THE BIG BUSINESS OF A WHITE SHOE

©CNN

When former V magazine art director Peter Poopat and brand consultant Flavio Girolami founded Common Projects ten years ago, the market for premium-priced sneakers was relatively underdeveloped. However, their prescience was soon to be proven by a boom in the luxury sneaker category, which has seen designer labels like Balenciaga, Givenchy and Saint Laurent selling sneakers everywhere from Sneakerboy to Bergdorf Goodman.

In recent years, a number of brands have gained popularity by bridging the gap between the Guccis and Nikes. These shoes are comfortable, but could be dressed up, offering a balance of quality construction and understated style. Most of them come with a sleek silhouette, narrow toe box and hand-crafted touch. Laurent Droin, managing director of Eurazeo Brands, which recently acquired a majority stake in Axel Arigato, reflected the long-term consumer trend to dress more casually. “These are not only sneakers that you wear on Sunday morning,” he said. “This is really about backing the sneaker trend, the casualisation of everybody’s wardrobes,” added Tara Alhadeff, a principal at Permira who worked on Permira’s acquisition of Golden Goose. “Once people realise you can look good and be comfortable, that’s an irreversible move people make in their wardrobes.” Like Dr Martens, she said, it’s a “uniquely powerful brand that resonates with consumers”.

PERMIRA SNAPS UP GOLDEN GOOSE

Golden Goose, the Italian brand whose deliberately scruffy-looking trainers sell for as much as GBP 1,000, had been sold for just under EUR 1.3 billion from The Carlyle Group to Permira, the private equity firm that also owns Dr Martens and also acquired Reformation last year.

Golden Goose, which was founded in 2000 by designers Francesca Rinaldo and Alessandro Gallo, has a long history of private equity ownership. In 2013, it was sold to Italian private equity fund DGPA which flipped it to mid-market investment firm Ergon Capital two years later. Carlyle had acquired the firm for EUR 400 million in 2017 driving its expansion in the United States and Asia with flagship stores in New York, Tokyo and Beijing. When Carlyle bought Golden Goose, it was a “little jewel” that was seeing “the first signs” of the celebrity interest that would go on to fuel sales and had significant potential back then.

STEVE MADDEN BUYS GREATS SNEAKER BRAND

On the heels of Farfetch’s acquisition of New Guards Group, Steve Madden announced that it will be acquiring Brooklyn-based sneaker brand Greats to further expand its range of footwear options in August 2019. Greats was founded in 2014 by Jon Buscemi and Ryan Babenzien who decided to start selling high-quality essential sneakers direct-to-consumer at an affordable price via its website, generating net sales of approximately USD 13 million.

Following the acquisition of Superga, Greats will be the second sneake brand in the Steve Maden’s portfolio. “We see significant opportunity to expand the business by combining Greats’ strengths—which include an outstanding brand and stylish, classic designs that appeal to today’s more casual consumer—with our proven business model, established infrastructure and global reach,” says Steve Madden’s Chairman and CEO Edward Rosenfeld.

When asked about the acquisition, Greats’ Founder and CEO Ryan Babenzein noted his admiration for the footwear empire Madden has created: “[Steve has] created a multi-billion-dollar footwear business from nothing, and there are less than a handful of people in the world who have done that. Getting the chance to collaborate with and learn from Steve and the rest of the Madden Company to accelerate my business is something that made a ton of sense to me.” Steve Madden is known for facilitating wholesale distribution for its licensed brands to major retailers and department stores, so it can be assumed that Greats will up its in-store presence as a result of the acquisition.

EURAZEO TO TAKE STAKE IN CULT-FAVORITE SNEAKER BRAND AXEL ARIGATO

Eurazeo Brands, the multinational investment firm’s consumer arm, which has also invested in Herschel Supply Co, is placing a bet on sneakers. The private equity firm has agreed to acquire Swedish footwear label Axel Arigato for EUR 56 million for a majority stake in the business. Founders Albin Johansson and Max Svärdh will continue to operate the brand, which generates upwards of USD 40 million annually in sales of its trendy colour-block footwear, streetwear and other accessories, and remain shareholders.

