Podcast

Learn from Fast Growing 7-8 Figure Online Retailers and eCommerce Experts

EPISODE 353 39 mins

Xero Shoes: How Steven Sashen is Leading the Barefoot Movement with a Digital-Native Minimalist Footwear Brand Pt. 1



About the guests

Steven Sashen

Kunle Campbell

Steven is a former competitive runner and the co-founder of Xero Shoes, a minimalist footwear company dedicated to giving people the freedom of barefoot movement. At heart, he is still a gymnast and a sprinter. Fun fact, he is one of the fastest runners today in the United States in the 55+ men space. What’s crazy is that the company started with just $40. Today, they are doing over $12M+ in sales annually and are selling their footwear in 55 countries across the world. Steven was also featured on Shark Tank, turning down a $400K funding offer from Kevin O'Leary in return for 50% of the company.



On today’s episode, Kunle is joined by Steven Sashen, an internet marketing veteran, a gymnast, sprinter, and Founder of Xero Shoes, a lightweight minimalist footwear company dedicated to giving people the freedom of barefoot movement with just enough protection and an authentic style.

Steven shares how his return to sprinting led him to founding Xero Shoes 12 years ago at age 48. Today Xero sells DTC, on marketplaces and well at through retail distribution at a $30M+ GMV selling in 55 countries across the world.

Steven was also featured on Shark Tank, turning down a $400K funding offer from Kevin O’Leary in return for 50% of the company. At heart, he is still a gymnast and a sprinter. Fun fact, he is one of the fastest runners today in the United States in the 55+ men space.

Here is a summary of some of the most important points made:

  • Xero Shoes has a minimalistic design that forgoes all the complicated designs of running shoes.
  • Tapping into existing communities to present your product is a great way to kickstart your brand’s growth.
  • Passionate employees come from hiring smart people and paying them more

Covered Topics:

On today’s interview, Kunle and Steven discuss:

  • Friendly Side Chat with Kunle and Steven
  • Steven’s Background
  • Life Prior to Xero Shoes
  • The Founding of Xero Shoes
  • Behind the Scenes of Xero Shoes

Timestamps:

  • 09:02 – Friendly Side Chat with Kunle and Steven:
    • Kunle’s barefoot running story and injuries
    • The myth of cushioned shoes
  • 13:20 – Steven’s Background:
    • Steven’s early years
    • A teen magical, street performer and comedian
    • Creating a standard word processing software for film and television writers
    • Being an internet marketer in the ‘90s
    • Meeting Lena, his wife
  • 16:57 – Life Prior to Xero Shoes:
    • Getting back to sprinting after a 30-year break
    • Constantly getting injured and the solution
    • Learning how to make sandals
    • Creating a website for his sandal making hobby
  • 20:33 – The Founding of Xero Shoes:
    • The simple days of Google SEO
    • SEO keywords and leveraging video
    • Giving away the farm
    • Building a community via videos
  • 26:53 – Behind the Scenes of Xero Shoes:
    • Managing 7,000 SKUs with demand forecasting and order management
    • The day-to-day operations of Xero Shoes
    • Challenges with a 3PL as a DIY shoe brand
    • Order and predictability
    • Hiring smart people and giving the right pay
    • Understanding shoe import taxes
    • A little hack for shipping tax-free

Takeaways:

  • Most 3PLs have challenges shipping Do-It-Yourself products.
  • Leverage existing communities to market your product to kickstart your growth.

Links & Resources:

Facebook Group • Continue the Conversation

The eCommerce GrowthAccelerator Mastermind Facebook Group has just launched.
It is a community…

✔️ for founders and experts passionately involved in eCommerce
✔️ for the truly ambitious wanting to make an impact in the markets they serve
✔️ for those willing and open to help and share with other members

Here is where to apply to join the Facebook group
>>http://bit.ly/ecommercefb<<

———–

SPONSORS:

This episode is brought to you by:

As you continue to grow your eCommerce business, access to growth capital will increasingly play a significant role in achieving and surpassing your financial and social goals.

Why should you give up equity or pay high interest rates to grow your business?

There is a new way to access growth capital that transforms eCommerce businesses.

