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The Drapers Interview: Colin Temple

By upping its distribution capabilities, Schuh is on a good footing for growth under managing director Colin Temple

Ask the footwear industry’s leading players what they think of Schuh and the response that comes back time and again is “slick”, with them heaping praise on the chain’s wide branded offer, its excellent back-office systems and great customer service. In a sector that has seen a great deal of change over the past year, Schuh continues to be one of the high street’s success stories.

Acquired by US group Genesco in 2011 for £125m, Schuh achieved sales of $364.7m (£216.8m) in the fiscal year ended February 1, 2014, slightly down on the $370.5m (£220.2m) it achieved for 2013. Profit has yet to be reported, but managing director Colin Temple says that, while it will be slightly down on the £25.5m it achieved in 2013 as a result of the popularity of its vulcanised styles that led to a bumper year, it will still be strong.

Whereas most retailers are trimming store portfolios, Schuh, which has 99 branches across the UK and Ireland, opened 18 stores last year and aims to open 10 to 15 this year.

To facilitate this growth Schuh has invested in a new £7m distribution centre, having acquired 245,000 sq ft of the J4M8 complex in Bathgate, West Lothian. The space is five times larger than its Warehouse at Schuh’s headquarters in Neilson Square in nearby Livingston, and will open in August or September. It will also create 50 jobs in Scotland over the next five years. Temple, who is described by his suppliers and competitors as one of the nicest people in footwear, says the development will improve efficiency and cut costs.

Schuh’s current warehouse has 82 chutes and, with one per store, there are not enough for the number of stores. This means it has to do two runs, the first for English and Welsh stores, which are further away, and a second for Scottish branches. “At the moment, our warehouse is very full and we have a lot of double handling to do. With the new warehouse we will get a much quicker turnaround,” says Temple.

The new warehouse will have 170 chutes, with the capacity to increase to 270, leaving ample room for growth, and will become Schuh’s primary distribution centre. The Livingston warehouse will remain open, but will focus on returns and stock that is being moved around the estate.

Temple says that due to the business’s West Lothian location, it can be hard to meet the expectations of consumers in the south of England that are used to being able to order before 10pm and receive their product the next day. To meet this demand, Schuh opened a satellite distribution centre in West Bromwich in the Midlands in December 2013.

“This allows us to put a veneer of as much stock as we can there and has enabled us to open our inventory until 10pm. So that extension is quite important,” says Temple. However, he adds that the biggest investment has been the store opening programme, saying that Schuh invests heavily in its own technology and that all of its systems are developed in-house: “For instance, we are experimenting with mobile payment in 14 stores. Restaurants have been doing it for years, but all they are doing is taking your money and not capturing any data, whereas we want to know what the SKU number was, what the size was, what payment method was used. It becomes very complicated and it has taken two and a half years to get all of the Wi-Fi to work.

“We’re just trying to find ways to speed up our customer’s journey through the store. We don’twant to rush them, we just want to take the unproductive bits out.”

While online accounts for a healthy 20% of sales, Temple adds that Schuh is “committed” to opening stores. The business has been focusing on London: it opened the doors to its second Oxford Street store in October and has a third planned for 2016, while other recent openings include Covent Garden in March. “The people are there and the money is there. We are also under-represented in the M25 corridor,” he says, adding that around three Schuh Kids stores will open this year, in addition to the three last year. Further investments include a stock room conveyor at its Marble Arch store to improve efficiency and stock room management, and kiosks where customers can buy from the online catalogue.

Temple says: “We want to be leading edge, but not bleeding edge. We don’t want to be crazy and get our fingers burnt with technology that doesn’t work, but when we feel it is robust enough we try to take it on board. The kiosks can tell customers which store has the shoes they want, can print them a ticket to say what the shoe is and where the store is, and at the same time alert the other store to put those shoes away for that customer. It’s all about service.”

The investments haven’t gone unnoticed by Temple’s peers. Daniel Rubin, chief executive of footwear chain Dune, says: “I have huge respect for Colin. The investment in technology Schuh has made has been stunning, and certainly industry leading. Theygot into multichannel way before anyone else and are continuing to develop it. In terms of technology and merchandising, they are strong.The other area where they are really strong is customer service.”