Prior to Eurazeo, Vaultier7 toke a stake in cult sneaker brand, investing USD 7.5 million, supporting the brand’s multichannel approach, strengthening online and wholesale, scaling internationally and building on the success of its London flagship in Soho, a “cultural hub” of music and art events, and collaborations with other emerging brands.

Founded in 2014 in Göteborg, Axel Arigato’s online sales have soared during the pandemic. The company responded to the crisis swiftly, changing the way it communicated with customers and leveraging powerful social channels to replace in-store events. The company also began investing in TikTok. While it’s amassed just 15,000 followers, the hashtag #AxelArigato has been used nearly 16 million times. Some of its posts — mostly filmed in-store, by a host hired specifically for the gig — have generated almost one million views. Johansson compared the TikTok account to a television channel.

Almost 70 percent of the company’s sales come from direct online retail and have been up 185 percent year-over-year. Stockists include Harrods, Harvey Nichols, Brown Thomas, Moda Operandi, Net-a-porter, Selfridges, Nordstrom and Printemps. They also took a more customer-centric view to design, launching the sportier “Genesis Vintage” runner in April, now the number-one seller in the shoe category.

Axel Arigato has been profitable since the end of 2018, and the founders said they did not need to raise money to hit their future sales goals. However, more cash will allow them to expand rapidly online and offline. While the focus will be on Europe in 2021, they plan to expand further into the Middle East and North America with an eye on opening physical retail stores in those regions, as well as regional offices, in the not-so-distant future. They are also looking to Eurazeo to advise on corporate social responsibility. The company is committed to a “360-degree” approach to sustainability, “from the floor material in our store to the packaging to the product itself,” Svärdh said.

LUXURY SNEAKER LABEL KOIO SECURES USD 9 MILLION IN FUNDING FOR SERIES A

Koio, the high-end sneakers brand led by Chris Wichert and Johannes Quodt, has raised an additional USD 6 million in Series A funding, bringing total Series A funding to USD 9 million. The round was led by Founders Fund, with participation from existing investors Acton Capital Partners and Brand Foundry, among others.

Koio designs their shoes in-house, and does all its manufacturing in Italy in a factory shared with Chanel. The average shoes on Koio go for about USD 250,00. The company sells primarily through its own sales channels, either online or via their pop-ups and brick-and-mortar locations. The company currently has six stores across New York, San Francisco, Chicago and Miami. Of all its direct sales, 60% come from the web with the remaining 40% coming from retail stores out of which about 10% of overall sales come from partnerships with other retailers, including J.Crew’s Madewell and Nordstroms.

 “We see in our community that the lines between professional life and personal life and all the other worlds you are a part of are blurring with no clear delineation between the two. We have started with shoes that are well designed, comfortable and durable, but in the end we want to offer different kinds of products that will complement that lifestyle,” said Quodt. Koio plans to use the funding to add more unique designs to its shoe lineup to offer a complete product portfolio to customers. Second, Koio plans to further invest in R&D to ensure it is using the best materials, with the best construction, to ultimately offer a best-fitting and most comfortable luxury sneaker.

THE CULT OF COMMON PROJECTS

Ten numbers, divided into three sets, are stamped in gold on the outer heel of each shoe. Each set corresponds to a style number, European size and colour. It is the only visible branding on a pair of otherwise perfectly clean, pared-back Common Projects shoes. But to a certain rubber-soled cognoscenti, these gilded digits have become every bit as emblematic as the Nike Swoosh or the Adidas Trefoil. Today Common Projects has built a network of 150 stockists around the world and generates around USD 10 million in annual revenue.

Common Projects have become synonymous with quiet, clean, understated sneakers. It’s a coup they pulled off by designing shoes that both elevate and pay homage to familiar silhouettes, stripping away the details to let the pared-down shapes speak for themselves. When Adidas revealed a set of minimal white Stan Smiths made for distribution at Dover Street Market, Barneys and Colette, commenters on Hypebeast were quick to mention the similarities to Common Projects, with some even going as far as to call the stark white Stan Smiths “a rip off.”

