It would be polite not to mention Crocs around Joyce Groote, whose Richmond, B.C., company has been selling foam clogs just as long as her Colorado-based competitor. The two companies' histories are somewhat intertwined, though today Holeys, Ms. Groote's company, is a distant No. 2 in the duel between the manufacturers. That makes Crocs the evil empire.

 

Today, however, sales have tumbled for both firms, and the Canadian company is trying to reinvent itself amid a slow economy with new product lines, a new distribution model and a tighter focus on a few consumer niches, all under a new brand (until last year, the company was called Holey Soles).

 

In fact, Ms. Groote says her now-much-smaller company is no longer about shoes but about the proprietary foam they're made of, and the many innovative products that can formed out of the material. Ms. Groote and her efforts are profiled in the new issue of Report on Small Business magazine: find the article here.

 

A geneticist by training, Ms. Groote is the former president of Ottawa-based industry association BioteCanada. After she famously got pied in the face by an activist protesting genetically modified foods, she decided she'd had enough controversy and moved to the West Coast.

 

Ms. Groote joined us earlier to take your questions about her business and the Report on Small Business magazine article that came out today.

 

Dave Michaels, globeandmail.com: Hi Joyce, and welcome. Let’s kick things off, shall we?

 

The article about you in Report on Small Business magazine, which came out today, outlines a few of the new product lines your company is playing with. Where do you get your ideas for new products?

 

Joyce Groote: In different ways. For example, our Critter concept actually started with our naming the shoes sizes using different bug names. Eventually, the bugs started to have personalities and we decided to make them “official.” This is where our Critters by Holeys line started. Once we had a focus for kids, it became sheer fun to find out how to play with the Critters themselves, and our unique SmartCel memory foam where the critters can be embossed on the shoes.

 

Our Home and Garden ideas come, in part, from my love for puttering in the garden. I work enough in a variety of conditions – hot/cold, dry, muddy, dusty – to know what would make sense to keep my feet the most protected and comfortable. Why would I be any different from other people who like to play in their garden? As it turns out, I’m not any different and our Home and Garden products have really taken off.

 

So, to put it in a nutshell, it is about function and play. We build our footwear around a function first. We decide what need/function to address and then design around it. We have luckily had some very talented footwear designers and graphic designers to help develop the final designs.

 

Dave Michaels, globeandmail.com: As you faced off with Crocs at the height of the foam-shoe boom, how did you deal with having a much smaller marketing budget? What sorts of ways did you get the word out?

 

Joyce Groote: First of all, we worked hard at customer service, so our retailers and distributors were some of our best champions to help get the word out. When we worked directly with consumers who had problems, they too became our champions. In the end, good customer service ended up creating a grass-roots support for our brand and our products.

 

The other ways we dealt with marketing was through attending select trade shows both nationally and internationally. These days, trade shows are less attractive as less people seem to be attending them. As a result we are really focusing on our customers and supporting their vendor shows. Last but not least, the Internet has been an important means to communicate with both customers and consumers around the world. It takes a lot of work to keep the Internet relevant, but it is probably the most cost-effective means to market. As well, it helps get you closer to the retailers and end consumers where you can have really meaningful exchanges. Some of the exchanges we have had to date, have really helped provide us with more insight and have helped us with new ideas for new products.

 

From Lenore, of Canada: Hi Joyce! Can you give us an idea of what kinds of products are in development using your proprietary foam? Thanks! Best of luck with taking Holeys in a new direction ... from adversity is born new empires!

 

Joyce Groote: I can’t share too much information ahead of product launch, but I can tell you that we are really focusing on our Critter by Holeys Line, which is footwear for kids, and our Home and Garden collection, which includes different types of footwear for a variety of different types of weather and chores. I appreciate your good wishes. Thank you!

 

Dave Michaels, globeandmail.com: You say in the article that you don’t see Crocs as a competitor any longer. Does this mean the shoes are a shrinking part of your business?

 

Joyce Groote: Although Holeys and Crocs started at the same time, using the same manufacturer and products, both companies have evolved in very different ways. We pro-actively started our evolution as soon as we started contract-manufacturing shoes in China, where we modified our design to fit consumer input. For example, our shoes were narrower in fit, had more arch support, more holes for ventilation, etc.

