Rebooting Converse: Should the Brand Play Hard to Get?

Converse is throwing a lot of spaghetti at the wall, trying collaboration after collaboration, while U.S. sales for its iconic Chuck Taylor high-and-low-top canvas sneakers continue to slump. This summer, at rough count, the brand will unveil a half-dozen collaborations and launches: Shoes made of upcycled jeans, shoes that change color like mood rings, shoes with dolphins. Even shoes that disavow being Chucks altogether.

It's puzzling, since Converse should be on fire right now: Retro sneakers are hot, clothing has never been more casual, and a recent Piper Jaffray survey shows teen girls spending more on footwear. Yet youthful, fashion-forward consumers, the future of any contemporary clothing or shoe brand, aren't feeling it for Converse as fervently as they were a few years ago.

In contrast, Converse's revenues have continued to deflate and there has been executive turnover. Matt Powell, sports industry advisor for NPD Group, said Converse's sales are down by a "mid teens" percentage year-over-year through June, according to data his firm collects. NPD's data excludes Converse's own stores and its e-commerce business.

Reinventing, while re-energizing

Converse is working feverishly to re-ignite. In addition to continually remixing the recipe for Chucks, it's trying to jump-start other businesses within the brand. In a Nike conference call in late June, Andy Campion, Converse's executive vice president and CFO, cited a "new, energized leadership team at Converse, focused on fueling growth through product diversification, including reigniting Converse's authentic brand positioning in basketball." In April, they debuted the All Star Pro BB, a good-looking Converse basketball shoe juiced by Nike performance technology.

There's also Converse Renew, a sustainability initiative launching this summer with Chucks made from upcycled blue jeans and recycled water bottles, respectively. 

Play hard to get?

Sam Poser, equity research analyst at Susquehanna International, said Converse needs to fix its overall brand appeal. He suggested the company use a "pull model" as Nike does. In a pull model, brands deliberately keep supply hovering just below demand, particularly on coveted styles. When a customer can't snap up a product, it whets their appetite for the next round of merch. "Nike has done a great job with this. Lulu has done a great job. Adidas has done a great job," Posner said. "Their brands are sacrosanct."

While the company's design collaborations are creating consumer buzz, and often sell out, in general, Converse hasn't created much buying urgency. Without fixing this issue, Posner asserted, its hard for other initiatives to catch hold.

Reinvigorating U.S. sales

Asked to weigh which of Converse's launches could help U.S. sales rebound, Powell said Converse Renew has some potential: "The customer is absolutely concerned about sustainability and they've said they'd be willing to pay more for products made sustainably." But, he added, Converse has to tell that story well, so the customer understands the product's attributes and $5 to $10 price premium. Some of the sustainable shoes read: "Life's too short to waste."

Powell was skeptical about Converse's recast basketball business, given overall lackluster demand for basketball shoes, and the fact that other major brands have targeted the category with lots of new product. "They're all hoping basketball comes back as a fashion look and want to be ready to leverage that," Powell said. "Long term, I'm not optimistic."