As a teen within the Nineteen Eighties, I eagerly awaited the summer season season, when our unglamorous resort city in japanese Greece could be inundated by hordes of vacationers clad in Birkenstocks.
The Germans would at all times pair them with a pair of white socks, whereas the French would go sockless.
In a rustic the place you don’t even take the trash out except you’re correctly dressed, we liked making enjoyable of Birkenstock wearers for his or her lack of “good style.”
At present, nonetheless, the joke is on me.
Practically three a long time — and 4 pairs of my very own Birkenstocks later — the legendary sandal firm is about to go public on the New York Inventory Alternate.
And as a professor of luxurious advertising with a concentrate on heritage manufacturers, I’m paying shut consideration to how issues prove.
In my place, I usually delve into the specifics of corporations like Birkenstock to know and clarify their endurance.
Such corporations sometimes possess a handful of frequent denominators.
They typically originate in Europe (Birkenstock is German); and have an extended historical past underneath comparable administration (Birkenstock was family-owned from 1774 till 2021 when the personal fairness agency L Catterton acquired a majority stake within the model); by no means moved from their unique place of producing (Birkenstock has lengthy known as the tiny village of Hammersbach, close to Frankfurt, house); possess a proprietary manufacturing methodology that hyperlinks heritage to innovation (Birkenstocks have at all times been made with the identical cork, leather-based and jute combo that incorporate each timeless attraction and obligatory innovation); and are distributed, like Birkenstock, inside a sure restricted capability.
Whereas I’ll spare you the lecture, it’s protected to say that Birkenstock — regardless of its “crunchy” status – firmly exists inside this “luxurious enterprise mannequin.”
It’s a hard-to-pinpoint distinction that explains the baffling reversal of a elementary legislation of economics, particularly the legislation of provide and demand.
Whereas heightened demand ought to immediate corporations to extend provide, the method is reversed within the luxurious sector.
Right here, heritage manufacturers both purposely keep their merchandise’ shortage or create a perceived shortage that solely will increase client need.
And such has grow to be the case with Birkenstock.
Want is what luxurious sells.
And nobody understands each client need and the way to answer it fairly like Bernard Arnault — the world’s richest particular person, head of luxurious conglomerate LVMH, and proprietor of L Catterton, which invests in fancy client manufacturers.
Birkenstock understood the benefit of promoting a stake to L Catterton as a result of it is aware of tips on how to make well-liked and fascinating corporations much more well-liked and fascinating.
They’re two adjectives that work greatest within the luxurious area even when many patrons don’t essentially view Birkenstocks as a luxurious product.
However luxurious isn’t solely about worth – but additionally about desires and aspirations.
And Birkenstock has confirmed extremely aspirational over the previous few seasons.
First, they properly partnered with high-fashion manufacturers equivalent to Dior and Proenza Schouler.
Then, final 12 months, hip creatives started clamoring for Birkenstocks’ comfortable Boston mannequin — which noticed its worth surge practically threefold on the resale market.
Just a few months later, a pair of Birkenstocks owned and worn by Steve Jobs offered for $220,000 at public sale.
Then this previous summer season, Birkenstock obtained a large dose of pop-culture cred when their Arizona Large Buckle Nubuck Leather-based Sandal was worn by Barbie within the eponymous big-screen hit (they had been pink, after all).
They’re the kind of natural advertising wins that corporations like L Catterton wish to see earlier than they take an organization like Birkenstock public.
L Catterton paid a hefty $4.9 billion for his or her majority share in Birkenstock.
However the worth made sense as a result of it included centuries of confirmed confidence in each the model’s backstory and the product itself.
Lower than three years later, L Catterton has spoken of an $8 billion valuation for Birkenstock when it goes public this fall — a tidy revenue and a sensible wager on the enduring worth of heritage and high quality that different privately held corporations can be taught from.
However right here’s the catch: Buyers in newly listed corporations typically demand such excessive returns that manufacturers are transferring away from the method that made them so fascinating within the first place — authenticity and exclusivity.
Managers undertake cost-cutting methods that result in sloppy manufacturing, market oversaturation, and model dilution.
Such was the case with Coach, which noticed its worth tumble after it went public in 2000.
Identical with Tiffany, one other luxurious jewel ultimately rescued by LVMH after a number of troublesome a long time as a publicly traded firm.
If this turns into the destiny of Birkenstock after its IPO, then the share worth will tank and its sandals grow to be tasteless — whether or not worn with or with out white socks.
Thomai Serdari is a professor of selling and director of the Style and Luxurious MBA Program on the Leonard N. Stern College of Enterprise at New York College
