Kenneth Cole Productions, Inc.
Kenneth Cole Productions, Inc.
Sales: $185.3 million (1997)
Stock Exchanges: NYSE
Ticker Symbol: KCP
SICs: 5139 Footwear (primary); 5661 Shoe Stores; 6794 Patent Owners & Lessors
Kenneth Cole Productions, Inc. (KC) manufactures fashionable men’s and women’s footwear, handbags, and men’s sportswear and tailored clothing, as well as offering accessories and other products under license agreements with other manufacturers. KC products are marketed to more than 2,500 department and specialty stores. The company’s Kenneth Cole Catalog reaches more than three million consumers per year, supplementing 47 domestic retail stores, which have expanded to include overseas operations in Amsterdam, Hong Kong, Singapore and Taiwan, and wholesale operations in eight countries. In 1995 Forbes named Kenneth Cole Productions 12th of the World’s 200 Best Small Companies in America, and in 1996 the company was ranked 21 on this list.
Marketing Footwear in the Early 1980s
The company was founded in 1982 when footwear and accessory designer, Kenneth Cole, debuted a ladies’ footwear collection. Cole started the company on a shoestring, with just $300,000, and soon determined that to maintain necessary cash flow he would benefit from acquiring credit from European factories in need of business. Cole contracted with factories in Europe before returning to the United States to offer his first collection of women’s shoes. Company records have documented Cole’s strategic reasoning:“At the time, a shoe company had two options. You could get a room at the New York Hilton and become one of about 1,100 shoe companies selling their goods [to dealers during market week]. This didn’t provide the identity or image I felt necessary for a new company, and it cost a lot more money than I had to spend. The other way was to do what the big companies do and get a fancy showroom in Midtown Manhattan not far from the Hilton. More identity, much more money, too.” Instead, he opted to borrow a 40-foot trailer truck from a friend in the trucking business and attempted to get permission from New York City officials to park it in Midtown Manhattan. Cole was informed by officials that the only people getting parking permits were production companies shooting full-length motion pictures and utility companies like AT&T. Not one to be easily dissuaded, Cole responded by changing his company letterhead from Kenneth Cole, Inc. to Kenneth Cole Productions, Inc. and applied for a permit to shoot a full-length film entitled ‘The Birth of a Shoe Company.” The trailer truck was set up across the street from the Hilton Hotel and opened for business with models doubling as actresses. Cole noted, “Sometimes there was film in the camera, sometimes there wasn’t.” KC sold out 40,000 pairs of shoes in just a few days, earning his reputation as a business maverick.
The man behind the company professes a firm commitment to taking the road less traveled. In a Los Angeles Times interview with Mary Rourke, Cole explained, “The more I circumvent the rules, the more successful I become.” A Long Island native, the youthful Cole left home to attend Emory University in Atlanta where he earned a degree in political science and planned to go to law school. He abruptly changed his mind when his father’s associate resigned, giving the young Cole an opportunity to follow his father’s footsteps into the shoe design business. Previously, Kenneth Cole had considered the design of women’s shoes to be the most unmasculine career imaginable, but he relented and joined his father in a business called Candies in 1976. He soon learned that the instant gratification of the trade was fulfilling. Within a matter of weeks his designs were rendered into wearable finished products. During the early 1970s their company began importing French and Italian shoes, which led to the fortune they made on “slides,” an inexpensive backless sandal with a wedge heel and colored beads strung on a leather strand. In 1987, after selling 14 million pairs of shoes, they sold the business. In the same year Kenneth entered into another partnership when he married philanthropist Maria Cuomo, daughter of former New York Governor, Mario Cuomo.
1994: Initial Public Offering
Cole, who acts as Kenneth Cole Productions’ president and CEO, positioned his offices in the prestigious Carnegie Hall Tower above the famous Manhattan concert hall. He told Kathryn Feldman, a writer for Inside, “We kept the name Kenneth Cole Productions to remind us of the need to be resourceful.” Cole’s design and business talents quickly won acclaim within the industry. In 1985 and 1987 he received the Cutty Sark Men’s Fashion Award for Outstanding Accessory Design in Men’s Footwear. Cole realized that the company would need to respond strongly in a marketplace dominated by the large retailers and that economies of scale and infrastructure were prerequisites to the kind of success he imagined. To grow large quickly the company would need public capital. Cole’s company, which had grown from a $5 million operation in 1982 to sales of $84.9 million in 1994, then made its initial public offering, hoping to raise $20 million. KC opened its Blooming-dale’s Manhattan flagship concept shop in 1994, followed by 14 concept shops in select Cincinnati-based Federated department stores around the country. KC already had launched its catalogue business, funding it out of the advertising budget. Catalogue sales were intended to promote the KC name and image, rather than serving as a profitable vehicle, although catalogue sales were beginning to improve during this period.
