David Kahan, the CEO of Birkenstock USA, has been in footwear and apparel his entire adult life. A part-time sales gig at a Staten Island Macy’s during college led to an opportunity in the retailer’s Executive Training program, where he was brought up in the footwear division and eventually became the first athletic footwear buyer.
“I like to say I went from working 14 hours a week in the industry to 14 hours a day,” Kahan said.
Kahan had his chance to escape—at Macy’s, employees can become general merchants and gain experience across categories switching from footwear to cosmetics to housewares—but the footwear life was the life for him. “I just had such a great connection with the people I met in footwear at such a young age,” he said. “I was 24 years old and the people who were in leadership positions provided tremendous guidance and support.”
For the last three years, Kahan has been at the helm of Birkenstock as it has entered a new chapter in its history, living parallel lives in both comfort independents and in Barneys. Under Kahan’s guidance, the 240-year-old brand has remained true to its core, maintaining its comfort, heritage, quality and price as many around it have succumbed to lower-grade materials and deep discounts.
VAMP: You’ve proven what so many retailers and brands claim is impossible—selling footwear at full price. How did you make this happen?
Kahan: Birkenstock is a brand with tremendous consumer equity. In a time when the majority of purchases are disposable by nature, Birkenstock represents quality. And, frankly, at $95-$150, purchasing a timeless style with handmade quality is a tremendous value. We manage our market distribution so that the retail partners who share this vision, now share in the amazing results. Anyone who, three years ago when we started this process, did not share this vision, are no longer with us as partners. It’s that simple.
VAMP: How do you regulate this with so many variables?
Kahan: We strictly manage the supply vs. demand in the market. Mainly it’s due to constraints in our manufacturing. We are largely a handmade, high-quality, made in Germany product, thus we can only produce so many units. This in and of itself ensures that supply will never quite catch up with demand, and as we know, this in turn generates even greater demand. Still, we manage this in a very nuanced manner. We are not a sell-in focused organization. We are a sell-through focused organization and all we do is ensure that the products we allocate are sold in so that they have almost certainty of sell-through by certain dates.
VAMP: Have retailers come to understand or value Birkenstock’s strategy?
Kahan: Smart retailers know that there are few brands that do in fact maintain this discipline and it’s in the retailers’ best interest to support the strategy. Why sell products that can’t yield strong margins? It’s a losing game. It’s a retail death spiral. Far better to support brands that maintain powerful consumer demand and maintain full brand pricing equity. When a consumer buys a pair of Birkenstocks, I would bet they never feel “taken” or that they “paid too much.” It is quite the opposite—they know they won’t see it cheaper in a week, or get it on a coupon deal the next weekend or see it discounted on a flash site or in the racks at a discount chain. It’s actually retail and branding 101. Make a great product and distribute it at a fair price with the best retail partners. To me, it can’t be any simpler.
VAMP: What do you say to retailers or other brands that argue against your strategy?
Kahan: Some brands are “transactional” and some are “emotional.” Its two universes. If a footwear brand is transactional by nature then sure—sell in as much as you can, discount like crazy and figure out at the end of the season how the retailer is made “whole” and you, as a supplier, can survive. That’s how the majority of footwear vendors operate. It’s O.K. for them, so be it—I am not judging.
But, when you have a brand like Birkenstock—a brand with a 240- year history, a brand that represents quality, represents comfort and a brand that has such a strong emotional relationship with our consumer—frankly we owe it to our consumers to not disrespect them by mishandling a brand they love. We are one of the only consumer brands that gets fan mail. People write us every day telling us how much they love what we do. Any retailer who hasn’t shared this vision, as I said, is no longer a partner. Those retailers who believed in me three years ago, and in our team, and helped us create the success and momentum we now have, share in the success. We are very protective of our retail partners and want nothing more than them to succeed. This is the focus in all we do and why we are so disciplined in our approach.
VAMP: In terms of business strategy, are there other industries you look to for inspiration or guidance?
Kahan: I live by a mantra to benchmark the best. If you benchmark mediocrity then you may think you are doing well but really falling far short of how great things can be. I am sorry to say, not many brands across most industries meet the standard to which we hold ourselves. Within footwear, a few of our models have been how Uggs was managed over an eight-plus year period, also Converse. It’s incredible they have grown from $200 million to $2 billion with a strong iconic style that they never compromise. I love how [Vans and VF Action Sports President] Kevin Bailey is able to capture a broad consumer base yet remain fiercely loyal and connected to their core demographic. Obviously Nike is best of the best in brand management. Look at Under Armour—they have exercised extreme discipline in their distribution.
Overall, it would be Apple. People standing outside three hours waiting for a new introduction says something about how they have connected with their consumer in a way few brands have been able. And lastly, we model the luxury brands. No one walks into Chanel and asks when this handbag is going on sale. When? Never. It’s brand management in its purest sense and it is respecting the brand and the consumer. We like to say in the “ocean of chaos” we want Birkenstock to be “an island of sanity.” This is what we strive for.
VAMP: What are some important qualities to have in order to succeed in the footwear industry?
Kahan: It definitely takes a passion for people, for product and a true commitment to do the right thing. I have also learned through the years to be a better listener. Great ideas are out there somewhere, and if you have an open mind, you can find them and adapt them to your own business. As a leader, it’s all about providing an environment where each person can actualize his or her own potential. When each person’s individual mission aligns with the company mission, that is when magic happens. It’s what we are creating here at Birkenstock. and we have a very big vision for the future. We have so much “runway” ahead, the brand is just now starting to develop closed toe shoes, legwear and bags—key categories that will help us meet the desires of the millions of consumers that have come to love our sandals. And, of course we will always continue to innovate and update our sandals to excite the consumer who loves to see new seasonal and limited-edition introductions.
VAMP: How have you remained passionate about footwear?
Kahan: Our mission is simple. We sell footwear that brings people happiness and satisfaction. That, and the incredible team we have created here and in Germany is what makes me so passionate about what we are doing.