How Hoka Built a Billion-Dollar Shoe Brand

Aaron Alpeter (00:00)
my goodness, like the CEO of a shoe company decided to leave and go start a shoe company.

Hey everybody, welcome back to Ecommerce on Tap. I'm your host, Aaron Alpeter. For those of you who are new to the podcast, each season we take a different industry and we do deep dives in about six different brands whose history, supply chain, or exit potential teaches something unique about where the industry is right now where it's headed. This season we're focusing on a category that we're all familiar with, So I've got shoes, you've probably got shoes. that's what we're talking about.

We are doing rotating co-host this season. And this episode we have my really good friend, someone I've looked up to for a long time who knows nothing about footwear, tells me, but

Mark Riskowitz. Welcome to the podcast. Thank you so much for being on here.

Mark Riskowitz (00:50)
Great, Aaron, it's always a pleasure. Great to see you, great to chat. And yeah, thanks so much for having me.

Aaron Alpeter (00:56)
Yeah, why don't you just give ⁓ our listeners a quick deep dive

Mark Riskowitz (01:00)
Sure, yeah, absolutely.

So born and raised in South Africa, I moved to the States about 10 years ago. for the past 10 years, been working in kind of e-commerce, supply chain, customer experience, operations, if you want to sort of chalk it up to that, And currently, I'm the SVP of operations at Caraway Home. We're a kitchenware company that

that sells non-toxic and better for you products in the space. happy to be here, happy to talk about business,

if you talk about really any of those different topics.

Aaron Alpeter (01:28)
Yeah, also, think we can have a whole other podcast about all the cool stuff that you're doing at Caraway and things that you have done. What's kind of your connection to footwear?

Mark Riskowitz (01:38)
Well, I use it like most people. know, if you don't, guess you're probably a certain particular kind of person that lives a certain way. But footwear for me, I have my standard pair of running shoes. I've got some golf shoes. then have my just mixture of different sneakers. And I'm not a deep sort of collector or aficionado when it comes to footwear. But I also am very focused on, you know, comfort and use ⁓

ability when it comes to shoes. So I'm a big fan of the slip-ons, the hands-free ones, you know, there's a couple of brands out there that sell some really great shoes. But I also have flat feet and so I can't just buy any pair out there and expect it's going to be a miracle solution. So yeah, that's basically the extent of it.

Aaron Alpeter (02:25)
Yeah, I think it's kind of funny this past weekend I was teaching my son, he's six, how to tie his shoes. That's kind like a big milestone for you to tie your shoes. But I'm going back to him like, go to my slippers. I don't want to tie my shoes. That's annoying. So we're making him do something that might be outdated or archaic.

Mark Riskowitz (02:33)
yeah.

you

yeah.

Listen, I mean, everyone says when you're an adult, you want to feel like a kid again, right? So I want to feel like I don't have to tie my shoelaces. So I like the hands free slip on shoes. That's just how I am.

Aaron Alpeter (02:54)
I love it, I love it.

Well, before we dive into our episode today, which is really gonna be all about comfort, we like to start off with a couple of tidbits from anything that popped up in last week. And so I'll share one, I don't know if you've got one that you wanna share, ⁓ but this one is kind of relevant. So Adidas unveiled their Atazero Adios Pro Evo 3, is the name of the shoe. And this is an update to a shoe line that they've had for a while, but they really tried to focus on a single thing, which is weight.

And the new shoe model comes in at an average weight of 97 grams. And so like when you, when people get these boxers shoes, they think that the box is empty. That's how light they are. And so it's just, it's so interesting because, you know, they've decided to see if they can optimize for a performance shoe running shoe that weighs next to nothing and still has some sort of things. they've done all sorts of interesting things where they've said, okay, can we take out the middle part of the midsole and just have it around the rim?

Can we really strip this down to the core essence of what the shoe is? And so I just thought it was crazy that you've got a shoe that is under 97 grams.

Mark Riskowitz (04:04)
I mean, it is wild and being in the supply chain and logistics business, start.

comparing and like looking at package weight versus actual weight, like all these different things. you think when I'm basically shipping the box, that's all I'm doing. And it's pretty fascinating. By the way, when you first read that in the pre-screening that we had, I honestly thought you were talking about the latest Claude model or something. I mean, it sounds like quite a mouthful of, of a shoe, but I guess it works, right? Everyone's used to those fancy words and you know, Evo point this and that. So, Hey, I think Adidas is just jumping on the bandwagon.

But yeah, 97 grams is pretty remarkable, if you ask me.

In terms of my tidbit, mean, it's not recent, but I have to just bring it up and in the combination of footwear and AI, I just can't get over it's a little bit old now, but I just can't get over.

that ⁓ that pivot that our friends at all birds have done

from

Aaron Alpeter (04:59)
my gosh,

Mark Riskowitz (05:00)
footwear to AI wear or something along those lines. That just fascinates me from a handful of different reasons. But I think the fact that the markets favorably reacted to it is just an indication of who's buying that kind of stock. So ⁓

It's, you know, say what you want about all birds journey. think it's a very interesting choice to completely flip industries. But I think that sort of synergy of not just a living and breathing AI in a company, especially in the footwear industry, but actually pivoting to it just shows how intertwined the technology. And then with what Adidas have done really is and how far we've gone from technological advancements. So it's all a multi-part of fascination to me.

