Patented Functionality – Unique Selling Proposition of "Breathing" Shoes: GEOX
“To innovate, innovate, innovate. In Italy there are many inventors but they often throw away their ideas because they do not believe enough and do not use patents” Mario Moretti Polegato, President of Geox
Mario Moretti Polegato is the CEO of GEOX, 1
maker of the breathable rubber shoesole. Yes, a shoe sole with holes that allow it to "breath". An idea that just 12 years ago was dismissed by most in the industry as ridiculous, but around which Moretti Polegato has built a company that sold last year 16 millions of pairs of shoes and is on its way to produce 21 million pairs in 2007 (which makes it, with revenues a market cap of 4 billion euros, the biggest Italian shoemaker)
GEOX started off with Mario Moretti Polegato, carving a hole in the soles of his sneakers to give his overheated feet some relief. He later studied the scientific phenomenon and realized that a perforated rubber sole with an integrated membrane served the purpose of allowing heat to escape in the form of water vapor, but at the same time the perforations were small enough to keep water out.
Mr. Polegato then immediately patented his invention in five countries. He initially had intended to sell the technology, but because of lack of interest by any of the worlds leading shoe manufacturer, he had to enter the shoe trade himself, with a workforce of five in 1995.
He tells of his epiphany, attending a wine convention in Reno, Nevada1
(where he was representing his family's prosecco production) and going for a walk in the desert. "I wore sneakers, and my feet were sweating, so I cut two holes on the sides of the sole to ventilate it". He researched the problem and discovered a membrane that's waterproof and breathable at the same time -- it has millions of small "canals", or micro-pores,
smaller than drops of water, so that water cannot get through but vapor can (see image below left). He built it into a rubber sole. Patented it. Offered it to several companies, "but nobody was interested". So he decided to go solo in 1995. Got a loan from a local bank. Picked GEOX as brand ("geo" in Greek means Earth; "x" is a sort of tech symbol). Hired the first of today's 3500 employees. "And we still have a big market to capture, since 90% of people use rubber-bottom shoes that don't breathe".
GEOX shoes are a combination of the latest fashion trends in footwear, with a level of innovation usually only associated with German car-makers. In creating the breathable soles of GEOX shoes, over 40 registered patents originated. The remarkable solution consists of three different components: a perforated inferior component called the outsole, a superior perforated component called the mid-sole and a third component which is positioned between the outsole and the mid-sole that is permeable to vapour and waterproof. The combination of these three components is a membrane characterized by the selective pores that can be found on the outsole and foot-strap of any pair of Geox shoes. This membrane allows vapour to escape from the foot while at the same time preventing water from entering. The shoes breathe, literally.
Functionality aside, one can be sure that no self-respecting Italian wears a pair of ugly shoes. GEOX has recognized that modern-day consumers cannot be ruled by comfort or style exclusively, but demand the best of both worlds. The result is a shoe which competes for looks with all the top fashion brands, but does not demand the same sacrifices in terms of comfort and breathability. GEOX is redefining “cool” in every sense of the word.2
GEOX has become Italy’s leading shoe manufacturer with sales of EUR 455 million in 2005. It has, in just over a decade, grown to be one of the world's largest brown (formal, casual and traditional) shoe manufacturers, outperforming the industry in terms of market and financial results. The surprising part of this incredible success story is that it took place in the crisis ridden Italian shoe industry, which is saturated at every price segment. GEOX has become a stock market hit, with the share price more than doubling since its initial public offering on the Italian stock market in December 2004. GEOX shoes are now distributed in 68 countries – in a total of 10,000 independent multi-brand sales outlets and 669 exclusive GEOX proprietory/franchisee shops. Customers associate GEOX with the “Made in Italy” label, even though only 650 staff actually works at the Treviso Headquarters, and GEOX produces all its shoes outside Italy – in 28 countries around the globe. Polegato aims to get a foothold in all segments of the market -- kids' shoes, sneakers, and dress shoes. "Ours is a mission, not a shoe factory," he says.
Although GEOX is marketed as an Italian brand, it is in fact manufactured at factories in Slovenia, Romania and Hungary. Polegato says the “Italian” tag still applies because, “Geox is still an original made in Italy, even though we have plants abroad; the raw materials are Italian, the technology is Italian, the design of the product is Italian, the brain and the heart of GEOX is Italian. In each plant we have Italian technicians continuously controlling the whole production process and ready to stop it if something is not as it should be. Every pair of shoes comes back to Italy [to be housed]. In this way we can control the quality.”
Obviously the “made in Italy” tag is compelling in fashion and design, particularly when it comes to shoes, and Polegato agrees that being an Italian brand helps. However, he feels that GEOX's most marketable differentiator is the technology behind the breathable shoe. Italy is not especially acclaimed for its technology, admits Polegato. However, he hopes that GEOX will be regarded as an exception and that the other features of his brand (Italian culture and Italian design) will combine with the technology to offer the customer both form and function. 3
With Italian industry reeling from a strong Euro and Asian competition, GEOX shows that an entrepreneur can still stand out. A combination of innovation, design, smart production, and aggressive marketing has made GEOX one of Europe's fastest-growing companies. Annual sales have increased an average of 39% in the past four years. In less than 6 years, GEOX has registered a 33% CGAR of net sales increasing from € 147.6 million in 2001 to € 612.3 million in 2006 4
During the same period the native European footwear indusrty lost, over a four year period, more than 50,000 jobs and nearly 500 SMEs. In fact, the footwear industry is particularly exposed to international competition due to its labor-intesity to the limited returns yielded by technological innovation and to the easy imitability of processes and products5.
