20VC From a $1.1M Acquisition to $1.4BN in Revenues; The Meteoric Rise of Hoka Running with Deckers CEO, Dave Powers

Summary Notes


In a dynamic conversation with Harry Stebbings on 20vc, Deckers CEO Dave Powers discusses the challenges and strategies of brand growth, particularly in the DTC model, and the importance of maintaining brand integrity through selective distribution and marketing. Highlighting the remarkable journey of Hoka Hoker, acquired for $1.1 million and now a billion-dollar revenue brand, Powers emphasizes the necessity of core consumer connection and innovation in product development. He shares insights on resource allocation, the significance of hero products, and the delicate balance between work and family life. The discussion also touches on the use of AI tools like Notion for workflow efficiency, the role of customer service platforms like Intercom, and the benefits of corporate travel solutions like Navan.

Summary Notes

DDC Model Sustainability

  • The Direct-to-Consumer (DDC) model struggles with sustainability due to high marketing costs.
  • Companies often reinvest a significant portion of revenue into marketing.
  • When marketing spending is reduced, sales can plummet.
  • Without additional revenue streams like wholesale, e-commerce sites can experience drastic declines.

"The DDC model is hard to keep sustained because you're spending so much on marketing. 30% of your revenue you're putting back into marketing to fuel the sales. The minute you pull that marketing away to make profit, your sales lines drops like a rock."

This quote highlights the challenges of maintaining a DDC model, particularly the reliance on continuous marketing investment to drive sales, and the risks associated with reducing marketing spend.

Hoka Hoker Acquisition and Growth

  • Hoka Hoker's acquisition is considered one of the greatest in consumer goods history.
  • The company was started in 2009 and sold in 2013 for $1.1 million.
  • A decade after the sale, Hoka Hoker's revenue is reportedly $1.4 billion.
  • Dave Powers, CEO of Deckers, oversees Hoka as one of their core brands.

"Hoca Hoker, started by two french entrepreneurs in 2009. Now check this out. Four years later, they sell the company for $1.1 million. But ten years after that sale, the company is set to do a reported 1.4 billion in revenue."

The quote summarizes the impressive growth trajectory of Hoka Hoker, from its inception to its significant revenue generation years after being acquired.

Notion AI and Intercom

  • Notion AI integrates notes, docs, and projects into one platform.
  • Intercom is an AI-powered customer service platform offering multiple support tools.

"Notion combines your notes, docs, and projects into one space that's simple and beautifully designed."

This quote emphasizes the convenience and design simplicity of Notion AI as a productivity tool.

"Intercom is a complete AI-powered customer service platform and the only platform to combine a help desk, AI, chatbot and proactive support tools."

The quote highlights Intercom's comprehensive features as a customer service platform powered by AI.

Career Reflections of Dave Powers

  • Dave Powers did not have a clear career path early on.
  • He pursued creative interests in music and fashion, starting his own magazine in college.
  • Powers realized in his mid-twenties that he could build a career from his passions.

"I always did have a creative side to me, and I was always building things and creating things."

Dave Powers reflects on his creative inclinations and how they influenced his early interests and eventual career path.

Learnings from Timberland and Converse

  • At Timberland, Powers learned the importance of brand identity and consistency.
  • Every Timberland product had to embody the qualities of their original boot.
  • At Converse, understanding the consumer and creating relevant experiences was key.
  • Powers values a non-political, collaborative work environment at Deckers.

"The brand, at the end of the day, really is everything."

This quote captures Dave Powers' key takeaway from Timberland, emphasizing the crucial role of a strong, consistent brand identity.

"Converse was really about tuning into who your consumer is and why they love your brand."

Powers shares his learning from Converse, which focused on deeply understanding and connecting with the consumer base.

Hiring Philosophy and Company Culture

  • Hiring should align with company values, not just experience.
  • Powers has learned to trust his instincts and be firm in hiring decisions.
  • He aims for a non-political, authentic work environment at Deckers.
  • It's important for employees to feel comfortable and be themselves.
  • Employees who don't fit the culture often naturally leave the company.

