Against The Flow: Reef fights the pull of stagnation.

Reef is relaunching its line of closed-toe footwear and will undertake a three-year brand-building drive that will include an 80-percent increase in marketing expenditures.

The announcement culminates an eighteen-month evolution of Reef, says Bob Rief, who was hired on as CEO in August of 2000: “Our biggest achievement this year doesn’t have to do with styles or product, but the transition from a family owned and family managed business into a company with a real business model.”

While Reef has been the dominant brand in the surf-related sandal market, its leadership role in the closed-toe arena has been murky at best — especially when you consider that 55 percent of the company’s worldwide revenues are from closed-toe shoe sales.

However, with the help of new design center at the brand’s world headquarters in San Diego, Cofounder Fernando Aguerre says the Fall 2002 line, which will ship in June, will double the size of the brand’s closed-toe offering.

More intriguing, Reef views its new closed-toe offering as a shot across the bow of an industry complacent with the skate-shoe trend.

“This is our anti-stagnation action,” says Aguerre. “Every slump in our industry has been because we sat on something that we defined for too long and it became mainstream. So by the time we woke up from the dream, it was a nightmare.

“We’re successful and making a lot of money,” continues Aguerre, “but up until a year and a half ago, we here at Reef were part of that stagnation process. The industry faces an option of doing something new or being a corpse floating down the river.”

Using the same “silo” strategy as its sandal line, Reef says the shoe line will appeal to a broader customer base than the “untied skate-shoe” crowd. By categorizing its 71 different sandal models into one of three silos — progressive, core, and fundamentals — Reef has seen a sales-volume increase at all pricepoints.

“It takes the emphasis off of style concentration,” says Marketing Director Jeff Cutler. “With a line of 70 models, you’re no longer driving only certain product at a certain pricepoint. It gets more of our product on the shelves, and it’s much more retailer friendly.”

Aguerre says the application of this strategy in the closed-toe market will also help retailers: “We’re bringing in people who wouldn’t have shopped there. Everybody who didn’t want a pair of skate shoes has been shopping somewhere else. They were going to athletic stores, they were going to the mall. We’re going to bring those guys back.”

The line will also allow retailers to once again focus on the surfing lifestyle, says Rief. “Retailers have let the surf lifestyle get away from them,” he says. “Here’s a chance through these types of products to reclaim the ground that was lost.”

Sneaker trends have been ephemeral. Chuck Taylor all-stars in the 1950s, the running-shoe fad of the late seventies, the Michael Jordan-fueled basketball-shoe trend of the late 1980s — all of these epochs shared a common belief that the trend would last forever. “But they were wrong,” says Aguerre.

Now Reef is betting that biggest growth spurt ever in the worldwide youth market will coincide with consumers looking for something authentic yet new. “The only way we can be ahead of the curve is by being outside of the trend,” says Aguerre. “Most companies don’t do that. Why? Because of the return on investment risk is too high for a lot of these companies.”

Aguerre says the key will be patience and persistence. “As an industry, we’re not used to staying the course,” he says. “As soon as somebody yells, ‘Hey, over here!’ the whole industry drops everything and goes running. That’s not how you achieve success.

“We need to blaze the trail,” he continues. “We know it’s an expensive exercise. It requires the muscle to plan and design and then the muscle after the product delivers. It takes a lot of preaching and a lot of consistency. However, we have the critical mass and critical muscle to do that. If you are a little mouse, you aren’t going to be able to move a single brick. But if you are an elephant with a big trunk, you can move around trees and create a new trail.”

So why would retailers want to try something new when the skate-shoe look is currently making them money hand over fist? “Some of the retailers you and I know are like a 75-year-old investor,” says Aguerre. “They don’t want risks, they don’t want up and downs, they just want to glide. They just want to trim the wall. Other retailers realize that trimming the wall is more dangerous than hitting the lip, because when you hit the lip you get more speed. If you’re trimming, you aren’t doing anything. You’re just hoping that the wave will continue to carry you along.

“We have forgotten, as an industry, that innovative product drives the retailer because it drives the consumer,” says Aguerre. “But in order to that, you need two components. First, the product needs to provide that innovation and differentiation. But then the company has got to put its money on the table. If I am going to promise retailers that they are going to sell our shoes, I need to go and spend some money. I can’t just show the nicest buns, the nicest maneuver in my ads and not talk about the product story — and that’s where we’re going to break ranks with the rest of the industry.”

Rief says retailers won’t be expected to pioneer any new shoe trend, a point Aguerre is quick to agree with: “I tell them, ‘I drive the business and you co-pilot.’ We’re going to put out the product. We’re gone put the effort into branding. We’ll do the promotions and demos. We’re going to do what’s necessary for this to succeed.”