15
Crocs’ Crocs’ Crocs’ Crocs’ New Styles New Styles New Styles New Styles Catching On Catching On Catching On Catching On, Back , Back , Back , Back-to to to to-School School School School Has Potential Has Potential Has Potential Has Potential 321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com FOLLOW FOLLOW FOLLOW FOLLOW-UP UP UP UP REPORT REPORT REPORT REPORT August 2 August 2 August 2 August 2, 2011 , 2011 , 2011 , 2011 Companies: AMZN, CROX, ETR:ADS, JWN, KSS, NKE, PSS, TGT, TJX, VFC 1 Reverdy Johnson, [email protected], 415.364.3782 Summary Summary Summary Summary of of of of Findings Findings Findings Findings Crocs Inc.’s (CROX) new styles have a stronger following and awareness than in Blueshift’s May report. Our sources said the Chameleons , Mary Janes, sandals and flip-flops are being well- received by customers and selling well in stores, echoing Crocs’ second-quarter earnings report . Because of its new sneaker , Crocs no longer will be locked out of schools and has potential for improved back-to-school sales. Crocs highlighted the sneaker as an important item for the fall. The Chameleon soon will be rolled out in wholesale stores. Inventory in stores appeared full and replenishments are frequent, but shipments are not always what stores or their customers want. Customers said they are increasingly ordering Crocs online as a result. Crocs corporate stated that weekly replenishment is ahead of last year’s pace. One supplier said Crocs raised prices minimally on one kids’ pair and one other style, which he will pass along to clients, but other sources said prices are holding firm. They also do not expect a price increase from Crocs in the near future. Crocs stated that a 5% cost increase on inventory will be offset with a price increase. One supplier said 75% of his Crocs merchandise in the last two months has been made in Mexico, a stark change from Crocs’ previous reliance on China. Crocs’ earnings call did not cover this topic. One customer noted seeing Crocs selling in discount stores T.J. Maxx and Marshalls for $15 in June. New New New New Styles Styles Styles Styles Picking Picking Picking Picking Up Up Up Up More More More More Interest Interest Interest Interest Than Than Than Than in in in in May May May May Crocs Crocs Crocs Crocs a Good Good Good Good Back Back Back Back-to-School School School School Bet Bet Bet Bet Price Price Price Price Increases Increases Increases Increases Coming Coming Coming Coming Suppliers Suppliers Suppliers Suppliers Industry Industry Industry Industry Specialists Specialists Specialists Specialists Store Store Store Store Visits Visits Visits Visits Customers Customers Customers Customers Re Re Re Research Question: search Question: search Question: search Question: How are Crocs How are Crocs How are Crocs How are Crocs’ new styles being received new styles being received new styles being received new styles being received, and what is in and what is in and what is in and what is in store for the back store for the back store for the back store for the back-to to to to-school school school school season season season season? Silo Summaries Silo Summaries Silo Summaries Silo Summaries 1) SUPPLIERS 1) SUPPLIERS 1) SUPPLIERS 1) SUPPLIERS A U.S. supplier said June was Crocs’ best of the last 12 A U.S. supplier said June was Crocs’ best of the last 12 A U.S. supplier said June was Crocs’ best of the last 12 A U.S. supplier said June was Crocs’ best of the last 12 months and that the new styles have been extremely months and that the new styles have been extremely months and that the new styles have been extremely months and that the new styles have been extremely popular, popular, popular, popular, especially among women. especially among women. especially among women. especially among women. He expects back-to- school to be a solid season for the brand. He noted an improved relationship with Crocs representatives thanks to increased promotional activity. Our second source, a supplier to a Southeast Asian country, said business is the same as in May. Classic Crocs are this source’s best seller, but he does not have Chameleons yet. He does not expect increased sales activity this fall because back-to-school does not have the same meaning in Asia. The final source confirmed that Jibbitz are no longer popular. 2) INDUSTRY SPECIALI 2) INDUSTRY SPECIALI 2) INDUSTRY SPECIALI 2) INDUSTRY SPECIALISTS STS STS STS One of three sources said Crocs is the most popular One of three sources said Crocs is the most popular One of three sources said Crocs is the most popular One of three sources said Crocs is the most popular footwear brand among moms and kids and that the footwear brand among moms and kids and that the footwear brand among moms and kids and that the footwear brand among moms and kids and that the new styles are a big hit with both groups. new styles are a big hit with both groups. new styles are a big hit with both groups. new styles are a big hit with both groups. One source said Crocs’ new styles have not altered the kids’ shoe market, while two others said Crocs is no longer popular on college campuses because it is late with new styles. Crocs is not succeeding in the world of fashion either. Its sneakers may make some noise during back Its sneakers may make some noise during back Its sneakers may make some noise during back Its sneakers may make some noise during back-to to to to- school because they are school because they are school because they are school because they are the only Crocs shoes likely to the only Crocs shoes likely to the only Crocs shoes likely to the only Crocs shoes likely to be allowed in most schools. be allowed in most schools. be allowed in most schools. be allowed in most schools. None source reported a price hike from Crocs. 3) STORE VISITS 3) STORE VISITS 3) STORE VISITS 3) STORE VISITS These six sources’ Crocs sales are on par with the previous year, and sources appear generally pleased with June and July results. The The The The Chameleons are selling Chameleons are selling Chameleons are selling Chameleons are selling very well in two Crocs stores, while adult Crocs are very well in two Crocs stores, while adult Crocs are very well in two Crocs stores, while adult Crocs are very well in two Crocs stores, while adult Crocs are better sellers in two Sports Authority stores better sellers in two Sports Authority stores better sellers in two Sports Authority stores better sellers in two Sports Authority stores. The new sneakers have potential to attract interest for back-to- school, but the shopping season has not gotten underway yet. Although inventory shipments arrive regularly, they are not always in line with customer demand. None of the sources expect a price increase. 4) CUSTOMERS 4) CUSTOMERS 4) CUSTOMERS 4) CUSTOMERS Our six sources like the new Crocs styles and have bought them or will consider buying them. However, they are not keen on buying Crocs for back-to-school season. Sources seemed unaware of the new sneakers. Three sources said Crocs now are less available in Three sources said Crocs now are less available in Three sources said Crocs now are less available in Three sources said Crocs now are less available in stores and have increased their online purchases of the stores and have increased their online purchases of the stores and have increased their online purchases of the stores and have increased their online purchases of the brand as a result. brand as a result. brand as a result. brand as a result. Most sources consider Crocs a kids’ brand. None has seen price hikes for Crocs.

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Crocs’ Crocs’ Crocs’ Crocs’ New Styles New Styles New Styles New Styles Catching OnCatching OnCatching OnCatching On, Back, Back, Back, Back----totototo----SchoolSchoolSchoolSchool Has PotentialHas PotentialHas PotentialHas Potential

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com

FOLLOWFOLLOWFOLLOWFOLLOW----UPUPUPUP REPORTREPORTREPORTREPORT

August 2August 2August 2August 2, 2011, 2011, 2011, 2011 Companies: AMZN, CROX, ETR:ADS, JWN, KSS, NKE, PSS, TGT, TJX, VFC

Reverdy Johnson, [email protected], 415.364.3782

SummarySummarySummarySummary ofofofof FindingsFindingsFindingsFindings � Crocs Inc.’s (CROX) new styles have a stronger following and

awareness than in Blueshift’s May report. Our sources said the Chameleons, Mary Janes, sandals and flip-flops are being well-received by customers and selling well in stores, echoing Crocs’ second-quarter earnings report.

� Because of its new sneaker, Crocs no longer will be locked out of schools and has potential for improved back-to-school sales. Crocs highlighted the sneaker as an important item for the fall. The Chameleon soon will be rolled out in wholesale stores.

� Inventory in stores appeared full and replenishments are frequent, but shipments are not always what stores or their customers want. Customers said they are increasingly ordering Crocs online as a result. Crocs corporate stated that weekly replenishment is ahead of last year’s pace.

� One supplier said Crocs raised prices minimally on one kids’ pair and one other style, which he will pass along to clients, but other sources said prices are holding firm. They also do not expect a price increase from Crocs in the near future. Crocs stated that a 5% cost increase on inventory will be offset with a price increase.

� One supplier said 75% of his Crocs merchandise in the last two months has been made in Mexico, a stark change from Crocs’ previous reliance on China. Crocs’ earnings call did not cover this topic.

� One customer noted seeing Crocs selling in discount stores T.J. Maxx and Marshalls for $15 in June.

NewNewNewNew StylesStylesStylesStyles PickingPickingPickingPicking UpUpUpUp MoreMoreMoreMore InterestInterestInterestInterest ThanThanThanThan inininin MayMayMayMay

CrocsCrocsCrocsCrocs aaaa GoodGoodGoodGood BackBackBackBack----ttttoooo----SchoolSchoolSchoolSchool

BetBetBetBet

PricePricePricePrice IncreasesIncreasesIncreasesIncreases ComingComingComingComing

SuppliersSuppliersSuppliersSuppliers

IndustryIndustryIndustryIndustry SpecialistsSpecialistsSpecialistsSpecialists

StoreStoreStoreStore VisitsVisitsVisitsVisits

CustomersCustomersCustomersCustomers

ReReReResearch Question:search Question:search Question:search Question:

How are CrocsHow are CrocsHow are CrocsHow are Crocs’’’’ new styles being receivednew styles being receivednew styles being receivednew styles being received,,,, and what is inand what is inand what is inand what is in store for the backstore for the backstore for the backstore for the back----totototo----school school school school seasonseasonseasonseason????