"You get caught up in their experience versus their values."

Dave Powers discusses the importance of aligning new hires with the company's values rather than focusing solely on their experience.

"I just want to come and work at a company that I just feel comfortable being myself at."

The quote reflects Powers' desire for a work environment where he and his employees can be authentic and focus on their work without political distractions.

Self-Critique and Competitive Nature

  • Powers holds himself to high standards and does not enjoy losing.
  • He believes in a balance between a positive work culture and a competitive drive to win.
  • The focus is on team collaboration rather than individual competition.

"Yeah, I do judge myself. It's not something I think about that often, but I do have high standards for myself."

Dave Powers acknowledges that he is critical of himself and maintains high personal standards.

Hoka Brand's Success Story

  • Hoka's success began with putting their shoes on the feet of hardcore ultra runners.
  • The brand focused on meaningful innovation and became indispensable to its consumers.
  • Hoka experienced high growth, but faced challenges with inventory management and market positioning.
  • Deckers recognized the need to focus on sustainable growth rather than chasing numbers.

"It's been a fascinating journey to watch... It was word of mouth within a very small niche industry. This is the greatest innovation in our lifetime in running."

Dave Powers describes the organic growth of Hoka through its strong product performance and word-of-mouth among dedicated athletes.

Account Closure Decisions

  • The company has strategically chosen to close certain accounts.
  • This decision is based on a desire to not be associated with those accounts.

We closed accounts that we didn't want to be in.

The quote indicates a deliberate action taken by the company to disassociate from certain accounts, suggesting a focus on brand image or strategic partnerships.

Risks of Chasing Growth

  • Chasing growth can lead to over-distribution and excess inventory.
  • This can result in having to mark down products, which may harm the brand's prestige.

But if you overdo it too soon, you could end up with extra inventory in the channel that you have to mark down. And then it becomes this brand that used to be versus a brand that could be.

The explanation is that aggressive growth strategies can backfire, turning a potentially leading brand into one that is seen as past its prime due to inventory issues and discounting.

Supply and Demand Management

  • It is crucial to manage supply on a per-channel basis to avoid supply-demand imbalances.
  • Overstocking can lead to price reductions and damage the brand.

So you have to manage supply on a per channel basis to make sure you don't have an imbalance of supply and demand and then lead to price reduction.

This quote highlights the importance of careful inventory management to maintain brand integrity and profitability.

Channel Forecasting

  • Channel forecasting requires meticulous attention to detail.
  • Inventory levels, sell-through rates, and strategic inventory bets must be carefully planned.

You really got to sweat the details on that. You have to look at every door you're going to be in, how much inventory you want them to have, estimated rates of sell through, and then where you want to place big bets on additional inventory or stay tight.

The quote emphasizes the complexity of channel forecasting and the need for precision in managing inventory across different retail locations.

Margin Considerations in Channel Distribution

  • The Direct-to-Consumer (DDC) channel is the most profitable due to higher margins.
  • The company aims to maximize business through the DDC channel while maintaining important wholesale relationships.
  • Selectivity in wholesale partnerships is key, and the company often rejects more accounts than it accepts.

Our DDC channel is our most profitable channel. Right? Margin and profit. And so ideally we want as much of our business to go through that channel as we can because that's best for the bottom line.

This quote explains the strategic focus on the DDC channel for its profitability, while also acknowledging the necessity of wholesale channels for brand reach and consumer trials.

Challenges in Retail and Wholesale Partnerships

  • The main challenge is ensuring brand representation aligns with company standards.
  • Partnerships should include proper branding, signage, and storytelling.
  • Past experiences with the Ugg brand inform current practices to avoid diluting brand value.

Finding partners that can represent and showcase the brand in a way that we feel is right for the brand.

The quote underlines the importance of carefully selecting retail and wholesale partners to maintain brand image and customer experience.