Wayflyer has shaken the way eCommerce operators access working capital.

With a dedication to only DTC eCommerce businesses, Wayflyer will fund you on a fairer “fund as you grow” model, meaning if your sales slow down, so does the amount you transfer back..

There is just a simple fee and the funds you need to grow are deposited to your account instantly.

It’s worth checking out – Wayflyer.com

This episode is brought to you by Klaviyo – a growth marketing platform that powers over 25,000 online businesses.
Direct-to-Consumer brands like ColourPop, Huckberry, and Custom Ink rely on Klaviyo.

Klaviyo helps you own customer experience and  grow high-value customer relationships right from a shopper’s first impression through to each subsequent purchase, Klaviyo understands every single customer interaction,  and empowers brands to create more personalized marketing moments.

Find out more on klaviyo.com/2x.

This episode is brought to you by Gorgias, the leading helpdesk for Shopify, Magento and BigCommerce merchants.

Gorgias combines all your communication channels including email, SMS, social media, livechat, and phone, into one platform.

This saves your team hours per day & makes managing customer orders a breeze. It also integrates seamlessly with your existing tech stack, so you can access customer information and even edit, return, refund or create an order, right from your helpdesk.

Go to Gorgias.com and mention 2x ecommerce podcast for two months free.

This episode is brought to you by Recharge, the leading subscriptions payment solution for Shopify merchants.

Recharge helps ecommerce merchants of all sizes launch and scale subscription offerings. Recharge powers the growth of over 15,000 subscription merchants and their communities—turning one-time transactions into long-term customer relationships.

Turn transactions into relationships and experience seamless subscription commerce with Recharge.

Find out more on rechargepayments.com/2x.

Transcript

In this episode, we’re joined by the Founder of Xero Shoes. It’s a minimalistic footwear company dedicated to giving people the freedom of barefoot movement. It is a terrific episode you do not want to miss, this time I mean it.

Welcome to the 2X eCommerce podcast. The 2X eCommerce podcast show is dedicated to digital commerce insights for retail and eCommerce teams. In this episode, I was joined by Steve Sashen who is an interesting individual. He is the Founder of Xero Shoes. On this podcast, we should be interviewing more D2C founders such as Steven. They’re few and far between but we should hunt them and get them on.

Do you know why? He has a phenomenal background. He has taken on several roles in the past. He’s been a screenwriter, an internet marketer since 1992, and an over 60-year-old D2C entrepreneur. I wouldn’t even say the D2C entrepreneur because he’s evolved this brand to more of a multichannel and omnichannel brand. They’re working with distributors now.

What is Xero Shoes? They are a minimalistic or minimal footwear company dedicated to giving people the freedom of barefoot movements. Interestingly, prior to recording this episode, I started barefoot running because I have been plagued with a one-year knee injury and I love running. I had a one-year-long injury and couldn’t run for a full year. I started running again and I started to have ankle pains and knee pains. I had more ankle pains in the mornings on my right leg so I decided to go out and strip the cushion trainers and run barefoot.

I bought a book about barefoot running and interestingly in this interview, I realized that Steven was inspired by the author of the book. He knows the author of the book that I’ve been reading about barefoot running. They’ve crossed paths. They’re panning into about $40 million in revenue. Their channels are primarily D2C marketplaces via Amazon and they have a number of distribution deals with retailers. They’re a growing multichannel brand. They have a team size of 60 in the United States alone. They have European operations and a UK partner.

Chances are if you’re into minimalist footwear, you would have come across them. The other interesting thing about their issues is the fact that they don’t just sell your shoes. If you want to build and make your shoes yourself. They can give you all of the components and materials that go into building shoes and they give you a manual to make your own minimalist shoes. It’s an open company and he’s an open individual. He’s widely read, full of life, and has a lot of enthusiasm. This is a high-quality conversation I had with him. He’s still a gymnast and a sprinter. He is one of the fastest runners in the United States in the over 55 men’s space. It’s incredible.

One of the things is he was featured in Shark Tank and Kevin O’Leary wanted to take 50% of his company for $400,000. He and his wife, Lena, thought they were having a laugh so they walked away but he said that the preparation from Shark Tank caught them to focus on exactly what they were about as a business. The exposure to Shark Tank took them to a new level and they’ve kept on building from thereon.

