They gave corporate America the boot and launched an online, custom- design shoe business. Three years later, the entrepreneurs behind Santa Cruz-based cmax.com are ready to try success on for size
They have a bond tighter than any knot you’d find on a pair of swank sneakers, and enough traction to sprint on the business treadmill for years to come. Most of all, David Solk, Irmgard Kreuzer and Dave Ward have got sole—a lot of it ... enough to make tens of thousands of shoes and then some.
Hear that? It’s Imelda Marcos sighing with envy.
To fully grasp the story of how Santa Cruz became home to three entrepreneurs who kicked corporate America on its rear end only to launch the country’s—perhaps the world’s—hippest cus- tom design online shoe buying business, cmax.com (also known as customatix.com), it’s best to simply put yourself, well, in their shoes. There you are ... working at a behemoth called Adidas, and although you’ve been enjoy- ing your job as an über executive in the high- paced and often frenzied industry, you just crave more. Something’s missing. What, exact- ly, is it? You’ve got a sweet income in a job that allows you to travel around the world. You’re also savvy with marketing and know how to really mass-produce athletic footwear. When you find yourself chatting with colleagues—com- pany employees who are also on the management end of things, a few of them living over- seas—ideas are tossed around. Why not branch out ... form your own company, sell shoes. But take it to another level: do it online and do it in a way nobody else does. You want your e-tailing adventure to allow the customer to design his or her own shoes, really get involved in the process ... make it an inti-mate, personal experience. It would put conventional shoe buying on a tilt, but would it fly? Got $2 million?
Kick Your Shoes Off ... Stay A While
Back in 1999, Solk, Kreuzer, Ward and Mikal Peveto (company co- founder at the time) had a decision to make at Adidas. Were they really ready to jump off the cliff called “life as you know it,” plunge into the Sea of Change and swim its uncharted waters? Risk at its finest hour had announced itself with the fervor of Big Ben at noon. Solk and Kreuzer were overseeing produc- tion operations in Adidas’ Vietnam site. Ward and Peveto were based in Germany handling marketing and the business end of sports accessories. Their gigs had that comfy, dare it be said, “feels like slipping into a pair of old shoes,” feeling. But the collective pang to own and operate their own company, some- thing savvy, fun and fresh, and something particularly Web friendly, needed to be fed.
One of the first steps would be to launch a Web site that actually had the technology to custom design shoes. The pricetag for the site alone— although they didn’t know it at the time—would even- tually hover over a lofty $1 million. If dreams cost plenty, big dreams cost even more—the quartet poured their entire life savings into what was, basical- ly, an idea pregnant with possibilities. Two Taiwanese investors, who were their business associates, as well as their friends, were intrigued with the “shoes designed by you” concept and tossed in some signifi- cant cash (about two-thirds of what would be nearly $2 million). The seeds were planted. But where would this new company be based? The group opted for the West Coast simply because it would be easier to take trips to Asia, where they had planned to build a factory. After scouring sites around the San Francisco Bay Area, the group discovered the pseu- do-beatnik beach bubble known as Santa Cruz and deemed it the ideal spot to establish their corporate roots. For one, it wasn’t actually in Silicon Valley, which, at the time, was drunk on excess and had become quite the bloated cash cow. They settled into a Seabright Avenue building, one door away from the popular stomping grounds for Italian food, Al Dente.
In the days that followed those July, 1999 begin- nings—they were operating under a clever moniker for the corporation: Solemates, Inc.—Solk, Kreuzer, Ward and Peveto monitored the finer intricacies of building a Web location and a decent factory. Their idea for a patented, high-tech Shoe Designer Applet would boast an array of options for the online designer: nine different shoe styles, separated into three categories such as skate shoes, running shoes and boots (or “das boots” as they would later be dubbed). Dozens of colors, accents and eccentrici- ties would be featured, and Web cruisers would also have the option to save their shoe designs until the thrill to buy tugged hard enough. In theory, a person could design more than 1 million pairs of shoes, which certainly would be a significant technical breakthrough. Ultimately, these “heady” Web details fell into the capable hands of Lutris Technologies in Santa Cruz. (Local Web seer KadiumDesign.com has since upgraded the site.) Beyond cyberspace, there were other areas that needed attention. Who would actually design the shoes, those base models that would act like a painter’s canvas? Scottish designer Ryan Lamont was recruited and worked full- time for the entourage during the first year and a half. Concepts were clever and the shoe names even more so. Some sneakers were knighted Deviant 1, Cruzer and Smoothie. Slip-on shoes went by Sokamoto and the ’N Forcer. N’Dorf’N and Hey Day ’78 occupied the running shoes category. For boots: Think Tank and Dr. Evil, no doubt drawing inspiration from pop culture with shades of Austin Powers thrown in for good measure.
