How to turn around a brand (ft. Doc Martens and Birkenstock)
Doc Martens has lost 85% of value since 2021 IPO. How can the new CEO bring it back?
Shoe brands Dr Martens and Birkenstock have a lot in common:
- Both are mono-brand shoe companies known for iconic aesthetics.
- Both were invented by German designers to offer a higher level of comfort than existing solutions.
- Both initially found product fit within unique subcultures — Dr Martens in punk music, but previously delivery workers and factory staff, while Birkenstock found an audience in health-forward hippies in the 1960s via its original distribution in health stores.
- Both IPO’d in the past few years (Birkenstock 2023, Dr Martens 2021)
The two companies have similar financials: ~$1-1.5Bn revenue, 38% cost of goods, EBITDA margins of 23–24%. And yet, Birkenstock is valued at 10x Dr Martens.
Why the difference in valuation?
One brand is growing (Birkenstock) and one is not (Dr Martens).
Weak US holiday caused Dr Martens to forecast a 10% revenue decline for the year, driven largely by slowing wholesale accounts:
The British bootmaker said in a trading update on Thursday that sales fell by 18% in its third quarter to £274m, and that, like many retailers, it had seen a “softer December”, with many cash-strapped shoppers deciding not to splash out for Christmas.
While sales made directly to customers fell by 3% in the third quarter, wholesale revenues — which account for demand by other retailers that sell Dr Marten footwear in their own stores — fell by 46%. — The Guardian, Jan 2024
At the same time, Birkenstock’s sales were on a tear, up 22% during the 2023 holiday season:
On Thursday, Birkenstock beat holiday quarter revenue expectations, with a 22% year-over-year spike, as the company benefited from its marked-up pricing and increase in U.S. demand — Retail Wire, Feb 2024
This past week, Dr Martens announced a promotion of former board member and Chief Brand Officer Ije Nwokorie to CEO later this year, as US wholesale orders continue to decline.
Mr Nwokorie has a clear challenge: increase demand for the iconic boot brand. But how?
Applying the Brand Growth Model
Last year, while researching Hoka’s impressive rise, I created a new model for brand growth. It breaks shoe brand building into two phases: Definition and Scaling.
Definition is about owning a specific niche and defining a core community, backed up by distinctive technology and/or design. This part of brand building is where a brand gets its initial footing (pun intended) with a clear use case, and establishes itself as part of a subculture (e.g. Hoka with ultra marathoners).
The next phase is Scaling. The challenge here is less about inventing innovative new technology, and more about threading the needle of expanding relevance to new audiences while maintaining a brands’ distinctive DNA. For most brands, that sounds like going in opposite directions. But Hoka did it, and Birkenstock is on its way. The key here is doubling down on what makes your brand unique, while being willing to expand relevance elsewhere.
For the full case on how Hoka did it, see this piece.
Today is about testing the Brand Growth Model on Dr Martens and Birkenstock — explaining both Birkenstock’s higher growth outlook, as well as steps Dr Martens and Mr Nwokorie can take to reverse course for the iconic Docs brand.
Brand Growth Model Phase 1: Definition
Let’s start with the first part of the model: Definition. Successful definition has 3 requirements: solve a niche problem, develop a distinctive product, and gain credibility in a specific subculture. Both Dr Martens and Birkenstock nailed it, which also explains why both were able to cross the $1Bn sales hurdle.
Definition: Birkenstock
Birkenstock’s history dates to the 1700s, when German cobbler Johann Adam Birkenstock started the family business of manufacturing insoles. Great great grandson Konrad Birkenstock designed the unique contoured insole in 1896 (previous insoles were flat), and it was not until 1963 when Carl Birkenstock introduced the first full Birkenstock shoe, featuring the deep, flexible cork footbed and wide strap that Birkenstock sandals are known for today.
Three years later, Californian Margot Fraser discovered Birkenstocks while looking for comfortable shoes during a vacation in Germany. She loved the product so much that she asked to distribute it in the US. Her best distribution partners happened to be health food stores, which solidified the brand as the shoe for counterculture youth:
“Fraser’s best outlets were health-food shops, near the granola. That was the start of Birkenstock USA. People who were against nukes, processed foods, and the sexualization of women wore them. In short, Birkenstocks were the shoe of opposition.” - The Cut
Perhaps no one fit this rebellious, counterculture energy more than Steve Jobs, who wore the shoes in the 1970s and 1980s while building Apple.
With their comfortable design, distinctive aesthetic, and growing fanbase among health communities and counterculture, Birkenstock defined a clear and distinctive brand.