I don’t want to say too much. It’s an interesting interview. I’ve decided to split this in half so you’re going to get the first half of the interview and then the next half of the interview will be another time. Nonetheless, it was an interesting interview. Enjoy part one of the interview and we should catch up on the other side. Cheers. Thanks.

Steven, it’s an absolute pleasure having you on the 2x eCommerce podcast. One thing you didn’t know is I started barefoot running. I posted on LinkedIn that I’ve started barefoot running. I’m going to use this opportunity to get into barefoot running.

What made you decide to start?

My injuries. I feel like I’m not getting that connection with the ground and that stability.

Are you suggesting that a regular shoe that has 1 to 2 inches of foam doesn’t connect you to the ground?

Precisely.

I want to pause and say that I’m not going to be suggesting that people take off their shoes and run barefoot. It changed my life, and I’d be curious to hear what it does for you, but there are other alternatives, which is why Xero Shoes but it suffices to say that it’s not about whether you’re wearing shoes or not. It’s about what you’re doing with your body.

If you’re letting your body do what’s natural, versus getting in the way of letting your body do what it’s meant to do. I love that you did that. For people who have some injury, that is the number one reason people decide to explore this and find out if there’s a there there, which there is and I’m happy to hear it. What’s it been like?

It’s still challenging, I have to say because you have to take it easy. What I do is I run 3 to 4 times a week so I would do 4.5K or 4.6K with my trainers and then I’ll take them off when I get to the field and I’ll run barefooted. From the literature I’ve read, it’s best not to get on to it so you should just win yourself into it rather than go for it all the time.

Anything that seemed like a job was a business that I created. Click to Tweet

You would never switch to a new shoe and then go run a race the next day because you want to get used to that shoe. It’s the same thing with barefoot. I’m going to suggest that you turn your training upside down. If you can, find a nice, smooth, hard surface and do the first bit barefoot because that’s when you’re the freshest and your mind is most aware of what’s happening with the rest of your body. If you want to finish it off in shoes after that, do that.

When I say a short run, I mean 20 to 30 seconds. If it doesn’t feel great like you want to keep going, play with the variables, which is your gait, which is whether you’re reaching out with your foot landing in front of you or getting your foot underneath you with how many steps you’re taking per minute. You might want to play with that a little bit not grossly, but a little bit. You want to see how your body is positioned, whether you’re keeping your core engaged, or if you’re squishy when you run so these are all little things that make a difference. I say to people if you’re going to run barefoot, on a smooth and hard surface, and a short run. If you’re not having fun, do something different until you are some because

Smooth and hard surfaces.

The squishy foam in your shoe doesn’t protect you because what happens is if you have something squishy underneath your foot, your legs stiffen to try to use the squishy thing but the squishy thing doesn’t work as well as the muscles, ligaments, and tendons so a smooth hard surface gives you the most feedback, and also gives you the most responsiveness. Feedback is the most important part because that feedback is going to tell you whether you’re doing it well or not. When you’re running barefoot, doing it wrong hurts, and doing it right feels great. Your guide is fun and comfort.

If it feels like you’re working too hard, you’re working too hard and the solution is not something like building up calluses or having to get stronger. It’s usually relaxing more, and making sure that you’re landing with your feet underneath your body and that you’re getting your feet off the ground without pushing, lifting your foot off the ground rather than pushing off the ground. If it’s not fun, you’re doing something wrong.

I should start a barefoot podcast.

Let’s do it.

You’re here to tell us the phenomenal story of Xero Shoes. I don’t want to touch the surface. I don’t want to ask you about the channels, you get traffic, and how you do email because I know you do SMS marketing. I want to get down to your story and how you started. Have you always been entrepreneurial? Given your numbers, you have over $30 million in revenue business. You’ve been in business for about a decade or so.

More than twelve and a half years.

You’ve done phenomenally well over this period. You’ve been featured on Shark Tank, and you’ve had one of the first equity-driven crowdfunding campaigns. You know what you’re doing. You’ve been through a number of businesses so do you want to give us some context as to who you are as Steven.