Aaron Alpeter (05:49)
The Allbirds thing I think is never gonna get old because I mean, the shoe, the products is what they sold, right? So they got rid of that. I would argue that regardless of what the legal structure is, they sold our Allbirds, right? There's somebody else that's gonna have those shoes and hopefully make a comeback. But I think they sold for like 37 million bucks and then they went to buy like GPUs or something. They're gonna build a data center. Is that what I read?

Mark Riskowitz (05:56)
Mm-hmm.

Yeah, I it wasn't too clear for me. feel like, you know, only 10 % of the story was really reported in terms of what's actually going on behind closed doors. If you want to call it that, I guess how close are the doors in a public company, but

I think it was, yeah, it was fascinating how they're essentially rebuilding a business in a completely different industry on the same ticker, I suppose, is kind of all that's changed. yeah, there's, you know, that sort of balance sheet is changing pretty rapidly in terms of what the categorization and what kinds of assets they hold on their books. So it'll be interesting to see where things pan out, ⁓ but I don't think anyone possibly could have seen this coming.

Aaron Alpeter (06:55)
No, I certainly say it kind of reminds me of I think it was like Wayfair overstock a couple of years ago. They just updated their their S1 to say blockchain and their stock went up while the robots were looking at it.

Mark Riskowitz (07:07)
Yeah, it's like that concept of if you hit different companies, look at their pitch decks, they have .ai as the URL, already that prices things at about a 25 % markup. So I feel like that's the new way to do things.

Aaron Alpeter (07:19)
It's true.

So we'll look forward to caraway.ai. That'll be great.

Mark Riskowitz (07:25)
I mean,

it's actually going to be coined the caraway eye. So it's, you know, one word. So just rolls off the tongue, you know.

Aaron Alpeter (07:29)
you

I love it, I love it.

All right, well let's get into the episode today. So we're gonna focus on a brand that you're gonna remember when you see it, and that's Hoka. If you aren't familiar with the shoe, pause right now, go look it up on Amazon or something. But these are known for ultra padded running shoes that kind of look like you're wearing marshmallows on your feet. And these ultra support shoes are inherently the opposite of the Evo 3s I just talked about.

Mark Riskowitz (08:00)
Yeah. I feel like

it's an interesting angle. Cause for me personally, as I mentioned, I have trouble with my feet and you I always need a bit more support and cushions. So I'm always thinking about does a lightweight shoe actually provide that sort of relief or does it really just distract from the whole thing? So I'm more interested in, in Hoka itself. And, know, I'm always focused on finding shoes so that it just alleviates some of that pressure as much as possible. I'm a big tennis player. I love to play tennis. I do hit a bit of a ceiling.

after a certain amount of time when my feet start giving me a little bit of pain. So I think after this, once I get all the ads on my phone for Hoka, think I'm going to fire off a purchase myself and probably do a 30 day review at some point, which I'm happy to share with you afterwards.

Aaron Alpeter (08:46)
I grew up as a runner. You may not believe it by looking at me, but I always thought that running shoes were there to protect my feet. And when you look at the category, the answer really seems to be changing. Sometimes, you know, the running shoe is about speed, sometimes about protection, know, sharp rocks and stuff like that. Sometimes it's about getting out of the way and letting your body...

So you see all this barefoot running and zero support sorts of things that are out there.

Mark Riskowitz (09:12)
I think it's evolving and it always changes because, know, every time you run, every time you take a step, everything changes and you've got all those physics, just combining and evolving over time. Especially as you, to your point, as you change, like the physics behind how that interaction is changes over time based on weight, age, technique, know, types of activities, surfaces, everything like that. So I think,

it does evolve, it does change over time. And I think you're right. It's, it's maybe intentionally designed to be something where there's a bit of unknown to it to actually invoke, mystery into buying ⁓ running shoes. But my perspective is that it's simply a shoe that is better for you for running and looks good while running. I mean, if you can sort of hit those two, I feel it would be, it would be pretty solid. But going back a couple,

what centuries at this point, ⁓ when people ran, when humans ran, did they run barefoot? Did they run with sandals?

Did they run with some sort of leaf situation tied with a piece of, know, makeshift string? Like, do we know? Like, what do you think?

