New Balance’s vice-president for Europe, the Middle East and Africa Fran Allen talks to Drapers about retail expansion, striking the balance between performance and lifestyle, and why the UK is integral to the brand’s growth strategy
On a wet, grey day in Warrington New Balance’s modern and suitably “cool” European headquarters are an oasis in the proverbial desert. Neon signs, an American-style diner and wooden floors, reclaimed from a gym in Glasgow, bring an air of Americana to this corner of the northwest.
Drapers is here to discuss New Balance’s ambitions of taking on “the big two” – Adidas and Nike – in the performance arena, how it plans to maintain its foothold in fashionable lifestyle sector, and the opening of its European flagship store on London’s Oxford Street in October – its first full-price store in the UK.
Sporting a pair of electric blue 880s – New Balance trainers are compulsory for all staff – Fran Allen seems to embody the principles of this 110-year-old brand.
A family man first and foremost, the 62-year-old Bostonian has three children and five grandchildren – their photos are plastered on his coffee flask so he can bring them to work with him – and his open nature, sense of humour and passion for New Balance are palpable.
“Adidas and Nike are great brands but they can be a bit impersonal. We have a little bit more authenticity and a personal quality,” he asserts. He attributes this to the fact that the brand is still owned by entrepreneur Jim Davis, who bought the six-employee Boston firm in 1972 and grew it into the global corporation with 4,000 staff of today.
“We are still privately owned, so we are unique in our field. It impacts the way the brand acts and that trickles down to the consumer, says Allen. “They understand our roots and our history and appreciate that we are different to other brands, in a good way.”
Adidas and Nike are great brands but they can be a bit impersonal. We have a little bit more authenticity and a personal quality
It is this understanding of the brand’s heritage that Allen believes has led to New Balance’s exponential growth.
When he joined the firm in 1991 as executive vice-president of sales in the US, the business was making around $120m (£84m) globally. Within 10 years it rose to more than $1.5bn (£1bn). Today annual turnover is almost $4bn (£2.8bn) worldwide.
Growth in international sales has been a key factor in the proliferation of NB logos pounding the pavements across the globe. For decades the US and Canada made up two-thirds of sales but in the last three years that has flipped: the US now accounts for one-third of sales, while the rest of the world makes up two-thirds – a fact reflected in Allen’s position in the firm.
The outdoors enthusiast left New Balance in 2008 and spent four years as senior vice-president of global sales at rival footwear brand Saucony, part of Wolverine Worldwide. Allen says this hiatus was “helpful” for him and New Balance, as it gave him a different perspective and international training.
At Davis’s request, the keen fisherman returned to New Balance in 2013 as general manager of UK and Ireland. He and his American wife migrated to Warrington – to her initial horror – and last year Allen was promoted to oversee the EMEA region.
His remit is to grow the number of New Balance shops in Europe from 100 (currently focused on central and eastern Europe) to 350 across the continent over the next five years.
The company is also looking at buying back distribution in some of its key European markets.
“We bought back our Italian [distribution] business in January this year, so we will be doing that with one or two others,” says Allen. ”We’re also looking for ways to streamline our logistics to make our product more attainable and accessible across the continent.”
As part of the increasingly international outlook for this quintessentially American brand, the UK is an important market. At the brand’s annual conference last October the UK was highlighted as one of the three key markets for New Balance over the next five years – along with the powerhouses that are the US and China.
Although Allen declines to break out the percentage of sales generated in the UK, he says the contribution was “significant”: “The UK is a really important market for us – it leads the way for fashion. The fact that we are based here and there’s a London flagship on the way speaks volumes about how important it is for us.”
New Balance plans to open flagships in five or six global cities over the next couple of years, and the Oxford Street store will be “the biggest and the best”, says Allen.
The 14,000 sq ft shop at 287-291 Oxford Street, opposite John Lewis, is set across three floors and will feature “design your own” technology and “all the trimmings”.
“It will be our first full-price store in the UK [New Balance has eight outlet stores across the country] and it will be our showpiece,” says Allen. “Our outlets are usually between 2,000 sq ft and 3,000 sq ft, so this will give us room to experiment.
Retail will never be as big as wholesale. We aren’t competing with our stockists
“It is prime retail estate and a blank canvas for the brand. We can do whatever we want to tell the New Balance story and we will have hundreds of millions of consumers from around the world walking past.”