Silo SummariesSilo SummariesSilo SummariesSilo Summaries 1) SUPPLIERS1) SUPPLIERS1) SUPPLIERS1) SUPPLIERS A U.S. supplier said June was Crocs’ best of the last 12 A U.S. supplier said June was Crocs’ best of the last 12 A U.S. supplier said June was Crocs’ best of the last 12 A U.S. supplier said June was Crocs’ best of the last 12 months and that the new styles have been extremely months and that the new styles have been extremely months and that the new styles have been extremely months and that the new styles have been extremely popular,popular,popular,popular, especially among women.especially among women.especially among women.especially among women. He expects back-to-school to be a solid season for the brand. He noted an improved relationship with Crocs representatives thanks to increased promotional activity. Our second source, a supplier to a Southeast Asian country, said business is the same as in May. Classic Crocs are this source’s best seller, but he does not have Chameleons yet. He does not expect increased sales activity this fall because back-to-school does not have the same meaning in Asia. The final source confirmed that Jibbitz are no longer popular.... 2) INDUSTRY SPECIALI2) INDUSTRY SPECIALI2) INDUSTRY SPECIALI2) INDUSTRY SPECIALISTSSTSSTSSTS One of three sources said Crocs is the most popular One of three sources said Crocs is the most popular One of three sources said Crocs is the most popular One of three sources said Crocs is the most popular footwear brand among moms and kids and that the footwear brand among moms and kids and that the footwear brand among moms and kids and that the footwear brand among moms and kids and that the new styles are a big hit with both groups.new styles are a big hit with both groups.new styles are a big hit with both groups.new styles are a big hit with both groups. One source said Crocs’ new styles have not altered the kids’ shoe market, while two others said Crocs is no longer popular on college campuses because it is late with new styles. Crocs is not succeeding in the world of fashion either. Its sneakers may make some noise during backIts sneakers may make some noise during backIts sneakers may make some noise during backIts sneakers may make some noise during back----totototo----school because they are school because they are school because they are school because they are the only Crocs shoes likely to the only Crocs shoes likely to the only Crocs shoes likely to the only Crocs shoes likely to be allowed in most schools.be allowed in most schools.be allowed in most schools.be allowed in most schools. None source reported a price hike from Crocs.... 3) STORE VISITS3) STORE VISITS3) STORE VISITS3) STORE VISITS These six sources’ Crocs sales are on par with the previous year, and sources appear generally pleased with June and July results. TheTheTheThe Chameleons are selling Chameleons are selling Chameleons are selling Chameleons are selling very well in two Crocs stores, while adult Crocs are very well in two Crocs stores, while adult Crocs are very well in two Crocs stores, while adult Crocs are very well in two Crocs stores, while adult Crocs are better sellers in two Sports Authority storesbetter sellers in two Sports Authority storesbetter sellers in two Sports Authority storesbetter sellers in two Sports Authority stores. The new sneakers have potential to attract interest for back-to-school, but the shopping season has not gotten underway yet. Although inventory shipments arrive regularly, they are not always in line with customer demand. None of the sources expect a price increase.... 4) CUSTOMERS4) CUSTOMERS4) CUSTOMERS4) CUSTOMERS Our six sources like the new Crocs styles and have bought them or will consider buying them. However, they are not keen on buying Crocs for back-to-school season. Sources seemed unaware of the new sneakers. Three sources said Crocs now are less available in Three sources said Crocs now are less available in Three sources said Crocs now are less available in Three sources said Crocs now are less available in stores and have increased their online purchases of the stores and have increased their online purchases of the stores and have increased their online purchases of the stores and have increased their online purchases of the brand as a result.brand as a result.brand as a result.brand as a result. Most sources consider Crocs a kids’ brand. None has seen price hikes for Crocs.

1

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 2

BackgroundBackgroundBackgroundBackground Crocs reported strong second-quarter earnings, in part because of improved product diversification and solid sales of the new styles. Blueshift Research’s May 26 Crocs report found that Crocs’ new styles that most closely resemble the Classic had stronger sales, the best reviews and the most potential. The edgier, more unique looks were described as cheap-looking and a detriment to Crocs’ image. CURRENTCURRENTCURRENTCURRENT RESEARCHRESEARCHRESEARCHRESEARCH In this next study, Blueshift assessed the market for Crocs’ new styles since May and Crocs’ back-to-school business. Blueshift employed its pattern mining approach to establish and interview sources in five independent silos:

1) Suppliers (3) 2) Industry specialists (4) 3) Store visits (6) 4) Customers (6) 5) Secondary sources (5)

Blueshift interviewed 19 primary sources, including 11 repeat sources, and included five of the most relevant secondary sources focused on earlier back-to-school promotions but later shopping, strong demand for Crocs’ Chameleons, and Crocs’ marketing through Facebook.

SilosSilosSilosSilos 1)1)1)1) SUPPLIERSSUPPLIERSSUPPLIERSSUPPLIERS AAAA UUUU....SSSS.... suppliersuppliersuppliersupplier saidsaidsaidsaid JuneJuneJuneJune waswaswaswas CrocsCrocsCrocsCrocs’ ’ ’ ’ bestbestbestbest ofofofof thethethethe lastlastlastlast 12 months12 months12 months12 months andandandand that that that that thethethethe newnewnewnew stylesstylesstylesstyles have beenhave beenhave beenhave been extremelyextremelyextremelyextremely popular,popular,popular,popular, especiallyespeciallyespeciallyespecially amongamongamongamong women.women.women.women. CrocsCrocsCrocsCrocs raisedraisedraisedraised pricespricespricesprices slightlyslightlyslightlyslightly onononon onlyonlyonlyonly twotwotwotwo stylesstylesstylesstyles, which this source, which this source, which this source, which this source expectsexpectsexpectsexpects totototo passpasspasspass onononon totototo consumers.consumers.consumers.consumers. Also, hAlso, hAlso, hAlso, heeee hashashashas noticenoticenoticenoticedddd thatthatthatthat thethethethe majoritymajoritymajoritymajority ofofofof hishishishis CrocsCrocsCrocsCrocs havehavehavehave beenbeenbeenbeen mademademademade inininin MexicoMexicoMexicoMexico instead of China duringinstead of China duringinstead of China duringinstead of China during thethethethe lastlastlastlast twotwotwotwo months,months,months,months, thoughthoughthoughthough hehehehe couldcouldcouldcould notnotnotnot explainexplainexplainexplain thethethethe reason.reason.reason.reason. HeHeHeHe expectsexpectsexpectsexpects backbackbackback----totototo----schoolschoolschoolschool totototo bebebebe aaaa solidsolidsolidsolid seasonseasonseasonseason forforforfor thethethethe brand.brand.brand.brand. HeHeHeHe notednotednotednoted anananan improvedimprovedimprovedimproved relationshiprelationshiprelationshiprelationship withwithwithwith CrocsCrocsCrocsCrocs represrepresrepresrepresentativesentativesentativesentatives thanks to increasedthanks to increasedthanks to increasedthanks to increased promotionalpromotionalpromotionalpromotional activity.activity.activity.activity. Our second source, aOur second source, aOur second source, aOur second source, a suppliersuppliersuppliersupplier totototo aaaa SoutheastSoutheastSoutheastSoutheast AsianAsianAsianAsian countrycountrycountrycountry,,,, saidsaidsaidsaid businessbusinessbusinessbusiness isisisis thethethethe samesamesamesame asasasas inininin MayMayMayMay. . . . ClassicClassicClassicClassic CrocsCrocsCrocsCrocs areareareare this source’sthis source’sthis source’sthis source’s bestbestbestbest seller, but he does not have seller, but he does not have seller, but he does not have seller, but he does not have ChameleonsChameleonsChameleonsChameleons yetyetyetyet. He does not expect . He does not expect . He does not expect . He does not expect increaincreaincreaincreasedsedsedsed salessalessalessales activityactivityactivityactivity thisthisthisthis fallfallfallfall becausebecausebecausebecause backbackbackback----totototo----schoolschoolschoolschool doesdoesdoesdoes notnotnotnot havehavehavehave thethethethe samesamesamesame meaningmeaningmeaningmeaning inininin Asia.Asia.Asia.Asia. TheTheTheThe finalfinalfinalfinal sourcesourcesourcesource confirmedconfirmedconfirmedconfirmed thatthatthatthat JibbitzJibbitzJibbitzJibbitz areareareare nononono longerlongerlongerlonger popular.popular.popular.popular. � Manager,Manager,Manager,Manager, onlineonlineonlineonline andandandand rerereretailtailtailtail buybuybuybuyer/distributorer/distributorer/distributorer/distributor ofofofof CrocsCrocsCrocsCrocs;;;; repeatrepeatrepeatrepeat sourcesourcesourcesource

Sales of Crocs were stronger in June than in the last 12 months. Women’s crocs sell best, with the strongest styles being the Patricia, Cleo II and Crocband Wedge. Crocs imposed a $2 price increase on two styles, including one kids’ style, which the source said he would pass on to consumers. Since May, order labels indicate Crocs has been manufacturing in Mexico rather than China, but he could not say whether the production switch caused the price hike. Of his last order, 75% of the shoes were made in Mexico. In May, Crocs instituted a new field program that strengthened this source’s relationship with the company. The Crocs rep has produced two events, replete with prizes and luring customers to the store.

§ “Our sales of Crocs are as strong as ever. June was the best month we have had in the last 12 months. Our inventory is stable. We order stock about every two months, so nothing has changed except we sell more open-toe shoes in the summer than we do of other styles.”

§ “Our best seller is the Patricia. It outsells all the rest. The Cleo II and Crocband Wedge with a single strap and 2- inch heel also sell well. We sell way more women’s than men’s.”

Our sales of Crocs are as Our sales of Crocs are as Our sales of Crocs are as Our sales of Crocs are as strong as ever. June was the strong as ever. June was the strong as ever. June was the strong as ever. June was the best month we have had in the best month we have had in the best month we have had in the best month we have had in the last 12 months. Our inventory last 12 months. Our inventory last 12 months. Our inventory last 12 months. Our inventory is stable. We order stock about is stable. We order stock about is stable. We order stock about is stable. We order stock about every two months, so nothing every two months, so nothing every two months, so nothing every two months, so nothing has changed except we sell has changed except we sell has changed except we sell has changed except we sell more openmore openmore openmore open----toe shoes in the toe shoes in the toe shoes in the toe shoes in the summer than we do of other summer than we do of other summer than we do of other summer than we do of other stylesstylesstylesstyles....

Manager, Crocs Buyer& Distributor

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 3

§ “We are an authorized seller, and we buy our stock directly from Crocs. There has been a price increase of a couple of dollars a pair on two styles. They did not say anything to us about it. We just noticed the increase on our most recent order invoice, which was about two to three weeks ago. It does affect our price to the consumer. We have a set formula for profit margins so our retail price went up on each of the [Crocs] pairs increased. I know one of the shoes was a kids’ shoe, but I can’t recall the other.”

§ “I can’t tell you why the price went up. I don’t know if it was due to manufacturing costs or raw materials. I can tell you they change the location of where they produce all the time, and it looks like they have switched from making shoes in China to making them at facilities in Mexico. Prior to this order, the last few orders said ‘Made in China,’ on the labels. They are required to say where they are made. On this order, they say ‘Made in Mexico.’ I would say 75% of the order was made in Mexico, and the others are older styles. Before this, everything was made in China. I don’t know if the change explains the price increase, but it could be more expensive to make them in Mexico or they could be adjusting their margins. We do not have access to that information.”

