Small Business: Heelys Wheel Ahead

In Japan kids dance in them, figure-skating style.  In Canada they glide in them to whack a street-hockey puck. And from London to St. Petersburg, preteens use them as alternative transportation. They're Heelys, and the brand is on the move. But how does a company with $40 million in annual revenues and a slender marketing budget expand to more than 60 countries in less than five years without getting lost? HSL Inc., launched in late 2000 with one product, posted U.S. sales of more than $36 million last year--an increase of 250%--and about $2.4 million in Europe (up a respectable 200%) while the company was opening up Latin America and combatting piracy in Asia. "Our marketing strategy is universal," says Mike Staffaroni, CEO of HSL, which is based in Carrollton, Texas. From Day One, the company has aimed at controlled distribution and growth, maintaining mystique by selling at premium-priced, higher-end retailers and "nix to the likes of Wal-Mart or Target." It positions Heelys as sporting equipment, not toys, despite a target audience of 6-to-14-year-olds.

The key to selling the brand abroad has been keeping it hot at home. Whether in Detroit or Taipei, the company relies on grass-roots marketing. To explain how to "heel" skate on one rear wheel, the company cherry-picks a handful of cool kids, "like school athletes," in selected schools to join Team Heelys. These paid performers demo the shoes at malls, concerts and sporting events, and they also chat up Team Heelys wannabes on the Heelys website, generating cred and buzz.

Staying hot means constantly retooling, chugging out upgraded wheel varieties, fashions and comfort features twice a year. HSL has also added accessories like helmets and related products.

Months after launching in the U.S., HSL shipped to Japan, its first offshore market. The company couldn't afford its own subsidiaries, so within each country or region it signed an exclusive distributor, which uses HSL's global marketing strategy but handles TV advertising, local-language websites and events.

Take Japan. Public demos proved a perfect vehicle for product exposure in that densely populated country. HSL rolled out Heelys in brighter colors and produced Hello Kitty and Winnie the Pooh models to take advantage of local licensing agreements. But success spawned cheap copies, slicing HSL's monopoly market share in half. In a neat bit of counterprogramming, however, its man in Japan recommended fighting the pirates on their turf: self-serve discounters. So HSL created Cruz, a lower-priced sub-brand, exclusively for Japan.

Not every local distributor has worked out. "It takes time to find the right one and to see results," Staffaroni says. Britain started slowly but is now the No. 2 market in Europe, while sales in Russia have increased for three years. Within five years, the company hopes to distribute directly in Europe, eliminating the middleman and boosting margins. Longer term, the company wants to control distribution in South America, Canada and Mexico.