Piggybacking to Success
Jibbitz Accessorizes Crocs
Every so often, a new product or old brand is so novel or exciting that it creates a groundswell, a mystique, a whole subculture of loyal customers avid to buy anything related to the sacred brand. At the luxury level, think Porsche, Rolex, Tiffany, Wedgewood, and Purdy shotguns. At another level, think Harley-Davidson, NASCAR, Budweiser, Silverado, the New England Patriots, and the U.S. Marine Corps. Such names become symbols, freighted with power and meaning for true believers. Some of their fans would happily wear the logos printed on their clothes, from caps to boxer shorts to sneakers. Some would—and many do—tattoo them right onto their skin.
One man’s (or woman’s) obsession is another’s chance to outsmart the competition. People who identify with hot brands create secondary markets for businesspeople agile enough to piggyback on the original company’s success.
Piggybacking is not entirely free of risks, such as being squashed or stiffed by a big company whose success you’re trying to complement with an ancillary product or service. After all, a shark doesn’t necessarily welcome the pilot fish crowding its space. In the mid-1960s, for example, the inventor Robert Kearns came up with the intermittent windshield wiper, a mini-breakthrough in automotive history. Kearns patented the device and offered it to Detroit’s Big Three automakers. They downplayed his idea and scoffed him out of town—then installed new intermittent wipers on all cars and trucks from then on. Kearns spent years and many thousands of dollars suing the automakers for patent infringement. When he finally won in the U.S. Supreme Court, the defendants were forced to pay him $30 million, a vindication soured by the near-certainty that he would have earned many times that amount in royalties had the automakers played straight with him.
However, piggybackers almost certainly benefit their target companies (and themselves) far more often than not. When a hot new product attracts a swarm of beneficial add-ons (accessories, decorations, extensions, enhancements, etc.), the resulting buzz is likely to make the original product even hotter by creating more customers, publicity, and new applications for the product. Consider Jibbitz, another company that has mastered this accelerated strategy, one that merits its own case study—and one that emphasizes that normal people who are immersed in normal daily activities can spot a seemingly simple idea that others have overlooked and turn it into big business. Sheri and Rich Schmelzer outsmarted the competition because they had vision. Sheri looked down at her daughters’ Croc-shod feet and saw an unmet need.
Jibbitz Jewels
The entrepreneur best positioned for piggybacking might be an ultraloyal customer with a head for business. That’s the Jibbitz story, too.
Sheri Schmelzer was the loyal customer. A stay-at-home mom in Boulder, Colorado, she was crazy about Crocs, the soft-resin clogs that mold to the wearer’s feet for unusual comfort and have holes for air- and water-cooling at the beach. The runaway best-seller Crocs are made in Niwot, Colorado, a Boulder suburb, and carried by 1,600 retail outlets in 20 countries.
Sheri’s husband, Rich, has a head for business. A serial entrepreneur, he founded and sold several software and Internet companies, including WorldPrints.com, a clearinghouse for art prints and desktop wallpaper. He sold the company in 2000 in a cash-and-stock deal worth an estimated $80 million.
One day early in 2005, Sheri was working with her three young daughters on arts-and-crafts projects in the basement of their home. As usual, Crocs were scattered here and there—the family owned at least a dozen pairs. On a whim, Sheri stuck a silk flower through a hole in one of the clogs. She liked the effect, and so did her daughters. By the time Rich arrived home that evening, his whole family was wearing Crocs decorated with all sorts of baubles, including buttons and bows from a sewing kit.
Crocs was still in its relative infancy when Rich Schmelzer came home and saw the ornaments his wife and children had made for their clogs. He saw the potential in a flash. “It was such an obvious idea,” Rich explains. “My kids were playing with them, and I thought, ‘If my kids like it, every kid’s going to like it.’” He wasted no time in patenting the idea, organizing a company, and coming up with a name for his wife’s whimsy. Their company and decorations would be called Jibbitz, a homage to Sheri’s nickname, Flibbertyjibbet.
The day after Sheri’s fanciful invention, she went out and bought more durable ornaments—plastic peace signs and rhinestones—and glued them onto cufflinks that she then snapped into the holes in the Crocs. When the decorated clogs were ready, she sent them off to school on her daughters’ feet. Their classmates took one look and clamored for some Jibbitz of their own. But Sheri still had a few kinks to work out—namely, making sure the Jibbitz could be inserted easily into (and removed from) the holes in the Crocs. Her seventh iteration proved to be the lucky design winner, a snap-in version that met her exacting standards.
To meet the budding demand created by their daughters’ fashion-forward feet, Sheri and Rich set up a production line in the basement, charging $2.50 per Jibbitz. But as news of the decorations spread through Boulder, the multiplying orders forced them to move the operation to an office and hire some help.