§ “Our sales are steady year-round although our slowest months are January and February because they do not have as many winter styles. For us, sales are even between what we sell to adults versus what we sell to kids, even though there are fewer kids’ styles to choose from. But someone might come into the store and buy two pairs for the kids and one pair for themselves. This buying pattern has always been the case.”

§ “Because we sell a lot and when we place an order it takes two weeks to receive the merchandise, we keep a lot of inventory in the back so we don’t end up empty-handed. But we mostly keep extra stock on the women’s sizes 6 to 8. We might buy three to four times the amount of that category so we don’t run out. We sell every size.”

§ “We do sell merchandise online, but the sales are not as good as in the stores. On a good day, we may sell six pair online and 20 pairs in the stores. It’s all the same inventory. What we keep in the store and show online is what we have in the back.”

§ “Our relationship with the Crocs company has gotten better in the past few months. We now have a designated market representative, and they have done two different [promotional] events. The program just started in May so we did one event then, no events in June and another event last week. They give away prizes like T-shirts and pens. It definitely brings people into the store because we promote the events in our regular advertisements. In our area, there aren’t many stores that sell Crocs, so we are the primary distributor. There isn’t a Nordstrom [Inc./JWN] or Kohl’s [Corp./KSS] near here, and I think the Nordstrom Rack takes discontinued styles and colors. They have nothing current.”

§ “I do not know how the new Chameleon kids’ style is selling because it is not available to us, or to any retailers as far as I know. They keep that style and certain other styles for themselves to sell at their stores. I have asked for it two to three times because I think it would do well, but they just say it is not a style they offer. There are a lot of colors and styles you cannot buy unless you buy from Crocs. For the most part, we have what people want. Sometimes they may ask for a certain color and say they saw it online, and I have to explain the situation. I am sure the Chameleons are doing well.”

§ “Our sales are generally strong between May and December, and I expect a solid back-to-school season. We service a number of area universities, but they are not back in town yet.”

� MarketingMarketingMarketingMarketing manager,manager,manager,manager, supplysupplysupplysupply chainchainchainchain distributordistributordistributordistributor forforforfor aaaa SSSSoutheastoutheastoutheastoutheast AsianAsianAsianAsian countrycountrycountrycountry;;;; repeatrepeatrepeatrepeat sourcesourcesourcesource

Crocs sales have been stable since May. The classic Croc styles remain the most popular. Crocs sales are stable in department stores, but the shoe sells best in the 32 boutique shoe shops set up by her company for Crocs. No manufacturer or retail price increases have occurred. A recent national sale promoted as part of Crocs’ 10-year anniversary celebration offered a 10% discount on all Crocs styles and led to a temporary sales jump. The source said the pre-celebration sale was unrelated to inventory and that inventory levels are well-managed. She knew nothing about manufacturing shifting from China to Mexico and said her stocks are made in China.

§ “Sales of Crocs are still doing well, about the same as in May. We have no new advertising campaigns but continue to run the same billboards, magazine ads and events that started in May.”

Our relationship with the Crocs Our relationship with the Crocs Our relationship with the Crocs Our relationship with the Crocs company has gotten better in company has gotten better in company has gotten better in company has gotten better in the past few months. We now the past few months. We now the past few months. We now the past few months. We now have a designated market have a designated market have a designated market have a designated market representative, and they have representative, and they have representative, and they have representative, and they have done two differdone two differdone two differdone two different ent ent ent [promotional] events. The [promotional] events. The [promotional] events. The [promotional] events. The program just started in May so program just started in May so program just started in May so program just started in May so we did one event then, no we did one event then, no we did one event then, no we did one event then, no events in June and another events in June and another events in June and another events in June and another event last weekevent last weekevent last weekevent last week....

Manager, Crocs Buyer& Distributor

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 4

§ “Not much of anything is different in the last two months. We did not change our prices on any of the styles, and we have had no price changes from the manufacturer.”

§ “Our best sellers continue to be the classic styles. They are selling well.” § “Our inventories are well-managed and not a problem.” § “We have all of the popular styles. We have the sneaker and the translucent Croc for spring and summer. We

are expecting a shipment of the new Crocs Tone shoe for the holidays. It has new technology in part of the sole, and it helps tone and strengthen the legs. The style is more for women. We don’t have the Chameleon shoe for kids yet, but expect it by the end of the year.”

§ “We do not expect any price increases from the manufacturer between now and the end of the year.” § “We did recently have a 10% off sale on all of the styles for men, women and children. It was last month, and it

was sort of a pre-celebration sale for Crocs’ 10-year anniversary next year. Ten percent is not that big, but we had some changes and a [temporary] bump in sales.”

§ “We have not seen any shoes here that were manufactured in Mexico. All of the shoes we receive for our area obviously are made in China.”

§ “We distribute to the largest department store. Crocs sales are doing OK in the department stores, but we also have our own stores and that is where they sell better. We now have 32 of our own stores all around the country. We do not sell or distribute online.”

� SalesSalesSalesSales aaaassociatessociatessociatessociate for a for a for a for a suppliersuppliersuppliersupplier of of of of JibbitzJibbitzJibbitzJibbitz----stylestylestylestyle shoeshoeshoeshoe accessoriesaccessoriesaccessoriesaccessories forforforfor CrocsCrocsCrocsCrocs;;;; repeatrepeatrepeatrepeat sourcesourcesourcesource

Jibbitz are no longer popular, and interest peaked several years ago. The manufacturer still gets a number of small orders monthly, but the Jibbitz craze is nearly dead. The declining interest in Crocs accessories is not a reflection on the popularity of the shoe. Crocs bought the original manufacturing facility of Jibbitz, based in China, but this source said Crocs likely uses the factory for other shoe manufacturing operations.

§ “Jibbitz charms are not popular, but they are no more or less popular than they were in May. The craze is on the decline, but we still receive a couple of orders a month on a regular basis, with the retail consumers ordering about two to three dozen charms at a time.”

§ “The decline is just due to the changing style. It was a passing fad that peaked five to six years ago when they sold like crazy.”

§ “I don’t think Jibbitz decorations are a big thing for Crocs, and I can’t imagine it has impacted their business. Crocs bought the original Jibbitz manufacturing facility. I can only imagine they use it for some other part of the operation. They own the original molds so they can tell the original manufacturer what to do.”

§ “I don’t think the declining interest in Jibbitz is any reflection on the popularity of the Crocs shoe but obviously the appeal of the style has lost steam.”

§ “When customers call in asking for Jibbitz, we do the design and manufacturing on-site. We don’t have a large inventory but make the charms as needed.”

2)2)2)2) INDUSTRYINDUSTRYINDUSTRYINDUSTRY SPECIALISTSSPECIALISTSSPECIALISTSSPECIALISTS OneOneOneOne of three of three of three of three sourcesourcesourcesourcessss saidsaidsaidsaid CrocsCrocsCrocsCrocs isisisis thethethethe mostmostmostmost popularpopularpopularpopular footwearfootwearfootwearfootwear brandbrandbrandbrand amongamongamongamong momsmomsmomsmoms andandandand kidskidskidskids andandandand thatthatthatthat thethethethe newnewnewnew stylesstylesstylesstyles areareareare aaaa bigbigbigbig hithithithit withwithwithwith bothbothbothboth groupsgroupsgroupsgroups.... OneOneOneOne sourcesourcesourcesource saidsaidsaidsaid CrocsCrocsCrocsCrocs’ ’ ’ ’ newnewnewnew stylesstylesstylesstyles havehavehavehave notnotnotnot alteredalteredalteredaltered thethethethe kidskidskidskids’’’’ shoeshoeshoeshoe market,market,market,market, whilewhilewhilewhile two others two others two others two others saidsaidsaidsaid CrocsCrocsCrocsCrocs isisisis nononono longerlongerlongerlonger popularpopularpopularpopular onononon collegecollegecollegecollege campusescampusescampusescampuses becausebecausebecausebecause it isit isit isit is latelatelatelate withwithwithwith newnewnewnew stylesstylesstylesstyles. . . . CrocsCrocsCrocsCrocs isisisis notnotnotnot succeedingsucceedingsucceedingsucceeding inininin thethethethe worldworldworldworld ofofofof fashionfashionfashionfashion either.either.either.either. ItsItsItsIts sneakerssneakerssneakerssneakers maymaymaymay makemakemakemake somesomesomesome noisenoisenoisenoise duringduringduringduring backbackbackback----totototo----schoolschoolschoolschool becausebecausebecausebecause theytheytheythey areareareare thethethethe onlyonlyonlyonly CrocsCrocsCrocsCrocs shoesshoesshoesshoes likelylikelylikelylikely totototo bebebebe allowedallowedallowedallowed inininin mostmostmostmost schools.schools.schools.schools. NoneNoneNoneNone source reported a price hike from Crocs.source reported a price hike from Crocs.source reported a price hike from Crocs.source reported a price hike from Crocs. � RetailRetailRetailRetail bloggerbloggerbloggerblogger aimedaimedaimedaimed atatatat womenwomenwomenwomen andandandand mothersmothersmothersmothers

Crocs are the most popular shoe brand on her blog so she continues to write about them—86 times in the past year. As a Crocs affiliate, she knows exactly how many shoes readers buy and said her readers adore the new styles, especially the Gabby and the Mackenzie, which are Mary Jane styles for girls. She has seen children wearing the new styles more than the original Cayman. She expects the new sneaker styles to be considered for the back-to-school season. Although her Crocs commission is down 2% from a year ago, she does not believe Crocs’ popularity is waning but admitted the shoes are not as popular outside the kids’ market.

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 5

§ “Crocs has worked really hard to develop a relationship with bloggers as one of their main sources for getting their product out there. They were one of the first companies to really recognize that bloggers do have some influence and are a legitimate marketing tool.”

§ “We decide what to post based on interest from readers. Our readers are moms from [ages] 25 to 40 with small kids. Crocs’ posts have the highest clickouts rate for shoes. It never ceases to amaze me because I personally don’t like Crocs too much. It’s been pretty stable based on the interest among readers. I gauge it by how many people click and how many people hit the ‘Like’ button.”

