I think that Paul and the AE management team are doing a lot of great things (for example, the number of ways through which customers can buy AE shoes; and the great customer service level of many of the SAs), but their treatment of the SF MTO program is a misstep. The MTO program did a couple of really good things; first, and most importantly, it was an incredibly useful source of information for AE about its core customers’ interests. AE’s design department could have been making much better use of the MTO program in terms of deciding what can reasonably be done, and what new directions customers want to go. Secondly, the MTO program gets long-term customers thinking about how they can move forward with their own collection in a way that leads to much deeper knowledge about the AE line of shoes and leathers, and that usually results in future non-discounted sales. Which brings me to my other point about AE missteps…
I once heard Paul mention in a video interview (that I cannot find now) that you can’t grow market share selling $350 shoes, which is why AE developed the line of shoes made in the DR. This, and the fact that AE is trying to get into clothing and other accessories scares me into thinking that AE is either deviating from or not fully aware of its value proposition and the core resources that support it. AE offers great fitting, incredibly comfortable, long-lasting, aesthetically pleasing, American made shoes at a reasonable price. Cheap shoes, huge variety, or unstructured sport coats and chinos won’t bring more customers out of their Cole Haans and Hugo Boss shoes to AE. There are very few competitors in the market that AE’s value proposition serves, and as its core market, AE should be working to grow that expanding market aggressively rather than moving into lower-price markets. AE should be doubling down on the skills of the employees who make the shoes. By the increased resources AE has been pouring into developing a market for its own 2nds, it does not look like that is what AE is doing. The Shoebank is great, but look at the enormity of the selection - that would scare the crap out of me if I was senior management!
Furthermore, as a big fan of AE shoes, I was happy at one time to get a pair of Longbranch boots at a $50 discount from their retail price (so, I happily paid $300). Now that I have purchased several pairs of shoes from the Shoebank for $150, I can’t imagine paying $385 for a pair of AEs unless they are an MTO. So, the huge selection and availability of nearly perfect shoes for @ $150 has destroyed some of AEs original value proposition for me (and I’m sure for other AE fans). I believe that AE could solve this by reducing the huge number of styles that they produce and the amount of churn in their selection (for example, why on earth do I have to MTO a pair of burgundy Macneils when I can just order this clearly esoteric style directly off the website)
Decide on the core styles, offer a good selection of colours, welts, edges, and soles on those core styles, and focus on training and keeping employees who can produce them more reliably. Rather than investing resources in selling shirts and key chains, and looking to technological automation to reduce production errors, give employees (and customers) a clear understanding of what AE is all about, hire employees who can demonstrate the ability to work to exacting standards and reward them consistently for quality work, and don’t overburden the manufacturing process with novelty styles so that employees lack the resources to perform consistently high quality work. Rather than looking to bring the low-end of the market to AE through products or pricing, they should be looking to take existing customers up-market. AE should be offering employees a career path that includes woking on elite production lines - the independence line is a great move in that direction, and the MTO program could be moving in that direction as well.
Cancelling the SF MTO program appears to have been a spreadsheet-based decision that ignores the informational benefits. I hope AE stays close to its core value proposition, and I hope they come out with a brown grain Macneil with a dainite sole for Fall (‘cause I was about to MTO one).