On August 9, 2005, their wedding anniversary, the Schmelzers took Jibbitz online. “The website just went crazy,” Sheri recalls. “I was getting 200 to 250 orders a day.” Then stores took notice of the market that was developing under their noses and began placing their own orders. The office gave way to a huge warehouse, and the manufacturing process was farmed out to a Chinese company.
The Jibbitz phenomenon, of course, was riding the bow wave of the giant Crocs fad, and more Crocs wearers were clamoring to decorate their shoes. Sheri was deluged with requests for new designs. Younger kids wanted their favorite cartoon characters, teenagers their favorite rock or rap stars. And Jibbitz’s appeal was not limited to the young. “Hello Everybody,” read a recent blog entry on the company’s website. “My name is Noortje, and I’m from Holland. Crocs are here very cool and for everyone, not just for kids! Mine are purple and today I’ve bought Jibbitz—four butterflies and two sunflowers. At the pediatrician where I work, the children like them very much. Love, Noor.”
Sheri cranked out designs and Rich rode herd on the company’s expansion. “We don’t want to grow too fast,” he told DailyCamera.com not long ago. “Organic growth and word of mouth is how we’ve been working.” In other words, no advertising and, for a while, no orders from major retailers. He also wanted to make certain that, in the excitement of the product’s popularity, operating efficiency didn’t suffer. “We’ve failed if you call Jibbitz and we don’t answer the phone,” he says.
A smart businessperson, Rich had his eye on the company’s future. He knew full well that piggybacking on a fad could last only as long as the fad itself. So even amid the mushrooming demand for Jibbitz-enhanced Crocs, he and Sheri were developing a new line of products, including wristbands, belts, anklets, and headgear—anything with holes that customers could insert their decorations into. As Sheri succinctly put it, “The more holes we have, the more Jibbitz we’ll sell.”
Eventually, the Schmelzers moved beyond products with holes to introduce a line of charms for cell phones and bracelets.
By summer 2006, the company had 40 employees. Jibbitz were being offered in 3,300 stores in the United States and hundreds more in Europe and the Middle East. More than six million pieces had been sold. “We couldn’t be happier with Jibbitz’s acceptance among consumers,” Sheri announced in a company news release. “We have always wanted a creative, self-sustaining business that could give back to the community through the creation of jobs in Colorado and abroad.”
One hot day that summer, seven-year-old Lexie Schmelzer wore her Jibbitzed Crocs (what else?) to the local swimming pool, where a man walked up to her and presented his business card. “Have your Mommy call me,” he urged her. The man was Duke Hanson, one of the three founders of Crocs, and Sheri called to chat. One thing led to another, and on October 3rd, Crocs announced its purchase of Jibbitz for $10 million in cash.
Jibbitz has since become a subsidiary of Crocs, with Rich Schmelzer as President and Sheri as Chief Design Officer. The agreement stipulated they could earn up to $10 million more if Jibbitz met certain earnings targets, and they are well on their way to meeting those goals. They now have 1,100 products available, including a wide range of Disney-themed Jibbitz, from Mickey to Winnie the Pooh to Pirates of the Caribbean characters, plus all the mascots of the National Football League and the National Hockey League.
And it all came about because of Sheri’s imagination and Rich’s opportunistic eye for tapping the success of others and riding the Crocs’ groundswell to fame and fortune.
Get Smart
• You can have too much of a good thing. Sometimes a market will respond so fast to your good idea that you don’t have enough time to build the necessary delivery capability without risking a sacrifice in quality.
• Think big. As you build your business model, make sure it is scalable.
• Don’t neglect your infrastructure. It’s critical that your company’s IT infrastructure and business processes be able to handle increased volume without incurring substantial added costs or needing to add people just to maintain or improve service quality.
• Think targeted marketing. One way Rich Schmelzer kept operations under control was by relying on word-of-mouth marketing and Jibbitz.com; he avoided spending on traditional advertising.
• Take the long view. When you’re in the midst of trying to make your business succeed, every waking hour is devoted to it, and it’s hard to step back and think about the midterm future—not tomorrow or next week, but the next year or two. Yet it’s an absolute necessity if you are to have any chance of long-term survival.
Questions to Ask Yourself
Have you bought any popular products lately that seemed to cry out for an accessory or service that isn’t available? Is this something that you could design, make, and sell?
If your piggyback product or service proves popular, is the product you’re hitched to doing well enough to give you a growing market?
Are its makers likely to resent your piggybacking? Can you present your product or service as an item that makes the host product even more popular?
What similar products can your add-on be used with?
What other possibilities are the host product’s makers neglecting to capitalize on? Can your product or service grow naturally into a whole line?
However fast the host product is growing, can you control your own growth well enough to forestall loss of quality, chaotic delivery performance, and loss of customers?
Thinking ahead, what will you do when growth of the host product slows down? Can your product be modified for other uses, or can you branch out to related products and services that you can sell without piggybacking on anything else?