Asian Expansion Strategy

  • The expansion strategy involves focusing on core athletes and specialty channels.
  • Success in Japan was achieved by exclusively selling through run specialty channels and building relationships with athletes.

Early on, we developed what we called a playbook for Hoka to go to market with. And it really was be meaningful and important to the best athletes in those sports in your market.

This quote describes the strategic approach taken for market expansion in Asia, emphasizing the importance of targeting core athletes and specialty channels.

Playbook Replicability Across Countries

  • Brand playbooks are centered on distribution and building brand love.
  • They can be replicated across countries despite differences in running communities.

Yeah, because each brand has its own personality. But the playbook I'm talking about is really around distribution and how you build brand love and then roll it out to more points of access.

The quote clarifies that while each brand is unique, the fundamental strategies for distribution and brand building are transferable across different markets.

Seeding in Athletic Communities

  • It's essential to gain traction within core running and specialty channels.
  • Recommendations from salespeople to consumers are critical for building brand reputation.
  • Success in specialty channels is a prerequisite for broader market expansion.

That's where it all came down to for us, is the salespeople started recommending hoca to people because of the way it performed, and then it builds from there.

This quote explains the grassroots approach to brand building, starting with endorsements from trusted salespeople in specialty channels.

Strategy for Targeting Professional Athletes

  • Performance brands commonly aim to be associated with top athletes.
  • Hoka also focuses on being important to everyday athletes, which is considered a unique brand strength.

No, I mean that's not unique to hoker on. I mean, every performance brand aspires to that same thing, right?

The quote indicates that while targeting professional athletes is a common strategy among performance brands, Hoka differentiates itself by also appealing to a broader range of everyday athletes.

  • The performance footwear industry is entering an era of innovation and technology.
  • The trend towards minimalist running shoes is seen as a past mistake.
  • The future holds potential for next-level "super sneakers" with advanced features.

So my point is, I think now with the availability of different compounds and carbon plates in all different ways of geometry and shoemaking. The sky's the limit on what you can do.

The quote suggests optimism for the future of performance footwear, highlighting the possibilities opened up by new materials and technologies.

Consumer Loyalty to Running Shoes

  • Consumers traditionally exhibit brand loyalty in running shoes.
  • The landscape is changing, with more people willing to try new brands.
  • Hoka benefits from a strong, dedicated fan base similar to brands like Patagonia.

But what we're finding is our fans of Hoca are diehard, lifelong fans.

The quote reflects the strong brand loyalty Hoka has cultivated, which is likened to the loyalty enjoyed by other well-respected brands.

Competition with On Running

  • Hoka acknowledges competition with On Running for shelf space and market share.
  • Both brands have opportunities for growth due to their small global market shares.
  • The focus is on staying true to their own brand identities rather than solely on beating competitors.

But I think there's just tremendous opportunity for new, fresh brands like on and Hoca to take massive market share.

The quote expresses the view that there is ample market potential for both Hoka and On Running, emphasizing the opportunity over direct competition.

Acquisitions and Brand Transformations

  • Deckers' acquisitions of Hoka and Ugg have been transformational.
  • Ugg's transition from a surfer brand to a fashion icon was pivotal.
  • The role of media and celebrity endorsements in Ugg's success is acknowledged.

That's a really interesting story. But it came down to originally UGg.

The quote begins an explanation of Ugg's transformation, emphasizing the strategic shift that led to its widespread popularity.

Niche Beginnings of Great Brands

  • Many successful brands start by addressing a niche consumer need.
  • They solve meaningful problems or meet unmet needs.
  • Niche origins can lead to broader appeal and unexpected collaborations.

I think so. I think they're a niche consumer need that hasn't been met yet, or they're solving for a problem that is meaningful to consumers.

The quote supports the idea that great brands often have niche beginnings, which provide a strong foundation for future growth and diversification.

Maintenance of Brands and Brand Specialness

  • Brands can lose their specialness due to over-distribution and lack of differentiation.
  • When a product becomes too common, it can lose its market appeal and be seen as lower quality.
  • Ugg faced a period where it was no longer perceived as cool due to these issues.

