March 17, 2010 – Renaissance Entrepreneurship Center
Beginning as a one woman show selling shoes from the second floor of a health food store to a $50 million dollar company with it’s own franchised stores and hundreds of large retail distributors, founder and former CEO Margot Fraser has a very good idea of what it takes to build a successful, truly value driven business.
Margot grew up in Germany during the War and had only one pair of shoes growing up and they were poor, at best. She was trained as a dress-maker and was used to standing on her feet all day and eventually developed problems with her feet. Her husband at the time decided to take her to a spa in Germany where she purchased a pair of shoes and took them back to the United States where they didn’t leave her feet for three months straight. After these three months, her hammer toes had vanished and she had already contacted the distributor to make another small order.
She received the shoes from the Birkenstock factory in Germany and went door to door in Santa Cruz trying to sell them to stores. “We can’t possibly sell those shoes here, no one would buy them”, she was told. But she knew better. If they could help her damaged feet, why couldn’t they help others too? So she rented a booth in a Health Food Show and bought more shoes on speculation that others would see the benefits of this product. She sold out and gained the respect of many clients along the way.
Despite this success, the business was not doing well enough and she left her husband and left the business in Santa Cruz and moved to San Francisco to return to dress making. During this time she was still being contacted by those customers from the Health Food Show and so she decided to contact Mr. Birkenstock directly and ask him if she could start distributing them in the United States. He of course agreed and in 1971 she opened up a small office in San Rafael above a health food store from where she began to distribute this amazing soles.
She had an idea to target the medical professionals and produced 100,000 product catalogs and mailed them directly to the doctors. She got very little response and was later told, “don’t expect any help from the industry because you’re a threat to their business” and knew then how true that statement was. She then went to more wholesale shows and door to door again and by 1974 she had shoe stores contacting her wanting to distribute these shoes for her.
Part of her success was a combination of the right product, which to this day has not altered the design of the sole of the shoe one bit, and timing. In the 70s when she began distribution, there was a huge cultural revolution going on in the world and much of it was happening locally in San Francisco. The kids didn’t want to wear what their parents were wearing, they wanted to rebel and be radical. So the Birkenstock hit the market and was totally different than anything they had seen before and the hippie generation swallowed them up. After a few years Margot went back to those original stores who turned her down and they were more than happy to carry her product. To this day, those stores are some of her best customers.
It wasn’t all easy sailing for Margot, many times she found her money tied up in the merchandise and struggled to find cash to pay her bills. The lead time for an order from Germany was three months, and so she had to stretch her cash to last the business through the three months without income. She got creative and decided to give her customers a cash incentive for early payment on their orders. This discount was the only way she financially survived for the first two years of the business! “It takes money to make money”, she tells us.
So how did she do it? Why did she do it? “I felt a responsibility towards my employees and retailers.” She said there are two things you must have when running a business: hard work and passion. You must be able to hang in there and feel that nothing is too much for you to handle.
Margot believes that it’s the “soft things that are really important.” Thank you cards and flowers to your employees. She knows that loyalty is something you build on a personal level and unconsciously had been building this from the moment she sold her first pair of shoes.
She believed in having many regular employee meetings and she wanted them to know the entire business and how it was run. She felt that the group meetings brought everyone together and created a great feeling inside the office. Margot says that she never really felt that she ‘owned anything’ because growing in Germany during the war everything could be taken from you at any time. And so today, the company is 100% employee owned through their ESOP or Employee Stock Ownership Plan.
This genuine care and responsibility Margot had for employees paired with a truly remarkable product, has help mold Birkenstock into the truly value driven and financially successful business it is today.
By Mindy Trisko