§ “The number of people who click on Crocs is pretty consistent. Mondays are higher, which is an anomaly for the blog. I think it’s mothers catching up from the weekend to see what they’ve missed.”

§ “I had 86 posts on Crocs since last school year. The interest, the price point and the different styles they have appeal to kids and parents.”

§ “Based on my statistics of readers, Crocs are absolutely popular. All the styles went well, especially some of the newer styles, like the Mackenzies, a Mary Jane-type shoe. The new stuff, the Gabbys, the Mackenzies, is definitely big with the girls because they look like a shoe you can wear with a dress. Those are more popular than the original style.”

§ “My Crocs sales this year to date are off by 2%. That could just be a sales price or I could have posted more than I did. I don’t feel like it’s indicative one way or another. This is not like a retail store where I have Crocs on the shelf every single day.”

§ “I’ve also written about men’s Crocs. I’ve written about ‘You by Crocs,’ and they just aren’t the same. There’s really no interest in that. My readers feel that if you’re going to spend $100 on shoes, it’s not going to be Crocs.”

§ “The Crocs sneaker is going to be interesting. I can’t see how a school will say you can’t wear a Croc sneaker. But I haven’t gotten any feedback on it yet from readers. Crocs has expanded so much from the original product.”

§ “I haven’t posted about the Chameleons. My readers are interested in the lower price points.” § “My 9-year-old son loves Crocs. He wears them all the time.” § “I write about [Collective Brands Inc.’s/PSS] Stride Rite and Keen [Inc.] too, but the response is never what it is

with Crocs.” § “Crocs are not the biggest seller on the blog, volume-wise. It’s in the top 20. Vera Bradley [Inc./VRA] handbags

are No. 1.”

� FounderFounderFounderFounder ofofofof a a a a childrenchildrenchildrenchildren’’’’ssss footwearfootwearfootwearfootwear brandbrandbrandbrand withwithwithwith moremoremoremore thanthanthanthan 20202020 yearsyearsyearsyears inininin thethethethe childrenchildrenchildrenchildren’’’’ssss footwearfootwearfootwearfootwear industryindustryindustryindustry;;;; repeatrepeatrepeatrepeat sourcesourcesourcesource This source frequently looks at the shoes on children’s feet, and has not noticed anyone wearing the new Crocs styles, including the Chameleon. Instead, he has noticed more children wearing cheap flip-flops over Crocs in recent months. This spring was the worst in 20 years for the children’s footwear business. The economy and cooler weather were factors. Once the weather improved, retailers already were slashing spring shoe prices. Crocs tend not to affect back-to-school sales since the shoe is not allowed at some schools. He believes Crocs will keep the status quo this fall.

§ “Business in children’s shoes has been dreadful this spring. I’ve talked to so many retailers about it. It’s probably the worst season they’ve had in 20 years or more.”

§ “Yes, it’s the economy. Plus, it was really cold this spring across the country. Spring didn’t arrive until June. Most retailers had spring shoes in February, so they’ve had to aggressively mark them down.”

§ “I can’t try to compete with Crocs. ... When you own a shoe store and are selling $28 footwear, you can’t do it. You’ve got to sell a more expensive item unless you’re selling hundreds of thousands of pairs. Crocs came on like a thunderstorm. They exploded. Now savvy retailers are realizing they can’t make a business on them.”

§ “As a kids’ footwear brand owner, I’m always looking at the shoes on children’s feet. I don’t see anybody wearing the new Crocs styles, just the Caymans and some of the licensed brands. I saw no Chameleons. No retailers said to me that the Chameleons are blowing everything else away.”

§ “What I’ve noticed is that before, half the kids were wearing Crocs. Now one-third are wearing Crocs. The other two-thirds are wearing cheap flip-flops.”

Based on my statistics of Based on my statistics of Based on my statistics of Based on my statistics of readers, Crocs are absolutely readers, Crocs are absolutely readers, Crocs are absolutely readers, Crocs are absolutely popular. All the styles went popular. All the styles went popular. All the styles went popular. All the styles went well,well,well,well, especially some of the especially some of the especially some of the especially some of the newer stylesnewer stylesnewer stylesnewer styles.... … … … … The new stuffThe new stuffThe new stuffThe new stuff………… is definitely big with the girls is definitely big with the girls is definitely big with the girls is definitely big with the girls because they look like a shoe because they look like a shoe because they look like a shoe because they look like a shoe you can wear with a dress. you can wear with a dress. you can wear with a dress. you can wear with a dress. Those are more popular than Those are more popular than Those are more popular than Those are more popular than the original stylethe original stylethe original stylethe original style....

Retail Blogger for Female Readers

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 6

§ “Crocs taught people that you don’t have to spend $50 on sandals when you can spend $28 on Crocs. But now, do you even need to spend $28 when you can spend $5 on flip-flops?”

§ “Crocs do not have a big impact on back-to-school. A lot of schools don’t allow Crocs as footwear. And it’s just not a big item in the fall. I think people will skimp on spring because spring tends to be a shorter season and they buy quality for fall. I don’t believe Crocs will be an issue during back-to-school.”

§ “It’s too early to tell how back-to-school sales are going to be. This is one of the byproducts of this economy. It’s buy now, wear now. If you need new snow tires, you wouldn’t buy them now. … Back-to-school may not start until mid- to late August.”

� CreativeCreativeCreativeCreative directordirectordirectordirector for afor afor afor a brandbrandbrandbrand rehabrehabrehabrehab andandandand trendtrendtrendtrend agency,agency,agency,agency, withwithwithwith expertiseexpertiseexpertiseexpertise inininin footwearfootwearfootwearfootwear andandandand collegiatecollegiatecollegiatecollegiate retailretailretailretail;;;; repeatrepeatrepeatrepeat sourcesourcesourcesource

Crocs used to be everywhere in on-campus collegiate stores, but it was dethroned about three years ago by the enduring flip-flop. Crocs lost momentum by not innovating. Now, the company appears to be chasing shoe styles that already have a following, like Converse (Nike Inc./NKE) high-tops, slip-on Vans (V.F. Corp./VFC) and even flip-flops. At least at the collegiate level, students go straight for the original brand, not the Crocs’ version.

§ “Crocs are losing momentum [on college campuses]. Looking at the reports coming back to me, it’s clearly not Crocs that are selling but flip-flops. And there’s nothing very special about the flip-flops, just the same old flip-flops.”

§ “In 2008, flip-flops outsold Crocs. From then on, we kind of all knew Crocs was losing momentum. And the reason was stupid. They thought everyone was going to buy the same shoe every year.”

§ “Crocs was the only freestanding [shoe rack] for a while. They also did the logos of the university. But I didn’t consider any of those to be particularly successful. They did it too late.”

§ “Crocs does not do enough research in fashion and trending for back-to-school. You only have three to four weeks when you talk about back-to-school. It’s a shame. Crocs had something distinguishable, but they went strategically backward. The tolerance of this group [of college students] is very high for accepting new trends. Crocs never really got innovative. They kind of went a little cheeky, like those Jibbitz for kids. They didn’t know how to distinguish the juvenile styles from the others.”

§ “I think they just got lazy. When they were clever enough to come up with something interesting … they went with the anti-trend and that’s too bad. … It’s a shame they didn’t know how to keep up the momentum.”

§ “They did a Converse type of thing and a type of boat shoe. But they’re not unique. They’re just trying to put their hand on everything else. But if everyone else can do it better than you, why do it? It’s a very bad way to bastardize their brand. No one is so loyal to Crocs that they’ll buy Crocs over Converse. It’s just not cool.”

§ “Even their flip-flops are flawed the way the shoe hugs the feet.” § “Crocs flip-flops just can’t compete. I don’t know who it’s for. You start to think about German men with red

socks.” § “Crocs purchases are completely decreasing because of their distribution. If it’s in the mall and in little kiosks

and most of the majors, even if you’re Pac[ific] Sun[wear of California Inc./PSUN], you can’t put it in your stores because [a Crocs kiosk] is going to be outside your store.”

§ “The vulcanized products are huge [for back-to-school]—espadrilles, Vans, slip-ons. The Converse All-Stars are staples. They do well, and they are so dirt cheap. And there’s all that Tom’s [Shoes Inc.] momentum. Again, all are in the materials that Crocs does, but they don’t participate in that way. They missed the boat on that trend. I think they’re just settling on whatever they can. They’re doing commodity shapes.”

§ “Crocs is trying really hard, and they have worthy distribution.”

� EditorEditorEditorEditor atatatat an an an an onlineonlineonlineonline fashionfashionfashionfashion magazinemagazinemagazinemagazine This source does not believe Crocs has a place in high fashion, even with its heels and wedges. The only people she has seen wearing the shoes are children.

§ “Crocs don’t fit well in the high-fashion industry, or with fashionable people in general. … People immediately think about the Cayman design the minute they hear Crocs. Sure, the new styles are fun and colorful—even some high heels—but I don’t see them being huge in the high-fashion market.”

Crocs taught people that youCrocs taught people that youCrocs taught people that youCrocs taught people that you don’t have to spend $50 on don’t have to spend $50 on don’t have to spend $50 on don’t have to spend $50 on sandals when you can spend sandals when you can spend sandals when you can spend sandals when you can spend $28 on Crocs. But now, do you $28 on Crocs. But now, do you $28 on Crocs. But now, do you $28 on Crocs. But now, do you even need to spend $28 when even need to spend $28 when even need to spend $28 when even need to spend $28 when you can spend $5 on flipyou can spend $5 on flipyou can spend $5 on flipyou can spend $5 on flip----flops?flops?flops?flops?

Founder, Children’s Footwear Brand

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 7

§ “I have not seen anyone wear [the high heels]. They probably fit best in the back-to-school market as Crocs are very comfortable and I guess a low-maintenance shoe. I still see children wear them.”

§ “I have received pitches on Crocs before and I hit delete immediately. But, again, our readers are of a different demographic.”

