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Joyce Groote, of Holeys.
Joyce Groote, of Holeys.

Report on Small Business magazine

Can this woman beat Crocs? Add to ...

Groote's strategy seems pegged to riding population trends: Belt-tightening boomers, she points out, are focusing their energies closer to home and flocking to gardening, for example. But, seated in her office beside a poster announcing “Life's better at the beach,” Groote herself seems far from ready to start taking it easy. Is she angry about Crocs turning Holeys, in the world's mind, into a knockoff brand? “I used to be,” she says resignedly. “They had more money for marketing, what can I say.” Even if Holeys could have spent more on promotion in the early years, “it would have been a drop in the bucket.” What she doesn't say is that the Colorado company's marketing investment helped develop the whole category, greatly benefiting its rivals.

Now that foam clogs are not just uncool but unpopular, and with Crocs continuing to struggle – its expansion into more fashionable shoe styles and golfing gear has seen mixed results, and its clothing line, launched in 2007, bombed – Groote is keen to distance herself as far away from her rival as she can. The two companies are chasing different consumers, says Groote. She claims to not even view Crocs as a competitor. “The only similarity between Crocs and Holeys footwear now is that they use similar materials to make very different products.”

As for the original Holeys Explorer clog that was at the core of all the litigation? “We don't even carry it. We're clearing it at a warehouse sale,” she says. “We're not the same company that we were.”

How to stay on the fast track

Joyce Groote's adventure in helping to drive the foam-clog trend has given her some hard-won lessons for managing a rapidly evolving business: Pick channel partners carefully: Make sure, Groote advises, that international distributors have ample warehouse capability, financial backing to make the investment in inventory, and are insured by Export Development Canada so they won't default on financial commitments. She also advises having a contract prohibiting them from going into business as your rivals. One of the first distributors Holeys signed, in Australia, ended up using the company's money to set up as a competitor. And verify that they have the kind of reach they claim. “Every distributor wants exclusivity for a whole country,” she says. “Well, prove to me you've got a sales force that can deal with [various vertical markets] They never can.” Importantly, Groote looked for distributors willing to be true champions of the brand.

Understand your partners' business culture: Groote learned early on that her Chinese partners had a different understanding of commitments. “You ask them if they can do something, they always say yes. The people in China just don't like to say no to you.” Finding this to be true across various Chinese companies she's dealt with, she has learned to account for that in her planning.

Find partners who'll grow with you: Holeys' first Chinese manufacturer wasn't willing to invest in expansion to keep up with rapidly escalating demand. “We were always pushing them to get more staff, more equipment,” says Groote. “But they were doing [our shoes]as something on the side.” She quickly switched partners, and wishes she had personally visited the first plant before the deal had been signed.

Raise money when you don't need it: Holeys worked closely with its banks and sought financing for expansion before it was urgently required, applying the timeline set out in Groote's business plan.

Manage the growth: While most foreign distributors source directly from China, Holeys decided early on to run its own warehouse operation in North America (except for some niche retailers, who were supplied by specialized distributors). A major consideration in that decision was having the ability to prioritize clients when the demand outstripped supply. Holeys made sure to supply its existing retailers even if it meant saying no to new distributors or stores.

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