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Mexican Shoemaker Relies on Sex Appeal, Not Bank Credit

Emyco’s “Sexy Walk” shoe line for women helped boost their sales in 2009.

As a shoemaker and retailer with a more than 80-year history, Emyco is a Mexican success story. But the difficulties the company faces in defending and growing its market are emblematic of the challenges facing the country’s medium-size enterprises.

The company was founded in 1926 by Felipe Martínez, who took advantage of abundant leather supplies and skilled metal craftsmen in the central Mexican city of León to lay the foundations of the country’s shoe manufacturing industry. His son, also named Felipe Martínez, joined the firm fresh out of university in 1964 with big plans of his own. “I felt the company needed to become international and to produce leisure shoes,” says Martínez.

To that end, Emyco struck a deal in 1967 with the American maker of Hush Puppies to distribute the shoes in Mexico. Five years later, Emyco reached an agreement with U.S. shoemaker Florsheim to open a chain of Florsheim stores in Mexico. In 1990, Emyco bought the chain from Florsheim, along with the use of its brand in Mexico. Both brands remain very popular in Mexico, where Florsheim’s best-known client is President Felipe Calderón. A laudatory letter from the Mexican head of state hangs on a wall in Martínez’s office. Martínez is also a close friend of Calderón’s predecessor, Vicente Fox, who was recruited into politics as a congressional candidate for the conservative National Action Party, or PAN, at a dinner held at Martínez’s home in 1988.

Although Emyco sells shoes through the American department store chain Macy’s — at an average price of $70 a pair versus $50 in Mexico — the company isn’t a big exporter. The domestic market, where Emyco owns 110 retail stores, accounted for just over 90 percent of the 6 million pairs of shoes it sold in 2009. Exports do serve as a barometer of quality control and competitiveness, though. “If we can adapt to the stringent requirements of the U.S. market, then we know we can compete against foreign imports coming into Mexico,” says Martínez.

Some 300 million pairs of shoes were sold in Mexico in 2008, with imports taking only 15 percent of the market despite relatively low tariffs of 15 to 17 percent on most footwear. To maintain its competitive edge, Emyco invests heavily in technology and quality control. Its main factory, where more than 1,500 employees work, sprawls across several acres of former ranchland on the southern edge of León. It takes 140 different assembly-line procedures — only one or two of them performed by each worker — to manufacture a single pair of shoes. Every finished shoe is inspected.

As a privately held firm, Emyco doesn’t disclose financial information. But the Léon Chamber of Footwear Industry says big outfits like Emyco earn a net profit margin of about 7 percent on an average pair of shoes, which suggests the company made a net profit of about $25 million in 2008.

With that kind of income streaming into the family business, Martínez’s son and likely successor, also named Felipe, can pretty much shelve the sophisticated financial tools he picked up abroad. After getting an MBA from the Thunderbird School of Global Management in Glendale, Arizona, he worked as a financial adviser for wealthy athletes at American Express Co. and then as a Goldman, Sachs & Co. broker before he was beckoned back to León by his father five years ago. He has slipped back easily into his hometown’s traditional pleasures, such as lunch at the Panteón Taurino, a cantina that serves hefty portions of barbecued pork tacos washed down with tequila. And he doesn’t miss Wall Street. “The financial industry is fun when the market is going up, but the shoe business is interesting even in a down market because you have to figure out the psychology of the client,” says the younger Martínez.

A case in point is Emyco’s “Sexy Walk” shoe line for women, launched to help the company bounce back from a 15 percent drop in sales in 2009. Company designers claim that granules on the shoes’ inner soles activate reflexology pressure points, making the body relax and releasing pheromones that attract men. The science may be debatable, but the marketing is certainly working. Orders were up 50 percent in the first quarter compared with a year earlier, and Emyco got a boost when Katie White, the lead singer of the British band the Ting Tings, wore “Sexy Walk” high heels at the recent Grammy awards ceremony. “Our women’s shoe production is completely booked until May,” says Martínez.

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