The Rise and Fall of Shoes of Prey

As a startup founder, one can learn a great deal from both success stories and failed ventures. Shoes of Prey, a once-promising startup, experienced a roller-coaster journey before its eventual decline. In this blog, we will discuss the company’s rise and fall, the reasons behind its failure, and the lessons that startup founders can take away from its story.

The Beginning: Shoes of Prey’s Vision

Shoes of Prey launched in 2009 with a clear vision: to revolutionize the retail industry through personalization and customization. The company believed that the future of retail lay in providing customers with unique, tailor-made shoes. And, for a while, it seemed as if they were onto something big.

Michael Fox wrote:

“We launched Shoes of Prey in 2009 with the vision that personalisation and customisation were the future of retail.”

Early Success: Traction Within a Niche Market

Shoes of Prey initially found success within a niche market of women passionate about customizing their shoes. The company grew rapidly, primarily through word of mouth and PR, rather than paid marketing. Their low customer acquisition costs, fantastic net promoter scores, and self-sustained growth during the first 2.5 years signalled a bright future.

Ambition to Conquer the Mass Market

Encouraged by their early success, the Shoes of Prey team set its sights on the mass-market fashion customer. Market research suggested that this wider audience would also be interested in customizing their shoes, provided four key conditions were met:

1. Reduce lead times to under 2 weeks
2. Simplify the shoe design experience
3. Offer customization without charging a premium
4. Establish distribution where the mass market fashion customer shops

Expansion and Investment

Over the next five years, Shoes of Prey worked tirelessly to meet these conditions. They secured investment from venture capital firms and strategic partners, such as Nordstrom. They also established their own factory to reduce production costs and delivery times, re-engineered their shoe design user interface, expanded their team to 200 people, and set up distribution deals with major retailers like David Jones in Australia and Nordstrom in the United States.

Failing to Gain Traction in the Mass Market

Despite these efforts, Shoes of Prey struggled to gain traction in the mass market. Contrary to their market research, mass-market customers did not share the same enthusiasm for customization as their niche audience. Instead, they preferred to be inspired by trends, celebrities, and influencers and wanted to wear exactly what they saw—both in terms of style and brand.

The mass market customer’s unwillingness to invest time in creating personalized products led to decision paralysis and lower conversion rates. Shoes of Prey had built its entire strategy around a market that, in reality, did not want its product.

Attempting a Pivot

Realizing the need to adapt, Shoes of Prey attempted to pivot to two adjacent areas that leveraged their unique one-at-a-time manufacturing capability:

1. Serving customers with small, large, wide, and narrow feet: With 76% of the female population needing narrow or wide shoes, Shoes of Prey saw an opportunity to cater to an underserved market. However, the challenge lay in educating these customers about proper shoe sizing, while managing a complex manufacturing business.
2. Short, fast-run manufacturing for other retailers and brands: Traditional shoe factories in China require large minimum orders and long lead times for production and delivery. Shoes of Prey could produce shoes efficiently with minimums of a single pair and delivery times under 2 weeks, which seemed like a promising alternative.

Challenges and the Inevitable Decline

While both of these approaches showed some potential, they faced two significant challenges:

1. Shoes of Prey’s operationally complex business model had high fixed costs, requiring scale to achieve break even. “76% of the female population should be wearing a narrow or wide shoe and don’t because mass-produced shoe brands can’t stock these shoes due to the high inventory costs.“
2. Producing shoes one at a time, while complying with environmental, health and safety, and labour regulations, resulted in higher unit costs than mass production in Chinese factories. “Shoe factories in China generally require minimum orders of 1,000+ pairs per style and 3–5 month lead times for production and delivery. We were able to produce efficiently with minimums of a single pair and delivery times under 2 weeks.“

Despite early signs of success in these new markets, Shoes of Prey failed to prove that they could generate enough revenue at a large enough scale to cover their fixed costs. With their existing funding exhausted, they were unable to secure additional investment to continue pursuing these avenues.

Key Learnings for Startup Founders

Shoes of Prey’s rise and fall offer valuable insights for startup founders. Here are some key takeaways:

1. Ensure that your business can scale: As a custom-order footwear business, it was not an easily scalable business model. The operations for producing shoes one-by-one incurred high fixed costs for the brand, without economies of scale. If you don’t have a plan for how you can scale on a unit basis, you won’t be able to create a large startp.
2. Understand the psychology of your target customer: Shoes of Prey made the mistake of not delving deep enough into their mass-market customer’s psyche. While market research indicated a desire for customization, in reality, these customers wanted to be inspired by existing trends. Ensure you truly understand the motivations and desires of your target audience before attempting to change consumer behaviour. “If I ever find myself in a position where I’m attempting to change consumer behaviour, I will ensure I’ve peeled back the layers to truly understand the psychology of my target customer.“
3. Focus on existing consumer behaviour frameworks: Another lesson for founders is to choose a business that works within existing consumer behaviour frameworks. In the case of Shoes of Prey, their early success within a niche market could have been sustained if they had not attempted to change mass market consumer behaviour.
4. Be cautious with venture capital: Raising venture capital can fuel growth, but it can also force a company to scale too quickly or pursue unsustainable strategies. Shoes of Prey might have fared better if they had focused on building a strong, smaller business serving their original niche market.

Conclusion

The story of Shoes of Prey serves as a cautionary tale for startup founders. As you build your business, remember the importance of understanding your target audience, working within existing consumer behaviour frameworks, and being cautious with venture capital. By learning from the experiences of others, you can increase your chances of success and avoid the pitfalls that led to the downfall of once-promising startups like Shoes of Prey.