Getting Your Foot In The Door: Lessons From Stance’s Launch


Jeff Kearl has walked many roads in his career. As an angel investor he's staked brands like Skullcandy, Matuse, and Celtek. He founded Logoworks, which was acquired by Hewlett Packard in 2007, and more recently became chairman of the board at Skullcandy. But perhaps his greatest achievement to date is launching Stance with Skullcandy Founder Rick Alden, where he now serves as CEO.

Stance has quickly become a darling of specialty retailers, and was one of the most mentioned brands in a survey of past TWBiz Retailers of the Year about new companies they're most excited about. To get a better idea of how Stance became synonymous with socks in our world, we caught up with Kearl and Alden for their tips on launching a brand.

Click on the images below for their interviews:

Jeff Kearl

Rick Alden

 

 Stance CEO Jeff Kearl

 So where did the idea for Stance evolve from?

The observation around Stance I think is really quite simple, and I'm sure a lot of other people besides us had seen it. If you really look back to Vans, the first skateboard shoe, I know it didn't start as a skateboard shoe, but they were first, and now it's well over a billion dollar business. Then you get into the early '70s—you see the emergence of Quiksilver and Billabong—those businesses are both now getting more than a billion in revenue. Then you get into like '84, '85, when Oakley comes out with its first pair of sunglasses and transitions from moto and bike grips, and even later in the 80's the emergence of a category like flip-flops with Reef, and then eventually Nixon with watches. In the early 2000's you have Skullcandy, and in every case the company that went first was larger than all of the other businesses combined.

I think Skullcandy taught us that snowboard skateboard and surfboard shops could actually sell products other than the traditional apparel. So we started thinking about what other products you could sell in specialty retailers where we understand the market, we know the owners.

We would literally walk up and down the aisles of Wal-Mart and Target, because in our view that's where all the watered-down generic, commoditized products ultimately landed. Imagine just walking down the aisle, and you look at school supplies- and there's Mead and Peachy and Trapper Keeper—these brands that have existed forever, just sort of variations on these old school supplies. There's nothing really cool about it for the kids, there's no brand, there's nothing that really sticks out. I could walk through all of the sections that we used to look at, from jewelry to sun-block—we would literally go down the aisles and say, 'geez, look at that… Hawaiian Tropic looks the same as Coppertone, looks the same as Neutrogena, looks the same as…' all their packaging is the same, their bottle is the same, they're positioned the same, and so the question is, what categories could you take to the core retailer and create a brand around that would actually be fun and exciting?

Tell me about that 'A-Ha!' moment, when you were like, 'That's it' with socks.

Well it was actually Rick…he was the one that actually said the word, "hey what about socks?" After you look at all of the different categories, then there is some more homework that has to be done, like how big is the market, and what is the cost of entry? See you take something like school supplies which I think is really ripe for innovation…

Was that one of the finalists you guys were looking at as well?

I don't know if it was a finalist, but I just think it's a good example, you probably would kill the idea pretty quickly because there's not a lot of margin in paper products, and its also somewhat seasonal. You can talk yourself out of a lot of these categories pretty quickly, but when we started to look at socks the market was actually more than twice the size of the headphone market

The clearest part of the opportunity for us was when we started to go into all of our favorite surf shops—and these are really great retailers—like Surfside, or Surf Ride, or Hansen's—iconic Southern California doors that have been in the game for a long time, really know what they're doing. We'd walk in and see  walls of skateboard shoes and a little box of socks on the floor. Whereas if you walked into the Nike store, adidas store, or even a Footlocker, they've got all the socks lined up next to the shoes, and they're clearly measuring the attach rate—how many socks are we selling for each shoe customer, and it's a whole part of the game plan.

We knew at a very minimum, the opportunity for us was to come in, help retailers sell socks to their shoe customers, and then if that's all we did, we'd be adding some nice profitability to the shoe business, and we'd probably earn our keep. The other thing that was attractive was we felt we could merchandise socks on a relatively small footprint, and that allows a store to try you out, with a relatively modest investment.

Also, if you look down the roster of athletes that we have,  our surf team and our skate team in particular rival a lot of the big brands.

They didn't own their feet already…

Yeah, I think you have two wins: one is, they're not getting paid anything for socks, so getting anything is better than nothing, but then if you really treat them well, and you engage them over time they'll stick with you for the long haul. Now it becomes harder for Quiksilver, Volcom, or some of the bigger incumbent players to go back and try and switch those athletes to their socks, because they have a great relationship with us, and they feel a sense of loyalty.

What do you think your background on the VC side added to the game as far as coming out of the gates for Stance?

One of the benefits of working at a VC fund is that you get to see a lot of other companies, and experience their problems vicariously. So one company where you’re invested might have a manufacturing problem, and another might not be able to attract enough software engineers, another has a corrupt comptroller that cooks the books, and another has a marketing problem and can’t create demand. In my case, we invested in about 38 companies during the four years I worked at the firm, and you usually get to experience those lessons from the board’s perspective. You go to a board meeting and you get a report on what's not going well, and how it can be fixed. You get to see a lot of patterns of what works and what doesn't.

Some of the key lessons we took away—I put a huge value on a quality management team. We invested relatively heavily early on in what I would call a high-quality, experienced management team.

