doc Martens trademark soured, and they lost the distributorship.

Greenberg's earlier "copycat" skills that he had honed while building L.A. Gear resurfaced. He started importing Doc Martens look–alikes from an Asian company. The Greenbergs named their lower–priced shoes "Skechers." Although the owner of the Doc Marten trademark later sued Greenberg, the suit was settled with no monetary payment. In 1996, the company introduced a women's sneaker under the Skechers name and sales hit $115 million. One year later, sales had grown to $185 million.

When sales reached $370 million two years later, company executives tried to persuade Greenberg to go public, to raise money to pay off $67 million in debt. Still shaken by the L.A. Gear fallout, Greenberg refused, but after months of prodding, relented. In 1999, Skechers USA, Inc. went public, selling 7 million shares at $11. Wall Street responded slowly, also remembering the L.A. Gear "Titanic." But within a year things heated up, and the company had opened more than 50 of its own retail stores in top locations such as New York's Times Square, Boston's Newbury Street, and London's SoHo district. It also marketed its shoes to 3,500 general retailers in another 25,000 stores.

In 2001, 10 percent of Skechers' revenue was from overseas sales in 35 locations. They opened stores in London, Paris, and Oberhausen, Germany, and hoped to pull in 25 percent revenue from overseas markets by 2004. Skechers had tremendous growth potential in foreign sales, enhanced by its trendy advertisements. Teen idol Britney Spears endorses Energy shoes in overseas advertisements. But the company is careful not to use Britney in U.S. ads—fearful of narrowing its consumer field to teen girls. In November 2001, Skechers announced it had signed a worldwide endorsement deal with L.A. Laker basketball player Rick Fox.

Successful marketing has kept Greenberg in the black. The company builds its image as a lifestyle brand, and spends about one–tenth of its revenues on advertising. Unlike some rivals, Skechers advertises on television, and Greenberg still pulls off memorable stunts at trade shows, such as using "lasers, dancers, and a 30–foot transparent wall displaying tens of thousands of shoes." "It takes flamboyance to build a brand name," he told a Forbes interviewer in 2001.

Chronology: Robert Greenberg

1940: Born in Massachusetts.

1962: Opened Talk of the Town hair salon in Brookline, MA.

1965: Started Wig Bazaar.

1970: Bought Europa Group.

1971: Bought Medata Computer Systems, renames it Europa Hair.

1979: Started L.A. Roller Skates of America.

1983: Started L.A. Gear.

1990: Sales peak at $820 million; L.A. Gear named third largest in industry.

1992: Ousted from L.A. Gear.

1992: Started Skechers with son, Michael.

1999: Skechers went public.

On its Internet Web page, Skechers describes itself as a marketer of "lifestyle footwear for men, women and children," offering "categorical diversity" in boots, shoes, sneakers, and sandals. It is traded on the New York Stock Exchange under the ticker symbol SKX.

Social and Economic Impact

For business students, the lesson taught by Robert Greenberg and his successful marketing career is to aim for being the first to market a new product, or at least as near to first as possible. While Greenberg's success with Skechers relies on a "copycat" mentality, he often "approximates" his look–alike products from overseas markets so that he can be the first in the United States with the "new look." For example, when Greenberg and his chief designer discovered bowling–style shoes made by an on–the–edge Spanish company, they quickly came up with a Skechers version. By the time Kenneth Cole and Prada debuted similar shoes for $100, Skechers had already been selling its $55 version.

Greenberg has offered the public a fresh, trendy way to wear affordable versions of the latest fashions, readily available in area stores. According to an August 2001 Forbes review, people just couldn't "get enough of these shoes." The company's advertisements feature young, good looking, trendy groups, wearing Skechers, sitting around talking, and looking, well, rather trendy. But buyers should remember, Skechers are not touted as performance–wear. For example, the company's "Energy" jogger is more for wearing at parties and being noticed than for jogging. The Energy sneaker comes in more than 100 styles and colors, including laceless pull–ons, sling–backs, and roller skate versions. Skechers keeps its prices down by using less expensive leather and other materials. What this means is that the consumer should be a trend–setting spectator at a basketball game, not one of the players, especially if the game is televised.