3)3)3)3) STORESTORESTORESTORE VISITSVISITSVISITSVISITS These six sources’ Crocs sThese six sources’ Crocs sThese six sources’ Crocs sThese six sources’ Crocs salesalesalesales areareareare onononon parparparpar withwithwithwith ththththeeee previouspreviouspreviousprevious yearyearyearyear,,,, andandandand sourcessourcessourcessources appearappearappearappear generallygenerallygenerallygenerally pleasedpleasedpleasedpleased withwithwithwith June and JulyJune and JulyJune and JulyJune and July results.results.results.results. TheTheTheThe ChameleonsChameleonsChameleonsChameleons areareareare sellingsellingsellingselling veryveryveryvery wellwellwellwell inininin twotwotwotwo CrocsCrocsCrocsCrocs stores,stores,stores,stores, whilewhilewhilewhile adultadultadultadult CrocsCrocsCrocsCrocs areareareare betterbetterbetterbetter sellerssellerssellerssellers inininin twotwotwotwo SportsSportsSportsSports AuthorityAuthorityAuthorityAuthority storesstoresstoresstores.... TheTheTheThe newnewnewnew sneakerssneakerssneakerssneakers havehavehavehave potentialpotentialpotentialpotential totototo attractattractattractattract interestinterestinterestinterest forforforfor backbackbackback----totototo----school,school,school,school, butbutbutbut thethethethe shoppingshoppingshoppingshopping seasonseasonseasonseason hashashashas notnotnotnot gottengottengottengotten underwayunderwayunderwayunderway yet.yet.yet.yet. AlthoughAlthoughAlthoughAlthough inventoryinventoryinventoryinventory shipmentshipmentshipmentshipmentssss arrivearrivearrivearrive regularly,regularly,regularly,regularly, theytheytheythey areareareare notnotnotnot always always always always inininin linelinelineline withwithwithwith customercustomercustomercustomer demdemdemdemand.and.and.and. None of the None of the None of the None of the sources expect a price increase.sources expect a price increase.sources expect a price increase.sources expect a price increase. � StoreStoreStoreStore manager,manager,manager,manager, SouthernSouthernSouthernSouthern CaliforniaCaliforniaCaliforniaCalifornia CrocsCrocsCrocsCrocs storestorestorestore;;;; repeatrepeatrepeatrepeat sourcesourcesourcesource

Back-to-school activity was relatively dead during mid-July. Customers still were buying summer sandals. The most popular adult style has been the Prepair, a flip-flop with pressure point padding. Kids’ shoes are the highest contributor to this store’s monthly revenues and remain the best-sellers.

§ “Orders for Crocs are higher now because summer is our busiest season, but that has nothing to do with back-to-school. We are selling a lot of summer styles right now and not so many of the newer styles.”

§ “What’s the same is kids’ shoes are the biggest sellers. The Chameleons clogs are selling very well, a little better than the Chameleon sandals.”

§ “The most popular shoe for adults right now is the crossover shoe called Prepair. The Prepair Slide is selling more than the clog. That is doing very well. Both men and women are buying those. We got them a few weeks ago, and they are in front for a reason.”

§ “Sales are strong. Summer is our busiest time. They are definitely up from where they were before June.” § “The inventory is about the same as in May. We don’t have any new styles coming in specifically for back-to-

school that I am aware of, and we don’t have any planned price increases that I know of.” § “I’m not sure at all what is going on [with Crocs] at Target [Corp./TGT], but I know Nordstrom here in this mall

used to carry a lot more styles of Crocs. Now they are focused only on the kids’ Crocs.” § “I don’t track online sales. We generally have almost every style we have online in this store, so we rarely have to

even refer someone to the Web site for a style they can’t get here.” Reporter Observations: Two adult women were the only customers on a Wednesday at 2 p.m. Both were in the kids’ section looking at the Chameleon clogs. Inventory was full.

� SalesSalesSalesSales associateassociateassociateassociate,,,, ChicagoChicagoChicagoChicago----areaareaareaarea CrocsCrocsCrocsCrocs store;store;store;store; repeatrepeatrepeatrepeat sourcesourcesourcesource

The Classic remains the store’s best-selling shoe. The store almost always meets sales goals. Customers like the new styles. As in May, the Kadee is most popular among women. Kids’ Chameleons are selling great and often are sold out for a week or more. This source has heard that adult Chameleons will be introduced as soon as this fall. This store just received new sneakers for back-to-school and already has sold a few pairs.

§ “We almost always meet our sales goals. Our store does well.” § “The Classic is still our No. 1 selling shoe. It is still the most popular

style, all around.” § “People like the new styles, but the Classic still does very well,

especially with the kids. The women really like the new styles because they look more sleek and more dressy than the Classic. The guys like the new style Croc shoes too. We sell a lot of them.”

§ “The Chameleons are doing great. Some weeks we are totally sold out of them. The entire kids’ wall was empty; now it’s full. We just got a pretty big shipment a few days ago.”

§ “I hear we are getting in Chameleons for adults. They should roll out in a few months.”

§ “We have sneakers for back-to-school. We just got them in. They are

The Chameleons are doing The Chameleons are doing The Chameleons are doing The Chameleons are doing great. Some weeks we are great. Some weeks we are great. Some weeks we are great. Some weeks we are totally sold out of them.totally sold out of them.totally sold out of them.totally sold out of them. The The The The entire kids’ wall was empty; entire kids’ wall was empty; entire kids’ wall was empty; entire kids’ wall was empty; now it’s full. We just got a now it’s full. We just got a now it’s full. We just got a now it’s full. We just got a pretty big shipment a few days pretty big shipment a few days pretty big shipment a few days pretty big shipment a few days agoagoagoago....

Sales Associate, Crocs Store Chicago-area

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 8

closed-toed, like the schools require. We have sold a few so far. They are $39.99.”

§ “Our best-selling shoe for women is the Kadee. It is $29.99. We just got in some new leopard patterns. Women really like the patterns.”

§ “After the Kadee, the strappy Adrina is probably selling the best for women. We had a lot more than we have now.”

§ “On the reverse, the Adrina flip-flop is probably selling the slowest. We have quite a few still on the wall.”

§ “The wedge slip-ons are new. They mostly appeal to the older customers. They have sold pretty well. Almost everything on the women’s wall has done well.”

§ “We had a pair of wedge heels that did very well. We are sold out now in the store. Women were buying them to wear with pants, and they look cute.”

§ “We just got some boots in. Some fall/winter merchandise is starting to trickle in now.” § “The boots do OK. I don’t know about slippage on the snow. ... If you look at the sole, it is smooth.” § “We get shipments in almost every day. We also have additional stock in the back if customers don’t find their

size. If we don’t have what they want, we can give them a code so they get free shipping at the Crocs site.” Reporter Observations: Approximately 20 to 25 people were in the store at noon on a Thursday. Many were purchasing shoes, including the Kadee, the Carlie, and the Yukon for men. The women’s section was at the front of the store while the kids’ section had been moved since May to the back of the store. Stock is comparatively lower, with about one-third of the selection from two months ago.

� ShoeShoeShoeShoe storestorestorestore employeeemployeeemployeeemployee inininin aaaa NewNewNewNew JerseyJerseyJerseyJersey mall;mall;mall;mall; repeatrepeatrepeatrepeat sourcesourcesourcesource

Crocs sales were up in June and July compared to May, meeting expectations. Inventory levels are adequate. The new sneaker for kids is not selling well yet, but back-to-school shopping has not started in earnest. The sneakers are more of a fall shoe and may help Crocs get past the ban in schools. This source has not heard of any price increases.

§ “Most people still see them as a summer shoe, so June and July are big months for sales.” § “Customers like the classic styles the best. We sell a few of the more dressy, different styles, but the base of the

business are the Classics and Caymans.” § “We sell far more kids’ Crocs than adults’.” § “The kids’ sneaker that looks like the Converse might sell well for back-

to-school, but it’s too early to tell. Right now people are focused on the summer Crocs.”

§ “Some schools won’t let kids wear Crocs to school, but I would think they can wear the sneaker type. Crocs might become more of a back-to-school item this year.”

§ “We don’t sell the Chameleon. In fact, I’ve never heard of it.” Reporter Observations: Compared with May, significantly more women’s styles were marked down on this visit.

� SSSSalesalesalesales associateassociateassociateassociate atatatat aaaa SportsSportsSportsSports AuthorityAuthorityAuthorityAuthority inininin ChicagoChicagoChicagoChicago;;;; repeatrepeatrepeatrepeat sourcesourcesourcesource

Men like the look and comfort of the newer styles like the Yukon but are put off by $60 price. Although this store has a full rack of kids’ Crocs, the brand is more popular with adults, specifically women. The buyer controls the ordering and expressed frustration over the low inventory of women’s Crocs. This store sells two pairs of Crocs on an average day. It does not carry the Chameleons, nor does it sell many Crocs for back-to-school. The store’s business is primarily summer and winter Crocs.

§ “We are selling more Crocs than in May—just for the mere reason that it’s summer now. People are buying them up now that it is warmer.”

§ “We just put out most of the kids’ shoes. We got in a shipment last week so we put them out yesterday. Now, the wall is totally full. We do OK with kids’, not as good as we do with the adult Crocs.”

We have sneakers for backWe have sneakers for backWe have sneakers for backWe have sneakers for back----totototo----school. We just got them in. school. We just got them in. school. We just got them in. school. We just got them in. They are closedThey are closedThey are closedThey are closed----toed, like the toed, like the toed, like the toed, like the schools require. We have schools require. We have schools require. We have schools require. We have sold a sold a sold a sold a few so farfew so farfew so farfew so far....

Sales Associate, Crocs Store Chicago-area

The kids’ sneaker that lookThe kids’ sneaker that lookThe kids’ sneaker that lookThe kids’ sneaker that lookssss like the Converse might sell like the Converse might sell like the Converse might sell like the Converse might sell well for backwell for backwell for backwell for back----totototo----school, but it’s school, but it’s school, but it’s school, but it’s too early to tell. Right now too early to tell. Right now too early to tell. Right now too early to tell. Right now people are focused on the people are focused on the people are focused on the people are focused on the summer Crocssummer Crocssummer Crocssummer Crocs....

Shoe Store Employee New Jersey

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 9

§ “We just got four or five boxes of Crocs in last week. There were no women’s Crocs in any of the boxes. It’s crazy. They were mostly kids’ and some men’s. As you can see, we are low on the women’s. But that is all the buyer. He does the ordering.”

§ “I would say we sell more women’s than men’s or kids. We should have more women’s in stock.” § “The guys seem to like the newer styles. They are more like shoes. We just filled up the rack with the Yukons.” § “I see a lot of guys look at the new styles. They are trying them on. They buy them if they can afford them at $60.