Despite retail expansion Allen insists wholesale is still at the heart of the business: “Retail will never be as big as wholesale. We aren’t competing with our stockists – we are just improving the brand and getting the New Balance name out there.”
New Balance has 487 UK wholesale stockists. They include “the big guys” such as JD Sports, Schuh and Office, as well as smaller operators, such as Drapers Independent of the Year 2015 Stuarts London.
Co-owner of the independent Ravi Grewal says the brand was “still strong” for his customers: “New Balance has refreshed its product with the launch of engineered styles, and the in-season pack launches still seem to be welcomed by sneaker heads. The ’made in the USA’ product is also in demand.”
Made in the USA is a large part of the New Balance story: the brand’s five US factories produce more than 4 million pairs of trainers every year. In 1979 the company opened a factory on this side of the Atlantic in Tralee, County Kerry. As demand grew, it needed to increase production, so in 1982 it moved to a 65,000 sq ft factory in Flimby, Cumbria, previously occupied by Clarks.
“We have a history of manufacturing here and it’s crucial for us internationally,” says Allen. ”Only 20% of what we make in the UK stays here – the rest gets shipped around the world to Japan, the rest of the Far East and the US. The Made in the UK product is extremely important to us as it sits at the top of our pricing pyramid [retail prices range from £110 to £150]. There is demand for it, so we would like to expand the factory further down the line.”
Allen says locally made product is a “significant” part of New Balance’s entire production, accounting for 10% to 20%.
Today New Balance is best known perhaps for its retro classics that don the feet of every other hipster in east London but the heritage of the brand is firmly placed in running and performance.
“We are on the fringe of fashion. We do so well in fashion shoes but we are still focused on performance,” insists Allen. “That’s where the long-term stability is and we will stay true to that authentic performance shoe. We want to grow that side more and that’s where we are putting our resources. Athleisure is important, of course, but performance is the point of the spear.”
Sales are split equally between performance and lifestyle but New Balance plans to grow the performance side, and aims to become the number one running brand globally and among the top three in performance within the next five years.
It will get there, believes Allen, through “heavy investment” and sponsorship. New Balance will sponsor the New York marathon in 2017 and has partnered with some of the biggest teams and personalities in the world of sport, including Liverpool and Celtic football clubs, England cricket player Joe Root and British tennis player Heather Watson. Performance footwear retails at between £40 and £125, while lifestyle prices range from £55 to £110.
Nivindya Sharma, retail analyst at consultancy Verdict Retail, says New Balance is in a good position to push its performance profile.
“Boosting its sportswear category can work, as it has a heritage in this field,” she says. “But New Balance needs to educate the consumer and tell them about this background, as well as the functionality and innovation of its sports products. The brand also has to be careful that it doesn’t alienate that lifestyle consumer – it needs to get the balance right, but it’s a good time to do it.”
Clothing will also play a big part in the expansion of the performance category: the brand wants to extend it from its current position as a “high single-digit percentage” of sales to the same level as its main competitors Nike, where 40% of sales is clothing, and Adidas, which has 50% clothing sales. Retail prices sit between £22 and £130.
The ‘cool factor’ won’t stay forever, but I’m hopeful we’ll sustain it
“Clothing represents a great opportunity for us to demonstrate or capabilities through retail and wholesale, it’s great for brand awareness,” adds Allen.
However, he realises the power of being a “flavour of the month” of sorts and plans to continue capitalising on it in the lifestyle category: “The ‘cool factor’ won’t stay forever, but I’m hopeful we’ll sustain it. If we can continue to innovate on the performance side, it will trickle into that retro product. It’s about giving the consumer choice.”
To bring the lifestyle consumer closer to the performance product, New Balance launched a hybrid collection for autumn 15 that combined the soles of performance trainers with the uppers of the classics.
Allen plans to grow this range for spring 17: “We realised there was a gap in the market between the two parts of the business. We are targeting that urban consumer who loves the classics and lifestyle shoes but needs more technology [in the sole] because they do sport. We see it as a huge opportunity for growth. It is all about finding that middle ground.”
Middle ground seems to be an essential part of running a business on such a fast growth trajectory. New Balance is trying to manage the contrast between, and combination of the performance and lifestyle sectors, while simultaneously dealing with dichotomies of its domestic and international markets, and the changing relationship between retail and wholesale. It appears that business, like life for this family man, is all about striking the right balance.