Converse — The Rise and Fall and Rise Again
Here is the video from this transcript: Converse
When I was a teenager, I would wear converse shoes to school everyday. For some reason, I really liked their style. Nowadays I wear any pair of shoes that provides me comfort. I don’t really pay attention to the brand. I thought that Converse was doing well at the time, only to find out that they filed for bankruptcy twice. Thus, I decided to take a closer look at their story. Let’s dive in.
We can trace the origins of Converse back to 1908. Marquis Converse was working at Beacon Falls Rubber Shoe, when the company got acquired by U.S. Rubber. When the merger concluded, Converse decided to open his own shoe company. Armed with 250,000 dollars and extensive experience in the space, he opened the Converse Rubber Company in Malden, Massachusetts. Since he knew the business model inside out, it did not take time for him to set up shop and expand quickly. After merely a year, he was employing 350 people who were churning out 4,000 pairs of boots and rubber daily.
Converse gained traction with the introduction of the Converse canvas All Star in 1917, one of the first basketball shoes produced. Mind you, at the time, Basketball was relatively new, having been created in 1891.
Charles Taylor, a basketball player, became the first endorser of Converse. He joined Converse’s salesforce in 1921 and traveled the world to promote basketball and converse shoes. However, Converse filed for bankruptcy in 1929, in the face of the great depression. From there, the company changed hands quite a few times. Mitchell Kaufman, the president of Hodgman Rubber, first stepped in to lead the company. After his unexpected death a year later, he was succeeded by Albert Wechsler who managed the company until 1933.
Then, the company was bought by the Stone family, who stuck with the company long enough to make it a market leader. During the great depression, Converse had pivoted to providing special footwear and other equipment to the Army. At the end of world war 2, Converse switched back to the consumer market, opened a new manufacturing plant and acquired two shoe companies. The company had opened three divisions: Sporting Goods, Footwear and Industrial. Its offerings expanded to include hockey pucks, teeth guards and other rubbery items.
The company was then bought by Eltra Corporation in 1972. Eltra wasted no time in continuing the expansion by acquiring manufacturing plants and distribution centers in North Carolina. However, increased competition from foreign brands and increased overhead costs lead the company to tone down its expansion. They sold some manufacturing and distribution centers to then be bought by Allied Corporation in 1979. During that time, Converse had established itself to be the leader in basketball footwear. Unfortunately, by 1982, Allied was itself undergoing a restructuring and decided to axe its consumer products business. The president of Allied, along with Converse’s President, organized the spin-off of Converse, which became publicly traded on NASDAQ in 1983.
Since more brands kept emerging in the U.S., Converse decided to expand internationally, opening a store in Japan. From there, licensing deals were made to distribute the products in Europe and other parts of Asia as well. By mid 80s, Converse diversified to become a full-line athletic shoe company, catering for all types of sports. It invested heavily in R&D, opening its own biomechanical footwear lab equipped with computers and robots.
The company inked sponsorship deals with USA Basketball, World Association of Basketball Coaches and the Federation Internationale de Basketball in the 70s and 80s. Converse even became the first footwear company chosen to represent the games at the Olympics. Endorsement played a huge part in Converse’s marketing plans. Their Magic Johnson endorsement had quite the spotlight for some time. Johnson was named the NBA’s most valuable player while he was endorsing Converse. However, he was disappointed in the deal as he was earning way less than players who were endorsed by Nike and other brands.
In 1986, Converse was acquired yet again, this time by Interco Incorporated. But Interco filed for bankruptcy in the early 90s only to re-emerge in 1992. A year later, Converse introduced its Run N Gun shoe line, which was changed to Run N Slam after it faced criticism over the violence implied in the name. Despite the brand performing well, Interco decided to sell Converse in 1994, when Interco split into three companies. The majority of Converse’s shares were owned by Apollo Investment Fund, a private equity firm owned by Leon Black.
By 1995, Converse managed to become the first company to be named the official shoe of the NBA, obtaining the rights to use the NBA name and logo in its advertising campaigns. During the same year, Converse bought Apex One, a marketer of sports-related footwear and apparel. However, Apex was soon closed down as it could not get enough orders to be profitable. Converse itself was not performing well. It registered operating losses, laid off hundreds of workers and eliminated most of its product lines. Moreover, its RAW basketball shoes were flawed and more than 400,000 pairs had to be recalled.
By the end of the 90s, consumers shifted from wearing basketball sneakers to boots. Converse was struggling to revitalize sales as it depended a lot on the basketball category. It continued to push for sales in the international scene, inking licensing deals in Canada and strengthening its position in Japan. In 1999, it introduced its new concept, helium cushioned shoes, in an attempt to generate interest in its brand. But by 2001, Converse filed for bankruptcy. It restructured its business in a way so that it could still operate. Its plan was to have third parties’ market and sell their products in the U.S., against which they will get licensing fees.
Analysts believe that Converse was over-specializing their footwear to sports. Other brands such as Nike, marketed their running shoes for the general population. Although Converse had its own R&D and released its unique shoes, it was quite behind in terms of fitting cushions and springs in their shoes. As revenues at Converse was slipping away, its endorsement strength took a hit. While Nike snapped up Michael Jordan, Converse was still stuck in their Chuck Taylor days.
Converse was bought yet again in 2003, by Nike. And let me tell you, Nike made a behemoth out of it. At the time of acquisition, Converse’s revenue was 205 million dollars. Nowadays, it rakes in close to 2 billion dollars. Nike obviously had the financial and human resources to rebuild Converse into a profitable business. The two even collaborated to reintroduce Converse’s famous Chuck Taylor, with Nike tech on the inside. It’s a win-win situation for both brands.
Are you a fan of Converse? Did you know that it faced all of these troubles throughout its history? Would you be willing to try them now? As always, let us know what you think.
