Howard Schacter, Steve & Barry’s

True story. I”m walking to work recently when a guy stops me. “Nice basketball shoes,” he says. “What are they?” “Starburys,” I reply. “Where’d you get ’em?” “Steve & Barry’s.” “How much?” “$14.98.” “HOW MUCH?” “$14.98.” “Where’d you get ’em?” “Steve & Barry’s.”

The next week, I see the same guy wearing the same shoes. “Nice basketball shoes. What are they?” I ask him. “Starburys.” “Where’d you get ’em?” “Steve & Barry’s.” “How much?” “$14.98.” “How’d you hear about ’em?” I ask. “A guy I know,” he replies. “He’s an expert on basketball shoes.”

Word travels fast, even without a huge marketing budget. That’s especially true when an NBA star endorses and wears $15 basketball shoes. But that’s also what happens when you are a retailer with such absurdly low prices that even Wal-Mart starts to look pricey. Steve & Barry’s University Sportswear was founded in 1985 by co-CEOs Steve Shore and Barry Prevor as a place where college students could afford to shop, with nothing higher than $7.98. That’s shirts, sweats, sweaters, jackets, everything.

How the Port Washington, N.Y.-based operation keeps prices low isn’t a secret. They negotiate great deals with mall landlords and source products directly from overseas. This strategy has served the company well. It has more than 200 stores in 33 states, now adding an average of five per month. In November and December, S&B’s plans to open about 90 new locations. And with celebrity-backed brands like Starbury and Venus Williams’ EleVen, they’re continuing to shake up the retail industry.

That latest twist came after S&B’s hired Howard Schacter as chief partnership officer in 2005. Schacter had previously worked at MKGT Partners, New York, which provided marketing services for such clients as Coca-Cola, CBS and Tommy Hilfiger. His contacts as a principal there and from his prior job as svp-corporate communications at Clear
Channel Entertainment, New York, were extensive. Among them was Jordan Bazant, a founder and principal at The Agency Sports Management &
Marketing, New York, who represented New York Knicks point guard Stephon Marbury. Marbury’s basketball shoe deal with And 1 had expired, so Schacter told Shore and Prevor that he wanted to approach Bazant with a unique proposal: Marbury could design a signature line of “Starbury” shoes priced at $14.98 but equal in quality to shoes 10 times that amount, as well as a sports apparel line where no item would be priced higher than $19.98.

But there was another angle to the pitch. While an NBA star might command a $10 million endorsement deal over a five-year period, Schacter suggested that Marbury’s pay would be based mainly on royalties. “They were looking for a quality partnership and we were looking to expand our brand, and it all came together,” said the 42-year-old Schacter.

Marbury liked the high-quality, low price-point promise, which, as he later said, meant “we can help teach kids to be responsible, earn their own money and buy these shoes without asking their parents for money.” When the collection was unveiled in August
2006, Marbury committed his time and energy by handing out Starburys to high school athletes at basketball camps, on playground courts and in barber shops. He wore on-court the exact same shoes that consumers get off the shelves. He even defended them against NBA star LeBron James, who has a $90 million deal with Nike. When James rejected the idea of backing a low-priced shoe, telling Newsday, “Me being with Nike, we hold our standards high,” Marbury replied, “I’d rather own than be owned.”

Steve & Barry’s doesn’t share financial figures. But after the Starbury launch, S&B president Andy Todd said, “We sold out what we thought was a couple of months of shoes in three days.” In November, Marbury himself offered, “I sold 3 million pairs of sneakers already.”

The success of the Starbury line enabled Schacter to use his contacts to open other doors. Since June, Steve & Barry’s has launched exclusive signature lines from actresses Sarah Jessica Parker and Amanda Bynes, and golfer Bubba Watson, and previewed lines from NBA all-pro Ben Wallace and tennis star Williams (see sidebars, this page). No item in any line is priced higher than $19.98.

This strategy is having a major impact at retail. “Since June, when we launched
Sarah Jessica Parker’s Bitten line, we’ve seen a dramatic increase in the number of women shoppers at our stores,” said Schacter. Likewise, Marbury, Wallace and Williams are attracting, among others, more urban consumers, Watson more upscale shoppers and Bynes teen girls.

Despite its higher profile, the chain has no plans to launch major ad campaigns.
Instead, it relies, as it has since 1985, mainly on word-of-mouth. “In 2005, we received the equivalent of about $19 million in advertising from about 100 million consumer pr impressions. We translate as one impression each time Steve & Barry’s is mentioned on TV or radio, and 2.7 per print [newspapers, magazines],” said Schacter. “That was mainly for store openings or general news.”

“I distinctly remember in 2005 the first product placement in the company’s history, a model on the cover of Women’s Health magazine wearing a pair of our
women’s cargo pants. It drew a roaring applause from what at the time were about 60 corporate employees.” There now are 500. Schacter said in 2006 the company got about $50 million worth of advertising from about 1.5 billion media mentions and he expects those numbers to double in 2007. Chew on this: Steve & Barry’s spent no money on ads in 2004, $525,000 in 2005, $2 million in 2006 and $500,000 January-July 2007, per TNS.

This year, Parker wore items from her just-released Bitten line on the June 2007 cover of Glamour with a six-page spread, and also on Oprah; Bynes did the tween and young adult print and TV circuit to support dear; and Williams appeared on Late Night with David Letterman during her appearance at the 2007 U.S. Open, where she wore shoes and apparel from her line.

“None of these celebrities knew there was a store like ours before they were introduced to Andy Todd and learned about Steve Shore and Barry Prevor,” said Schacter. “It’s been a lot of fun to watch the vision become a reality.”

“The $14.98 Starbury shoe was a perfect addition to the marketplace because it appeals to a broad demographic,” said Bob Basché, chairman at marketing agency Millsport, Darien, Conn. “Bigger brands have to take notice.”

Someone should tell LeBron James that Nike has taken notice. Kevin Durant, a rookie with the Seattle SuperSonics, is working with Nike to create a “lowerprice shoe,” though the price has not yet been revealed and is at least a year away.

Even with this glam blitz, the firm maintains about 20% of inventory with products that built the business, including items from 400 exclusive licensing deals with universities and marketers such as Kellogg, Jeep and Hasbro (the largest apparel deal in the game maker’s history). However, this year, S&B’s dropped University Sportswear from its logo and became, simply, Steve & Barry’s to better reflect its expanded demographics.

“Our heritage is a store that caters to university students. But today, we are a family-friendly casual sportswear store with product categories for the whole family,” said Schacter. “Our competition is anyone who sells clothing in a mall environment, from Macy’s to PacSun.”

Vital to keeping prices low are wellnegotiated leasing deals to claim spaces
(stores average 60,000 square feet) from former occupants such as J.C. Penney and
Old Navy, although more stores than before are being built. It also means doing business directly with factories in Mexico, Africa, India and China. That has opened the company to attacks regarding alleged unethical production methods, a charge Schacter rejects. “Steve & Barry’s belongs to the Fair Labor Assn.,” he said. “Firmly embedded in our history and culture is a deep commitment to legal compliance and ethical business practices.”

Not to mention low prices. After all, the main reason people are now buzzing about S&B’s is it’s a place to dress like celebrities for under $20. Even a star used to Hollywood parties and perks has been converted. “Sarah Jessica Parker has definitely drank the Steve & Barry’s Kool-Aid,” said Schacter. “When we suggest something to her, she’ll say, ‘Oh, will that be too much? Do you really want to spend on that?”

Photo by Juliana Thomas