Lakai exec on challenges and rewards of move back to Girl

A year ago, Lakai skate shoes left Podium Distribution and moved back under the umbrella of Girl Distribution.

We asked Lakai Brand Manager Kelly Bird for an update on the brand, what’s changed, where the brand wants to be in five years and for his take on the state of the skate shoe industry

Now that Lakai is under the Girl Distribution umbrella, has the new arrangement worked out as expected?

The expectations were mostly to build an infrastructure that is singularly focused on Lakai so all of us could collectively work to maximize the brand’s potential. When employee workloads are spread across multiple brands, sacrifices have to be made, so we’re happy to have eliminated that scenario.

What have been some of the benefits? What have been some of the challenges?

The primary benefit is the singular focus. Knowing that every employee, from sales to design to accounting to manufacturing, is now working toward the same goal all day every day makes a huge difference.

Lakai’s Manchester

The challenges are likely no different than the ones any footwear brand will deal with at some point. For starters, we switched our manufacturing from China back to Korea shortly after we moved, and any time you move 100% of your production in one season, you’re going to face some hurdles.

We may have been a little too idealistic in thinking that we’d be able to re-develop three seasons worth of designs in three months and still deliver the first season on time, but being fully in control of the production process now has made those hiccups well worth it, and we get closer to being back on schedule every day.

Outside of production, the other primary challenge thus far has been with our 3PL facility. When we left Podium, we decided to make the move into a new 3PL at the same time. The place we ended up choosing did a great job of wowing us with their sales presentation, but unfortunately, it proved to be a nightmare right from the start. No matter how much hand holding we did to try and improve the situation, it was clear that it was never going to be what we needed to service our customers appropriately.

We all knew we were going to have to get out of there sooner than later, but recent developments have forced us to move that project into the sooner column, which by all accounts will have been a godsend once the dust settles. This move will stretch our resources a little more than we had anticipated in the short term, but as with the manufacturing, now that we’ll have full control of our shipping and customer service, we’ll be able to make up so much of what we were losing with our current setup in a relatively short amount of time.

All in all, having these challenges put before us and meeting them to our satisfaction and delight will definitely help us better achieve our overall objectives.

See Page 2 for Kelly’s take on the skate of the shoe industry

How would you describe the state of the skate shoe industry?

Well, for a lot of folks out there, I know times are real trying right now. What’s happening in this sector of the industry is a microcosm of what’s happening in a lot of developed economies overall.

When all you’ve really known since the inception of your brand is growth, you tend not to spend a lot of time thinking about downside risks, so your company goals gets more and more ambitious, and your business ends up becoming leveraged accordingly.

Lakai’s Mariano

So when the headwinds get strong and the bottom does start to fall out, now you have these huge infrastructure costs relying on these anemic sales figures for support, and the debt pile gets bigger by the month. Now all your resources are going to managing this huge debt pile, which means you need twice the sales just to break even.

That’s obviously a tall order in today’s global market, so inevitably the banks come knocking and that’s where this whole process of deleveraging begins. The most you can hope for at that point is being able to keep the core components of your business in tact throughout that process.

Then you have the real establishment – the traditional athletic footwear manufacturers – that have likely dealt with this cycle several times throughout their existence, and they’re better prepared for these types of shocks and their positions become even stronger as a result.

So yeah, in a nutshell, I think a lot of what I would consider to be the real skate shoe industry is still in the process of deleveraging right now. And while that happens, much of their market share is in jeopardy of being lost to the more traditional athletic footwear manufacturers for some time. I don’t think that trend is irreversible, but the longer it goes on, the more effort it is going to take to get it back.

Can you describe Lakai’s distribution in the U.S. and abroad?

Our U.S. distribution starts at the core and goes all the way up to mid-majors such as Zumiez, CCS, Tilly’s, WSS, Zappos and Journeys. That’s a pretty broad scope for us, so our primary objective now is to expand our offering within these channels.

Lakai’s Marc

We have 82 SKU’s (67 men’s / 15 kids) in our Spring 2013 collection, which we’ve worked hard to differentiate so that there is room for retailers to bring in more styles going forward. We have seen marked progress on this front over the last year and anticipate that it will only continue to improve as things fall into place with our production and deliveries.

Internationally, we have distribution in just about every country bar China and India right now. Obviously those are two markets with a lot of upside potential, and we have managed to make a little headway into China recently, but more pressing priorities mean we probably won’t be able to make huge strides there in the short term. We’re fine with this as we believe we haven’t come close to maximizing our potential in the majority of our current international markets, so the primary focus will be on them for now.

What is Lakai’s positioning, and is it evolving at all?

I think we’re positioned very well. We weren’t unmanageably leveraged after we took full control of the brand, so we do not have to make any of those adjustments. Even with some untimely team defections last year, I think our brand equity is still as strong as it’s ever been with our customers. And the upcoming release of the new Girl/ Chocolate video, Pretty Sweet, will only fortify that position.

Lakai’s Linden

Our sell through is strong across all categories at all retail levels, which is also a good sign considering what our resources are in comparison to the traditional athletic brands.

Once we get our new distribution center fully up and running and catch up with our production, which I anticipate happening by the end of this summer, we’ll be in real good shape. That’s when the evolution really begins.

Where does Lakai want to be in five years business wise?

All we need to do is be able to maintain a level of sales level that gives us the capability to properly support a fully staffed infrastructure that provides proper global brand support at all levels, allows us to compensate our team at fair market levels, give us the resources to execute all of our marketing ideas/ capabilities to their full potential and keeps our manufacturing engine firing on all cylinders.

We’re not quite there yet, but I don’t anticipate it taking five years to get there. Once we do though, as long as we can maintain it, that’s really all we’re looking to do.