Aaron Alpeter (10:26)
Well, going back from what my kids see in Moana, I don't think there's a whole lot of footwear there. I mean, in all seriousness,

there was almost nothing. There was very minimal footwear when people were having. When they did have something, the running shoes were thin, flat, and they were mostly about protecting your foot from sharp rocks or other things you might step on the ground. And so think it's safe to say that

that we didn't really have much of an understanding of biomechanics and running was just something that the body naturally did. I mean, you learned how to do this as soon as you can walk. And I think that, you know, early humans also weren't running repetitive miles on asphalt and cushioned sneakers. They were running on a variety of terrain. And so these, these mechanics that come into running really varied over lifetime. It's really relatively new that we would run on a single type of surface for a long period of time.

back to the late 1800s, early 1900s. And that was the first, we would now look at as a running shoe. So it was the, it was a purpose built piece of footwear that shows up in track and field, not in road running. Road running really didn't exist as an idea. mean, late 1800s, early 1900s, you barely had paved roads in a lot of places. And so they first came out in terms of track spikes in like the 1860s and 1920s.

You see the earliest track spikes coming out of England. And that was really for competitive running and brands that like JW Foster, which later became Reebok were some of the earliest pioneers in these tracks spikes. And the construction was fairly simple. You had an upper, which was thin leather, know, sole, which was flat leather or early rubber. And then the spikes were basically metal pins or nails that were, you know, taped into stapled into the forefoot. And so there was no heel, no cushion.

It was really like a piece of leather with some nails on it, is effectively look at it.

In the 1920s and 1960s, you started to see early road running shoes come out. So brands like Adidas, Puma, Onitsuka Tiger, which became ASICS, they focused on simple lightweight shoes made of either canvas or leather. And the point was to be very close to barefoot. There was very little shock absorption. And the prevailing idea in the engineering at time was that the body was naturally evolved and was set up to absorb the impact.

and shoes really shouldn't interfere with that. ⁓ Because running was natural, everybody knew how to do it, and you'd figure out, let's not get in the way. And so the push was really less weight, less material, and that was gonna result in better performance and less interference.

Mark Riskowitz (12:55)
And then it was a little bit after that, that Bill Bowman from the University of Oregon was more just like obsessed with improving athlete performance.

And at the time, his runners were training on grass, everything, grass, dirt, center tracks. And the challenge was achieving the traction without adding weight. We're talking about the 97 grams Adidas shoes. So they've obviously cracked the code with that. But obviously back then, the existing options were a bit of a trade off. You could have shoes that gripped very well, but then they were too heavy.

or shoes that were light, but then they just slipped all over the place. And so in an effort to solve this, he famously poured liquid rubber into his wife's waffle iron.

And it created that sole with that grid-like pattern. And this design started surfacing a bit more and increased that area and multi-directional grip while remaining relatively lightweight. And so you got the improved traction ⁓ as well as greater confidence in footing across the different terrains.

And the waffle sole, which I think is a fantastic name, could be a great name for a restaurant by the way, ⁓ was really just that philosophical shift in footwear. And before Bowman, the shoe was largely seen as passive equipment. After him it became something that could really boost and enhance performance. And that shoe later turned into Nike.

Aaron Alpeter (14:23)
the waffle sole was so simple, but it changed the mindset that you were talking about. companies went from asking, how do we protect the foot, to how do we improve performance through design? And the key thing is, is that this worked. mean, athletes who train in the waffle sole,

experienced better traction across different surfaces compared to the spikes and the Waffle trainers felt much more natural and much more comfortable for longer runs. And so this gave athletes a kind of race-like performance, even in a training shoe,

I think the key thing here wasn't that we just had a better grip with these shoes.

it was that we could actively design something that would enhance performance. And it really gave birth to all sorts of innovations in running shoes like mid soles and stability and cushioning controls.

Mark Riskowitz (15:07)
Yeah, I think once that shift happened, brands began asking what else could be engineered. So in the seventies, the eighties, as recreational running exploded, more people like miles and harder surfaces, Injury rates became more visible, cushioning emerged as the next frontier. And in companies like Nike, Ascis, New Balance, they began experimenting with the Eva foam mid-soles, gels inserts, and eventually

eventually

air pockets to absorb impact while introducing stability while also not adding too much weight. each brand

into a different interpretation. Nike focused on cushioning and later energy return. Asics emphasized structured support and shock absorption and New Balance bulleted its identity around fit and stability and eventually dad shoes. I think we can all say I don't own a pair, probably should as a newish dad. I'm sure you have one or two yourself. And what drove all of this was just this growing realization that running moved from elite athletes on soft tracks to mass participation.

on hard repetitive surfaces and the shoe could no longer just get out the way. had to actively manage that, especially when you're so much strain on the feet on those hard surfaces for a continuous period of time.

Aaron Alpeter (16:24)
Yeah. And I think that what's interesting about footwear and the running shoe in particular is that there's always a trade-off when it comes to these different things. So as you mentioned a little earlier, these heavier cushioned shoes were often bulkier, maybe a little bit less stable. They reduced the ground feel. And some runners felt that they were disconnected from where they were running. Kind of like you're running on moon boots or something. But what was really interesting is all of this padding and stability and things like that was

created with the intention of reducing injury. But injury rates didn't really decline, which created lot of skepticism around whether that additional technology, that additional cost was actually helping. And actually by the early 2000s, most consumers and researchers began questioning the paradigm where runners said, hey, these cushioned shoes are encouraging me to heel strike and it's changing my natural mechanics. And at the same time, you've got

a budding field of biomechanics and people shouldn't look at this and saying, you know what, maybe we were onto something as a species and barefoot running and you know, these, these minimal running shoes is, is what's important for your gait and your mechanics.

