After taking the helm of Shoe Studio Group, chief operating officer John Egan reveals his plans for the footwear powerhouse and the challenges it faces
It’s nearly midnight and the Shoe Studio Group team are jigging to a remix of The Jacksons’ Can You Feel It pumping over the speakers in an exclusive Glasgow bar. They are celebrating the opening of a flagship Shoe Studio store - the second in its new chain of standalone stores.
John Egan, chief operating officer of the department store concession and footwear supply group, throws in some discreet moves of his own. He recently turned 50, but doesn’t feel it. “SSG is a young business. I’m surrounded by young people and it tends to keep you young in attitude and mind,” he says.
With an estimated turnover of £150 million, SSG needs the dynamism of youth on its side as it rolls out its first standalone high street stores. It faces a climate where specialist footwear retailers are being trampled by value fashion players and supermarkets. UK spending on footwear has grown by 34% since 2001, whereas specialist shoe shop sales grew by less than half that, according to Mintel’s latest market figures.
SSG has a 7% share of the women’s footwear market and its brands, such as Pied a Terre, Bertie, Nine West, Principles and Roland Cartier, sell from more than 270 UK outlets.
Though Egan joined SSG’s management team in 1999, he stepped up to the helm and became the public face of the business in November, when founder and chief executive Don McCarthy and financial director Stefan Cassar left to join House of Fraser.
In the laid-back, pre-launch-party atmosphere of Glasgow’s trendy Malmaison hotel, Egan explains in a softly spoken Mancunian accent the changing shape of the industry and how SSG plans to tackle it. “In three years it has changed beyond all recognition,” he says. “The low-price players have come in, whether it’s Primark, New Look or the supermarkets. At first it wasn’t significant, because they tended to be low-price and low-quality. But they’ve started to do well as they’ve moved into fashion.”
Today’s footwear customer has what Egan refers to as a “disposable lifestyle” - happy to pay £25 for a pair of shoes they will wear just five times. But it’s not just consumers who have evolved - fashion retailers have also muscled in on the market by rolling out footwear ranges. “Everyone wants to do footwear - the Zaras and Hobbs of this world,” he says. “It’s changed the dynamic of the footwear model because people used to go to a specialist to buy their footwear.”
Multi-brand concessions in department stores such as Debenhams and HoF comprise 90% of SSG’s business. The rest is made up of a smattering of brandalone stores, such as the Nine West store in London’s Covent Garden, and a small but growing wholesale arm. Egan says: “We looked at the market and said ‘what are our strengths?’ and ‘what can we do?’”
SSG’s strength is undoubtedly its brand arsenal, which stretches surprisingly far beyond its core labels. “We sell anything from Prada or Gucci all the way through to Diesel. Our brand portfolio has about 70 brands in it,” he says.
The weaponry in place, it is down to Egan to lay forth SSG’s battle plan to fend off the value and fashion players. Passing anecdotes reveal he has a knack for making the right choice.
Before joining SSG, Egan spent almost 20 years working for luxury footwear brand Bally, latterly as global sales director at its Swiss head office. It was there in the mid-1990s that he hit upon the idea that airport retailing would, to excuse the pun, take off.
“I opened Bally stores at the airports many years ago when everybody said ‘no one will buy anything at the airports’,” he says, mimicking a whining falsetto voice. “I remember the board meeting - they said people would never buy shoes there.” Bally now has 79 airport stores and, as for airport retailing as a sector, BAA reported sales of £2.34 billion last year.
In 2004 Egan, McCarthy and Cassar also correctly foresaw Baugur’s future influence in the UK, allowing it and a consortium of fellow Icelandic investors to take a 20% stake in SSG. Egan says: “We liked them very much. They were young, dynamic and also great fun. We thought Baugur would be a significant player in UK retail and we thought it better for us to be part of it than have it as one of our competitors.” They were right, but surely Egan could not have predicted the extent to which Baugur would affect the future of SSG and his career.
Egan was a stakeholder in the 2001 SSG management buyout led by McCarthy. Shortly after the deal, SSG bagged the exclusive UK licence for Nine West (which, Egan adds, it has secured for “many years to come”). SSG entered a growth period, which included the acquisition of Rubicon Retail, owner of Principles and Warehouse, in 2005. It was then SSG’s turn to become an acquisition target when Baugur-backed Mosaic Fashion, which owns Oasis, Karen Millen, Coast and Whistles, acquired Rubicon in October.
But it was one more Baugur acquisition that would break up the SSG triumvirate. In August last year the Icelanders teamed up with McCarthy to buy HoF, resulting in McCarthy and Cassar leaving Rubicon to head up the department store chain.
