Croc and Roll

What if, in the name of comfort, you took the squishy foam used to cushion running shoes, and instead of sandwiching it between the foot bed and sole, you made an entire shoe out of the stuff? Pretty simple, really. All you'd have to do would be to blend together the standard plastic resins supplied in bulk by chemical companies like DuPont and Dow, add color and heat, and inject the resulting goo into a mold, say, shaped like a Swedish clog. Tiny air bubbles would form and then, within a few seconds, out would pop a shoe that was not only cushy and comfortable but form-fitting, too. It would weigh barely more than a Nerf ball. And because of its closed-cell foam, it'd be both waterproof and odor-resistant. It would get great traction, too; it wouldn't even scuff. Best of all, unlike conventional shoes, whose production typically requires that dozens of components be sewn and glued together, this shoe would have just one piece, making it about as easy to knock out as squeezing shapes from a Play-Doh Fun Factory. It would be so cheap to manufacture that you could price it at $29.99 a pair and walk away with a fat profit.

(Charlie Archambault for USN&WR)

"It's the kind of simple genius that makes you ask, 'Why didn't I think of that?'" Robert Neilley, a longtime industry watcher and editor of Injection Molding Magazine, says about the idea. It's also an idea that last year helped make Crocs the most successful initial public offering in footwear history—with the stock now near an all-time high of $60 per share and a market cap approaching $5 billion. First introduced in 2002, the comfy, so-ugly-they're-cute plastic shoes have since logged over $1.2 billion in sales, three quarters of which was earned in the past year alone. Profits are expected to more than double this year to $164 million, thanks to wide gross margins of 59 percent, a rapidly expanding line of more than 50 styles, and a worldwide manufacturing and distribution network of 25,000 outlets and counting.

Crocs may be the quintessential example of how to profit from consumers' growing obsession with comfort, a trend that is fast turning not just the shoe business but also the entire fashion industry inside out. It's the "latest step in our unending quest to dress as casually as possible," talk show host Bill Maher recently complained of the Crocs craze. "You know, I used to wear flip-flops, but they're a little dressy. I want clothing I can hose down!" Such caricatures of today's consumers may seem extreme, but "just go to the malls, and you'll see. It's pajama pants, hoodies, and flip-flops," says Marshal Cohen, chief industry analyst at the NPD Group, who estimates that the molded footwear business is now worth $2.2 billion a year. And it's not just the kids. "Style used to be No. 1. But now it's all about comfort and value, and the people at Crocs have capitalized on that trend brilliantly," notes Cohen.

Not that the light bulb flipped on when Scott Seamans initially pushed the spongy clogs on his friends George Boedecker and Lyndon Hanson in 2002. "At first, I just thought they were ugly," Hanson recalls of the day his longtime college buddy insisted he don a pair during a four-day sailing trip from Mexico to Miami. "But they were really comfortable."

Sure-footedness. Sporting perforated holes to drain water away and tiny "circulation nubs" to ease muscle strain under the foot, the shoe had been created by a small Canadian plastics company for use in day spas. "But Scotty thought they'd make great boat shoes," Hanson says. A born tinkerer, Seamans had already begun tweaking the shoe, using medical rivets (the same kind used to secure torn ligaments) to attach a plastic strap around the heel, which added a certain sure-footedness needed to maneuver around a boat deck.

By the end of their sailing trip, the three friends had agreed to start a new business selling the modified shoe to boaters and beachgoers. Naming their company Crocs (the shoe's side view resembles a crocodile's snout), they priced a pair at $29.99. It hit a sweet spot; customers crowded around the Crocs booths that the founders set up at boat shows early on, and the shoes soon became popular with nurses, cooks, and others on their feet all day and in need of a shoe that could be washed down after every shift. (Indeed, the Crocs medical line was deemed so comfortable that the American Podiatric Medical Association endorsed it as an alternative to flip-flops.) "They started buying them by the hundreds," retailer Gordon Reddick recalls of a medical company near his Wrightsville Beach, N.C., shop, which first sold the shoes in basic neutrals: black, white, and brown. "But then people started asking for them in colors. And then the kids came in. And now, well, you don't even want to get near that corner of the store when the new [Crocs products] come in."