Company profits continued to rise despite lagging performance by many competitors. Cole attributed his success to a philosophy of active listening. He told writer Pamela Reynolds of the Boston Globe, “Years ago, I used to think [that] as a designer my responsibility was to determine what a customer should wear. Today I’ve learned that my responsibility is to give them what they want.” His designs in men’s fashion were based upon personal preferences—items that he would like to own and wear. Increasingly, the public seemed in favor of reasonably affordable comfort, but not necessarily at the expense of fashionable style. KC shoe lines include Kenneth Cole, the most expensive of his brands, with shoes priced at approximately $100 a pair (in 1996); the Reaction brand, priced around $60 to $80; and Unlisted, considered a “utility” product (with a name inspired by the trend toward unlisted business phones), selling at $30 to $50. KC’s Reaction brand shoes were designed to appeal to those in search of a “utility” shoe, emphasizing comfort with style.
Overall growth profits increased about 35 percent by the third quarter of 1995 on the heels of a secondary stock offering. Approximately 20 percent of business was derived from company-owned retail stores. By 1996 KC operated 17 retail stores in the United States, a store in Amsterdam and another in Singapore. A partnership deal with a Hong Kong firm created a new marketplace in the Pacific Rim, where a series of stores followed featuring KC items.
KC prepared for extensive expansion in 1996 and awarded stockholders a two-for-one stock split. Growth in most areas was attributed to the company’s consistent marketing efforts and from opening in-store shops in department stores, which increased sales by as much as 40 percent. The choice of licensing partners was critical since astute retailers carefully inform manufacturers concerning customer brand loyalty and following. The company anticipated continued skyrocketing in royalty income from licensed products—an area where revenues had doubled within the previous year. They held 24 licenses in products such as neckwear, outerwear, belts, eye wear, women’s hosiery, briefcases and luggage, and began researching deals for watches, fragrance, jewelry, underwear and men’s tailored clothing, sportswear and hosiery, both domestically and internationally. These products were a natural complement to shoes and handbags and allowed those in the industry a broader scope of influence with consumers. Shoe brands that extended into apparel and other areas reinforced customer brand awareness as consumers were identifying KC as the source for “urban-aspirational” fashion, a term coined by company image-makers.
Cause-Marketing a la 1990s
A savvy, risk-oriented marketing approach underlies much of KC’s success. Cole’s catalogues—which are sent out semi-annually to three million potential customers—and advertisements frequently use vintage black and white photos, combined with a Kenneth Cole quote to captivate his audience. His products were not featured in his early advertisements because he chose to utilize his presence as a forum for raising social awareness. Cole’s first public service campaign was in 1984, for AmFAR, the American Foundation for AIDS Research. The issues he spotlighted included supporting the rights of gays in the military, reproductive rights, preservation of rain forests, the rights of the homeless, and the fight against AIDS. One advertisement, for example, depicts a pair of very worn men’s boots, captioned: “Have a heart, give a sole.” Smaller text beneath the shoes reads: “During the month of February, if you bring an old pair of shoes to any Kenneth Cole store for someone who really needs them, you’ll receive 20% off a new pair.” Maria Cole chairs HELP, which provides temporary housing in the New York Metropolitan area, and the Coles are associated with a variety of campaigns for the less fortunate. They have challenged corporate America to follow in their socially responsible footsteps.
Kenneth Cole Productions, Inc. is committed to creating a business that is flexible and responsive to prevailing conditions in the marketplace. We are positioned to accept whatever challenges are presented. Our history has shown that when times are bad, people turn to creative alternatives, and we’ve always positioned ourselves as afresh alternative. In the retail sector, our goal is to have a store in each major market, which will serve as a base from which we can promote our brand.
Other advertisements sport a much lighter tone. For example, a 1936 photo of Ginger Rogers dancing in patent pumps is accompanied by the caption, “Ginger’s footwork left Fred astare.” Cole does not shy away from political portrayals, which some have called “irreverent,” evidenced by an advertisement featuring Dan Quayle, with a goofy expression, smiling above text that reads, “Don’t forget to vot.”—Kenneth Cole alluding to the former vice-president’s notorious spelling error. Small print at the bottom of the page reads,“Come by our Pre-Election Sale going on now.” Another advertisement quipped: “Imelda Marcos bought 2,700 pairs of shoes. She could’ve at least had the courtesy to buy a pair of ours.” Cole’s spoofy ads earned him the 1994 GLADD New York Media Award for Outstanding Achievement in advertising. For his work with AIDS awareness and homeless causes, he received the shoe industry’s Man of the Year for 1996. He also received the Humanitarian Leadership Award sponsored by Dom Perignon and presented by the Council of Fashion Designers of America, as well as the Extraordinary Voice Award by Mothers’ Voices for his continued efforts in AIDS awareness, among others.