Definition: Dr Martens
Dr Martens was also born from a cobbler in Germany. Dr Klaus Maertens broke his foot skiing, and found his standard issue military boots incredibly uncomfortable. He worked with his friend-turned-business partner Dr Herbert Funck to craft a new boot, heat-sealing soles to the uppers to create “air-tight compartments that cushioned the foot and offered unprecedented support.’ (The Rake).
(Side note: how cool would the brand have been if they anglicized their name to Dr Funk?)
Like Birkenstock, the shoes made it big when they were discovered and licensed for sale in another country. UK-based Griggs company acquired the license to manufacture and sell Docs in 1960, adding two important elements to market the shoes: one, they branded Docs’ shock absorbing technology: Airwair, with ‘bouncing’ soles. Two, Griggs added the signature yellow stitching, making the product instantly recognizable.
The comfortable sole and distinctive look became a hit among the English working class. But the brand became an icon when Pete Townshend of The Who wore them on stage. Townshend credited his energetic performances to the Docs sole: “their toughness combined with their softness and flexibility is what made them so perfect for the pseudo-athletic routines I performed on stage” (source: The Rake).
The Airware technology, distinctive yellow stitching, and sharp association with working classes and the punk rock music community established the Dr Martens brand as a force in culture.
Brand Growth Model: Scaling
Scaling to new audiences provides a new set of challenges. As mentioned, brands must walk a fine line of maintaining distinctiveness, while also expanding to new customers to grow.
How did Birkenstock do it?
Part of it is due to luck. In 2012, designer Phoebe Philo of Céline had models walk down the runway in mink-lined Arizona Birkenstocks, establishing Birks as something one could wear outside of bohemia:
“A long dress with a Birkenstock became the new minimalistic chic.” — The Cut
“The truth is nobody controlled what Céline did with our shoes,” — Oliver Reichert, CEO, Birkenstock, — The Cut
Nevertheless, the brand worked on making its product more palatable to the masses. In 2015, Birkenstock released a new series using EVA soles, selling for ~$40, as opposed to $100+ for the traditional cork models.
“since Birkenstock has made the rubber sandal, everyone in P-town is wearing them. It’s the new flip-flop.” … The EVAs now account for as much as 15 percent of the 25 million pairs of shoes the company will make this year. — The Cut
The EVA models maintain Birkenstock’s distinctive aesthetic and contoured insole, but allowed the company to address a much wider market of casual customers to try the shoe without high expense. According to Birkenstock’s IPO filing, the average customer owns 3.6 pairs of Birkenstocks — meaning that trial by EVA sandals can bring in loyal customers.
At the same time, Birkenstock expanded on the fashion community Phoebe Philo introduced, collaborating with mainstream luxury brands from Valentino and Manolo Blahnik to skater brand Stussy, which lifted the cachet of the brand and helped it get on the feet of celebrities and influencers.
The most interesting part of the Birkenstock story is how they look at distribution. Essentially, the Birks team sees distributors as a marketing channel to reach new audiences. They then pull consumers to their owned channels where shoppers can find broader selection, and Birks eventually scale down the distributor relationships:
“We operate our channels synergistically, utilizing the B2B channel to facilitate brand accessibility while steering consumers to our DTC channel, which offers our complete product range and access to our most desired and unique silhouettes….This transformative approach now serves as a blueprint for all our regions, where we have strategically converted from third-party distributors to owned distribution.” — Birkenstock IPO filing
Birkenstock is also careful with who receives its products, allowing only select wholesale customers access to its high end “1774” collaborations, which lifts brand equity akin to the pyramid strategy employed by luxury brands who offer their top products only to select customers:
We segment our wholesale product line availability into specific retailer quality tiers, ensuring we allocate the right product to the right channel for the right consumer. For example, we limit access to our premium 1774 and certain collaboration products to a curated group of brand partners” — Birkenstock IPO filing
Finally, Birkenstock expanded its audience relevancy by advertising how everything goes with the iconic Birk sole. Current ads on Meta sell Birkenstocks as products that ‘pair with everything from denim to linen’ and ‘play well with everything in your closet:’
In all, the lower priced product, expanded distribution, ‘everyone can wear this’ marketing, and collaborations with mainstream brands expanded Birkenstock’s audience, while consistent contoured sole and shape maintain Birkenstock as the owner of the slip-on sandal, even as other companies have copied their look.
Brand Growth Model: Scaling Dr Martens
The Dr Martens team did an excellent job establishing the brand as a cultural icon. However, sales are declining, and the stock price suggests that the brand’s growth has peaked.
Can Docs come back?
Let’s look at how Docs has addressed the ‘Scale’ phase of brand growth model, and where it can go from here. I am focusing on the US market for the purposes of this analysis.