Mark Riskowitz (17:33)
You know, it's probably not the best analogy, but I think about the same thing with golf. And I think about all the advances in technology with the kinds of shafts the heads and all these kinds of things. And people often forget that you have to go back to the swing. Like if you can swing a golf club and do it well, the rest is incremental and maybe you'll have some relief here or there. But if you can't swing a golf club, no matter, no amount of tech or...

shaft or driver heads or whatever the case is going to help. And so the real question becomes, do we trust the body or do we engineer around it?

Aaron Alpeter (18:08)
I think that's a key question. And now we've kind of set the stage for Hoka because they are one of the clearest answers to a question that doesn't have a single answer. And so let's kind of dig into the company now. Who are the founders and how do they end up starting a footwear brand?

Mark Riskowitz (18:23)
So Hoka was started by Jean-Luc Dillard and Nicolas Mermoud. in the French Alps.

both of them came out of the Salomon group, a footwear brand and the Alpine world So their reference point wasn't flat controlled road racing. was mountains and steep descents and uneven footing and long durations where the body is constantly absorbing force. So in that environment, the traditional assumptions of running shoe design, lightweight, low profile ground feel,

it felt incomplete.

what they kept coming back to was downhill running, which is fundamentally different from flat or uphill movement. And none about you, but especially with challenging feet, when I run downhill, it's far worse for me. I feel the impact way more than anything else. Yeah. Yeah. your quads are under a lot of load. Your joints are taking this amplified impact and every step sort of just compounds.

Aaron Alpeter (19:06)
So

Mark Riskowitz (19:16)
So it's one of those few scenarios where speed actually increases the punishment on the body rather than simply improving performance. And unlike cycling or skiing where equipment helps manage that energy, running offers almost no mechanical assistance. The body nearly takes all of it in that instance.

And so that gap is what triggered the original idea. They began asking a question that most of the industry wasn't really focused on. Not how do we make runners faster? It's more about how do we reduce the damage of running, especially over long distances.

Aaron Alpeter (19:53)
this led them to a solution that at the time really looked backwards. ⁓ So while the broader market is moving toward minimalism and natural running, they're sketching shoes with oversized mid soles and really exaggerated cushioning.

And it wasn't really an aesthetic choice. They weren't trying to be bold. It was a functional one. And they believe that they could meaningfully reduce the impact that people experience with each step that they could extend how long a runner could perform before that fatigue or breakdown set in. And they knew that, you know, not, they couldn't just add more foam and call it a day. It had to be engineered in a way that didn't create new problems around weight or instability or just awkward movement.

Mark Riskowitz (20:33)
The industry had largely been asking how to enhance that performance, as we mentioned, with a given stride. Mermoud and Diard started asking how to preserve the body across

thousands of strides and from that perspective the conclusion became pretty clear. The limiting factor wasn't speed, it was impact.

Aaron Alpeter (20:51)
Yeah. in your introductions of the founders, you had mentioned that they came from Salomon. So why don't you go a little bit deeper into that.

Mark Riskowitz (20:58)
Well, Mermoud was there for seven years as an international marketing director and Diard spent 26 years at Solomund with the last nine years as CEO of the business.

Didn't expect that.

Aaron Alpeter (21:11)
Wow. So the CEO and I think when I saw

that I was just like, my goodness, like the CEO of a shoe company decided to leave and go start a shoe company.

And I don't know about you, but like most CEOs that I know have a pretty good track record of getting what they want when they want it. And so this kind of naturally

begs the question, why didn't they just try to launch Hoka inside of Salomon?

Mark Riskowitz (21:33)
It's a great question. I think the honest answer is that Hoka likely couldn't have emerged from within Salomon not because the company lacked the technical capability, but because the idea itself ran kind of counter to everything the brand stood for at the time.

Salomon's footwear philosophy was rooted in precision, control, ground field, especially in those trail environments. We talk about the mixed terrain and fluctuating impact that has. Whereas Hoka's concept, maximal cushioning, high stack height, and a rolling geometry looked and felt like a rejection of those principles in a way.

Aaron Alpeter (22:09)
there's there's no clear public evidence that Hoka was ever formally pitched or that Salomon's board rejected the idea ⁓ or that they invested in the concept. But the absence of any sort of ⁓ commentary about that is kind of telling because I think that a radical concept like Hoka often struggles to survive inside an incumbent ⁓ because they require

you have to be able to give it time to look wrong, to be misunderstood, to find the right early adopter. mean, you just imagine if they brought this shoe to market inside of Salomon, it would have been seen as the CEO's pet project. People have been like, well, why aren't we emphasizing these other shoes that are selling really well? We have this dog over here that our CEO really likes, but it's not doing anything. And that's just a really hard thing to try to support as a business. especially when they've got investors and responsibilities to their

employees and shareholders to have predictable cash flows. And this is very much of a unpredictable thing. And so they started Hoka externally and they kind of gave themselves space to experiment. And they decided to start targeting a niche in the ultra runner community. And they thought that if they could prove the product there through experience, that that would be enough validation for them. They potentially have a business in their hands. And so this is just a classic case of

founders recognizing and solving a real problem that might require stepping outside of a system that they had once led.

