Slow expansion seen as way to bring new categories to the fore. Another sneaker waits in the wings.
By GREG MELVILLE
BOSTON -- For a company with precisely zero percent market share, it sure knows how to create a buzz.
Last week, eyewear maker Oakley Inc. unveiled its new performance athletic shoe. Designed for no sport in particular, the unnamed, technology-laden shoe will be manufactured completely at the company's Foothill Ranch, Calif., facilities and will be distributed to 200 independent retailers for the upcoming back-to-school season.
The new shoe is part of the 23-year-old company's strategy of slow expansion into new categories. Creating an athletic shoe, according to CEO Link Newcomb, "is something we have considered for a long time."
A few years ago, the company's founder and Chairman Jim Jannard approached Nike Chairman and CEO Phil Knight about collaborating on a domestically produced shoe, but that plan was "tabled," Newcomb said.
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During the past year, Oakley has engaged in a bitter fight with the Beaverton, Ore.,-based athletic footwear giant. At one time, the two companies' chairmen were friendly, and Knight would often wear Oakley eyewear in public. Then, Nike began producing its own line of sunglasses to compete against Oakley, the second largest sport eyewear manufacturer in the world, behind Bausch & Lomb Inc. In July, Oakley filed a patent-infringement lawsuit against Nike regarding the design of a pair of sunglasses. The companies are also connected in another way: Nike endorser Michael Jordan sits on Oakley's board and endorses its eyewear.
Oakley is fiercely protective of its designs and brand identity. It generally does not advertise its products on television and does not license its brand name. Last year the company, which had net sales of $193 million, filed more than 20 patent infringement lawsuits; it has more than 350 patents worldwide.
Along with expanding into footwear; the company is also developing a line of apparel. Expansion of the brand will be slow, but continuous, Newcomb said, adding that the decision to enter into these two categories was not made to lessen Oakley's dependence upon the sunglasses market.
"I think that we are going to have our hands full for a while with footwear, but the bottom line is that we have slot of talented people in the design area, and they are no longer contained to optics," he said.
Oakley is now designing a second sneaker, although Newcomb would not elaborate on when it would be released or whether it would be designed for a specific sport.
The suggested retail price for the shoes unveiled last week will be $125. Among the innovations touted by the company in the new shoe are an outsole inspired by race car tires, a breathable upper that includes interlocked Kevlar, and oval laces that are less apt to come untied than normal ones. Distribution will initially be limited to retailers who already carry Oakley eyewear, but will broaden as manufacturing capacity increases, Newcomb said. Like its eyewear, there are no plans to make the shoes available in department stores.
One of the challenges the company faces as it expands is maintaining its identity as an edgy, non-conformist brand. Among the endorsers for the new shoe will be professional surfers and wake-boarders, instead of basketball or football stars. Newcomb said Oakley will be careful not to dilute its image.
"We are brand fanatics. We're control freaks about the brand itself. We're a little bit slower at things at times because we have to plan and execute everything ourselves," he said.
The company's hands-on approach also allows it to keep manufacturing costs down and margins high, he said. Oakley is constantly creating new technologies to make production more efficient and inexpensive, in order to continue to be able to make products in the United States, Newcomb said.