According to Docs recent filings, the largest sales declines are in wholesale accounts, where sales are down as much as 50%. Direct-to-consumer (owned stores and ecommerce) was not spared, but declines were less, suggesting that current/aware audiences (those who go directly to Dr Martens’ stores) have stronger demand than unaware audiences:
The performance of our Americas business was challenging, as expected. We recorded a double-digit decline in DTC revenue, with softer ecommerce and low footfall. Wholesale revenues broadly halved year-on-year as continued caution from wholesale customers resulted in a weak order book. Overall, Americas revenue was down 31% reported, or 26% CC. — Dr Martens
Birkenstock uses wholesale accounts as its billboards to grow awareness, before shifting those customers to its owned stores and ecommerce. Why isn’t that working for Dr Martens?
Wholesaler accounts-as-marketing only works if audiences feel ready to buy when they see your product in stores, which Birkenstock engineered via broader awareness (mainstream fashion partnerships, advertising) and accessible pricing ($40 EVA models).
Dr Martens has not set up its wholesale for success. Dr Martens maintained high pricing. It’s hard to find Docs under $100 that aren’t on clearance, and even then clearance items start at $65 online. Iconic boot models are in the $150-$200+ range, a big investment for someone new to the brand. Dr Martens and Birkenstock have near equal gross margins, so I am not implying Dr Martens is overcharging for its products. They cost what they cost. However, similar to Birks’ EVA sole, it may make sense for Docs to innovate a new product that can maintain the brand’s equity (visually via distinctive stitching) and comfort (via shock absorbing tech) in a cheaper model.
The third leg of brand expansion is marketing. Marketing is where brands convince new audiences that this product is for them. As discussed, Dr Martens has roots in 1960s punk culture and rock music. These roots fit the aesthetics of the time, just as how Birkenstock’s cork sole fit in with 1970s counterculture. However, while Birkenstock strategically shifted its partnerships to address a fashion audience in the 2010s, and updated visuals to style products with today’s trends, Dr Martens maintained its punk rocker aesthetic, even as rock music has declined in popularity.
For example, Docs’ new campaign “Strong Since 1960” is true to the brand’s history, but the prevalence of tattoos, plaid prints, and lace feel more relevant to the punk 1960s than today’s subcultures:
At the same time, the campaign feels uninspired. The hero video tells audiences directly, “be true to yourself, that is what is going to make you strong,” but there is no story of people being true to themselves in the video. There’s no payoff to the video at all, which is quite … boring. As a result, Docs get lost in a sea of yesterday’s styles (distancing Docs from audiences today), and associate the brand with generic messaging (limiting the power of the campaign).
If Docs wants to grow demand, they should show audiences that Docs can go with anything, conveying a shift from I need to be punk to wear Docs, to I can be punk by wearing Docs. They should also tell a story worth watching. How about they lean into sneaker fatigue and inspire audiences to add some punk energy to their lives in Docs? Show people in Docs rocking out at a concert, opening up a fire hydrant on a hot day, getting a new ear piercing with a new friend just because. One of my favorite campaigns is when Quicksilver had surfers create explosions in the river in the middle of Copenhagen so they could surf. This is obviously a bit illegal, but it’s fun, unexpected, and causes a ‘hey that’s a cool idea…’ reaction.
How about collabs?
Like Birkenstock, Dr Martens uses brand collaborations to grow awareness and stimulate demand. But here they also stay too focused on their niche audiences. Dr Martens collaborates with art museums, and fashion brands like Rick Owens and Denim Tears. Don’t get me wrong, Rick Owens is very cool. As is Denim Tears (founded by the former Creative Director of Supreme). But awareness of these brands is not mainstream. Both serve an ‘if you know you know’ fashion crowd. Fine if Docs wants to peak at 1 Billion in global sales. Or grow the awareness of their collaborators. Not so much if Dr Martens wants to expand beyond their niche.
That’s the question for Mr Nwokorie — what does Dr Martens want to be? Doc Martens’ IPO prospectus tells a story of global expansion and addressing a wider audience. But pricing, products, and marketing suggest a narrow focus on a counterculture that has come and gone.
Why are sales declining, despite the tight audience focus?
Even if Dr Martens is not expanding its targeting, shouldn’t sales at least be stable? The sales decline suggests existing customers are also leaving. According to Reddit, Dr Martens has a product issue. Multiple threads feature complaints about declining quality, with fans suggesting competitors, and/or buying only from Dr Martens ‘Made in England’ line. The ‘Made Strong’ campaign may be an attempt to shift quality perceptions. However, it also suggests that Dr Martens needs to fix some manufacturing problems in addition to its marketing.