Mark Riskowitz (23:34)
So other than looking like a marshmallow, let's dig into what was so different about the shoe from an engineering perspective.

Aaron Alpeter (23:42)
Yeah, so Hoka's design really starts with the decision that fundamentally breaks traditional footwear.

Instead of minimizing material underfoot, they sought to dramatically increase it. Traditional running shoes that we're talking about, especially pre-2000s, had relatively little EVA mid soles, and they balanced kind that modest cushioning with stability and weight. That was kind of the brief they looking for. Hoka pushes the stack height, so how much foam is there, far above the norm. So they almost look like platform shoes.

which immediately creates a whole set of other engineering challenges. So when you add that much foam, you start to introduce more instability. doesn't, it's foam, it's gonna compress. The risk of rolling ankles or things like that can be difficult. There's compression variability depending on how each person steps on that shoe. And then there's obviously weight concerns. even if they feel good, they don't wanna walk around with 10 pounds on each foot when they're going down the mountains. And so the problem really wasn't just about adding more cushioning, it was about

How do you add the cushioning without making the shoe feel slow, sloppy, or unsafe? And that's where their material selection became really important. So they relied on low density EVA blends and later refinements allowed them to have high volume without that proportional weight gain. And those materials really had to be fine tuned very carefully because too soft and the shoe would collapse from the load, but too firm and the entire value proposition of absorbing an impact goes away.

I kind of think back in science class when you were titrating and you'd get those drops in there and be clear and then it would turn blue and if you went too far it turn purple and you'd fail the science experiment. I feel like that's what they were doing here to try and get the right fitness. I can only imagine how many samples they had and I don't know if I could tell the difference between sample 37 and sample 38, but someone did.

Mark Riskowitz (25:22)
you

I mean, the geometry is just as important as the material. The rocker sole, of Hoka's defining features is not aesthetic, it's compensatory. And when you increase stack height, you reduce the natural flexion and ground feel of the foot. So the rocker helps guide the runner through that gait cycle. Combined with a wider base platform, it offsets the instability introduced by the height of the shoe. But this kind of design is difficult to execute consistently at scale.

Molding

thick mid-soles requires pretty specific tooling, precise temperatures, precise pressure control, tight tolerances to ensure the ride feel is consistent across sizes and production batches. We know a thing or two about that. Small inconsistencies in foam density occurring can change how the shoe performs, which is a much bigger issue for a product defined by feel rather than just the appearance.

Aaron Alpeter (26:23)
And you touched on some of the manufacturing complexities and constraints that we're working on here. mean, here's just a list of things that they probably had to work through in the design phase. So you talked about those high-stack mid-soles. So that meant larger molds, more material per unit, and potentially longer cycle times. Because if you have a machine that's used to turning out a shoe or a sole every 30 seconds, maybe this is taking 90 seconds. So you just think about what that does to your line time and your cost there. The material, the cycle times increases the cost.

reduces the flexibility when you're still uncertain about the demand. And so if you've only got $100,000 to make your initial units, is that going to get you 100 pairs or 1,000 pairs? That's the difficulty there. But there's also just a higher risk of defects. So whether it be air pockets, uneven compression, durability issues, all these sorts of things are outside the normal use cases that you would typically see with traditional running shoes. And on top of that, you've got outsole integration that's more complex and

All this just means that Hoka wasn't just a different design. It required a different level of precision and discipline in manufacturing. And so very quickly, you've got these founders that need to find manufacturing partners who are able to go on this journey with them and to invent things that don't exist because nobody'd ever asked for them.

Mark Riskowitz (27:38)
And it seems like a ton of work and potentially really expensive. bet they got the first quote and went, my soul. And, you know, realize that they, you know, might be onto something and if they could figure it out, were they serious about starting a company with this? mean, there's a reason why no shoes have ever looked like this.

Aaron Alpeter (27:56)
You're right. I think that based on what I could see from the research, they didn't really start out with a traditional like, hey, let's start a company. Like I do is really more of an experiment. And I think that they were motivated to solve a problem that they were personally experiencing in the mountains. And the earliest versions of their shoe were much closer to prototypes than to products. And, you know, even the name itself, Hoka, came from Maori, and it's often translated into fly over the earth, which is telling in how the

have thought about themselves and how they wanted people to experience the product. And I think that contrast is really important because visually

looks very heavy. It looks very grounded. You wouldn't expect that you're to fly over anything in those. Maybe float, but not fly. But this is something that helped them create this light, effortless feel in the branding despite all the added cushioning. And so I think it's safe to say that early on, this was much more of a passion project that was driven by curiosity and problem solving. More of a, you know,

Could we do this? Could this solve a problem that we're experiencing more than saying, hey, here's the market, we've made a spreadsheet, and here's where we think we're going to be in five years?