Along came the marketing costs, which soared to about $800,000 when it landed in the smooth palms of ad giant OWN&P, a San Francisco-based agency that was particularly adept at zeroing in on market- ing to the 18- to 34-year-old crowd. The pressure was high. OWN&P had a colossal reputation because it always screened its potential clients. The cmax.com team had to pitch their idea to the com- pany before it could even be considered as a poten- tial client. OWN&P performed marketing wonders for Burger King, Target and Peeva.
During this time, the factory was under construc- tion in China, one home of many shoe manufacturers in Asia. The cmax.com site was to be a separate housed section within a larger factory occupied by Dean Shoes, which was producing more than 2 mil- lion shoes a month for New Balance, Adidas and Wilson. (That main plant is one of the top footwear manufacturers in the world: see deanshoes.com.) Cost effective? Yes. But Solk in particular wanted to make sure their plant didn’t smack of anything sweat shop. At Adidas, he had increased the awareness for human rights within the factory system and it ulti- mately led to more appropriate working conditions for employees. Their cmax.com base would have to have stellar management, proper air conditioning and enough room for workers to move around easily so they could make shoes—get this—one pair at a time.
Finally, on May 5, 2000—or “Sneaker de Mayo”— the company Web site officially launched into Internet orbit (as customatix.com) and they tossed a party locally at culture-rich Caffe Pergolesi in Santa Cruz. A month before that, interestingly enough, the Silicon Valley hot air balloon experienced the first fatal fizzle. But that didn’t really matter to Solk, Kreuzer, Ward and Peveto.
“We never considered ourselves a dot-com compa- ny at all,” Solk says. “We are a company that uses the Internet to sell the product. None of us come from a dot-com background. Quite frankly when we first stepped into the whole world of dot-com [to launch the Web site], we were absolutely disgusted by the way [some of them] did their business—unethical, unprofessional, top to bottom. It was just an outrage. We were used to good, old-fashioned business, where you do what you say and possibly you earn some money. So we always shied away from the dot- com thing. A lot of the companies [at the time] were all itching for an exit strategy within two or three years, and how they were going to take all the money. It’s too much pressure. Our ultimate purpose is not to jump in two years. Our ultimate purpose is to sell millions of pairs of shoes a year, 15 to 20 years down the road. It took Nike 20 [years]. It takes time.”
Kreuzer is all for perfect evolution. “I was probably the one of the four who was happy if the company stayed smaller,” she admits. “I don’t necessarily need [the company] to be growing huge as long as we are all on the same page. I was never looking for the big time, million-dollar experience. I was looking to be part of a small company and have fun.”
At the time, Peveto claimed, “We know there are enough people out there who really dig shoes, have a closet full already and would love to have a crack at creating their own design.”
“Sure, it was a risk, especially looking back at it now,” says Ward about walking away from Adidas and dropping his hard-earned coins into the cmax.com idea. “But it came from a combination of things we had seen on the development side at Adidas, when we were still gainfully employed there and earning paychecks. We knew the Internet was evolving and net users were growing quite radically. We saw the Internet was a perfect vehicle for customization. For the first time, a company could communicate one on one, first hand with the customer, bypassing all the middle people involved. We saw that they (the customers) could basically design and order the shoes they wanted in real time, and us being the facilita- tor. We just put it in simple terms: ‘You design it, we make it.’”
