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Source link: http://blog.mises.org/10294/goodbye-crocs/

Goodbye Crocs

July 16, 2009 by

I don’t really share Karen DeCoster’s bitter hatred of the Croc shoe, but she is certainly the prophetess of this company’s demise. The Washington Post reports that the world is flooded with Crocs that no one wants and the company has about two months to live. Thanks Sheldon.

{ 9 comments }

Yancey Ward July 16, 2009 at 8:58 am

Jeffrey,

This is completely off-topic, but I thought you would find the following storying of interest.

http://www.washingtonexaminer.com/local/Devices-that-warn-drivers-of-speed_-red-light-cameras-draw-police-ire-7930619-50074717.html

Yancey Ward July 16, 2009 at 8:59 am

Jeffrey,

This is completely off-topic, but I thought you would find the following story of interest.

Civil Disobedience

jon July 16, 2009 at 9:33 am

it seems to me that if crocs are supposed to last forever, but can only sell for $30 or so, this was inevitable. given the nature of fashion, yes, but also the plain fact that with numbers like that the company set out to work themselves out of business, whether they intended to, or like it, or not.

now if they intended to, one might see the croc as a smashing success. hard to believe, perhaps, but other austrians have also established elsewhere that investing for the long term, with broad diversification, was a scam to begin with — and the implication is simply that businesses do not last and/or do not outperform the market forever.

investors who trusted crocs as far as they could throw them would have made out, and the plain fact that some profited demonstrates a good.

David Spellman July 16, 2009 at 11:59 am

All boom-bust cycles, whether at the company level or economy level, are based upon the delusion of exponential growth. The actual curve is S-shaped, with rapid early growth that tapers off to asymptotically approach zero growth at market saturation. It is true that population growth will drive market growth at a basal rate, but we are talking about entrepreneurial growth which is more nimble and saturates due to quick response to consumer demand.

Banking and investment assumes eternal exponential growth of compound interest. Sales and marketing departments pretend that they can drive exponential growth year over year. Financial analysts demand exponential growth of earnings and stock prices. Our entire system assumes, yea even demands, exponential growth and punishes those who cannot meet expectations. The real losers are those who assume exponentially increasing debt to finance business whose demand will saturate. This is a recipe for bankruptcy when the two curves cross.

If exponential economic growth could be sustained, then $1000 invested at 5% interest when Columbus discovered America would be worth $40 trillion today. There were a lot of people with $1000 to invest back then, but none of their descendants are worth anywhere near $40 trillion today. There are many factors impinging on the ability to realize such accrual, but in the end we are left facing the reality that for whatever reason, exponential growth cannot be sustained forever in the real world.

The smart entrepreneur recognizes the limits to growth and plans with saturation in mind. Very few things have truly insatiable demand (electric power, maybe). This is particularly true with fad products like Crocs whose market value is temporally limited. The same was true of the network infrastructure manufacturers during the dot com boom–capacity expanded far beyond any reasonable market need.

It is true that no one wants to leave money on the table, but the demand curve goes up and then down and there is an optimal peak. The smart money recognizes that demand will peak and the fools believe that demand is monotonically increasing to infinity. Remember those books about the 30,000 or 40,000 Dow? Right, sure…

AttentionSurplus July 16, 2009 at 5:38 pm

I don’t much care about fashion; so, I like wearing plastic shoes that are comfortable and easy to install. I have two pair. One pair are name brand and the other are generic. The name brand ones cost around $30 bucks. The generic pair was $8. The name brand ones make a weird popping noise when I walk. My girlfriend always tells me, “I heard you coming”, when I where them. Besides the sound effects, one of the fasteners for the strap came apart and disappeared. No big deal… I just used a bread tie to hold the strap on. My generic pair run silent and have shown no sign of falling apart, eventhough they are a year or two older than the name brand pair. If (CROX) is in trouble, I would say it was because they cared more about fashion than they did about quality. Perhaps, they were thinking they would sell more if they fell apart sooner and they offered slight style changes over time. In the long run, that business model doesn’t work for car companies and it doesn’t work for shoes.

ron July 16, 2009 at 7:08 pm

http://blog.crocs.com/2009/07/16/john-duerden-responds/#comment-1380

ceo responds to the stupid article

LibertyVini July 21, 2009 at 10:07 pm

I bought a pair of knockoffs at Target for working in my garden;

http://www.facebook.com/album.php?aid=88190&id=541047985&l=5c610af67e

Larry Ruane July 21, 2009 at 10:23 pm

My understanding of Austrian business cycle theory is that producers of capital goods that are more remote from the consumer experience the greatest booms and busts. If that’s correct, why does Karen consider Crocs to be a business fueled by boom insanity (as she says over at the LRC blog and on her blog), given that its product is not at all remote from the consumer?

Daniel July 22, 2009 at 10:00 am

Larry, though that is certainly true, being close to the consumer does not actually grant immunity to the boom (or the bust) as it merely makes it less likely.

Companies that give people things they actually need, e.g. Walmart, have been operating well as of late, whereas businesses which are expensive for no reason or merely suit a whim are going down the drain. Two examples of this are ones that Tom Woods likes to use as examples, which are: Coldstone Creamerie, with its 7 dollar ice cream; and Cereality, where you are served cereal (something you could easily do yourself) by a dude wearing pajamas.

PS: one time I went to a store to see what all the fuss about “Crocs” was about and a saleswoman asked me if I’d like to try it on, to which I replied “No, thank you. I have taste.”

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