Privately owned (with equity crowdfunding)
Industry: Consumer & Lifestyle
Xero Shoes has focused on natural movement since day one. The company's patented, flexible FeelTrue soles are engineered to feel like walking barefoot. With a wide toe box and low heel, the lightweight shoes are built on the presupposition that most modern footwear is overbuilt and uncomfortable.
The market agrees: The crowdfunded company's revenues increased from $8.8 million in 2018 to a projected $12 million for 2019.
The big news of 2019 was an order in February from REI for 4,000 pairs of Xero's Sport Sandals. After several shipments, the outdoor giant called again. "They called and said, 'We want the remainder of your inventory,'" says co-founder and CEO Steven Sashen. Xero shipped an additional 8,000 pairs to REI stores, and Sashen says the relationship is expanding "the number of products and the number of stores" in 2020.
In Colorado, JAX was another important retail partner, he adds. "They're going to have more of our products in all of their stores in 2020, which is really exciting."
Growth of the Xero catalog is likewise accelerating. The company introduced a new product or two each year until 2018, when it debuted two in the spring and six in the fall. Sashen says 25 styles -- or more than 1,000 different SKUs when size and color are taken into account -- will make a big jump in 2020.
After sourcing from South Korea when Xero was making a "do-it-yourself sandal kit" in its early days, Sashen says the company moved production to China in 2011 when it connected with ICB, a global footwear sourcing company. "They liked us," says Sashen. "They took a gamble and decided to work with us."
ICB helped narrow down the list of potential manufacturing partners in China and Xero vetted the finalists. "We would go and inspect the factories and talk to the factories, but it was their responsibility to identify them and be the liaison between the factories," says Sashen.
Xero moved production to its current factories in Dongguan and Jinjiang in 2018 after an intellectual property dispute with a previous partner. "As our company has grown, we've been able to move to progressively better factories that do higher-quality work and can handle the volume we need," he adds.
The process also entails finding specialized suppliers for parts like sandal toe loops and synthetic components to supply their primary two facilities. "We developed a specialized manufacturing technique, and it took us years to find someone who could do that," says Sashen. "There are all these people involved in what seems like these tiny little things, and they're all doing a very specialized job that's very difficult to do."
"Footwear manufacturing, especially athletic footwear manufacturing, basically moved to China in the early '70s. Now it really is the place, because they have a wealth of experience and the supply chain is built out," says Sashen. "It's really just gone [in the U.S.]. The kind of product we make, you literally can't make these shoes here."
Considering that context, tariffs have been "arbitrarily imposed and mess up our lives," he adds, and tells Xero's "incredible tariff story": A boat with a shipment of Xero's was not able to dock on the deadline of August 31, 2018, due to port capacity issues the next morning. "The Port of Long Beach was just full," says Sashen. "Because it wasn't able to get in at the last minute, it cost us over $50,000."
Tariffs have rankled the footwear industry at large. "New Balance was very pro-tariffs until the recent ones when suddenly they got hit," he adds. "While they like to say they have a bunch of things that are made in America, they're still sourcing materials from China, because you just can't get them here. When they got hit by tariffs, they freaked out. It's funny watching them do an about-face."
The big lesson: "Making things is hard. Making footwear is exceptionally hard, because there are so many little pieces that involve human beings from start to finish where innumerable things could go wrong."
A lot, says Sashen. "I could use a clone and an assistant for my clone and a clone of my assistant," he laughs.
New products are a focal point. Xero launched its first winter footwear in fall 2019. The Denver men's boots and Mika women's boots "are the first two cold-weather-friendly products that we've made, and we are really, really thrilled to see them take off," says Sashen.
Xero will announce its spring and fall 2020 lines at the Outdoor Retailer trade show in Denver in January.
Sashen also makes passing reference to a clandestine project. "It's secret enough we're going to call it The Phantom," he says. "It's a whole new way of thinking about what footwear design actually is. It's just a completely new way of manufacturing footwear."
Regardless of the product, the differentiator -- footwear designed with natural movement in mind -- will remain the same at Xero. "Your feet are supposed to bend and move and flex and feel the world," says Sashen. "That's just the way they were designed, and we make footwear that allows them to do that."
He adds, "Once you have it, you can't go back to something that doesn't feel good and doesn't let you move naturally."