Mark Riskowitz (29:04)
In terms of getting the business off the ground, they started the business in 2008, initially self-funded, leaned on the relationships in the industry to move forward, but there really wasn't widespread conviction that this would become a major brand. And in fact, quite the opposite. The product, to your point, looked unconventional ⁓ or just wrong. It just didn't fit. And it ran counter to the minimalist trend that was gaining traction at the time. Those early production runs were small in distribution,

was limited to specialty retailers who were willing to take the risk on something new like this. And the expectation wasn't immediate scale, it was validation. And it really was the question of could the shoe solve a real problem for a specific type of runner?

The turning point came when the product started to resonate beyond the founders original use case and ultra runners, trail athletes, they began adopting the shoe not because of marketing, but because of how it felt after long run. So they're really focused on the product itself. That's when the project shifted from something built for personal performance to something with broader commercial potential.

Interest wasn't really driven by aesthetics or branding, you know, like some companies have success in it was driven by outcome. And that's the one aspect I love about, you know, companies like this is when the product is just absolutely a home run and it sells itself in that regard. and that signal became pretty clear that a meaningful subset of runners were not just trying the shoe, but sticking with it. And that's when the business case started to form at that point, token transition from an

experiment into a proper company. And then of course, with all the challenges that come with scaling something that had initially been built to solve one problem, not to grow at the rate that they were growing.

Aaron Alpeter (30:56)
Yeah, their product was so good at a very specific thing. ⁓ and it wasn't like this was going to be good for everybody, that's really kind of indicative in how they, they went about growing because their initial geographic focus was, in Europe.

specifically France. And so you think about all of the downhill running, doing the Alps and talking to the people. And of course they had networks from Salomon and they got access to some running communities, but they really started to focus in Europe and eventually started to see the product into the U.S., ⁓ which was already a growing market for endurance sports. And the strategy was very deliberate. They avoided mass retail entirely and they focused only on specialty run shops because they needed to explain to the staff.

you know, what the product was and where the credibility was coming from. ⁓ because the business really wasn't built for scale. It was built to test whether the product could earn trust. Because like you said, you walk into a running shoe store and there's kind of what you've always had. There's the minimal stuff. And then you see this abomination in the corner and you're like, well, what do I do here? And know, you've got to have somebody who's willing to explain and say, well, if you're doing ultra marathons, like this is a really good fit. They're seeing it Europe and you know, just see how it feels. And people are like, okay, that's not too bad. Like I'll try it.

And as a result, the revenue was very, very modest in the early years. It was likely under a dollars to maybe single million dollars in revenue. And it was just driven by a small number of specialty accounts with limited production runs. And so they were working inside this classic early stage constraint of how do you get around MOQs? What do you do with long lead times? What's the risk of overproducing for a product that may or may not sell?

And so I can imagine like demand planning would be so important in this case because they're not improving the existing category. They're kind of trying to do something new or service a piece of the market that hadn't really been serviced before. And so there is no comp to say, well, Nike sells 100,000 shoes a month. And so let's just assume we're getting 1 % of that and base our Excel model off that.

Mark Riskowitz (32:56)
Yeah, at some point you have to break free from people you know, or the ultra marathon community. How did the rest of the market react to the shoe

Aaron Alpeter (33:05)
Yeah, I think like if we're being generous,

like the market perception was mixed at best. mean, for all the reasons we've talked about, people wanted minimalism and this was a bulky, unconventional thing. Retailers were very hesitant to allocate shelf space that would require their people to try to explain something. runners themselves were like really not interested in this to begin with. Really the biggest thing they had was if they convinced somebody to run in the shoe, especially

You know someone who was dealing with with injury or pain then they started to really say okay I get it now like it may look weird. Haha Yeah, it's a marshmallow shoe, but like I actually This actually works and so it became less about convincing people to try the shoe then more about getting on their feet So once someone ran in it it worked out and that really Dictated how Hoka marketed itself and they really relied heavily on athlete validation and word-of-mouth

And you think about ultra marathoners, if you've ever seen someone who runs an ultra marathon, they're not really concerned about aesthetics. They're not gonna look great ⁓ while they're doing it or afterward. They're focused on performance and outcomes. And so they naturally became the first credible advocates for that. And their feedback about, this is causing less fatigue, I have better recovery, I have more comfort at long distance. That was the de facto marketing message. And it was really just this testimonial that they were giving that they could...

know, rinse and repeat over and over again. So these special retailers played a crucial role because they were interpreters of the product. They could say, yeah, it looks weird, but here's what this famous ultramarathoner said about this. Here's a picture of them running on it. And they effectively became part of the sales force.