If I had an answer to that, I would happily give it. I am a guy who likes to figure out how things work. I have never had a real job. I have done a bajillion different things but anything that seemed like a job as a business that I created. I’ve never interviewed for a job. I want to do that at some point for the fun of it. I want to have fun. I want to find a big deal interview and go and give all the wrong answers to see what happens.

Why do you want to work here? For the money, why would anybody want to work here? Are you kidding me? Let’s call it what it is. That would be a blast. I started young. I just had a flashback. In my first way of making money, there were two. One my dad was into footwear, ironically and he would pay me $0.25 for polishing his shoes and $0.50 for polishing his boots. This was more than 50 years ago. He didn’t realize how often he needed his shoes and boots polished. I clearly was much more aware of that than he was.

The second thing that I did is I figured out the combination of his piggy bank so I would go in there every now and then and raid it for quarters. I love telling that story because right before my dad died, I made some comment about that bank that he had, which he still had and he said that he knew that I had figured out the combination when I was a kid. He thought it was entertaining that I would go in and take $1 worth of quarters every now and then. It was enough that I could go out and buy some candy not enough that he would notice but he noticed which is great.

When I was 13 I was doing magic shows at kids’ birthday parties. At 16, I started street performing. I ended up doing stand-up comedy for ten years. I ended up getting a degree in film because I had nothing else to do during the week when I was doing stand-up comedy. I wrote some screenplays, and I ended up inventing the industry’s standard word processing software for film and television writers. On the side, I’ve been meditating since I was 10 and I developed a weird meditation course. I was selling that online. I did a bunch of other internet marketing. I’ve been an internet marketer since 1992, pretty much before there was the internet.

All these things came together at the right time that allowed us to start Xero Shoes, including probably most importantly, the fact that somehow my wife decided to become my friend first, girlfriend and wife after three years of ignoring me. She was avoiding me like the plague is more accurate. She gave in and became my friend and then eventually somehow decided to become my wife. I say that that’s the important part because she’s a brilliant operations and finance person and I’m a marketing product person so when this started, it was the perfect fit.

You need that synergy. You can’t do it all. Did you stop barefoot running before Xero Shoes? Did you not like what was in the market? How did you so ideate Xero Shoes? Why the name Xero Shoes?

When I was 45, I got back into sprinting after a 30-year break and was getting injured pretty much constantly for the next two years. A friend of mine who’s a world champion runner suggested I take off my shoes and go run barefoot. I quickly learned why I was getting injured. I was overstriding, pointing my toes in a way that was putting the brakes on with every step.

Doing it wrong felt bad. Doing it right felt good. By getting out of my big thick padded motion shoes with pointy toe boxes that are not the shape of your foot, my injuries went away. I became faster. I’m a Masters All American Sprinter, which means for men over 55 in America, I’m one of the fastest guys in the country. I was looking forward to my first official race when I turned 60. I was All American again.

Congratulations. You’re an over 60-year-old eCommerce entrepreneur.

That barefoot experience, that natural movement experience, I wanted more of that and so I knew about the Tarahumara Indians in Mexico who make sandals out of used tires. I got some shoe repair material so a sheet of rubber about four millimeters thick and figured out a way to lace those onto my foot and that’s what I was wearing for footwear. Other people kept asking me to make sandals for them so I made a pair for my wife who patted me on the head.

Was this for the track or was this every day?

It was for everything. I was going barefoot whenever I could and wearing sandals if I didn’t want to argue about whether it was legal to get into a restaurant, which it is. On the track as well. I can’t run full speed barefoot on the track because with a Mondotrack surface, it’s sharp and at the speed that I’m running, it rips the crap out of your foot so I needed something to add protection. If you think about it, for 99.95% of human history, that’s all footwear was. It was something to protect the bottom of your foot, something to hold that on your foot, something that let your foot move naturally. That’s what I was doing. I was going back in time.

One day, a guy who was a barefoot running coach said that he was writing a book about barefoot running, in fact, called Barefoot Running and he said, “If you had a website for the sandal-making hobby of yours, I’d put you in the book.” I rushed home and I pitched this incredible opportunity to my wife, who assures me that it was a dumb idea that won’t make any money and is a waste of time. I said, “I won’t do it then.” After she went to bed, I built a website.

