These Boots Really Were Made for Walking
They look like Justins, but wear like sneakers. How a startup shoemaker called Ariat is persuading cowboys to switch brands.
(Business 2.0) – How do you break into a business that has been ruled since the days of Wyatt Earp by two brands—and both are owned by Warren Buffett? That was the challenge facing Beth Cross in the early 1990s, when the Stanford MBA drew up plans to reinvent an American classic—the cowboy boot—and go toe-to-toe with Berkshire Hathaway's venerable brands, Justin Boots and Tony Lama.
The answer came in the form of boots every bit as ranch-ready as a pair of Justins but ergonomically redesigned to feel as comfy as a perfectly fitted running shoe. Serious equestrians took to them, as did city slickers looking to add some Old West flair to the shoe closet. Today, from an unlikely outpost—Union City, Calif., on the outskirts of Silicon Valley—Cross's privately held company, Ariat International, rings up more than $80 million per year in sales and owns about 17 percent of the U.S. market for western wear.
Not bad for a startup hatched out of Cross's home in 1991. While sales growth at Justin Brands (which includes Tony Lama and several other boot lines) has leveled off at about 5 percent, Ariat has been growing so fast—more than 25 percent a year since 2000—that it has already branched out into several new lines of riding pants, shirts, and clogs.
No wonder, then, that Justin and Tony Lama, which hadn't changed much more than their stitching for decades, have been scrambling to follow Ariat's lead. "Once you got Ariat boots on people, they could feel the comfort," says John Wilcox, vice president of Shepler's, the largest western-wear chain in the United States. "When Ariats started selling, Justin started making their own versions." Here's how Cross and her team helped a tired industry to reboot.
Find the Market's Blind Spot
As a consultant for Bain & Co. in the late 1980s, Cross helped companies like Reebok push the latest materials—such as gel padding, carbon fiber, and air pockets—into every line of athletic footwear. Then Cross, who grew up on a horse farm outside Philadelphia, began to notice the niche that was long overdue for an upgrade: leather-soled riding boots. After doing some market research, Cross quit Bain, confident that with 20 million riders around the world, the market had room for another brand.
Make Friends in High Places
Key to Ariat's launch wasn't just the seed money that Cross cobbled together ($250,000 from friends and family) but also the industry bigwig who took a shine to the company's ideas and chipped in—Angel Martinez, then Reebok's head of business development, whose daughter rode horses. When Martinez agreed to be an Ariat board member, Cross found it easier to recruit more high-level expertise in footwear, retail, and finance. The high-profile board, in turn, helped secure an estimated $9 million in venture funding in 1996.
Pay Less, Charge More
While Justin still runs its own factories in Missouri and Texas, Ariat's operation is nearly virtual: just 100 employees, most of those in sales and customer service. Cross found high-quality leather suppliers in Europe and hired manufacturers in China who were already turning out boots for Timberland and Wolverine and could easily adapt production lines to accommodate Cross's designs. Two years after Cross won patents for various gel and carbon-fiber components (which helped shed weight and boost comfort), lower-cost Ariat boots were for sale—often with a higher retail price than Justins. Result? Ariat generates more than $800,000 a year per employee, compared with an estimated $175,000 at Justin.
Create Your Own Demand
With no marketing budget to speak of, Cross initially went straight to consumers—hauling boots in cars to sell at horse shows and rodeos, advertising only in newsletters for riders. While it couldn't pay to sponsor top pros, Ariat simply gave boots away to rising amateurs. Seeing hotshots shod in Ariat boots, other riders began asking for them—forcing tack shops and western stores to start taking orders. Catalogs, chain stores, and online retail outlets followed. Says Cross, "There's no better way to get a retailer to stock your product than to have people start calling for it."
Sources: Ariat; Business 2.0 estimates