But they do say they are comfortable.” § “The women’s Cleo sandal has done well. It’s a new style. But the Classic is still moving. It is still a popular

shoe.” § “Sales are good for Crocs. I bet we sell a few pairs every day. It is pretty consistent.” § “The Classic style still sells. It is still popular all around—with the women, men and kids. We are always running

low on the Classic styles.” § “We sell a few here and there for back-to-school. We’ll sell some in September, maybe October but not that

many. In the fall, people are waiting for the winter stuff to come in. We sell more when we get the winter Crocs than we do for back-to-school.”

§ “The Adrina sold slower for the women. We have quite a few left in those. And there are five colors available still. Most of the other women’s styles have done pretty well this summer.”

§ “Colorful athletic footwear is hot, and the patterns and colors keep getting crazier. You see it more in the kids’ Crocs we have. We just got some new patterns in last week.”

§ “We don’t have the Chameleons here at this store.” Reporter Observations: Four Crocs ends caps were located at the back of the shoe department. All have the same signage above them. Two end caps have men’s Crocs, including one end cap with only black styles. The other end cap had 45 pairs of the Yukon, 20 pairs of the Cove and 15 pairs of the Santa Cruz. The women’s Crocs display was low on stock and was halfway filled with Adrina sandals. The other half was a combination of Cleos, flip-flops and Classics. The kids’ rack was full of bright and colorful patterns and styles such as the Shirley, Carlie and the Classic. We noted no purchases during our visit, which started at 1:30 p.m. on a Thursday. Most of the store’s eight customers were trying on Nike shoes; none looked at the Crocs displays.

� SalesSalesSalesSales associateassociateassociateassociate atatatat TheTheTheThe Flip FFlip FFlip FFlip Floploploplop SSSShophophophop inininin LosLosLosLos AngelesAngelesAngelesAngeles

The store received its first Crocs shipment about two weeks ago. Initial sales have been good, but inventory is limited to adult clogs in blue and black and a few kids’ styles in pink and blue. Crocs are thought of as more of a flip-flop than a shoe by most adults. This source does not know if the store will receive more Crocs styles.

§ “We had customers coming in before asking for Crocs. We referred them to the kiosk they had downstairs, but now the kiosk is gone.”

§ “We’ve sold several of the adult Classic clogs, but the biggest sellers are the kids’ shoes, the pink clogs mostly for girls.”

§ “I do not think adults are as crazy about Crocs as they used to be. They do not seem like a year-round shoe. They are too disposable. People think of them like they think of flip-flops. They are not going to be wearing them to a club or on a dinner date or to the movies or something.”

§ “I cannot comment on orders or pricing because we just got them. Our manager will be ordering more of the adult clogs because we have sold a bunch of them. We got an order in yesterday, but it was all kids’ shoes.”

§ “I have not seen or heard customers come in here shopping for back-to-school shoes, but we are not that kind of store anyway.”

§ “If the price stays low, I think Crocs can stick around. But they are so easy to copy. I have seen so many knockoffs in other stores, and I sometimes wonder how they managed to keep making money.”

Reporter Observations: The Crocs rack was in the front of the store and had prominent signage. Inventory was limited to black and blue adult Classic clogs and three styles for kids—mostly clogs in pink and blue. Only one customer, a woman, was in the store on a Thursday at 2:30 p.m.

Our manager will be ordering Our manager will be ordering Our manager will be ordering Our manager will be ordering more of the adult clogs more of the adult clogs more of the adult clogs more of the adult clogs because we have sold a bunch because we have sold a bunch because we have sold a bunch because we have sold a bunch of them. We got an order in of them. We got an order in of them. We got an order in of them. We got an order in yesterday, but it was all kids’ yesterday, but it was all kids’ yesterday, but it was all kids’ yesterday, but it was all kids’ shoesshoesshoesshoes....

Sales Associate, The Flip Flop Shop Los Angeles, CA

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 10

� SalesSalesSalesSales associate,associate,associate,associate, SanSanSanSan FranciscoFranciscoFranciscoFrancisco----areaareaareaarea SportsSportsSportsSports AuthorityAuthorityAuthorityAuthority

Sales of Crocs are on par with last year, and the new styles are off to a good start. Inventory is consistently replenished, but lacks organization. Customers could have difficulty in locating the desired Crocs style given the haphazard display.

§ “Sales are the same as last year.” § “The kids’ shoes are really popular, especially the Classics and the

Shirley.” § “The men’s Crocs do well here too, like the new Santa Cruz.” § “We’re low on both the Shirley and the Santa Cruz.” § “Adults’ Crocs sell better than the kids’ shoes because Crocs are expensive for kids’ shoes.” § “We get a daily shipment of Crocs. We never really know what we are going to get.”

Reporter Observations: Crocs were located on the back wall at the very end of the shoe section, and lacked visibility and signage. The kids’ and adults’ rack both were disorganized.

4)4)4)4) CUSTOMERSCUSTOMERSCUSTOMERSCUSTOMERS Our sixOur sixOur sixOur six sourcessourcessourcessources likelikelikelike thethethethe newnewnewnew Crocs Crocs Crocs Crocs stylesstylesstylesstyles andandandand havehavehavehave boughtboughtboughtbought themthemthemthem orororor willwillwillwill considerconsiderconsiderconsider buyingbuyingbuyingbuying themthemthemthem.... However, tHowever, tHowever, tHowever, theyheyheyhey areareareare notnotnotnot keenkeenkeenkeen onononon buyingbuyingbuyingbuying CrocsCrocsCrocsCrocs forforforfor backbackbackback----totototo----schoolschoolschoolschool season.season.season.season. SourcesSourcesSourcesSources seemed seemed seemed seemed unaware of the new sneakers. unaware of the new sneakers. unaware of the new sneakers. unaware of the new sneakers. Three sources Three sources Three sources Three sources said said said said Crocs Crocs Crocs Crocs now now now now are are are are less available in stores and less available in stores and less available in stores and less available in stores and have increased their online purchases of have increased their online purchases of have increased their online purchases of have increased their online purchases of the brandthe brandthe brandthe brand as a resultas a resultas a resultas a result. . . . MostMostMostMost sourcessourcessourcessources considerconsiderconsiderconsider CrocsCrocsCrocsCrocs a a a a kids’ brandkids’ brandkids’ brandkids’ brand. None . None . None . None hashashashas seen price hikes for Crocsseen price hikes for Crocsseen price hikes for Crocsseen price hikes for Crocs.... � MiddleMiddleMiddleMiddle----agedagedagedaged woman,woman,woman,woman, Chicago;Chicago;Chicago;Chicago; repeatrepeatrepeatrepeat sourcesourcesourcesource

The new Crocs styles are cuter, more feminine and more attractive than the Classics. Compared with a few months ago, this source has seen more Crocs in kids’ boutique stores. She purchased a pair for her toddler two months ago but has no plans to purchase for back-to-school. She has never had issues with shoes being out of stock, and said the Classic style remains popular. She questioned the traction of the boots’ soles, and also said she does not like the Chameleons.

§ “I think people like the new styles. The styles I have seen are a lot cuter than they were. They are a lot more feminine. They are all around a lot more attractive than they were.”

§ “I don’t plan to get anything in Crocs for back-to-school. I think of Crocs more as a summer shoe.” § “I am seeing more Crocs in the stores compared to a few months ago. Mainly, I am seeing them more in kids’

boutique stores in the city.” § “I have never not been able to buy them because they were sold out.” § “I have bought Crocs online. I bought some at [Amazon.com Inc.’s/AMZN] Zappos before.” § “I got my daughter the hot pink and green Crocs in a Mary Jane style.” § “I have seen the boots. I think they are fine. I don’t really trust the sole because it’s plastic. I feel like it’s going to

be slippery. All her other boots have a rubber sole, so I don’t want to get them for my daughter who is only three.”

§ “I think people are still into the Classic. I still see people wearing them. They are still popular. And most of the kids I see wear the Classic style.”

§ “I have seen the Chameleons. ... I don’t really get them. I don’t plan to buy them.” § “I don’t think I have seen any price increases lately in the Crocs.” § “The soles of the Crocs wear out too fast but then again; they are plastic shoes.”

� 40404040----yearyearyearyear----oldoldoldold femalefemalefemalefemale inininin NewNewNewNew Jersey;Jersey;Jersey;Jersey; repeatrepeatrepeatrepeat sourcesourcesourcesource

This source still reports seeing fewer Crocs in stores than she did a few years ago. She now shops online. She has not seen any new styles but would be interested in them. However, her interest diminishes with any style that gets away from the core concept of slip-ons that are easy to clean and relatively indestructible. She has not seen the Chameleons. She buys the Classic styles for her sons, who prefer Crocs with cartoon characters on them. She does not plan to buy back-to-school Crocs and has not noticed any price increases.

We get a daily shipment of We get a daily shipment of We get a daily shipment of We get a daily shipment of Crocs. We never really knowCrocs. We never really knowCrocs. We never really knowCrocs. We never really know what we are going to getwhat we are going to getwhat we are going to getwhat we are going to get....

Sales Associate, Sports Authority San Francisco-area

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 11

§ “In the spring I spent several days driving around to stores where I had purchased Crocs before and none of them carried them anymore, so I ended up buying them online.”

§ “I have not noticed any more people wearing them or any more stores carrying them compared to May.”

§ “I like the idea of the new styles but not if they go too far from the original concept. I would not be interested in Crocs that had ties and the kids couldn’t get on themselves. I also wouldn’t want fabric that I couldn’t hose off.”

§ “We were at a pool party this weekend, and a 2-year-old had them on and could get them on and off by himself. That is the beauty of them.”

� 53535353----yearyearyearyear----oldoldoldold womanwomanwomanwoman inininin SouthernSouthernSouthernSouthern CaliforniaCaliforniaCaliforniaCalifornia

This source will not buy Crocs for back-to-school because they are not allowed at school and the soles get black from the black top. She usually buys her Crocs from a Birkenstock USA GP LLC store about every six months. She has bought only retail and tends to stick to the original clogs.

§ “I haven’t been seeing as many Crocs. I remember seeing more a few years ago. It seems like people might buy them online now, and a lot of stores have gone out of business due to the economy.”

§ “I usually buy the older style, and the stores we go to seem to always have them. We recently wanted a pair in a certain color and could not get that color. My mother works in a Birkenstock store that sells Crocs, and she said they were low on stock.”

§ “I’ve never bought Crocs online. It is hard to buy footwear online unless you are absolutely certain of the size. For my daughter, whose feet are always growing, it’s better to try them on. I just am not that much of an online shoe shopper.”