 

In 2007, it was clear that we had come to a fork in the road where we could either develop new footwear that followed the fashion markets or footwear that performed a real function (but could still be attractive). From my perspective, Crocs followed the first path. We chose the second path. Our Home and Garden collection is perhaps the best example to show what I mean. We have used the unique qualities of our SmartCel foam and SoleTek to build footwear that is lighter and more comfortable than any other footwear/boots that you will find for working in your garden (or washing your car or walking your dog). As an example, our Weatherall boot (mid-knee high), weighs only 10 ounces (or 300 grams). The construction is seamless, so it is also 100 per cent leak-proof. The closed-cell nature of SmartCel means you can wash your shoes/boots when you come in from the garden with a hose so that they clean up easily. If you look at the qualities I have just described, they are all functional that match the needs of what you might look for as a garden enthusiast.

 

Christine Mushka, globeandmail.com: Despite their practicality, a lot of women have found foam shoes to be boat-like and too bright. Have you thought of collaborating with a fashion designer to come out with a more subdued-looking line suitable for the mature women to wear to the grocery store?

 

Joyce Groote: When we first starting designing new products, we did put a lot more thought into designs and worked with designers to achieve that. Since that time, and with our new focus on functionality, we are still trying to ensure that our footwear looks good but meets the needs of what it was built for in the first place. As an example, our coastal boot is built for slipping on and off so that it can easily be used for working in the garden. It is difficult to make a streamlined product that will fit this need. Having said that, it is certainly more streamlined than the more traditional clog shape that you are referring to. We do have customers that like the bright colours but our experience has now shown that the darker more subdued colours are the favourites. For that reason, we like to have a variety of colours but always have our products available in the darker, more conservative colours such as black, navy blue and brown or the camouflage patterns. (I wear my camouflage PROlines or coastal boots to the grocery store all the time and never get looks as if I have just committed a fashion faux pas …)

 

Christine Mushka, globeandmail.com: Uggs, the fleece-lined booties, have managed to outlast their initial trend. Do you take comfort in the notion that women – especially young women in the 15 to 25 age bracket – want to wear comfortable, flat shoes at the bottom of their skinny jeans? Can they be persuaded to wear Holeys?

 

Joyce Groote: I certainly take comfort in the fact that many companies have been able to look to their core strengths and reinvent themselves as long as they are in tune with the markets. I don’t think that we are any different in terms of the self-discovery and work we have had to do to achieve the same result. In terms of looking for the perfect footwear, I would rather ask the question: “Does such a shoe/boot really exist?” I have a lot of different footwear for different reasons. Walking shoes for walking, special boots for hiking and our products for slipping on to go to the store on a wet day or working in the garden. When I want to look fashionable, I have shoes for that as well. I believe that comfort is a trend right now and that all ages of women are realizing that heels aren’t always the best thing.

 

With respect to teenagers, it’s funny that we received an e-mail from one of our Holeys enthusiasts not too long ago who brought home her first fuchsia pair of coastals, much to the dismay of her teenage daughters. That was during our big snow dump in B.C. last winter. She quickly found her daughters “borrowing her boots” so that she could no longer find them because they were always on one of her daughters’ feet. She had to buy 3 more pairs for her daughters (more subdued colours for two of them and a bright colour for the 3rd).

 

Dave Michaels, globeandmail.com: You manufacture items in China. Do you have any advice for business-people considering outsourcing? Any problems with quality control?

 

Joyce Groote: No question that outsourcing in China has its own set of issues. I know it is mentioned in the article that China is a culture unto itself and that you really need to go there in person to see what you are getting into. I will stand by these statements. As in any business relationship, it is important to establish a good relationships with your suppliers and key trades that your business is dependent on. This is no different for working in China. When starting to source I also suggest that you always have at least 3 potential sources you are in discussions with to help keep them competitive with each other. It is always amazing to me how pricing can improve when there are a few bids on the table!

 

So once you have one or two suppliers for your product at prices you can live with, how do you ensure quality? There are a number of ways to do this. There are companies in China that do this. A number of the companies have employees from North America who understand what quality means to places like the EU and North America and can ensure that goods are checked before they go into a container. Better to ensure quality in China rather than opening a container in your warehouse and getting a nasty surprise. Other people also hire employees to work in the factories and oversee quality. We do both of the above. We also have a third check when product comes to our warehouses in North America. We spot-check shipments when they come into our warehouses to ensure that overall quality is good. Then when we pack to fill orders, we examine each pair of shoes against standards we have set to ensure that the product has the quality that we expect.

