Editor’s note: Deckers CEO Angel Martinez wowed the crowd at the SES Executive Roundtable Friday. Angel was insightful, funny, inspiring and forthcoming – he had no problem saying what he felt. SES writer Shelby Stanger summarizes his key points below.
Shop-eat-surf Founder Tiffany Montgomery interviewed Deckers Outdoor CEO Angel Martinez Friday at the Shorebreak Hotel in Huntington Beach during the Shop-eat-surf Executive Roundtable.
Deckers owns the UGG Australia, Teva, Sanuk, Ahzu, Mozo and Tsubo brands.
Angel shared insights from his more than three decades of footwear experience. He also gave details about how the company grew UGG and Deckers, and his opinions on selling and hiring, competing with Nike, why Deckers brands will never sell to Costco and areas where he thinks action sports brands can improve.
Angel drew a big laugh from the crowd when he shared one set-in-stone hiring law at Deckers – the “no shithead” rule.
“Like termites, sometimes there’s an infestation and you have to eradicate them,” he said.
He also shared some of his personal history, including his immigration from Cuba as a young boy and separation from his family who he did not see for 34 years because of the Cuban revolution.
Here are some of the key highlights from Angel’s talk.
Running leads to Reebok
A runner in high school and at UC Davis, Angel wanted to make a living following his passion. He got into footwear sales back in the days when the sporting goods industry was full of good old boys selling camping and fishing equipment at stores with stuffed polar bears in the window.
He was one of the first three employees at Reebok and got his start as a road rep. He said he always views product and marketing from the view of a guy carrying a bag.
Angel started at Reebok in 1980. By 1982, the company had grown to about $13 million in revenue.
A turning point for Angel – and for Reebok – came from the idea for an aerobics inspired shoe, Reebok’s top selling “Freestyle,” which he said was partly inspired by his wife, Frankie. Angel credits his wife with a lot of his decisions.
In the early 1980s, he went to an aerobics class with Frankie.
“I was the only guy at the class and people were mostly barefoot. People were complaining about their feet hurting or that their shoes looked ugly with a leotard and leg warmers.
“It occurred to me we needed to make aerobics shoes. If we made it cute with the cushioning of a running shoe, the stability of a court shoe and the look of a Capezio. … that it could work.”
The Freestyle Reebok shoe was designed on a napkin, he said.
Reebok marketed the shoes by getting instructors to wear them after he noticed that women in the class copied the outfits and style of the teachers. Then, he helped Reebok set up a branded Aerobics Certification (AFA) course, the first of its kind. They ended up with 300,000 certified instructors.
The company grew to $65 million when Reebok introduced the shoe, and its rapid growth continued for years.
Angel spent 21 years at Reebok. He said most of the original Reebok alumni are all running companies today.
“We didn’t know what we weren’t supposed to know or do, and broke rules because there were none. We shook it up and it was a lot of fun.”
See Page 2 for Angel’s thoughts on competing with Nike
Competing with Nike
Reebok was $13 million in revenue in the eighties at a time when Nike’s ad budget was around $60 million. Angel realized he couldn’t get customers into stores buying ads or competing with Nike.
However, Nike’s advertising would draw people into running stores, where they would see Reebok shoes.
Angel and Reebok focused on relationships with sales people on the floor. As a former running storeowner himself, he knew that good salesmen bring out three shoes at a time.
The first is the one the customer asks for, he said. The second one is the style they have too many have or want to get rid of. The third is the one they personally love to sell.
“I wanted my team to be one of the first three boxes, preferably not the second.”
As for other thoughts about competing with Nike, Angel said, “You never want to take Nike head on. You have to get good at doing things they don’t do well that leverages your strength against them. It’s a jui jitsu thing.
“You have to beat them on the periphery and distract them. They hate to be beaten at anything. They are competitive to the point of dysfunction.”
UGG’s Success
Prior to joining Deckers, Angel’s wife, Frankie, had UGG slippers she wouldn’t take off. When they wore out, he tried to replace them, but they were sold out so he bought her a similar style by a different brand. They were not UGGs though. His wife wouldn’t wear the slippers.
At the time, Angel was at Keen, which he helped found. Keen was launched as a direct competitor of Teva because they thought Deckers-owned Teva was underperforming.
When Deckers founder Bob Otto offered Angel the CEO job at Deckers, Angel thought UGG might be asleep just like Teva was asleep.
“Visually, UGG looks like nothing else. Tactilely, they feel like nothing else. Intellectually, you go right back to loving them. I thought UGG could be one of biggest brands in world when I interviewed with their board.”
When Angel joined Deckers, UGG did about $150 million in sales. In 2011, UGG reported $1.2 billion in sales.
See Page 3 for how Angel balances keeping brand integrity with the pressures of managing a publicly-traded company
Managing growth under public company pressures
“There’s an adage someone told me, ‘Pigs get fed; hogs get slaughtered,’” Angel said.
At Reebok, there was a point when they were bigger and better than Nike, Angel said, and then they started being run by Wall Street, and “We sold anyone that could fog a mirror.”
You lose control of your brand experience and become less relevant to retailers when you oversell, he said.
It only takes that one customer that you shouldn’t be selling to ruin it, he added.