According to a report by Cone Communications and cited by Baber in Footwear News, many companies have found that consumers frequently display a loyalty to products associated with one or more charitable issues. Their report showed that when asked to choose between two products of equal price and quality, 76 percent of consumers said they are more likely to select a brand if it is associated with a good cause. Labeled “cause-marketing,” the intention is to establish long-term trust relationships with customers, allowing them to feel good about contributing to saving the rain forest, or feeding the homeless, for example, while purchasing items they would have purchased anyway. In discussing the study, Cone stated, “No one ever bought anything based solely on a cause. Cause-related marketing adds to the brand persona, the character. It’s the second tier of influences.” A philanthropic image provides another “edge” in an increasingly competitive marketplace. The footwear producers, Keds and Reebok, also are counted among the many companies that embrace cause-related marketing, boosting their corporate image and, potentially, boosting long-term revenues, while also benefiting one or more causes.
The company is attempting to make new headway into the boy’s footwear market, which had been almost entirely dominated by athletic shoes. A more recent trend suggests that parents are beginning to buy new styles in shoes and boots for their boys, in addition to the athletic footwear popularized by sports stars. KC debuted its children’s line in 1997, offering a wide selection of loafers, chunky monk-straps, oxfords, and boots. According to one retail manager, quoted by Boehring in Footwear News, “If the shoes have the comfort of a sneaker, boys aren’t a tough sell.”
Kenneth Cole men’s tailored clothing (manufactured under a license agreement with Hartmarx) was introduced in the fall of 1997 and men’s sportswear (manufactured in partnership with Paul Davril, Inc.) was launched in a debut runway show in early 1998. Like the well-priced, somewhat trendy shoes, the sportswear line appears to fill a niche—a niche defined by the company as urban, fashion-conscious consumers who want designer styles, at a reasonable price. KC’s new suits are priced from $395 to $595, a bit less expensive than Calvin Klein and a little costlier than Liz Claiborne, Tommy Hilfiger, and Náutica. The subdued color palate of grays, black, dark blue, and murky violet are consistent with the sophisticated, urbane image. But it may require more than appearances for this clothing to stand out significantly from the crowd, which is where public sentiment concerning brand and image is tested. So far, the combination of product and marketing strategies has worked. Depending upon the success of the 1998 men’s lines, KC plans to expand into women’s and children’s clothing. Except for a second-quarter slide in 1997, revenues at Kenneth Cole Productions have grown steadily.
Boehring, Julie C., “Boy Wonders; If Today’s American Men Grew Up in Nothing But Athletic Shoes, Will Their Sons Wear Anything Else?,” Footwear News, February 2, 1998, p. 82.
——, “Style Counselors; Should Footwear Companies Take the Nontraditional Accessories Route?,” Footwear News, May 26, 1997, p. SS14.
Campbell, Roy H., “Kenneth Cole Sizes Up His Success with Shoes: Style and Quality, at a Good Price,” The Philadelphia Inquirer, December 3, 1995, p. H3.
Emert, Carol, “Kenneth Cole Does About Face; Files IPO,” Footwear News, April 18, 1994, p. 1.
Feldman, Kathryn Levy, “Sole Man; Head over Heels for Kenneth Cole,” Inside, Fall 1997, pp. 87–89.
Gault, Ylonda, “Giant Leap for Cole,” Cram’s New York Business, January 5-11, 1998, p. 1.
Gellers, Stan, “Report Kenneth Cole To Ink Suit License with Hartmarx,” Daily News Record, October 1, 1996, p. 2.
Givhan, Robin, “Kenneth Cole and His Model Citizens,” The Washington Post, February 3, 1998, p. B4.
MacDonald, Laurie, “Kenneth Cole, Seriously, with Business Growing Beyond $100 Million, the Ads Aren’t the Only Things Grabbing Attention,” Footwear News, February 5, 1996, p. 16.
Malone, Scott, “Footwear IPOs Find Tide Runs High and Low,” Footwear News, May 5, 1997, p. 1.
Reynolds, Pamela, “Sensible (About) Shoes,” The Boston Globe, June 25, 1996, p. 58.
Rourke, Mary, “Kenneth Cole’s Shoes Grab Our Feet—And His Social Concerns Grab Our Attention,” Los Angeles Times, August 27, 1993.
Sauer, Georgia, “Shoeting Star,” Pittsburgh Post-Gazette, June 9, 1996.
Seo, Diane, “Stepping into the Future,” Los Angeles Times, January 15, 1998, pp. B5 and B7.
Sohng, Laurie, “Children’s Division Launched by Kenneth Cole,” Footwear News, July 22, 1991, p. 56.
Stronger, Karol, “Resourcefulness Got Cole’s Foot in the Door,” Lifestyle and Fashion, February 7, 1997, p. B3.