Egan misses the tightly-knit SSG team. “Myself, Stefan and Don were the three main shareholders. We always got on very well and all had strong views about everything. What I miss is their company. Even now I still see them a lot and we speak on the phone most days - it’s like being married,” he jokes.
Egan now reports directly to Mosaic chief executive Derek Lovelock, and insists that both Lovelock and Baugur - Mosaic’s main shareholders - let each business, including SSG, run autonomously. It therefore falls upon Egan to command SSG’s ambitious growth strategy, which involves rolling out standalone stores, developing footwear for Mosaic’s brands, international growth, an ecommerce site, and new footwear and accessories concessions.
The standalone Shoe Studio fascia aims to showcase its men’s and women’s brands. The Glasgow flagship, which has been designed to resemble an upmarket hotel lounge, stocks the core SSG brands, as well as high-end labels All Saints, French Sole, Kenneth Cole, Paul Smith and Oliver Sweeney. It sits in a strip of high-end footwear retailers including Office, Aldo and Russell & Bromley on Buchanan Street, which is Glasgow’s version of Oxford Street.
Egan is not worried about company-owned stores cannibalising sales in its department store concession business. Shoe Studio in Glasgow, for example, has opened opposite a House of Fraser with an SSG concession. “It gives us an opportunity to profile our brands in a fantastic environment. It improves the presence of the brands so people see them in the department store in a better light,” he says.
The first Shoe Studio store opened at Gatwick in May 2006, thanks to Egan’s penchant for airport retailing, and there are plans to open 15 more stores in the next five years.
Having recognised that fashion players will continue to encroach on the footwear market, Egan has decided if he can’t beat them, he may as well supply them. SSG is well placed to do this, with six Mosaic brands on its doorstep. It has already proved its worth by developing footwear for Rubicon stablemate Principles, which sells in the clothing retailer’s shops and in SSG concessions. The group is now working on a similar model for Warehouse and Coast.
Outside Mosaic, SSG has also recently developed footwear for young fashion label All Saints (yet another Baugur-backed retailer) and is working on a range for HoF’s in-house fashion label Linea. If all that wasn’t enough to chew on, SSG’s close ties with HoF will be further exploited in the autumn, with the trial of a 500 sq ft shoe and accessories area. The strategy will combine SSG product with jewellery, scarves and handbags from Mosaic brands, such as Oasis and Warehouse.
Egan says young shoppers are after a one-stop-shop that allows them to outfit-build. “In department stores there’s no one doing that. You may have a fantastic fashion offer, but you end up with clothing area after clothing area.”
He hopes that collaborations will also help SSG expand its international presence, which at present accounts for between 3% and 4% of its business. Egan says: “We run the shoe business in Ilum in Copenhagen, we opened nine months ago in De Bijenkorf in Rotterdam, and will open within its store in The Hague in autumn. So we see further opportunities to grow.”
In the past it was McCarthy, widely known as a larger-than-life character, who spearheaded SSG’s growth. Cassar describes him as “the most forceful, charismatic, inspirational leader you’re likely to meet”. It was a tough act for Egan to follow, but Cassar says McCarthy started to take a back seat at SSG after the Rubicon acquisition. This enabled the footwear business to take on a life of its own under Egan’s stewardship.
Another source, who worked closely with both McCarthy and Egan, agrees they have completely different management styles. She says of Egan: “John is really approachable with a great sense of humour, but is also very driven.”
Egan would be pleased with this synopsis. He says: “My day is all about people. I start off on the mobile and have a bit of a catch-up. A lot of the day is spent with product people, visiting suppliers and spending time with brands. The rest of the time is in the stores.”
He is proud of SSG’s strong people ethic, preferring to promote internally, as it has done with Cassar’s position and in the creation of new design teams for each of the Mosaic brands.
As he mixes with his staff on the dance floor, it is clear Egan does not believe in an ivory tower style of management. In a challenging environment for specialist footwear retailers, he is working hard to ensure that SSG has all the right moves.
SHOE STUDIO GROUP: STEP BY STEP
2007: SSG launches Shoe Studio flagship in Glasgow
2006: Mosaic Fashions acquires Rubicon Retail - the new holding company for SSG, Principles and Warehouse
2005: SSG buys Rubicon, which owns Principles and Warehouse
2004: An Icelandic consortium, including Baugur, buys 20% stake
2002: Kenneth Cole licence agreement is secured
2001: Don McCarthy heads a management buy-back; Nine West licence agreement secured
1999: Nine West bought by Jones NY
1997: SSG acquired by Nine West
1991: SSG founded by Don McCarthy and David Spitz.