David Short, country managing director at Brantano and Jones Bootmaker-owner Macintosh Retail, agrees: “In a period where footwear multiple market share has declined, Schuh has established a clearly defined market position and is a destination store for a generation of young consumers. The business is built on brand authority and excellent service, but to deliver the consistent level of growth that it has in recent years it would be naive to underestimate the strong business processes and attention to detail that clearly underpin the organisation.”

Temple says Genesco, which also owns US footwear chain Journeys, leaves Schuh to run itself: “Every Monday I have a conversation with head of retail Jim Estepa at Journeys to discuss trading in our markets. Every month we’ll have a video conference with the Genesco management to talk about what our expectations are for the next month. I’ll also go there two to three times a year, and they will visit about the same number of times.”

He adds that because Genesco is listed on Wall Street, Schuh has a conversation with chief executive Robert Dennis every quarter so he can update them on how the share price is doing, and Schuh will present one- and five-year plans.

The partnership allows for investment into the business, and Journeys’ 960 US stores mean Schuh has greater clout when it comes to buying.

Temple admits that while Schuh has a comprehensive offer - stocking 93 brands ranging from Nike to Ugg to Converse - it is not unique, which makes its service proposition more crucial: “If you can offer a better experience for customers, they might have a propensity to come to back to you. The reality is by not having a unique product offer there is always the chance they might go somewhere else.”

Temple says footwear retailers must do one of three things to flourish: they can be the cheapest; offer something unique via their own-brand offer, which also allows for more “price elasticity”; or, as in Schuh’s case, offer an appealing shopping environment with the brands consumers want, along with great customer service. He adds: “If you can do all of those things, then there is a person in the market for you. And I would argue that those that have fallen by the wayside haven’t fitted into one of those categories.

“Barratts [which collapsed last year] perhaps wasn’t the cheapest, it didn’t offer something unique and the environment wasn’t special. Office is a good example of a retailer that has got the environment right. Its stores have a great environment that offers the footwear young fashionistas want, and it does it well.”

Schuh was established in 1981 and sales are split 50% women’s, 45% men’s and 5% children’s. Branded footwear accounts for 90% of turnover, and the mix is updated every season, with women’s labels Privileged, Ego & Greed, Youth Rises Up,

BucketFeet, and Swedish Hasbeens added, while men’s saw the introduction of Ecoalf, Jerusalem and Android Homme. However, Temple declines to reveal which brands are the best performers.

Priced between £20 and £110, Schuh carries 300 styles each season in its own-label collection, which accounts for the remaining 10% of turnover. Temple says that, while the margins are higher, the terminal retail price can often be lower: “It’s very hard to be a mono-brand footwear retailer. Dune does it quite well, but it is one of the few.”

In total, Schuh carries about 3,000 lines - but its largest store on Oxford Street can only display 2,200, so merchandising is key. “We stagger our ranges over the stores,” Temple says. “If we open in a new market, then we give the store a bit of everything, give it some time to see what sells and then take away lines that don’t sell. So all of our stores have unique ranges massaged by local demand.”

Harvey Jacobson, chairman of footwear brand house Jacobson Group, says Schuh has a “knack” for covering an “awful lot” of brands: “The offering is fantastic, with a lot of brands and a great selection, which is down to the merchandising side of the business. They have phenomenal systems, which are really slick and minimise their exposure to over-ordering on stock. They get the mix between branded and own brand right. Some stores overload on own brand, and others overload on purely branded.”

Despite strong trading in the UK and Ireland, Schuh has yet to follow the likes of Dune to international success. International sales only account for about 3% of the total, and the French website it launched in 2012 closed last year after failing to “gain traction in the market”, says Temple. However, he adds that as Schuh’s UK footprint is getting “mature” it might trial a store overseas, most likely in France, in the coming year. With a second foray into international in the offing, Temple will be hoping Schuh can remain one step ahead of the competition.

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