Crocs' E-Commerce Business Grows Despite Inventory, Supply Chain Issues

By Jamie Grill-Goodman — 11/06/2015

Casual footwear company Crocs, Inc. reported revenues of $274.1 million for its 2015 third quarter. Excluding store closings and discontinued product lines, core business was up $9.7 million or 3.7% to last year on a constant currency basis.

Despite operating 11 fewer country-specific sites compared to last year, Crocs' global e-commerce business grew on a comparable site basis 31% in constant currency, with the Americas up 33% and Asia up 42%, while Europe e-commerce was up less at 19%. 

Crocs' new marketing campaign #FindYourFun has driven a 27% plus increase in brand desirability and consideration among consumers who have seen the Crocs ad.

The online experience launched in June and allows fans around the world to style their very own fashion show, which happens to take place on a water slide. The Crocs Funway Runway experience was built on Twitter, and allows users to style their own water slide fashion show by choosing a model, outfit, Crocs shoes and music track. Once all selections are made, the user gets a 30-second video of their model splashing down a water slide, which they can share on Facebook and Twitter. There are 135 different Funway Runway combinations users can create.

"Global direct-to-consumer comp revenues were up 4.7%, repeating the strong performance in Q2. Our e-commerce business was strong across all regions, led by the U.S. and Asia," said President Andrew Rees. "In our six core markets, our e-commerce business has benefited from better execution, including a globally consistent online customer experience and a commitment to better in-stock positions on core product."

The company admitted to a previously dated product line and delivery challenges in 2015, however noted it has driven continuing business model growth in constant currency in the low single digits.
The new spring/summer 2016 line is the first developed by the company's new product team, led by Michelle Poole.

"With our new product, year two of our marketing programs and improved deliveries, we're confident that we can drive 2016 revenues up in the mid-single digits based on current exchange rates," said CEO Gregg Ribatt.

However, Rees noted the company is not satisfied with the effectiveness or efficiency of its supply chain. "In the third quarter it resulted in poor customer service and ultimately lost sales and increased costs. We are committed to improving our customer service levels and reducing our costs and complexity, and we've made this one of our key strategic priorities."

Crocs has implemented five initiatives to drive materially improved supply chain performance:

1. It has reduced SKU count by 40 percent, which significantly simplifies product development, casting, forecasting and inventory management.

2.It has reduced its direct-ship model. Hi"storically they're very low minimum order quantities or orders placed directly with factories," said Rees. "By increasing minimum order quantities to industry standards, we're taking away significant and unnecessary complexity on managing our factory orders and production."

3. It is reducing the number of value-added services, in other words special order processing, closer towards industry standards, to reduce the complexity on packaging our orders and handling them through its distribution centers.

4. Crocs has implemented better systems, such as SSE and processes, giving it better visibility into customer orders earlier in the processing, enabling the company to manage its global supply chain more effectively.

5. Crocs has also elevated its team, adding great functional industry leadership in key areas, enabling more effective managing of this part of the business.