Squishy foam in your shoe doesn't protect you. Click to Tweet

The next morning, she growled at me and I said that it’ll be a case study for some search engine marketing business that we had started. I said, “I’ll own the keywords that I care about within about three months and we’ll see. Maybe it’ll be a car payment, who knows.” I was wrong on both counts. It only took me six weeks until I owned the keyword. For any keyword that I cared about, I had at least 40 of the top 50 search results. It was clearly going to be more than a car payment by six weeks in as well. That’s when Lena said, “I’m all in. You’re going to need me to manage this for you.” That’s how it all began.

The book doesn’t have to be this one.

It’s exactly that one.

It’s Michael Sandler. This is providence. I bought it when I started running. When you started this, what year was this?

It was late 2009.

At the time, if I’m not mistaken, SEO started becoming a bit complicated. Google started releasing the Penguin update.

That was a few years later. In 2008 and 2009, it was pretty simple. It was a bit of a free for all and Google kept over-optimizing certain things so do you remember. Do you remember Squidoo? Let’s see how far back you go.

I don’t.

Squidoo is a blogging platform in a way. For a period of time, if you made a page on Squidoo, they called it a Lens. I don’t know why. Maybe it’s a lens looking into something. There was a time when if you had a Squidoo page with good keyword optimization, you were number one instantly, and then Google figured that out, “We can’t do that.” In 2009 and early 2010, they were over-optimizing video and there were maybe 50 or 60 video sites.

If you submitted videos to all 50 of those sites, you owned a lot of real estate and a lot of articles sites as well so there were a lot of places to post things. Since the early days of Google, they were all about backlinks and a preponderance of backlinks. You could submit to all those sites and suddenly have a lot of backlinks and Google was giving you a high priority. The big thing that changed for us is you know you’re in a bad market when annoying internet marketers and the people who bought their course should go after the people who bought their course as a way of making money. For example, do you remember the AdSense AdWords arbitrage at the time?

Yes.

For people that don’t know, AdWords is when you search something on Google and you see ads. Those are AdWords ads and they’ll point you to a page. What people were building was pages that had AdSense and AdSense is those same ads on your own page so there was an arbitrage play, where you could advertise on Google for say, $1, drive people to your website, and if they clicked on one of those links, you could make $1.25. You’ve got a $0.25 margin by building out these sites.

The big thing that happened, then, that’s when people said to go after barefoot running as a place to build AdSense pages and run AdWords ads to them. It was way too expensive for us to advertise. Because people who had gotten these internet marketing courses were paying $2 or $3 a click and we were selling a $20 product. There was no way to make that work.

I was at an internet marketing workshop in 2010 or early 2011 where there were a bunch of guys at that workshop who were making millions of dollars a month doing this AdSense AdWords arbitrage play. I was with them the day that Google figured it out and killed all those sites and they went from millions of dollars a month to nothing overnight.

Did you remember a guy called Shoe Money?

Yeah, I remember well.

I remember him. I wonder how he’s doing now.

I was walking around this conference and it was watching ghosts because they were stunned and one internet marketing friend of mine, one of the few guys who’s done this longer than me, said to them, “I told you don’t build your business on somebody else’s back. They can change it at any moment and here’s the situation you’re in.”

From the sounds of things, it looks like search was the major way you launched Xero. Were there any defining moments?

We’ll search with a caveat. I gave away the farm. I made a bunch of videos showing exactly how to make our product and if you bought our materials but also if you didn’t buy our materials. I gave away the entire business model, knowing that most people weren’t going to do it and if they did, that’s cool. I have no problem with competition. It was all those videos that started it and then they were the other organic search as well but the video drove it significantly.

Were these YouTube videos?

It was on YouTube and Vimeo. There were 50 different video platforms. YouTube was the number one driver though.

It sounds to me like you’re building community because with your videos, you’re getting attention from an audience of people and some of them are going to take action, given that the content and information you’re giving to them was valuable.