If you take the Silicon Valley way of launching companies, it’s raise equity financing in stages over time, build a really great management team, attract that management team by sharing equity with them, so that they're yoked up in the ownership and the outcome of the business, and then every single move you make is a de-risking move- how do I remove a little risk from the business today? That's really the pattern we followed.

In all the lessons you took away from your previous work, what would you say were some of the smartest things you did in getting this off the ground, and some of the things you would do over?

One thing I think served us pretty well is that we involved the retailers. Before we even really got started we  took a look book to 12 retailers, the most ionic guys in So-Cal, from LA to San Diego, and showed them, 'here's the concept, here's what the fixture could look like, here's what the price points could be,' and we got a lot of feedback.

We took that feedback and incorporated it into the line that we ultimately developed. Quite frankly had those retailers said 'no, we're not going to buy this,' I think we would have just stopped and gone home. We got really great encouragement from people like Dave Nash at Sun Diego. They said ‘this is a void in our store…we could do much better at socks than we're doing today… this is a great idea, we would buy it.’

We took all of their feedback, about how big the fixtures should be, what the signs should look like, how the socks should hang, how they could be merchandised, and we incorporated all of that retailer feedback into our first line. I actually felt like it would have been a little bit hard for those retailers to say no, because we built what they told us to build.

Lots of times start-ups just build it and then take it to retailers and hope it will sell. The very first sales meeting is when they're actually getting that feedback of how it could be different or better.

A look at some of Stance’s in-store displays:

Are there any lessons you learned the hard way from launching the brand? Things you'd do differently, given the opportunity?

No I don't think we would really change anything. We never really had a formal business plan, but I do think we had a well shared and understood concept of how we would build the company. I feel like we've been really true to that, and maybe we just haven't been doing it long enough to get bit. I'm sure we will make some big mistakes, but we haven't made any that are too big.


Rick Alden

How did you land on targeting the sock market?

This was a result of a thought process that began four or five years ago as I was trying to evaluate what made Skullcandy successful; it certainly became a whole lot more than I had anticipated. I really wanted to go into an academic study of what things worked and why they worked with the idea of trying to figure out how to replicate that process. I identified certain characteristics, things like Skullcandy was a very non-seasonal product in a non-seasonal, non-weather dependent category. It was a non-sport-specific category, it wasn't snowboard bindings or snowboard boots like I had been involved in before.

It was a category that was broadly distributed, almost commoditized before we got  in it, and very importantly, it was a category that I thought had been benignly neglected by the market leaders in that space. No one had stepped in and really tried to apply steeze or lifestyle to a pair of headphones before. That became the troop of characteristics for any future project that I might want to look at.

Definitely sounds like a mirror of what Stance is doing.

Imagine that, funny how that works (laughing). I spent a lot of time trying to think through what other kind of consumer products fit that category. I looked at denim: it's been done how many times over? T-shirts: done, how many times over? Optics, watches, footwear, shoes, headwear, those are all  non-sport specific, non-seasonal.

I found about three quarters of an inch on a human body that had yet to be really well branded or really well-focused on. I was sitting there with my legs crossed and I noticed a gap between the top of my shoe and the bottom of my pant and I think that was the only part of my body that was not branded. And I said, ‘you know something? Just about everybody you know has feet and just about everybody's got two of them. And they all buy socks. And nobody's focusing on that category. And who doesn't love a great pair of socks?’

Amen.

So it became go through the filtering process, talk to everybody that I trust and everybody I like. One of the guys on that list of people I trust with bringing into any new concepts is Jeff Kearl. Kearl came back after we held the initial conversation. He had just sold a business that he was involved in and was not enjoying the results of that business as far as being an employee. He came to me and said, ‘Hey, Rick, I want a CEO project and I'm being haunted by the thought of socks all night long every night. I wanna start this thing, let's get it off the ground.’ Anytime you've got a guy like Jeff Kearl who comes to you, the first thing you do is anything he says.

He seems like a great fit.

It became a real quick, easy decision. He's been involved with Skullcandy since I think year two. He got himself up to speed real fast and the most important thing, I think the biggest takeaway was to get people around you that have done this before, that are best in class, and Kearl took that note straight out of Skullcandy's book and he went out and got the most amazing people that the industry has bred.

It's definitely a super solid management group.

It's an operational dream team. You get that many wicked smart guys all standing around talking about socks, you're gonna sell a lot of socks.

The Stance management team (L to R) John Wilson, Ryan Kingman, Aaron Hennings, Jeff Kearl, and Taylor Shupe

Why did you decide to make it a new brand versus putting it under Skullcandy's umbrella?

I think brands have got a certain amount of elasticity that you can tolerate. Skullcandy,  we sell some brand supporting apparel, some brand supporting hoodies and t-shirts, hats, beanies, all the basic stuff that everybody does and we sell a ton of that. And, believe it or not, we actually sell some Skullcandy socks. But, if you wanna be pure and organic within one category, don't overstretch the brand permission.

What's your role with Stance these days and what else are you working on?

Jeff and I are pretty much equal shareholders. When we started out, we were fifty-fifty and I actually went to him and said, ‘dude, if you're going to be operations, if you're gonna be day-to-day there, it makes sense that you own more than I do.’ So I gave him one percent of my ownership to make sure that he was a jump above me.