§ “I buy Crocs mostly for my daughter, who is 8 years old. She just wears the regular original clogs.” § “My shopping habits for Crocs have not changed at all in about a year or two. I basically buy the same clog type

shoe for my daughter and myself. My older son often wears his clogs, but they are about 3 years old. He seems to make his last longer.”

§ “I do see people wearing newer styles, like the Mary Jane style flats and the gels, but we haven’t tried any yet.” § “I think the Mary Janes are cute. I would stay away from anything that is too wild looking or too bright in color or

fancy swirls. I haven’t seen the Chameleons yet. We haven’t shopped for Crocs for about six months.” § “I don’t let my daughter wear them to school because the blacktop makes them dirty really fast and they get

sand inside at recess. We won’t be buying them as part of our back-to-school stuff this year.” § “I haven’t noticed any price increases for what we buy. The other styles might be more expensive, but that would

make sense if they are trying to expand their inventory and their brand.”

� Woman in her 40s or 50s, ChicagWoman in her 40s or 50s, ChicagWoman in her 40s or 50s, ChicagWoman in her 40s or 50s, Chicagoooo This source has seen Crocs for the first time at The TJX Cos. Inc.’s (TJX) Marshalls and T.J. Maxx this summer. She has no plans to purchase for back-to-school but recently purchased four pairs. She purchased the new Crocband and Mary Jane styles, but prefers the Classic style for comfort although they are the least attractive. She also has looked at the wedges and boots. She does not know anything about the Chameleons but likes the look of the new, patterned slip-on Croc styles.

§ “Most of the stores have all the summer Crocs in now, so I guess I am seeing more than I was in the spring. I have seen them in Marshalls and T.J. Maxx now, too. I don’t remember that last summer. I would have noticed them in the stores. My sister got a pair of cute brown and pink flip-flops from Marshalls for $15 in June.”

§ “I just got four pairs at the beginning of this summer, so I am good. I don’t have any plans to get Crocs for back-to-school. I don’t have any kids to buy for. If I did, I wouldn’t be getting them Crocs as back-to-school shoes. They would get real shoes. Crocs are for the beach or to wear in the rain.”

§ “I got a purple-lined Crocband on sale, and I tried a few other styles new to me. Some did not fit right, so I ended up returning them downtown. They let you do that rather than paying to ship them back, which I appreciate.”

§ “I also got a newer Mary Jane style that feels very supportive. I am a little disappointed in them though because after I wore them shopping on a rainy day, my feet hurt. They are not as wide as the classic Crocs. ... The back strap also slips off my heel, which is annoying. I am a little bummed as I got them in three colors.”

In the spring I spent several In the spring I spent several In the spring I spent several In the spring I spent several days driving around to stores days driving around to stores days driving around to stores days driving around to stores where I had purchased Crocs where I had purchased Crocs where I had purchased Crocs where I had purchased Crocs before and none of them before and none of them before and none of them before and none of them carried them anymore, so I carried them anymore, so I carried them anymore, so I carried them anymore, so I ended up buying them onlineended up buying them onlineended up buying them onlineended up buying them online....

Crocs Customer New Jersey

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 12

§ “I think people want something other than the traditional Crocs. I know I did. I got sick of looking at and wearing the same ones. The new styles are cuter. ... The Classic is still the most comfortable, but it is the ugliest one.”

§ “I looked at the boots. They are OK. I had seen the wedges before. I am not interested in Crocs with heels. I might consider the boots in the future but don’t really like the looks from last year. I don’t want plaid tartan on my boots.”

§ “I don’t know anything about the Chameleons.” § “I did have a problem finding the pink Crocband in my size. The

downtown store was nearly wiped out of the pink Crocbands the last time I was there.”

§ “I bought Crocs from their online store a few months ago. I used a coupon to get 20% because I subscribe to their e-mails; it was a good deal. I will just use another e-mail address to get another coupon if I decide to get the Crocbands.”

� 31313131----yearyearyearyear----oldoldoldold womanwomanwomanwoman inininin LosLosLosLos AngelesAngelesAngelesAngeles

This source has a pair of classic Croc clogs that she rarely wears outside. She was returning a pair of blue Crocs clogs she bought for her daughter because they were too big. She has not bought a new pair for herself in about two years, but she replaces her daughter’s Crocs about every six months. She likes the Chameleons but has not bought them yet.

§ “I love my Crocs, and they are perfect for my daughter. She is wearing the pink ones she got for her birthday and we are returning these blue ones for other pink ones because they are too big and she is into pink.”

§ “I have a pair of the original black Classic clogs that I bought about two years ago. I love them, but I do not really wear them anywhere but home, sometimes to yoga or the gym. They seem more like disposable shoes to me rather than an all-around shoe.”

§ “I like the Chameleons but haven’t bought them yet. I also like the little Mary Janes. She’s been asking for those, and we’ll probably end up with them eventually.”

§ “I haven’t noticed the prices going up on the Classics, but the other styles are higher than what the shoes started out being.”

§ “When Crocs were first out, they could be found everywhere. I used to buy them at Target, but they don’t carry them anymore, or at least they don’t seem to have very many styles left.”

§ “I am not ready for back-to-school yet, but if I were I would probably make sure she had a new pair. I think I will buy the Mary Janes because those are more like shoes. The schools do not usually let the kids come with the sandals or flip-flops, so I can see myself doing that.”

§ “I do not see myself buying any of the new styles for myself. I am pretty attached to the old style. I don’t think my husband would be into them either. He does not have a pair of Crocs clogs, so I doubt it.”

� 40404040----yearyearyearyear----oldoldoldold femalefemalefemalefemale inininin NewNewNewNew JerseyJerseyJerseyJersey

This source reported seeing fewer Crocs in stores than in May, though inventory remains high enough that she has been able to find shoes to purchase. She buys the Classics for her sons. She has purchased Crocs online and thought the service was great. She saw the Chameleons and liked them, but her kids wanted the Cars shoes because of the summer release of Cars 2. She will not be buying Crocs for back-to-school.

§ “I don’t feel like I need Crocs to do anything more than what the Classic style does. It’s great if they come up with some new characters to put on them. I will still buy them for summer either way.”

§ “I wouldn’t switch over to Crocs for the school year. I am pretty faithful to Adidas [AG/ETR:ADS] Samba sneakers for the boys’ back-to-school shoes. They each get a pair every year, and they hold up so well that they can get a whole year out of them.”

§ “[Crocs] are cute on the kids, and they are great because they can wear them in the water, in the mud, through the sand and they can be cleaned so easily.”

§ “My kids are so into Cars that they wouldn’t even consider any other style or design, so I didn’t even bother looking very long at anything else.”

Most of the stores have all the Most of the stores have all the Most of the stores have all the Most of the stores have all the summer Crocs in now, so I summer Crocs in now, so I summer Crocs in now, so I summer Crocs in now, so I guess I am seeing more than I guess I am seeing more than I guess I am seeing more than I guess I am seeing more than I was in the spring. I have seen was in the spring. I have seen was in the spring. I have seen was in the spring. I have seen them in Marshalls and T.J. them in Marshalls and T.J. them in Marshalls and T.J. them in Marshalls and T.J. Maxx now, too. I don’t Maxx now, too. I don’t Maxx now, too. I don’t Maxx now, too. I don’t remember that last summer. I remember that last summer. I remember that last summer. I remember that last summer. I would have noticed them in the would have noticed them in the would have noticed them in the would have noticed them in the stores.stores.stores.stores. My sister got a pair of My sister got a pair of My sister got a pair of My sister got a pair of cute brown and pink flipcute brown and pink flipcute brown and pink flipcute brown and pink flip----flops flops flops flops from Marshalls for $15 in Junefrom Marshalls for $15 in Junefrom Marshalls for $15 in Junefrom Marshalls for $15 in June....

Crocs Customer Chicago, IL

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 13

SecondarySecondarySecondarySecondary SourcesSourcesSourcesSources One of our five secondary sources isOne of our five secondary sources isOne of our five secondary sources isOne of our five secondary sources is aaaa retailretailretailretail iiiindustryndustryndustryndustry piecepiecepiecepiece thatthatthatthat showsshowsshowsshows backbackbackback----totototo----schoolschoolschoolschool promotionspromotionspromotionspromotions happeninghappeninghappeninghappening earlierearlierearlierearlier inininin thethethethe summersummersummersummer butbutbutbut parentsparentsparentsparents waitingwaitingwaitingwaiting longerlongerlongerlonger totototo makemakemakemake thesethesethesethese purchasespurchasespurchasespurchases.... Other sourcesOther sourcesOther sourcesOther sources includeincludeincludeinclude detailsdetailsdetailsdetails onononon ChameleonChameleonChameleonChameleon shoesshoesshoesshoes sellingsellingsellingselling wellwellwellwell inininin June,June,June,June, CrocsCrocsCrocsCrocs’ ’ ’ ’ attemptsattemptsattemptsattempts totototo turnturnturnturn allallallall ofofofof itsitsitsits FacebookFacebookFacebookFacebook fansfansfansfans iiiintontontonto customerscustomerscustomerscustomers withwithwithwith promotionalpromotionalpromotionalpromotional offers,offers,offers,offers, aaaa defectiondefectiondefectiondefection ofofofof aaaa CrocsCrocsCrocsCrocs brandingbrandingbrandingbranding executiveexecutiveexecutiveexecutive totototo LululemonLululemonLululemonLululemon Athletica Inc. (LULU)Athletica Inc. (LULU)Athletica Inc. (LULU)Athletica Inc. (LULU),,,, andandandand aaaa blogblogblogblog showingshowingshowingshowing Crocs Crocs Crocs Crocs dealsdealsdealsdeals andandandand discounts.discounts.discounts.discounts. � JulyJulyJulyJuly 21212121 AdvertisingAdvertisingAdvertisingAdvertising AgeAgeAgeAge articlearticlearticlearticle

Families are delaying their back-to-school shopping despite enticing offers from retailers that are coming earlier in the summer than in previous years. http://adage.com/article/news/back-school-shopping-moves-closer-day-school/228829/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+AdvertisingAge%2FLatestNews+%28Advertising+Age+-+Latest+News%29&utm_content=Twitter

§ “Marketers may want to take a closer look at the timing of their back-to-school campaigns.” § “Like ‘Christmas creep,’ back-to-school creep has invaded the nation’s retailers, with ads promoting school

supplies launching as early as mid-June. But schools in some parts of the country are still in session until the end of June. And even schools getting an early start don’t typically begin classes until the end of August. Still, the bulk of retailers’ back-to-school campaigns typically roll out in early July, reaching a fever pitch by the end of the month.”