"We were selling basically the same item. So the classic tall boot to every account that asked. And so when you walked down high street and you looked in the windows, everybody had the same product and there was no differentiation."

This quote explains that Ugg lost its specialness because every retailer had the same product, leading to a lack of uniqueness in the market.

Strategy to Recover Brand Specialness

  • To regain brand specialness, it's necessary to pull back distribution and make the product less ubiquitous.
  • The process involves retrenching, repositioning, and working with the right influencers.
  • This strategy can result in reduced revenues and profits in the short term but aims for a longer-term profit increase.

"Bluntly, what we ended up doing, and this is in the US and in Europe, is pulling back and making it almost kind of disappear in the eyes of the consumer."

The quote describes the strategy of reducing the brand's market presence to rebuild its specialness and appeal.

Managing Team Morale During Pullback

  • Pulling back distribution can be challenging for team morale.
  • It's important to provide the team with a sense of purpose and belief in the brand's future.
  • Turnover during this period can bring fresh perspectives and new energy.

"Yeah, it's tough. We really have to give them something to believe in."

This quote emphasizes the importance of giving the team a reason to stay motivated during challenging times when the brand is pulling back from the market.

Reacceleration Strategy

  • Reacceleration involves product innovation and creating new iterations of classic products.
  • It's crucial to clean up the marketplace and focus on reducing SKUs while innovating.
  • Leveraging influencers is part of repositioning the brand.

"We brought in a new president around 1617 for the brand. My remit to that person was just disrupt this brand."

This quote indicates that the new president was tasked with changing public perception and reinvigorating the Ugg brand.

Importance of Hero Products

  • Hero products are essential for a brand's success and allow for scale, volume, and consistent business.
  • It's important to iterate on these products while staying true to their original appeal.
  • Iconic styles are crucial for the overall business and must be handled with care.

"I mean, they're massive. I've had the fortune of working at companies that were founded on a hero know."

The quote highlights the significance of hero products in building a successful and sustainable business.

Luxury Margins and Brand Positioning

  • Luxury brands can demand high margins due to consumer aspiration and brand positioning.
  • To achieve luxury margins, a brand must create and maintain aspirational products.
  • Iconic brands have built-in defense mechanisms due to their exclusivity and price points.

"They're geniuses of building aspirational love for their consumers."

This quote reflects the idea that luxury brands are successful in creating products that consumers aspire to own, allowing for high margins.

Brand Decline and Immortality

  • Brand decline can happen quickly and catch companies off guard.
  • Brands with a legacy and history, like Balenciaga, have a form of "brand immortality."
  • These brands can recover from setbacks due to their established consumer base and heritage.

"It's quick, yeah. It catches you off guard."

The quote indicates that brand decline can happen rapidly, which can be difficult for companies to manage, especially with inventory planned for growth.

Company Growth and Acquisitions

  • Decker's strategy focuses on organic growth rather than acquiring new brands.
  • Organic growth is less disruptive and more predictable with higher return on investment.
  • The company focuses resources on high-growth brands like Ugg and Hoka.

"We don't need to. We have such organic growth with UGG still with Hoka that we feel we have a path where we could add billions onto our revenue today, over the next five years organically."

This quote explains the company's decision to focus on organic growth rather than pursuing acquisitions, as they see a clear path to increasing revenue through their existing brands.

Resource Allocation Among High-Growth Brands

  • Decker's allocates resources strategically to support its high-growth brands.
  • The company shifted from evenly distributing resources to focusing on brands with the highest potential.
  • Healthy profit margins enable the company to manage resource allocation effectively.

"That's one of the things that we have done, I think, really well over the past six or seven years is focus our allocations and resources against those two brands."

The quote describes how Decker's has successfully managed to allocate resources to their two main high-growth brands, Ugg and Hoka, to ensure continued success.

