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Different by design

We are not a division of Nike, Proctor and Gamble or The Gap. We don’t advertise, sponsor extreme athletes, or trade on the NYSE. We’re proud of our independence. We live and breathe footwear.

– Chaco brochure

Mark Paigen dropped out of Vermont’s Goddard College after one year. For a time, he worked as a made-to-measure, custom shoemaker in northern California. Then, in the late 1980s, Paigen moved to Paonia, Colo., for “the beauty and small-town atmosphere.”



But after a year of running clients down the Gunnison Gorge as a river guide, he’d grown tired of the soggy tennis shoes on his feet.

“I started seeing the original Teva sandal, which I thought was pretty cool,” said the 46-year-old Paigen. “But I thought they could use some enhancements, too, like a pull-through strap – the keystone to Chaco design – instead of velco to cinch the fit.”




Paigen, as it turns out, was onto something. His idea for a new sport sandal – first named “Gecko,” switched to “Chaco” later due to a trademark conflict – found its way onto his workbench, and soon onto his own two feet.

“In the very beginning, I’d make them for myself, my fellow river guides and occasionally clients. And in ’89, I decided to quit guiding to see if I could sell a few more to folks,” said the Chaco president and CEO during an interview at the company’s 28,500-square-foot plant and headquarters, located a few orchards away from downtown Paonia.

“It takes awhile, and then when things begin to catch on, they tend to catch on somewhat quickly.”

Paigen – master inventor, designer, cobbler, entreprenuer, salesman and marketer – is also a master of the understatement.

From its origin as Paigen’s own individual enterprise, Chaco Inc. now employs approximately 100 people in Paonia and has expanded operations internationally to Italy (boots) and China (flip-flops), and domestically, as of last week, to Delta for a new distribution center. Last year, Chaco sold approximately 300,000 of its hallmark Z/1 and Z/2 sandals. This latest tabulation confirms that Chaco’s growth – despite a no-advertising policy – is nothing short of astronomical.

“Just to put it in perspective, in 1996 we sold approximately 20,000 pairs of sandals,” said Ed Wieland, Chaco’s director of finance.

Going by the numbers, Chaco’s growth amounts to an annual average increase of 60 percent from 1996 to 2002. “It really is impressive,” Wieland said, “from a pretty tiny company to one that’s fairly sizable.”

Chaco is an undeniable brand now. It’s irresistible albeit expensive – the sandals retail for $85 (on average), making Chaco’s the priciest footwear of its kind at the Ute Mountaineer in Aspen, for instance.

Paigen said Chaco’s market share in the multimillion-dollar sandal industry is “quite small,” but for how long that will remain a fair characterization is anyone’s guess.

“We’re about simple, functional, comfortable footwear, and it seems like the industry has gotten away from that, with more bells and whistles,” Paigen said. “People don’t understand biomechanics, they just understand how it feels.”

Assembly line

By popular vote, the men and women who make up Chaco’s 45-person assembly line at the Paonia plant work a four-day week. They used to work a regular five-day week, but as JoAnn Katzer, a Chaco production specialists said, “We all wanted to go to a three-day weekend.”

Now the crew works from 6 a.m. to 4:30 p.m., Mondays to Thursdays, with a half-hour lunch break. To combat monotony, workers switch stations – from sewing to gluing, for instance – every two-and-a-half hours, and they pump out an average of 1,200 pairs of sandals per day, 1,800 on a good day in the busy season.

The operation, a cozy configuration of sewing machines, buffing and gluing stations, combing and trimming areas, and finally inspection and packaging tables, mints sandals right into boxes. The finished products are sent to more than 1,000 stores in the Unites States, as well as a host of countries in Europe and Asia.

“It looks like mass confusion but we actually know what’s going on,” Katzer says during a tour of the plant.

The simplicity of Chaco’s sandal design is evident in the manufacturing process, particularly in what Paigen refers to as the “pull-through strap.” It enables the webbing that secures the foot to be tightened underfoot, literally through the sole of the sandal, meaning only one adjustable buckle is needed. By comparison, other prominent sport sandals are wrought with several adjustable straps, velco and even neoprene.

Chaco sandals feature contoured, polyurethane footbeds glued to the soles (three different soles are available), meaning Chacos are the only sport sandals that can be resoled. So when the new distribution center opened in Delta, the Paonia plant was revamped to include an expanded repair center, as well as additional office space. Not that Chaco sandals, with an unconditional warranty, have a habit of wearing out.

Brion After, manager of the Ute Mountaineer, has only seen one pair come back in three years.

“It’s been our No. 1 sandal the last few years, even though it’s the most expensive,” he said. “I saw the first pair ever come back – a woman had worn them out after eight years. They weren’t totally destroyed, just on their last legs.

“She bought a new pair.”

“The sandals haven’t changed hardly at all since I’ve been here,” said Katzer, who joined Chaco more than four years ago. “I was like the 16th or 17th employee they hired, and we were ecstatic if we broke 170 [sandals a day] when I first got here.”

Born and raised in Paonia, Katzer went to college in Grand Junction.

“And I knew when I came came back, this is where I wanted to be,” she said. “Specifically for women, this is about the only place you get paid a decent amount. It’s different for men with the mines nearby.”

Many workers in Chaco’s plant and offices wear (no surprise here) Chaco sandals, but there’s no requirement to do so. “There’s certain work stations where you can’t wear open-toe shoes, but everywhere else, sure. Some people even still wear their old Tevas.”

New designs

Last year, Chaco expanded into a new market with a line of three boots made in Italy (but designed in Paonia). And in 2004, Chaco plans to debut a line of long-awaited flip-flops called Z/rivatives, including the “Flip,” the “Zong” and the “Dipthong,” that will be manufactured in China.

Employing what Ute Mountaineer manager After called “a cutting-edge design,” the new Chaco boots don’t borrow much from the designs of competitors, and instead rely on workmanship similar to old logging boots. That is to say, they utilize little in the way of synthetic liners and insulation, and a lot in the way of layered, high-grade leather.

“We’re going to enter the boot market and do the same thing we did in the sandal market,” Paigen predicted. “It’ll take a little while, but with the comfort and durability, I think we’ll see the same success. No one’s doing it quite like this.”

While Chaco’s ad budget amounts to zero, the company donates 3 percent of its after-tax profits to nonprofits and environmental groups. Recipients include Paonia organizations like High Country News, the local public radio station and the local youth soccer program, as well as national groups like Leave No Trace, the Sierra Club and American Whitewater.

Chaco’s success, despite its no-advertising strategy, might mystify economists and MBAs, but the logic is simple for Paigen.

“People really believe in word-of-mouth,” he said, “and I think it carries more weight. And because our brand on average costs twice as much as others do … the product has to be that much better in order to get people to talk about it.

“Plus, I’d rather take the money from advertising and put it into making the product better rather than tooting our horn.”

It’s a formula that has worked with stunning success. And, for the time being, Paigen wants to continue growing the company in the footwear arena. He has no desire to expand into other products.

“I’m the last one to predict five years down the line, but I’d love it if we can stay in Paonia,” he said. “We have a good reputation in town, and we offer wages and benefits that are very competitive. The idea is, `Let’s make it as positive a work environment as we can because the quality will be reflected in the product.'”

As for what’s next for Chaco, Paigen offered this:

“A line of leather sandals and some other very technical footwear, which is somewhat top-secret.”

Tim Mutrie’s e-mail address is mutrie@aspentimes.com


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