 

All of the above has meant that our rejection rate from our customers is below 0.1 per cent, which in our company translates to happy customers!

 

Melissa in Oakville, Ont.: Any chance that you’ll open up a method for customers to purchase directly from you online?

 

Joyce Groote: You can order online from Holeys at www.holeys.com. If you want to find a retailer that is close to you that might sell what you are looking for, you can call us on our toll-free line, 1 866 538-7653, to find out where. If they don’t carry the product, we are happy to sell directly to you through our online retail store.

 

Dave Michaels, globeandmail.com: Your narrow fit, compared with Crocs, seems to be a benefit. How are you planning to capitalize on that?

 

Joyce Groote: Now that I have been in the footwear industry for more than a few years, I realize that you don’t just develop a new design and make it work. You have to decide what the fit will be first. Since we first started contract-manufacturing our footwear and then designing it, we realized that a narrow last would be the basis for most of our new designs. I found that the shoes we first started ordering from Finproject that eventually became known as the “Crocs” were too wide for my feet. They floated a lot and therefore were not as comfortable as I wanted. Many other women found the same thing. We have had many testimonials from people (many of them women) who preferred our narrow fit when compared to some of the other competitor products. We recognize that we still need to have a wider fit for those who need it, which is why our Getaway shoe was developed. However, our overall fit that we use for our products is as much a part of who we are as a company as your wardrobe is to you. The fit is dependable, which is why people come back to you over and over again as they know what works for them.

 

Eric McCarron of Canada: Regarding your new products, is your plan to develop niche markets and penetrate them through niche distributors, or more general markets, and general distributors?

 

Follow-up question: Where do you go to get advice on how to develop your distribution network? Peer groups, or business associations, networks, or do you rely on yours and your husband’s intuition?

 

Joyce Groote: Our marketing plan is multi-pronged and can vary country to country. Internationally, we rely on our distributors who have their own sales force and established markets. Their markets are varied and include the smaller independent retailers, mid-sized chains and the larger department stores. In Canada, we sell to the same mix as just described.

 

There is no question that we are becoming more focused in terms of who our markets are. When we first started selling our Explorers, we sold to such a diversity of markets that I would have been hard pressed to actually define them. Now it has become very clear. We sell directly to retailers that are in the home and garden markets such as Home Hardware as well as department stores such as Sears for the kids market. We also sell to numerous smaller independent retailers. Because of high duties on boots that Canadian customs charges as well as the exchange rates, it is difficult to come up with a strong distributor model in Canada where everyone can get the margins that they need for their businesses to be viable. This is why all of our sales are direct in Canada. In the U.S., it is slightly different. We do now go through distributors for our home and garden markets. For the other markets, we sell direct through our own sales force.

 

In terms of how we developed the distribution network, a lot of this was based on hard-won experience as well as common sense in terms of what works. Ensuring you have enough margin to provide to distributors is key to even being able to consider using them as a part of your business model.

 

From Louise in Winnipeg: Hi, glad to see the ankle boot design (my chiropractor doesn’t like clogs!). Where can I get a pair in Winnipeg?

 

Joyce Groote: The coastal is just starting to be ordered for this fall. So, I’m not sure if they are available just yet. I would try your nearest Home Hardware. A quick hint: if they don’t have them yet, then please let them know what you are looking for in terms of colour to ensure that they order what you are looking for. If you would like to get your own pair sooner, please visit us at our website where you can place an order online.

 

Dave Michaels, globeandmail.com: Well, that's all we have time for. Readers, thanks for joining us today. Joyce, thanks for taking the time. Any parting words?

 

Joyce Groote: This has been an interesting experience. While we were having this online discussion, we have also had a lot of readers emailing us directly looking for where they can buy our product. The enthusiasm we have seen for our new products from our retailers and now from many consumers is exciting. To us, it is a continual reminder that using our SmartCel memory foam to make new interesting and functional products was the right direction for our company. It is also a wonderful reminder that our products are here to stay and that they are becoming an important staple in our chosen markets vs. the fad growth we previously experienced. It will be fun to continue to build a strong stable business!