Overall, Dr Martens’ score on the Scale part of Brand Growth is poor. Declining product quality means that the brand has failed to maintain what made it distinctive in the first place. High prices and niche marketing limit growth to new audiences, which in turn is causing distribution problems and weak wholesale revenue.
Dr Martens going forward
All is not lost. In fact — Mr Nwokorie has one of the best jobs on the planet (in my opinion): make a brand relevant again. The Brand Growth model provides a clear roadmap.
- Product quality needs to be addressed. The ‘Made in England’ line has a better reputation (albeit higher prices). Dispatching a team to understand how manufacturing is different can start to identify ways to improve manufacturing across factories.
- Launching more accessible products will help get Docs into more hands/feet. Docs may need to look to other materials to offer shoes at more accessible pricing. Maintaining their signature yellow stitch, as well as some sort of comfort innovation supported by ‘Airware’ technology will maintain their brand even without the classic Docs sole. A sandal, slide, or flat could be ideal.
- Marketing can expand audiences. Who is the counter-culture of today? Punk rock might have come and gone, but the energy of youth music movements still exists, as is the credibility that comes from a product designed for working classes. Mr Nwokorie comes from the brand world (former CEO of agency Wolff Olins). So I’d guess he’s no stranger to customer research. If I were him, I would map out who the punk rocker of today is. What are the subcultures Doc Martens can tap into today? What aesthetics will modernize of Doc Martens, and who can frontline creative to show broader audiences that Dr Martens is for them?
- Brand campaign that opens up relevancy and desireability, by 1) Positioning Docs as a way customers can be punk, rather than implies you need to be punk already to wear Docs, and 2) defining what ‘punk’ is in an aspirational way
- Finally: new brand collaborations can help with both audience and distribution. Despite recent declines, Dr Martens is still a cool brand. It has recognizable aesthetics, and maintains equity as a tough, quality product. Brand collaborations with more ‘mass’ brands will be mutually beneficial: Docs gains broader relevance, and mass brands get to sharpen their design aesthetic for a fresh line.
Brand collabs are a dime a dozen today.
Standing out will require a bit of creativity.
Why not platform Docs collaborations into a campaign?
If Dr Martens is about punk, confidence, and strength — how about a collaboration platform where Doc’s partners with mass brands to add some punk and confident energy to their lineup? E.g. partner with Gap on a limited line of classic denim jackets featuring leather panels and yellow stitching. Then, showcase how a pair of Docs livens up a classic Gap jeans and t-shirt look. Suddenly, anyone can wear Docs. Docs becomes the star, and the message is clear: Docs adds a bit of punk energy to my look.
Then do the same with Vince, bringing in platform Docs sandals to pair with Vince silk dresses and oversized knits. Docs can go upmarket by collaborating with Toteme to remake their viral jacket/scarf with Docs’ yellow stitching. And then mass again by working with their distribution partner Revolve on a festival collection to go in Revolve’s festival pop ups. A Docs shoe repair pop up could be a fun brand experience for festival goers. A more formal line with Banana Republic or Theory can showcase how Docs liven up a power suit (maybe with limited edition grey stitching to keep the look semi-formal). Non-fashion collabs (e.g. a line of punk energy coffee beans with Blank Street or Alfred) will reinforce the ‘punk energy’ message and build awareness with new audiences.
One key learning from Birkenstock is their retail strategy: they view wholesale as one part of a cohesive marketing plan, linking marketing campaigns and distribution SKUs to ensure customer match and sell-through.
Two can play that game: Dr Martens can link its collaborations to its partners, debuting its limited editions only at specific partners (e.g. the high end stitched edition is only available at Toteme boutiques), allowing Docs to address new customers and rebuild partner sell through. Broader marketing campaigns will support the idea that Docs are for everyone, with a new ‘add some punk to your life’ brand campaign, which will not just encourage people to wear Docs, it will reinstate the energy of Dr Martens, while also conveying that Docs are for everyone.
(Or everyone who wants to break free from sneakers and live a little.)
Scaling Dr Martens
I am not a customer of Dr Martens. But writing this piece has made me want to purchase a pair. The icon is there, and the simple act of showing it on more of todays styles makes me want to wear it myself. That, and sneaker fatigue.
But outside of my personal feelings, Docs’ proposed growth strategy are rooted in the same principles of Hoka and Birkenstocks, while staying true to the Docs brand. I think it could work. What do you think?
Can Docs expand without losing its current customer base? How would you grow it? And if your name is Mr Nwokorie, feel free to email me.
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