“I want to evolve UGG to its place in the market globally, but I don’t feel public pressure to sell more product.” Angel said they have healthy margins, their average selling price for the UGGs are high, about $160, and they are extending product lines the right way.
Costco – never
Tiffany asked if Deckers would ever sell its brands to Costco, a venue that more and more action sports brands are selling these days.
“Over my dead body,” said Angel.
“It’s not going to happen. It’s an insult to the (retailers) who built these brands.”
Angel said there are a lot of public companies who have pressure so sell to Costco because they feel it’s a nice way to bury a number and they can apologize later. “That has no integrity,” he said.
As a former small retailer himself, he also still remembers what it felt like to support and help build a brand, and then to see it down the road at the local Big 5 at a discounted price.
Buying Sanuk
“I fell in love with Sanuk. I love that brand – it’s so authentic. It’s truly a lifestyle brand. I love the irreverence, the marketing, and it was a perfect fit.
After meeting Jeff, Angel said he couldn’t imagine a better fit and synergy between the two companies.
“It was a love fest,” Angel said.
Angel had lots of praise for Sanuk Founder Jeff Kelley. “He’s authentic. Jeff is a person who is a creative energy and a source for innovative thinking.”
“Pushing (people) out of comfort zones is a difficult thing to do. Being out of the comfort zone at Sanuk is normal. In this business you never want to be comfortable.”
“This business is fast. That’s why it’s called ACTION sports.”
See Page 4 for how Angel thinks the action sports industry can improve, the female opportunity
Teva’s action-outdoor strategy
“ Middle age guys wearing white socks and Tevas populate the outdoor industry. That look is not allowed in our building,” he said with a laugh. “The outdoor industry has struggled with aging.”
Teens today don’t want to go camping in a tent with zero wireless or cell phones, he said, and the outdoor industry is suffering because of that.
“Right now, we see a parallel world to outdoor in action sports. And we see other activities emerging, like these Spartan-type races.
“There is an emerging of outdoor being refined in a more youthful and more adrenaline way. Otherwise it’s really boring. You go to a campsite and eat pancakes. Teva is really defining these activities and trying to make the product relevant to consumers.”
What the action sports industry is doing wrong
Angel addressed this issue in response to a question from the audience.
“I think there’s a certain amount of fear of letting go of what you have, and I think you are not challenging the consumer,” he said. “I think the product all looks the same to me. There’s a lack of innovation. I think there’s an unwillingness to put effective new technology out there – not faux-tech – effective tech.”
“I think that is a critical part of growth because you have to get the consumer engaged in new and fresh things. You can’t be so narrow in who you want coming through the door that you are not energizing whole sections of the population. I think the industry is painting itself in a corner.
“For example, there is very little done to attract women in this business from a product standpoint. I am not just talking about cuter swimsuits or surfboards with different motifs. There is a whole footwear, apparel and accessories piece missing.”
“Women spend way more time shopping than most men and why isn’t this industry a destination for her to get the coolest most cutting edge stuff? I think there is a sort of myopia in the industry and I hope we are changing that. I think Sanuk and Teva are going to be a big part of that, and I hope others are, too.”
Innovation, exciting customers key for skate brands, others
Angel was asked for his opinion about how independent skate brands can compete with Nike.
“It’s innovation. You can’t beat Nike going head on into Nike. You have to reinvent the game. You have to reinvent the product. And you have to take enough shots at it that it has your own voice and your own perspective, and is totally unique to you as a brand.”
“Too many companies are just focusing on paying the bills. That’s not how you are going to make a difference. You have to excite consumers and if you excite consumers, miraculously, that’s how all the bills get paid.”
See Page 5 for the key skills needed to be CEO, and Angel’s incredible immigration tale
CEO skills – including humility
Coming from sales, and then product and marketing, Tiffany asked how he acquired the skills to then rise to the CEO level.
“I’m good at knowing what I don’t know,” he said. “I know my way around a P&L and a balance sheet, but rely on people more talented than me and I know which questions to ask.
“For example, I know inventory is a killer. You need to be good at managing inventory. I know that improperly managed inventory will kill us, so I have a team that’s really good at managing inventory.”
Humility is also important, and Angel gave the audience some advice:
“If you have a CEO that says they know everything – you should leave. I’m fine admitting I don’t know everything so that way it opens the opportunity to learn more and bring people into the conversation. You have to have respect for the people you hire. And treat them well. That’s why we have the no shithead rule.”
Tough upbringing
Toward the end of the talk, Tiffany circled back and asked Angel about his upbringing and the story behind his immigration from Cuba.
Born in Cuba, he was adopted by and lived with his grandmother’s sister and husband in South Bronx in New York City when he was 3 years old, and he and his guardians eventually settled in the Bay Area.
Other members of his immediate family were supposed to join him in America, but the Cuban revolution happened, and Angel didn’t see his father or sister for over 34 years.
Angel grew up poor. His grandma’s sister spoke zero English. When her husband died, Angel was a freshman in high school, and took care of her. They were on welfare and food stamps, something he was embarrassed about growing up.
Angel became a U.S. citizen at 18.
He received scholarships to college, and he recalled telling his friends there how much it bothered him to be getting free stuff. He vowed then to someday pay back this country.
“And I think I have,” he said.
Then with a laugh, he added: “I definitely have in taxes!”