You nailed it. Yes, it’s creating value, that’s number one but you use the phrase building a community. I was doing something a little more subtle than that. I was tapping into existing communities. There was, at that time, a burgeoning barefoot running community that was showing up. There were some blogs and Google Groups, etc. I was showing up where people were already having a conversation about what I was doing, and injecting myself into that conversation by providing actual value and then moving them over to what we were doing as a result of that and then that would grow also.

I met a guy more than ten years ago who said, “I saw your videos and I started making sandals and I’ve never bought anything from you.” I said, “Great. I did it because I’m trying to change the world, not trying to get money out of everyone’s pocket and this is changing the world. I’m happy to hear it.” Because I learned to make my own footwear, it was like having a superpower and then I started repairing appliances that I had. Instead of throwing them away and buying new ones, I started repairing them. I started making other things and I started gardening.

It opened up this whole idea of having agency in your life, instead of turning everything over to some corporation, which is an ironic thing to say now that we’re selling footwear. You can still go out and make a pair of sandals the way human beings have been doing it since the beginning of human beings. It’s not rocket science, or as they said back then, “It’s not rocket science.” If you’re going to make actual footwear, that’s a whole other story. You can’t do that on your own easily.

How many SKUs do you have at the moment at Xero Shoes?

If we’re including sizes and colors for every style, I don’t know the answer to that question. Probably somewhere around 7,000.

How do you manage that from a demand forecasting and order management perspective?

Let’s say that no one’s ever done it right. If they did, there wouldn’t be stores like America, Ross, Marshalls, TJ Maxx, and other outlet stores where companies give away their old inventory. It’s tricky. We are looking at every color and every size, and seeing what isn’t isn’t selling. We can’t do it perfectly, because sometimes and often will sell out of colors and sizes so we don’t know what the data is or would have been if we hadn’t sold out.

Because we are growing so quickly, most of the time, since we started, we never had enough money to buy enough inventory to know what organic sales would look like. Sometimes we make a style that doesn’t sell as well as we expected it to and we get over inventory. This is something that we are monitoring daily, evaluating weekly, and making decisions about every couple of months when we have to figure out what we want to do next and we have to place those orders. There are lots of tools that have a lot of smart people who’ve been doing this for 30 years plus but it’s a concerted effort to get as close as you can, knowing that you’re never going to get it right.

How many orders have you processed on a daily basis?

On average, about 1,000.

That’s a lot of shoes.

During a sale period, sometimes 2,000, 3,000, or 4,000.

Operationally, where’s your fulfillment based? Is it in a single unit?

It is right now. We work with 3PL, a third-party logistics company, and quickly became their biggest client. That company was trying to grow in part to support us and their investors said, “We want out.” We moved to a couple of other 3PLs. Some of our products like the Do It Yourself sandal kits were weird to deal with for a 3PL.

Doing it wrong felt bad. Doing it right felt good. Click to Tweet

You can’t make them in advance because we had a bunch of different soles styles, sole colors, sole thicknesses, and then a bunch of different lace colors. There are about 5,000 combinations and you can’t make them in advance because there’s no way you’d get that inventory correctly so you have to build them on the fly.

Most of the 3PLs weren’t willing to do that or do it at a cost that made any sense. We’ve been running our own warehouse for over eight years. We have our own warehouse in Denver that’s about 90,000 square feet and that’ll last us for a few years. We are looking to find ways of taking some of that inventory and moving it to both East and West Coasts.

We also have distributors in other countries. We have our XeroShoes.eu in the EU and we have a whole operation based in Prague. There’s a dealer in the UK which is XeroShoes.co.uk. We’re going to be taking that over in the near future. We’re looking at the different ways that we can handle inventory and warehouse inventory and manage returns in the UK. Post-Brexit, it’s become complicated and expensive. We can ship from Prague to the UK but it costs about $40 per box, which is insane.

For travelers, for instance, you used to be able to claim your VAT when you travel because it’s 20% more. Since Brexit, you can’t do that anymore.

Brexit has had unforeseen consequences but these are all things that many of us predicted and they’re just coming. The people who were pro-Brexit didn’t believe they were real or didn’t believe they’d be significant.