Mark Riskowitz (34:43)
And as, as adoption grew within this niche, the company began to see early signs of the product had that broader potential and the key sign wasn't the top-rank growth. was really that retention, the conversion and the runners who tried Hoka to your point often stayed with it. And that kind of repeat, repeat behavior. I mean, that's something a lot of brands crave to see, you know, with, with their products. And so I think the fact that they sort of stumbled upon that, was all that much better and a lot more organic and authentic about, about the company.

So the revenue began to climb into the high single digital or guess low digit millions as reorders increased and additional specialty accounts came on board. At this stage, the business was still fragile, but it had crossed that sort of important threshold. It was no longer just that experiment. It was a viable growing brand with that defined segment and that clear product market fit. And geographically, the US, of course, became increasingly important

as the brand gained traction. The American running market with its mix of recreational runners, specialty retail infrastructure, it provided a real fertile ground for expansion.

Hoka's present in specialty chains and independent running shops allowed it to scale without diluting its positioning. And that turning point became a real business, really when Hoka began to move beyond ultra runners into adjacent segments. So trail runners gave way to road runners, not the Looney Tunes character, just to clarify for the listeners, although that probably did predate Hoka itself. And eventually, ⁓

consumers who weren't necessarily performance focused, but valued comfort ⁓ naturally gravitated into the Hoka ecosystem. And that expansion didn't happen through a rebranding effort. It really happened organically as more people experienced the product. So word of mouth was a major factor in that as well. And the core value prop, reduced impact and fatigue proved pretty relevant to a much wider audience than initially expected. This is when the founders

I could start to see that Hoka wasn't just solving a niche problem, it was actually tapping into a broader, very under addressed need that the running community had.

Aaron Alpeter (37:01)
Yeah, I think we see this happen a lot where brands will start out with a really specific niche and then expand out to other products. I'm thinking of a couple of brands that come to mind, but it feels like getting the timing right for that is super important. if I'm a founder of brand here and I've been known for something here, how do know when it's time for that brand to expand?

Mark Riskowitz (37:22)
I mean, I say it's a balancing act ⁓ because to your point, you sort of fired too early and you run the risk of not really being known for anything, you burn a ton of capital and potential strategic relationships ⁓ that could obviously cost you. You expand too late, then you risk being sort of pigeonholed too tightly. I know a few brands historically in the space that we can talk about if you want. ⁓ I think the reality is that you stay focused

for long enough to really understand what matters for consumers, in this case, that recovery and that fatigue. And then you find people who are interested in that. And it's less about trying to convert people into becoming the type of customer, the ultra marathoners or what have you. It's more about finding people who may also share the same problem and share the same, in this case, joint pain or injury prone, and they're really looking to serve that need. it's really about

finding customers that might be really just ⁓ focused on the same kind of problem that you actually have a solution for, even if it's inadvertently.

Aaron Alpeter (38:33)
Yeah, I think that makes a lot of sense and I can imagine how difficult it be for Hoka if they were, their whole thing was about getting more people to do ultra marathons. Like that would just, that would be a very difficult thing to do.

Mark Riskowitz (38:41)
I mean, I'd be

lost. I mean, let's be real. I love their brand. I love their shoes. But like, am I going to be a marathoner? Probably not.

Aaron Alpeter (38:52)
Probably not.

Like, do you guys have a golf shoe? Maybe we'll do that. ⁓

Mark Riskowitz (38:55)
Yeah, there we go.

Aaron Alpeter (38:57)
Well, I think it's interesting because this organic evolution almost requires slower growth, which ironically plays in, the fact that it didn't take on any significant early stage venture funding. So instead they really relied on being disciplined with their growth and eventually took on some strategic investment from Deckers. And so let's just talk about that for a bit because Deckers first got involved with Hoken in 2012 and the business was

very much an early stage niche performance brand, but they had proven product market fit and they had proven that they could resonate well within a specific community, again, those ultra marathoners, but it wasn't a skilled operation. And so their distribution was limited, their SKU count was tight, and they were kind of navigating these operational realities that ⁓ were inherent in producing a technically differentiated shoe. And so revenue wasn't publicly disclosed, but

It's estimated that Hoka was in like the high single digits, low teens, millions of revenue at the time of the acquisition of Deckers.

Mark Riskowitz (39:58)
I imagine there were quite, especially at that stage, a lot of shoe companies, obviously doing a lot more revenue that had similar direction or these expanding in a similar fashion. What made the business interesting to deckers because it clearly wasn't its size, right? But it was more so its conversion and retention dynamics. think that's a, you know, those are very healthy and attractive metrics and numbers to look at. And retailers were reordering.

Runners who tried the product were sticking with it. It's pretty simple stuff when you talk it down to the basics. And that was obviously a very clear indication that it was gonna be a durable consumer brand, which of course investors love to hear.