If The Shoe Fits
Intrigued by the thrill of creating the DNA of my own shoe—and strictly for research purposes mind you—it was time to shake hands with my inner shoe designer. (Who knew it would turn into a bear hug?) Athletics, 16 on the National League end, including the San Francisco Giants. (These, I later learn, can also be ordered by anybody.) There’s some buzzwor- thy news about its collegiate footwear and the phrase (What? No Banana Slugs?) Then there’s the compa-ny’s promotional footwear: let’s say your Mr. Master Card and you want your employees to strut around in comfy shoes bearing your company’s logo ... it’s clearly an option. (Imagine the folks at City Hall or Al Shugart International trekking up and down the block in some sweet custom designed boats.) The real fun, it seems, happens on the left of the screen: “click here to start designing shoes.” Six different shoes appear. Do I want a runner, a sneaker, a slip-on, sk8r, a casual or a boot? A few seconds later, I’m in another online viewing parlor. I have two options for the boots: a Think Tank (at $90-$100, including shipping) or the Dr. Evil brand ($85- $95). The Think Tank, with its thick sole, is lumberjack chic and definitely a possibili- ty for the hiker within, or if I just want to feel taller than 6 feet. But do I want such a thick sole (spiritual or otherwise)? The Dr. Evil impresses me at the moment so I click on that. Two clicks on Netscape later, and I’m in the world of cmax.com, a virtual shoe palace. Big shoes burst into view and to the right of my computer screen are basic tidbits. Since the company’s inception, it has branched out into designing shoes for Major League Baseball teams: 14 in the American League, including the Oakland
“Just because you left college doesn’t mean your feet have to,” forces a chuckle. OK. It’s hip, I’ll give it that. Here, shoes for 30 schools (including Fresno State), 3 styles of shoes and 90 conferences are featured. I do notice that I can indeed save my shoe design without purchasing anything right away. (When you just have to have a pair of funkadelic bowling shoes delivered to your door within two weeks, this might be the place to go.) But for my Dr. Evil ... do I want leather or suede?
Suede, definitely suede. The next step allows me to click on a specific area of the shoe—side, front, back, heel or shoelaces—that I want to design first. I choose the front of the shoe and about 30 seconds later (at times it seems longer), after the applet loads the information, the area is outlined for me. I have 16 color choices: navy blue, bright red, off-white, black, lime, beige, brown, orange, forest green, denim, dark purple and ... wait a sec- ond! Dark purple? Well, that’s out of the norm. Why not be a bit unconven- tional? (Is life complete without a pair of purple pumps?)
The extrovert within wins. Dark pur- ple it is.
Over the course of the next 30 minutes, I happily design the outer layers of my shoe and slowly, a pur- ple creation is born. Next ... do I want the sole of my shoes to be beige, black, dark yellow, lime or rust? Dark yellow with dark purple? Beige seems more purple friendly. Ten minutes later, I’ve given birth to a deep purple suede shoe with beige soles and black shoelace holes.
But now I’m curious.
What would a suede yellow shoe look like with forest green soles? Or, a suede denim concoction with dark yellow soles, black laces—no, maybe denim laces—and a navy blue tongue? For that matter, what if the front of the shoe were one color, say bright red and the rest of the shoe entirely black? Toss in some yellow laces and it’s quite a looker. I playfully make several mental notes as I find myself absorbed in another vision: the union of lime, black and navy. (Not for me, of course—it can accompany a totally pink shoe for an eclectic friend.)
The final step, before exerting some serious pur- chasing power, is to personalize each shoe. I can choose one word that would appear on each heel. Decisions, decisions. What would Imelda do?
On a Friday afternoon in the middle of summer, the fog begins to burn off above Seabright Avenue. The cmax.com worldwide corporate headquarters is unpre- tentious—an urban mini-warehouse feel, a baby loft, some computers, rolling bins that store footwear, an office in the back, high ceilings. The front of the estab- lishment is filled with, what else, shoes. A colorful wall display cradles them and there is a carpeted ramp off to the side on which dozens of shoes are lined up for a cool viewing.
Do Solk, Kreuzer and Ward actually get walk-ins here? A few. But, they say, many county residents may not be aware of their locally based company since most of the business is done online anyway.
They’re a down-to-earth trio, focused, definitely not dull, and obviously downright creative. They’re considered equals, but they do hold titles. Solk is C.O.O. and responsible for cost-related issues and monitoring Web engineering. Kreuzer is Director of Sales, handling product development, most factory communications, working with designers and in customer service. Ward is C.E.O., keeping a watchful eye on budgets as well as promotional sales and licensing of the major league baseball and collegiate footwear. Or, in online speak from their Web bios: Solk is “Director of Hard Stuff,” Kreuzer is “Director of Actually Doing Stuff Without Being the Damn Boss” (a German farm girl turned shoe god- dess). And Ward ... “The Big Cheese E-O.” Peveto, who had been with the company since its inception and had been the C.M.O., was dubbed “Director of Creative Chaos.” He recently vacated his post in order to return to his home in Portland, Ore., but he still plays an integral part with the company, especially with various designers.
