L.A. Gear started in 1983, When Robert Greenberg picked up the hang 10 license of shoe skates. Once he realized that it was the shoes that held the most promise, Greenberg began focusing on shoes instead of skates, which led to the birth of the L.A. gear brand.
L.A. Gear entered the athletic shoe market with the canvas workout shoe in 1985, and the company soon gained significant success. Greenberg’s shoe designs were targeted at fashion-conscious females between the ages of 12 and 35 who wanted stylish, comfortable shoes. L.A. Gear sales went from $ 200,000 at the beginning of 1985 to $1.8 million at the end of the year.
In 1986 L.A. Gear went public and it diversified its offerings. L.A. Gear started offering sport and casual wear for men, women, and children. The company began to to spruce up its line of woman’s shoes with fringes, pastel colors and spangles. For men, the company produced bold high tops for basketball. It’s children’s shoes featured cool checkerboard and cow spots designs.
Business Week Contributor Kathleen Kerwin attributed L.A. Gear’s almost instant success in footwear sales to their ability to appeal to 80% of customers who “rarely set foot on a tennis or basketball court.” The company’s growth in sales and product recognition surpassed that of the entire footwear market. Sales increased 200% in 1986 and doubled the next year. In 1988 and 1989, Business Week selected L.A. Gear as one of the best small American companies. Business Week, the Wall Street Journal, the Los Angeles Times, and Fortune highlighted L.A. Gear’s stock as the best performer on the New York stock exchange in 1989. In 1990 company sales peaked at $818.8 million, it’s 11.8 percent share placed it third behind Nike and Reebok.
The company’s appeal to fashion conscious females was unique. “L.A. Gear has really hit on a formula no one else has,” John Horan, publisher of of Sports Management News, told Advertising Age in 1989. “They take a shoe that’s not a real technical shoe, so not expensive to produce, put some spangles and some colored trim on it,” and “put their money into marketing and advertising.” “They sold sex and sizzle,” noted Business Week.
L.A. Gear expanded its sales into the men’s market in 1989. L.A. gear used its same marketing and design techniques that served it so well in the women’s market. The men’s market was highly competitive, men’s athletic shoes accounted for 70% of L.A. Gears competitors’ total sales but only 20% of L.A. Gear’s total sales. L.A. Gears fashion centric approach was odd because men typically pay less attention to style.
Instead of hiring an in style sports star like Jerry Rice, Michael Jordan or Bo Jackson, L.A. Gear hired retiring L.A. Laker Kareem Abdul-Jabbar to endorse its new basketball shoe line. It’s the modern-day equivalent of a company hiring Dwyane Wade to endorse a sneaker line in 2020, instead of Zion Williamson. If you’re trying to appeal to the suburban dad crowd, a splendid choice, but it’s not the endorser or market most athletic shoe companies are trying to appeal too.
The company next tapped an even more unlikely athletic shoe endorser. Michael Jackson was paid close to $10 million to be the company spokesperson and to design a line of shoes and T-shirts. L.A. Gear prepared to tap Michael Jackson’s worldwide popularity by coordinating the Jackson line rollout with the release of a collection of his greatest hits album called A Decade. Michael Jackson’s album was never released and his black, heavily buckled shoes were “too hip” for parents and most men buyers. The shoes did not sell well, Jackson endorsement and shoe line were quickly discontinued. This fiasco cost the company several million dollars.
Inventory started stockpiling because of unrealistically high sales projections, this caused the company to discount almost all their shoe styles to liquidate the inventories. Selling the shoes at discounts angered retailers because it made their prices seem exorbitantly high and degraded the L.A. Gear brand image. Terrible marketing decisions, coupled with rebellious retailers who refused L.A. Gear shelf space, contributed to a net loss of $66.2 million for the company in 1991.
The fashionable men’s athletic shoe strategy was not working, so the company branched into the men’s technical shoe market with the introduction of the Catapult basketball shoe in 1991. The company even choose a current NBA basketball player endorser this time, albeit a boring one in Karl Malone (Think LaMarcus Aldridge in 2020). Unfortunately, problems with product quality interfered with initial sales. After the company outfitted the Marquette University basketball team in Catapult shoes, one player tripped on its shoe sole as it peeled off during a televised game. Things weren’t all bad in 1991, for L.A. Gear it introduced the L.A. Lights series of lighted athletic shoes for children. That line fared better than the men’s line.
Because of its investment and low returns on trying to stake a bigger claim in the men’s athletic shoe world market, L.A. Gear was facing financial troubles. In 1991, the company went into default on its bank loan. The company dropped from third to fourth place among footwear companies.
Fashion sense changed in the 90s, and L.A. gear could not keep up. Grunge and more Hip Hop orientated urban wear was in and bright colored crop tops and spandex that L.A. Gear’s paired so well with were out. Essentially, anything 80sish was out. It took years for L.A. gear to notice this shift and change its marketing accordingly.
In 1994, L.A. Gear abandoned its performance men’s footwear line and began marketing its lifestyle brands for women and children more aggressively. In 1995 L.A. Gear reported a loss of $51.4 million against sales of just $296.6 million. L.A. Gear had fallen to sixth place in the U.S. athletic shoe market, its market share was only three percent. Also in 1995, Wal-Mart and L.A. Gear agreed to a deal where the shoe company would design lower valued and specific to store shoes for Wal-Mart. The venture failed as sales for L.A. Gear shoes at Wal-Mart declined. L.A. Gear filed for Chapter 11 bankruptcy in 1998. Since the bankruptcy filing, L.A. Gear has made three concerted attempts at coming back, all three failed to catch the initial popular wave of the brand.
Mistakes: 1. Odd or weird celebrity endorsement choices
Picking a great but retiring NBA player and an eccentric but great pop singer as your main endorsers were just head scratching decisions. The point of celebrity endorsers is to make the product seem cool and hip. How does picking Kareem Abdul-Jabbar and Michael Jackson help sell shoes? Who are they trying to appeal to with those endorsers? The selection of those endorsers were just way off the mark and ended up costing the company millions.
2. Not understanding the playing field.
L.A. gear was wildly popular with the female shoe crowd because the shoes were fashionable and comfortable. The company tried this same approach with the Mens shoe market and failed miserably. Mens shoes were more about technical advancements than fashion in the 1990s, especially in the men’s athletic shoe market. When L.A. gear tried to reverse field and enter the technical market it just made poor copies of competitors shoes and rebranded it as its own. The public saw through this and didn’t buy the shoes.
3. Diluting its brand
When inventories of shoes were stockpiling in warehouses, L.A. Gear made the strategic decision to dump inventory by selling the shoes cheaply to flea markets, swap meets and supermarkets. Though this decision got rid of excess inventory, it undermined one of its key selling points. L.A. Gear was only available to top end retailers like Nordstroms, but when it started showing up in swap meets for half the price, it diluted the brand name and it could never get back to the standing it had in the 1980s.
4. Not keeping its ear to the ground.
L.A. Gear was really in sync with 1980s fashion and trends. When the trends changed in the 1990s, L.A. Gear was too slow to adapt and change course. It’s marketing and advertisement became way out of date. Once L.A. Gear noticed its errors, it was too late, consumers had moved on to the Nike or Skechers of the world, which ironically was started by Robert Greenberg who left L.A. Gear.
Originally published at https://mwmblog.com on June 27, 2020.