In the sneaker world, resale value is a common indicator of a brand’s cachet. Depending on their rarity, ‘deadstock’ trainers from Nike’s Jordan brand can easily fetch 300 percent more than their original retail price on sites like eBay, where buyers paid USD 338 million for sneakers last year. Interestingly, there is a fertile resale market for second-hand Common Projects sneakers, too. Arun Gupta, the founder of Grailed, an online marketplace for fashion, says shoes by Common Projects are always in demand. “There is just so much hype around them; the Achilles almost always resells for $250-plus” even when worn.

After a decade in business, Common Projects has never raised external investment and is, at the core, still very much a two-person team, which means Poopat and Girolami do not have to live by the numbers or by anyone else’s rules. Indeed, a combination of patience and diligent cash flow management has allowed their brand to flourish on their own terms, funded completely from steadily growing sales revenue. Common Projects does not have “crazy [growth] curves,” according to Girolami. “Our company doesn’t really work like a standard company. “We try to do something that is classic and timeless,” says Girolami. “You only get to introduce yourself once,” adds Poopat. “We approach each thing like it’s a first impression and we try not to fuck that up.”

THE MOST SUSTAINABLE SNEAKER

From London to Paris, New York to Newcastle, pavements the world-over are being pounded by white tennis-style sneakers emblazoned at each side with a logo in the shape of a V. Even those that aren’t familiar with Veja will recognise its now-ubiquitous designs. “With a minimalist aesthetic and an accessible price point, Veja appeals to a wide audience, from streetwear kids to suburban moms and the traditional luxury consumer,” says Christopher Morency, editor-at-large of the online streetwear and sneaker-focused site Highsnobiety.

Founded in 2005 by Kopp and François-Ghislain Morillion, Veja was the first fully sustainable sneaker brand, crafted in Brazil from organic cotton with Amazonian wild rubber soles. Yet even today, many who wear the brand aren’t aware of its ethical credentials, as Veja also does not proactively market it. The shoes “have to stand up alongside non-sustainable competitors”, says Kopp.

Today, Veja sells almost two million pairs of trainers every year, stocked at 2,000 retailers in 45 countries, including luxury sites like Net-a-Porter and 24S, as well as at the H&M-owned Arket. In recent years, the privately owned company has experienced significant growth and expects to turnover more than EUR 60 million.

Not content with their conquering of the fashion sneaker industry, however, Kopp and Morillion have set their sights, and Veja’s future, on the USD 181 billion performance wear market with Veja’s first-ever running trainer. Titled the Condor, it was four years in the making; Veja wants to disrupt the technical sneaker market by making the first post-petroleum running shoe. “We succeeded in doing a sustainable trainer that you wear for everyday, and we thought OK, the next logical step is sports, as technical shoes are mostly made from virgin plastic,” says Kopp. “Breaking into the running market isn’t easy,” says Morency. “It’s expensive and highly technical. Most fashion brands [instead] partner with a big sports label, such as Nike with Junya Watanabe, Puma with Jil Sander, and Reebok with Chanel.”

Some 12 months into development, they “hired two running specialists to work on the project internally”, says Morillion. “It was a challenge, even with the factories, as they were used to working with 100 per cent virgin plastics. We needed to deconstruct the shoe and look for alternative materials for each part to have both optimal performance and a bio-based, recycled origin.”

Sales of the Condor have thus far been positive: some stockists sold out within 24 hours. But Kopp and Morillion remain cautious. “Right now, it’s not the real reception,” says Kopp. “Everyone comes to us saying, ‘Oh it’s so nice, it’s amazing.’ But we trust the public, we need to see if people like running with them. After a few months, we will know if the shoe is a success or not.” And if it is, what’s next — global sportswear domination? “We could be 10 times bigger, but why, for who?” says Kopp. “We don’t do Veja for money. We get the biggest investors emailing us every day, but we say no. The way to build a globally successful sneaker brand, it seems, is to not really try to build one at all.