The initial buzz—spread almost entirely via word of mouth—quickly became deafening. Iron Chef Mario Batali showed off his orange pair to TV audiences. (He's since entered into a partnership with Crocs.) Jack Nicholson sported a blue pair, Faith Hill a tan pair, and when Britney Spears jumped on the bandwagon, she reportedly bought the shoes in every color. (There are 27 currently available.) Even President George W. Bush was recently spotted in black Crocs as he headed out for a bike ride.

Inevitably, the attention has sparked a backlash against the shoes—these days it's arguably as fashionable to bash them as it is to wear them. "They are to your eyes what secondhand smoke is to your lungs," says Vincenzo Ravina, whose ihatecrocs.com website features videos in which he and a friend take scissors and firecrackers to the shoes. YouTube is filled with similar fare.

Keeping cool. If all that sounds like the kiss of fashion death—the Bush endorsement probably isn't a big plus—well, it wouldn't be the first time. "It can happen to any footwear product, anytime, for any reason," says John Shanley, a senior analyst for Susquehanna Financial Group. Shanley ticks off now ignominious brand names like Jellies, Heelys, and L.A. Gear, the last of which went from hot to not almost overnight after Macy's ran Sunday ads cutting their prices. "Within three weeks, retailers couldn't give them away," notes Shanley. The only way to avoid such a fate, he warns, "is to constantly reinvent your product. If you can do that, then you have a chance."

Crocs founders positioned the company to do just that. They first solicited another college buddy, Ron Snyder, to join their team as president in 2004 (Snyder became CEO in 2005). Snyder had run the design division at manufacturing giant Flextronics International, where he'd helped churn out reinventions of everything from wristwatches to computer printers. He figured that the key to Crocs' future growth was to give the product enough flexibility to adjust to consumers' changing tastes on the fly.

Unlike most shoe manufacturers, which typically pre-sell their fall lines to retailers in the spring, then outsource production to Asia, Crocs makes approximately a third of its shoes in-house. The company retains its original Canadian factory, which it bought out in 2004, and has added facilities in Canada, Mexico, and Brazil. The company takes preorders, but "if a particular style or color is hot, [retailers] can order more and we will deliver them while they're still in season," Snyder explains of shoes like the new fleece-lined Mammoth version. And if "the demand warrants it," he adds, "we can make 10 times more than we originally anticipated."

Crocs also controls the secret recipe responsible for its shoes' uniquely cushy feel. (If you must know, it's reportedly a cross-linked blend of Levirex-brand EVA copolymers, Dow Chemical's Engage elastomer, and pigments, which are combined in differing proportions depending on the color and shoe size you want.) Now trademarked under the name Croslite, the formula—which Crocs declines to reveal—foils knockoffs "because it's actually quite hard to get [it] just right," says Michelle Maniscalco, senior editor at Injection Molding Magazine, who has sleuthed out the basics of the recipe. "At least so far, the knockoffs out there just aren't as comfortable."

Brand extension. To further protect its turf, last year Crocs obtained patents on the ankle strap Seamans first used to make his prototype. The company also launched a series of lawsuits against copycats, winning settlements from a half-dozen competitors. "We've created a new category of footwear, and we're not fine with people who have infringed on the patents [of] our first shoes," Snyder says. "But going forward, we're about a lot more than just our original styles."

Indeed, while Crocs continues to crank out its ubiquitous Beach and Cayman styles, the company has quickly moved toward giving fashionistas less reason to whine. Last year, it acquired Italian footwear designer Exo Italia and quickly put its designers to work, rolling out more than two dozen new styles, from fancy flip-flops to 3-inch heels. Crocs also acquired sandal-makers Ocean Minded and Bite Footwear and incorporated the Croslite foot bed into their designs. Perhaps most noticeably, Crocs took on Jibbitz, maker of a line of wildly popular charms that fit into Crocs' perforated holes. Buyers can now customize their Crocs shoes with everything from rhinestones to a growing collection of logos and characters. Crocs has licensed companies like Disney and Nickelodeon and numerous professional and college sports teams. The results so far are impressive. New products now make up about 75 percent of overall sales, which have doubled since the beginning of the year to $224 million in the past quarter. And with more shoe styles and a new clothing line on the way (featuring a semistretchy blend of cotton and Croslite), "let's just say we're pretty comfortable with the direction we're headed in," Snyder says smugly. That is, as long as comfort doesn't go out of fashion.