The company attributes its success also to the business model they use, which is completely different from that of their competitors. In many sectors of Italian industry the dominant model is still the "Mama and Papa Corporation". GEOX does not operate as a family business, unlike most in various sectors of the Italian Industry. It employs professional managers for production, marketing and distribution.
Competitive Edge of the Company Owing to Patented Technology
The competitive advantage of the company comes from the innovative technology used, which is also the core message conveyed in the advertising campaigns- illustrated by a sole which has steam escaping from it. The CEO is clear about the fact that the success of the company cannot be attributed to a marketing strategy but to the uniqueness of the product based on its patented technology which makes the shoes breathable. Also, he is confident that the company would keep growing, considering 90 percent of the world's population use rubber soles, while only 10 percent use leather soles, and the arrival of GEOX makes all other rubber soles obsolete.
Constantly on Their Feet- Research and Development
Since the first patent, dating back to the late1990s, GEOX has continued innovating, investing heavily in research and development. In temperature controlled environments, shoes are tested for different ambient conditions. In 2003 GEOX invested 7.5 million € in R&D, a little less than 3% of net sales; an unusual proportion for a brown shoe manufacturer. This conspicuous research effort has resulted in a stream of patented inventions and innovations related to the original concept, as well as many relating to materials (e.g., plasma applications), products (e.g., the breathable leather shoe), processes (e.g., glue saving assembly and sewing systems allowing improved shoe perspiration and flexibility), equipment and machinery (e.g., for shoe sole molding and injection). This series of corollary patents developed around the original patent have also the function to make it impossible, for competitors, to simply copy the product when the original patent expires. In fact, GEOX currently has some 40 patents and the original one, which expires in 2009, will be practically unusable by competitors because of subsequent improvements.
Technology- a Vital Part of the Communication Strategy
Contrary to most competitors, the GEOX marketing strategy neither relies on style and fashion but on the product’s technical characteristics. It highlights the unique selling proposition, its patented technology enabling its shoes to “breathe”, differentiating its products from that of others. The advantage of focusing on a single message not only points out the difference offered by the GEOX product, namely, that it resolves a problem that other shoes do not but it also makes it possible to use the same message and image to publicize the product all over the world and in all market segments (men, women, kids, dressier shoes, leisure shoes etc.), increasing the ease of identifying the brand and therefore also its value. Thus, it is clear from the success story above that patents have contributed in a very big way to strengthening of the GEOX trademark and thereby enabled the company to reach where it is today.
Patent Also Extended and Applied to Apparel
Geox Research and Development Department continually carries out important studies on perspiration and the heat of human body. GEOX, thanks to laboratory tests and to the cooperation with the most important universities committed to this end, has found the solution for the improvement of the well-being applied to apparel.
Human body constantly produces heat, which particularly increases during situations of mental or physical stress. Consequently, the natural reaction of our body is an increased production of sweat. Apparel that isolate the body from the outside environment do not allow humidity to escape hence retaining it in the garment, close to human skin.
The patented system introduced by GEOX allows warm air and humidity to rise along a cavity created in the garment and be finally expelled through special aerating holes positioned in the shoulder area.
The patent used for the GEOX apparel line provides a natural dissipation of sweat from the garment and a natural regulation of the body temperature
is a comic book 6 for children designed to build brand loyalty with the help of a greenish slimy character called Accumulated Sweat. Apparently, it's the fascinating tale of how, with superior footwear, you can beat a team of Marshy Aliens at a little-known sport called Splashball.
The main protagonist bears an uncanny resemblance to Polegato, down to the square-framed glasses. In the comic book, he discovers the GEOX sole with the help of a friendly hedgehog called, imaginatively, Prickles. The Polegato character is also on a mission - "a long interplanetary journey to show my invention to whomever needs it" 7.
1 Moretti Polegato and Why "ideas are worth more than a factory" (http://www.lunchoverip.com/2007/10/sif07-moretti-p.html)
2 GEOX Breathes Life into the South African Shoe Market (http://www.spitz.co.za/news/geox_breathes_life_into_the_south_african_shoe_market.html)
3 Mario Moretti Poligato: A Step Ahead By Robin Rusch (http://gerstmanandmeyers.com/careers_profile.asp?cr_id=30)
4 All Steamed up about GEOX, by Andreas Thomann, Credit Suisse http://emagazine.credit-suisse.com/app/article/index.cfm?fuseaction=OpenArticle&aoid=175497&coid=162&lang=EN
5 Breathing Shoes and Complementarities: How Geox has rejuvenated the footwear industry (Massachusetts Institute of Technology IPC Working Papers Series) http://web.mit.edu/ipc/publications/pdf/05-005.pdf
6 Business Profile: A Man on a Mission to Save our Soles http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2003/03/22/ccprof22.xml