DTC (Direct-to-Consumer) Model Challenges

  • The DTC model is difficult to sustain due to high marketing costs.
  • Companies often spend 25-30% of their revenue on marketing.
  • When the marketing spend is reduced, sales and profitability can plummet.
  • Without additional revenue streams such as wholesale, the business model can quickly become unprofitable.
  • Growth is often not sustainable without continuous marketing investment.

"The minute you pull that marketing away to make profit, your sales lines drops like a rock."

This quote highlights the dependency of the DTC model on marketing spend and the immediate negative impact on sales when marketing is reduced.

Importance of Product and Brand Strength

  • A strong product and brand can outlast marketing spend.
  • Products that are only interesting due to marketing or social media presence may not have longevity.
  • Word of mouth and repeat usage are important for sustainable growth, but may not be enough if the product is not compelling.

"Great product, great brand, meaningful to consumers, will outlast the marketing spend."

This quote underscores the significance of having a strong product and brand that resonates with consumers beyond marketing efforts.

CEO as a Resource Allocator

  • Being a good resource allocator is a key component of being a successful CEO.
  • CEOs must also motivate teams and ensure product and innovation engines are running.
  • The best resource allocation decision involved focusing funds on the most significant opportunities.

"These two things need that money and we're going to reset that was the biggest reallocation success that we had."

This quote explains the strategic decision to concentrate resources on the most promising areas of the business for greater success.

Financial Discipline and Resource Allocation

  • Setting financial guardrails is crucial in budgeting and resource allocation.
  • A disciplined approach is necessary to prevent overspending and to focus on areas with the highest return.

"You just got to hold people accountable to their targets."

This quote emphasizes the importance of accountability in achieving financial targets and maintaining discipline in resource allocation.

Challenges with Talent Management

  • Attracting and retaining talent is a major concern for CEOs.
  • The business aspects are straightforward compared to the complexities of managing people.

"Keeping and attracting talent is my biggest concern right now."

This quote reflects the CEO's view that managing human resources is the most challenging part of the job.

Personal Relationship to Money

  • Both speakers discuss their personal evolution in how they view money.
  • Success and financial stability can be surprising compared to one's upbringing.
  • The speakers acknowledge the emotional aspects of wealth, such as loneliness and insecurity.

"It blows my mind that my life has ended up where it is and CEO of a company and financially successful."

This quote conveys the speaker's astonishment at their own success and the contrast to their early life expectations.

Influence of Upbringing and Aspirations

  • Upbringing and family culture can influence one's aspirations and attitudes towards success.
  • The speaker tries to expose their children to global experiences and open-mindedness.
  • The goal for their children is happiness and being good humans, regardless of career choice.

"I try to model opportunities for them... But it's up to them."

This quote highlights the speaker's approach to parenting, which focuses on providing opportunities without imposing specific career aspirations.

Work-Life Balance and Parenting

  • Balancing career and family life is a challenge that requires sacrifices.
  • Many parents wish they could spend more time with their children but are constrained by work commitments.

"Every parent wishes they could spend more time with their kids."

This quote reflects the universal desire among working parents to have more time for their children and the difficulty in achieving this balance.

Quick-Fire Round: Personal Insights and Opinions

  • The speaker identifies as an introvert and discusses the misconception that CEOs cannot be introverted.
  • They express a desire to improve struggling businesses like Gap.
  • They view competition as both an enemy and a friend, from which one can learn.
  • The speaker's biggest competitor for their brand is Nike.
  • For personal travel credit, the speaker would choose Bono or Dave Grohl due to their global impact.
  • They remember their father's advice that life is not easy.
  • To destress, the speaker enjoys alcohol, exercise, and music.
  • In ten years, the speaker hopes to be engaged in creative and purposeful activities, regardless of their role at their current company.

"This is the harsh word, but your enemy and your friend, if you're smart, you will learn from your competition as much as you try to take them down."

This quote reveals the speaker's strategic approach to competition, emphasizing both rivalry and the opportunity to learn from competitors.

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