Aaron Alpeter (40:43)
Absolutely. think ⁓ the deal structure is interesting because they did a minority investment in 2012 and then acquired the brand outright in 2013. And so perhaps they were using that initial investment to kind of validate the trajectory before fully committing. And from a strategic perspective, Hoka fits pretty well into Deckers. So unlike Nike or Adidas, which are already deeply invested in into other performance shoes, Deckers has a track record of scaling unconventional footwear brands, most notably UGG.

And so, know, Hoka represented a similar opportunity with a product that looked very different and solved a very real problem and had this early credible traction. I think like Nike or Adidas probably wouldn't have been interested because it's too small, too disruptive for what they're doing. But Deckers was like, hey, this is actually a clean adjacency, allows us to get into this and we just plug it into our growth engine.

Mark Riskowitz (41:31)
Yeah, I kind of liken it to, you know, went to the blackjack table, put the minimum down, won the first hand. I was like, well, I'm going to put everything on because clearly I'm, you know, in a winning mindset. you know, that's, that hasn't really worked out for me in the past, but any case, what do we know about the deal size and the structure, especially with that fast follow of the, the full on

Aaron Alpeter (41:50)
Well, we don't really know all that much. There's a rumor online that Hoka was acquired for like $1.1 million, but that number needs to really be handled carefully because it could be misleading of taking at face value. ⁓ The figure appears to reflect the final step in the acquisition. So we don't know how much the business was, they sold with the minority investment, but it's safe to say that

this was not a massive deal and it was relatively low valuation. Let's assume it's a sub $15 million brand with strong early signals, but limited scale. But regardless, Decker's has done really, really well with the deal. And it's likely that the founders rolled over a large portion of equity. They kept Jean-Luc Diard as involved. So he's still with Decker's today. He was able to preserve the product philosophy and ensure that the growth decisions didn't dilute what made Hoka special in the first place.

And Deckers recognize a specific kind of opportunity here, a product with an unusually strong conversion retention, but really constrained by scale. And so they recognize that they didn't need to reinvent the brand or reposition it. They needed to amplify something that was already working. And that's just ultimately what turned this niche subscale running shoe company into a billion dollar brand. It wasn't just more capital, but the right kind of capital applied with patience and the clear understanding of what not to change. I think it's really interesting to look at

where they've been since this. So since the acquisition, Hoka has become one of the most successful examples of disciplined brand scaling and footwear. Deckers has provided the infrastructure, the supply chain scale, the working capital distribution, the demand planning, but still largely preserving their product identity and channel strategy. The brand has expanded from ultrarunning into road running and into the broader consumer segments like walking, healthcare, lifestyle, et cetera.

and they've changed their position to be all around cushioning and comfort. So it's a much bigger group of people that are interested in addition to the ultra marathoners. And so today, Hoka does over one billion in annual revenue in recent years. So there's a period of time where they were growing 40 % year over year. And they are just one of the fastest growing footwear brands to get that scale in a period of time. And so I think the impressive thing here is that they've done this without being commoditized.

a really clear point of view in a crowded market, which is ultimately what made them valuable in the first place.

Mark Riskowitz (44:07)
Aaron, this has been a really fun episode. Like I said, I'm going to get a million ads for Hoka probably after this. And I really have with all the research.

Certainly taught a lot about and also changed my understanding of this brand, especially with Footwear in general. And I'm curious, what are some of the major takeaways our listeners should remember from this particular episode?

Aaron Alpeter (44:29)
Yeah, well, first up, thank you so much for being on. This was a lot of fun. I always like spending time with you. I think for me, as I think about Hoka, some of the key lessons are one, the problem you choose to solve matters more than the product that you built. And so Hoka really didn't win because they wanted to build a better running shoe in the traditional sense. They won because they chose a different problem to solve. And so the best early customers are usually not the biggest and

but they're the ones that are most sensitive to the problem. so, Hoka didn't start with mass market runners. They weren't trying to be for everybody. They focused on the ultra runners.

Mark Riskowitz (45:05)
For me, it's that great products often look wrong before they look obvious. I think that that's a theme I'm detecting. Hoka almost failed because it looked slow, it looked bulky. The marshmallow effect clearly didn't track in the beginning. And so it really cut it outside the lines in terms of that. And the key insight to your point was really about solving that real world problem.

And it probably, you know, isn't different enough. And so the product market fit is measured by behavior, not revenue. And I think that's where more recent times that those have been, you know, mixed and even at times conflated a lot. ⁓ Hoka was likely a $15 million branded acquisition. The customers came back, retailers reordered, adoption spread organically. The lesson of retention and conversion matter more than early scale, I think is paramount and should

Aaron Alpeter (46:02)
Yeah, yeah, you don't want 100 million people trying it one time and then never buying it. It's called a bubble, so it makes a lot of sense to me. Well, Mark, this is great. Thanks again for being on. And thank you for all of our listeners for tuning into this episode of Ecommerce on Tap. Check out Hoka check out Caraway and we'll have you back next time.

Mark Riskowitz (46:08)
Yeah.

Great, thanks so much for having me and let's go do some running.

Aaron Alpeter (46:23)
Let's do it.