A breezy conversation ensues. New Jersey born Ward, fortysomething, talks about his days at Nike overseeing production in Korea and the Philippines before moving on to Adidas. Kreuzer, who was born in Germany, reveals that she literally jumped into the shoe business—she went skydiving with some friends who worked in the industry. She wound up working for Adidas for 10 years. British born Solk, 34, says he “was practically born on a shoe factory assembly line,” and talks about the shoe busi- ness his family ran in Leeds, England and how it spanned several generations and 93 years. “One thing that stood out for me was that my father was an extremely honest man who was true to his word,” Solk says. “That has helped me [in Asian shoe production]. Trust is everything. Contracts mean nothing.”
The Asian connection continues to pop up in conversation. Asia has become the global loca- tion to mass-produce athletic footwear—Reebok, Nike, Peeva and others. Nearly 95 percent of branded athletic shoes are made in Asia. Billions shuffle out of the region every year. “You can’t be in the athletic footwear industry today and not have a good relationship with Asia,” Ward says. “When we worked there it taught us great shoemaking—no question about that.”
“It was like getting a Harvard degree for me,” Kreuzer adds. “It was a practical way to learn how to run a business and it was a team effort. When you are mass producing some- thing like a million pairs of shoes at a time, the reason the product is successful is that there is a successful team inside who basically pull the same string.”
The cmax.com factory employs 350 people, 50 of which are on the management end. The remainder of the staff actually makes shoes— one pair at a time.
How does the company actually manage to do this?
“Painstakingly so,” Solk admits with a laugh. “We basically have a very tightly controlled material warehouse [in the Asian factory]. An inventory is taken in the morning and we have runners who take the initial orders that come in. They download [the orders] in Chinese, take it and run off in the warehouse where they stack all the material they need for the day’s cutting. Imagine trying to do that in America.”
It simply isn’t done.
From there, the shoes sparked in the imaginations of people worldwide are made within about three or four days after order- ing. Shipping takes nearly a week. Of interesting note, there’s a 24-hour “cooling off” period. Translation: folks have 24 hours to cancel their orders in case they want to re-design or back out. Credit card orders that go through in cyberspace are not even handled in the main office. The lowdown for you, the designer: most shoes cost under $100 and there are plenty for $65-$85.
As for the actual shoes themselves, a variety of materials are used. There’s stressed leather, patent leather, tumbled leather, suede, polypag (a nylon material), light-mesh, lycra, heavy mesh, synthetic leather. Because real leather is more durable and com- fortable than synthetic leather, real leather is used on some trims. True vegans would be happy to note that cmax.com’s running and slip-on shoes lean toward all synthetic. In addition, high- grade double foam linings are placed in all of the sports shoes—it reduces the risk of blistering. Boots have leather on the inside as well as the outside.
The weight of each shoe matters. For instance, the popular athletic shoe, N’Dorf’N, weighs 15 ounces and boasts 16 design zone options, whereas the more ath-leisure Sockamoto is only 10 ounces and has 12 design options. Another athletic standout: the Road Rage, at 13 ounces and 17 design zones.
But note the Road Rage stats and behold the whimsical- sounding foreign language of Shoe DNA: a “TPU Rollbar” for an enhanced fit, something called an “AngrumTM Inside,” which is a “high rebound rubber foam [whose] molecular structure ensures more bounce back from each impact.” It’s offered in the heel, forefoot and insole of the sk8r shoes, and the insole of cmax.com boots. Road Rage also has “DamliteTM EVA,” a special compound that “reduces the weight of the midsole by 15 percent while maintaining durability.” Or, in the company’s own words: “It’s damn light.”
Meanwhile, the Railer, another athletic shoe, has something called “Ollie-Ollie Protection,” which combines a “separate, durable, rubber lateral forefoot insert with a full rubber tip.” It’s supposed to guarantee durability during those “vertical board tricks and flips.”
“They’re excellent shoes,” beams Mike Garing, a 30-year-old music promoter who works for the Aptos Club. “I love it. It’s the best idea in the world—to allow us to have more con- trol over how we want our shoes to be designed, even from the comfort standpoint. It definitely gives you creative control over your shoes, which you never had with any other com- pany. And if you have special needs—my feet are big and I wear a size 14—it helps that you can design a shoe that might be narrower in the sole. Comfort is very important. They have a life- long subscription [from me] at this point.”