It’s quite a sophisticated and complex operational setup you have. You mentioned that your wife manages operations and finance. What’s your secret to ensuring order and predictability in operations?

First, let me clarify. Lena was this COO and CFO but we now have the good fortune of having a professional CFO and professional CFO so they’ve taken over a lot of what she was pulling her hair out over for years. This idea that you can manage things and it’s not always hair on fire out of control, that’s hysterical. Every day, there’s something that goes chromatically wrong, and hopefully, you’re smart enough to figure out what you need to learn to put out that fire.

We do the best we can by hiring smart people by paying more money for certain positions than other companies think. Our customer happiness team, aka customer service, they’re important so we pay them well. With our warehouse teams, it’s the same thing. It takes a long time to get someone up to speed and know how to support our brand and to lose somebody is super expensive so we want to make this a good place to work. We want people to want to be here.

That’s another thing. We only typically hire people who believe in our mission and are gung-ho about helping change the world by giving people a healthy and happy body starting feet first. Without that, there’s no synergy, good mix, or fit with the company. Running a company is a daily process of dealing with things that go wrong that either we’re going fine yesterday that you have control over or that we’re doing fine yesterday that you have no control over. When the Trump administration created this trade war with China and increased our tariffs or import duty or import taxes, we had no control over that and we had to figure out what to do when the cost of some of our shoes doubled. That was entertaining.

What did you do?

We did some negotiating with our factories. In most of the world, import taxes are relatively simple so for Europe and the EU, for footwear, it’s 17%. End of story. In the US, there are 500 different categories of taxes for footwear. One of our sandals looks like a flip flop so it has a textile material for the lace. As a result, the import duty is something like 37.5%. It’s ridiculous. If that textile lace was replaced with leather lace, the import duty would be 20%.

If we could, instead of having little wings on the side of the sole so the laces don’t touch the ground, if we had little holes on the bottom so it looked like a flip flop with a hole in the front and holes in the back that’s a zori construction, the import duty would be zero. It makes no sense whatsoever. A lot of these tax rules were created more than 100 years ago and haven’t been revisited since.

Here’s a crazy one. If 51% of the sole of the shoe is fabric then there’s a lower tax rate. There are things you can do to treat the sole of the shoe to make it fabric and people have known about this for years. You need an attorney who understands all the footwear tax laws to find all the various little things that you could do to find a way to not have to pay so much but the other thing we had to do is we had to raise some of our prices because there was no way around it. That was painful for us but we had no choice.

I see three key functions working in tandem. You have the attorney that’s picking up all the nuances in the law and then your product team trying to adjust your products in line. You still need to customer advocate to know if we’re making these changes in these shoes or this footwear, is it still going to satisfy our customers and all you have to do is to work out.

You nailed it in. There are a lot of companies that start exactly the way you said it. They understand the tax law and then they build a shoe based on the law. Rather than trying to figure out how to work together, they go straight for, “Here’s the way around all these taxes and now we’re going to build that product and take it from there.” Here’s an interesting one. If you ship your product from certain tax-free zones and the cost of the product, the sale price is under $800, there’s no import duty at all. There’s no taxation at all.

There are people who are shipping their products to certain places in Mexico, which are tax-free zones. When they get the order, the order goes to Mexico, and then a FedEx truck picks it up in Mexico, drives across the border to California, and then drops it off at a FedEx facility and ships it from there tax-free. The challenge is that you have little control over a lot of pieces of that process so a lot of things could go wrong.

Our warehouse is fifteen minutes away. It lets us go check on inventory and lets us see what’s happening in a way. It lets us be involved with our warehouse workers who are our employees so they have a vested interest in our business. It’s a different thing. It’s a constant game of cat and mouse between the industry and the government, the manufacturers and the government, and the customers and the government so there’s a lot to pay attention to.

About the host:

Kunle Campbell

An ecommerce advisor to ambitious, agile online retailers and funded ecommerce startups seeking exponentially sales growth through scalable customer acquisition, retention, conversion optimisation, product/market fit optimisation and customer referrals.

Learn from eCommerce Entrepreneurs & Marketing Experts


Get Free Email Updates by Signing Up Below:

Podcasts you might like