§ “But despite marketers’ early promotions, the National Retail Federation reports that more parents will be shopping closer to the beginning of school this year. Nearly one-third of families will begin shopping just one to two weeks before school starts, up from less than one-quarter last year. And more than 40% of shoppers will begin shopping three weeks to one month before school starts, up from 33% last year. That means, for many of those students not hitting the books until September, shopping won’t kick off until early August or later.”

§ “Mike Gatti, executive director at the Retail Advertising and Marketing Association, a division of NRF, said the push to promote back-to-school shopping earlier in the summer began about 10 years ago. Consumer spending was up and consistently growing year over year, he said, leading to increased promotions. Now, it’s nearly impossible to stop those early-summer promotions, for fear of falling behind a competitor.”

§ “‘You’ve got to be out there with something. You have to get your brand out there and make sure you’re a back-to-school destination,’ Mr. Gatti said. ‘[Retailers] are learning how to deal with this finicky consumer we’re seeing. [They] are trying to corral the consumer into shopping at a certain time, but it’s harder and harder.’”

§ “Retailers are eager to get a jumpstart on the shopping season, given that it’s the second biggest sales period behind the holidays. According to NRF, back-to-school and back-to-college spending is expected to top $68.8 billion this year, even as some families tighten their purse strings. Spending per family with children in grades K-12 will average $603.63, down slightly from last year’s average of $606.40. Back-to-college spending will average $808.71, down from $835.73 last year.”

§ “‘Parents aren’t opposed to spending on what they need, but parents want their children to take a good look around at what they already have before deciding what to buy for back-to-school this year,’ said Matthew Shay, NRF president-CEO. ‘Retailers understand consumers are extremely focused on value and are taking this opportunity to offer substantial savings on merchandise.’”

§ “Parents are still feeling pinched by the troubled economy, the survey found. More parents say they will buy store-brand or generic items, comparison shop, shop for sales and use coupons. Last year many families replenished their kids’ closets and replaced worn-out items that had been in use throughout the recession, meaning that spending in categories like clothing and school supplies will decrease slightly this year, the NRF found. Nearly 30% of those surveyed said they would be making do with last year’s school items.”

§ “Fewer families also reported that they would be purchasing electronics this year. This year just more than half of families with children in grades K-12 said they planned to purchase electronics, compared to 64% a year ago.

Like ‘Christmas creep,’ backLike ‘Christmas creep,’ backLike ‘Christmas creep,’ backLike ‘Christmas creep,’ back----totototo----school creep has invaded the school creep has invaded the school creep has invaded the school creep has invaded the nation’s retailers, with ads nation’s retailers, with ads nation’s retailers, with ads nation’s retailers, with ads promoting school supplies promoting school supplies promoting school supplies promoting school supplies launching as early as milaunching as early as milaunching as early as milaunching as early as midddd----JuneJuneJuneJune.... … But … But … But … But more parents will be more parents will be more parents will be more parents will be shopping closer to the shopping closer to the shopping closer to the shopping closer to the beginning of school this yearbeginning of school this yearbeginning of school this yearbeginning of school this year....

Advertising Age Article

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 14

Among families with college-aged kids, 46% said they planned to buy electronics, the lowest level since 2005. The back-to-college crowd is expected to spend about $210 per family, an 11% decrease from a year ago.”

§ “‘Young adults are often the first in line to buy the latest tablet device, smartphone or MP3 player, so many college students are already armed with the latest gadgets they’ll bring with them to campus,’ said Pam Goodfellow, consumer-insights director at BigResearch, which conducted the survey with NRF. ‘A decline in electronics spending could also be due to the fact that many popular college items, like laptops, have experienced huge drops in price over the last several years.’”

� JuneJuneJuneJune 16161616 FinancialFinancialFinancialFinancial NewsNewsNewsNews NetworkNetworkNetworkNetwork OnlineOnlineOnlineOnline reportreportreportreport WJB Capital’s June channel check showed that the Chameleon color-changing shoe was selling well and in high demand. http://www.fnno.com/story/news-corner/331-report-indicates-strong-demand-crocs-chameleons-stock-jumps-5-crox-news-corner

§ “WJB Capital reported that sales of the company’s new Crocs Chameleons are strong.” § “WJB Capital said its channel checks indicate the Chameleons are ‘selling like hotcakes,’ and that the biggest

concern was that Crocs had underestimated demand and hadn’t made enough of them.” � MayMayMayMay 20202020 InsideInsideInsideInside RetailRetailRetailRetail blogblogblogblog

Crocs is targeting Facebook users to turn its 350,000 “fans” into e-mail subscribers by giving them a 20% discount in exchange for their e-mail address. This continues Crocs’ efforts to deliver its product directly to consumers via the Internet and reinforces Blueshift’s May findings of fewer product options in stores and more customers making purchases online. http://www.insideretailing.com.au/IR/IRNews/Crocs-to-target-Facebook-users-931.aspx

§ “Footwear retailer, Crocs, has launched an interactive marketing campaign targeted at converting the company’s nearly 350,000 Facebook ‘fans’ into email subscribers.”

§ “Developed by Digital Evolution Group and powered by interactive marketing provider ExactTarget, Crocs’ ‘Facebook Collect’ campaign gives Facebook users a chance to sign up for email communications on Croc’s fan page in exchange for a special 20 per cent off coupon.”

§ “‘The key to our interactive marketing campaigns is delivering highly relevant and timely content to our customers, regardless of whether it’s Facebook, email or Twitter,’ said Andrea Stow, senior global e-marketing manager for Crocs.”

§ “‘Facebook Collect allows us to grow our email subscribers and meet customers where they are, inviting Facebook fans to become email subscribers and vice versa.’”

§ “The Colorado-headquartered company’s successful abandoned shopping cart campaign regularly sees a 40 per cent open rate, earning the company an average 60,000 percent return on investment.”

§ “‘Facebook and social sites are fast becoming a destination for first-time brand engagement in the way that companies’ web sites are not,’ said Ramsey Mohsen, social media discipline lead for Digital Evolution Group.”

§ “‘Crocs’ results with Facebook Collect underscores the power of delivering great content to loyal customers.’” � JulyJulyJulyJuly 7777 CanadianCanadianCanadianCanadian Business.comBusiness.comBusiness.comBusiness.com articlearticlearticlearticle

Lululemon recently hired its new senior vice president of its e-commerce division away from Crocs. http://www.canadianbusiness.com/article/32104--lululemon-hires-former-crocs-executive-in-key-role-at-its-e-commerce-operations

§ “Lululemon Athletica Inc. has hired former Crocs executive Chris Ladd as senior vice-president of its recently revamped e-commerce division.”

§ “The retailer of yoga-inspired clothing said Thursday that Ladd will head online business strategy, which includes global expansion plans for the website’s services.”

§ “Ladd previously worked as Crocs’ senior vice-president of global marketing, where he handled retail merchandising and design concepts, social media as well as 23 websites.”

§ “‘Chris has the right combination of leadership and experience to guide Lululemon into new areas of growth,’ said chief executive Christine Day.”

Nearly 30% of those surveyed Nearly 30% of those surveyed Nearly 30% of those surveyed Nearly 30% of those surveyed said they would be making do said they would be making do said they would be making do said they would be making do with last year’s school itemswith last year’s school itemswith last year’s school itemswith last year’s school items....

Advertising Age Article

Crocs Inc.Crocs Inc.Crocs Inc.Crocs Inc.

321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com 15

§ “‘He has a proven track record for building innovative and profitable online businesses and building global infrastructures.’”

§ “The Vancouver-based company has been working to grow its earnings by building a stronger online presence.” § “Lululemon completed a massive overhaul of its e-commerce site earlier this year and plans to ramp up its

online presence through social media, web advertising and mobile applications.” � JulyJulyJulyJuly 22222222 ForTheMommForTheMommForTheMommForTheMommas.comas.comas.comas.com dealdealdealdeal

Select Crocs shoes were offered at 60% off and with a 10% cash-back offer. http://forthemommas.com/hot-deals/crocs-up-to-60-off-10-cashback

§ “Crocs is offering up to 60% Off on select styles of Crocs. The Finn Clog is $9.99 shipped. Use code fallship to receive free shipping.

§ Don’t forget to use ShopAtHome for 10% cashback.”

NextNextNextNext StepsStepsStepsSteps BlueshiftBlueshiftBlueshiftBlueshift’’’’ssss nextnextnextnext reportreportreportreport onononon CrocsCrocsCrocsCrocs willwillwillwill determinedeterminedeterminedetermine whetherwhetherwhetherwhether thethethethe sneakersneakersneakersneaker caughtcaughtcaughtcaught onononon asasasas aaaa backbackbackback----totototo----schoolschoolschoolschool item. We also will monitor item. We also will monitor item. We also will monitor item. We also will monitor momentum formomentum formomentum formomentum for newnewnewnew stylesstylesstylesstyles for the fall and wintfor the fall and wintfor the fall and wintfor the fall and winter.er.er.er. Finally, we will gather moreFinally, we will gather moreFinally, we will gather moreFinally, we will gather more detailsdetailsdetailsdetails onononon Crocs being made in Mexico, as Crocs being made in Mexico, as Crocs being made in Mexico, as Crocs being made in Mexico, as reported by a supplier source.reported by a supplier source.reported by a supplier source.reported by a supplier source.

Additional research by Carolyn Marshall, Tamara Chuang, Erica Franklin, Heidi Mirdala and Tina Strasser The Author(s) of this research report certify that all of the views expressed in the report accurately reflect their personal views about any and all of the subject securities and that no part of the Author(s) compensation was, is or will be, directly or indirectly, related to the specific recommendations or views in this report. The Author does not own securities in any of the aforementioned companies.

OTA Financial Group LP has a membership interest in Blueshift Research LLC. OTA LLC, an SEC registered broker dealer subsidiary of OTA Financial Group LP, has both market making and proprietary trading operations on several exchanges and alternative trading systems. The affiliated companies of the OTA Financial Group LP, including OTA LLC, its principals, employees or clients may have an interest in the securities discussed herein, in securities of other issuers in other industries, may provide bids and offers of the subject companies and may act as principal in connection with such transactions. Craig Gordon, the founder of Blueshift, has an investment in OTA Financial Group LP.

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