Twenty-one-year-old lead guitarist for the Expendables, Raul Bianchi had no idea who or what cmax.com was. “A friend, who had worked for them, gave me a gift certificate and I went online. I had never done anything like that before,” he says. His pre- mier shoe was a skate shoe with black leather and blue suede.
“I’ve got something like four pairs now,” Bianchi adds. “It’s unique because it gives you the individuality for your own shoes, and they are really comfortable.”
The cmax.com gang sits across from me in Ward’s office. We’re waxing philosophical about shoes. On the brick wall to my left sits a framed article about the company from Forbes magazine several years ago. Ward is pictured with his per- sonalized shoes kicked up on his desk. Forbes is not the only publication giant that is sprawled out on the cmax.com publicity vine. Newsday, Playboy, Katy Couric, the New York Times— they’ve all made media love to cmax.com’s con- cept. Last year, the company was given a HotTech award from the Santa Cruz Sentinel.
The topic of money and profits come up. The bottom line: how much cash are they pulling in? Lips are sealed, but, those custom designed beauties seem to be tapping nervously. At the end of the day, they do make a profit.
“If we’re clearing 10 to 12 percent, we’re doing well,” Kreuzer says. (Still, Ward says their company is currently looking for investors for the next round of financing.)
But let’s do the math anyway—at least for online designs: If the average price of a shoe is, say, $75, and in a year’s time, 55,000 pairs of shoes are created online, bought and delivered, that’s more than $4.1 million. Add it to the total figures for retail sales of collegiate and MLB footwear, which, presently, surpasses the Web orders—and various consulting gigs—and the financial picture looks rosy. But there are other costs—materials, salaries for 350 Asian employ- ees and two Santa Cruz employees, and the cost of shipping one pair of shoes at a time in specially labeled boxes, the first time UPS has ever done such a thing.
Even with a special pricing plan implemented due to frequent single shipping, “United Parcel Service makes much more than we do,” Solk says, head shaking. (Wonder if UPS could use some custom designed company shoes?)
“For a company that didn’t even know what dot-com meant when we started the idea, we are doing quite well,” Solk says. “Our philosophy is to not think of ourselves as a dot-com business.”
To take it even further, it’s refreshing to see that a local company can survive outside of Silicon Valley and while the economy is weak.
But they’re also giving back to the communi- ty as well. Online shoe designers are asked if they want to contribute 50 cents to one of two charities: Santa Cruz’s Above the Line, which assists homeless minors and San Francisco’s Larkin Street Center, which serves more than 2,000 youths and young adults each year. Cmax.com matches the 50-cent donation.
“We personally appreciate that they support our cause,” says Suzanne Stone, executive direc- tor for Above the Line, which has received more than $2,000 in cmax.com donations during the past year. “There are so many homeless youths in Santa Cruz County and they could see that there was a need, so they served us with not only a financial donation but with actual returned shoes [from returned orders]. Many of the young people we work with never get anything that is new, so for them to get something new and especially way out of their price range, it means a lot to them. We just appreciate businesses that want to give back to their own community.”
But is the custom-design biz done by any- body else?
Over at Nike.com, shoe customization exists. For about $85-$165, online designers are offered four styles and about as many color options. Personal IDs are featured as well. Over at IC3D.com, it’s customized jeans and slacks, and at Dell.com, tech savvy people can even design their own computers. But in the online customized shoe department, cmax.com clearly stands out. Future-tripping, the cmax.com gang says they want to further improve the custom design aspect of the business, do more consult- ing and add onto existing shoe styles. (Perhaps a high heel shoe down the road?) The company recently launched a European Web site. It’s ini- tially in English and the group hopes to add a vocabulary for 10 languages.
I snap a few photos of the crew, try on a gaggle of shoes, and we part. I walk away intrigued by the intricate network they’ve imple- mented here. But for the love of shoe ... what made these folks put their hearts in their soles?
Ward once admitted that they were just your basic “shoe addicts,” shoe dogs doing what they know best.
“We believe customers are ready for one-of- a-kind designs that reflect the unique character of the people wearing them,” he noted. “We say: ‘If you can tie your own shoe, you can design your own shoe.’”
This brings me back to that dark purple suede beauty I created and saved online on the cmax.com site. It still needs to be personalized. After visiting the local moguls, perhaps my own shoe message should reflect their creativity. Why not “Be Soleful.”
Read more at gregarcher.com.