After raising Hotter’s UK profile, its director Peter Taylor plans to make tracks overseas.
In a footwear retail sector characterised by store closures and administrations over the past few years, comfort shoe business Hotter is a genuine British success story.
Since February 2010, its retail operation has grown from five to 66 stores across the UK, with managing director Peter Taylor presiding over its largest phase of growth as it opened 21 stores over a 12-month period to January this year. Now, following the sale of the company to Electra Private Equity for £200m in January, the former managing director of wellington brand Hunter has set his sights on increasing revenue by 2018 by focusing on international markets. “We doubled the business in the last four years and we want to double that again,” he says. “For the last two years we focused on the UK, building the Hotter name. We needed that to push out into the next wave, and international will be a part of that.”
Hotter, which saw sales increase 9% to £74.9m and profits jump 16% to £8.6m in 2012, is now plotting its first stores across the Atlantic, after launching a mail-order business in the US in 2007 following private equity firm Gresham’s acquisition of a minority stake for £21m.
“The US business had 60% growth last year; the direct-to-consumer approach is working well for us there. We’re having conversations with store groups and key retailers about opening wholesale accounts, and then we’ll start looking for locations for our first two or three Hotter stores,” Taylor says.
“It’s a three- or four-year plan. Like in the UK, we’ll place the stores in strategic locations where our customers are based and footfall is high. The temptation is to spread sales across the country, but we’ll focus on the east coast. The great thing is we already have hundreds of thousands of customers there so we have loads of data on where they are.”
Hotter, which targets over-50s consumers, is planning to launch a mail-order business in Germany this autumn, with France to follow. It is also looking for a franchise partner to open stores in the Middle East before the end of 2014.
“It’s not one size fits all,” Taylor says. “We’ll work out what model is best for each market and it will inevitably change over time.
We have distributors contacting us every week to take on the brand, but we’ll take it step by step.”
Back In the UK, Hotter will open a further six shops this year in locations around the M25. “We’re not about central London trophy stores,” Taylor explains. “Retail is detail, but also choosing locations that will really work for you. At the end of the day, this is a business venture and has to be successful.”
Under Taylor, who joined in 2012, the business is not only growing its retail footprint but is also extending its product range and materials used to bolster sales: “One of the things I recognised when I joined was that the company had a narrow range. If you look at the footwear wardrobe, there are a lot of opportunities to go into different categories - more casual and formal styles, for example.
“One of our bestsellers now is a canvas shoe, for example - we never used to do canvas before.”
He also sees potential in the men’s range, which he says was an “untapped” market for Hotter: “Half of the over-50s are men - it wasn’t a focus for us. When you hit 50, your body shape changes and your feet change shape as well. Men need footwear as much as women do - it’s a notable opportunity for the brand and a great chance for me to look at this and ask how we are going to drive it forward.”
The men’s offer has been extended from a “few individual styles” to a 30-piece range for autumn 14 covering casual, formal and active shoes. He intends to double the men’s business, which accounts for 10% of the spring 14 collection, over the next two years.
“We have now focused in terms of design, and that has come through in sales. Our point of difference is engineered comfort footwear that looks stylish. Men are more tech-focused, so the communication has to be around that. We are one of only four Gore-Tex licensees in the UK, for example,” he points out.
The women’s collections will “continue to evolve” as new styles are added (including leather Chloe and Mellow wedges), classics updated and a greater variety of materials used - from character leathers to canvas and mesh fabrics. Hotter has around 200 wholesale stockists in the UK, and Taylor expects this to keep growing as retailers buy into new areas of the men’s and women’s ranges.
Hotter started life as a slipper manufacturer - Beaconsfield Footwear - set up in 1959 by Thomas and Harriet Houlgrave, parents of Hotter founder Stewart Houlgrave. In the late 1980s, cheap foreign imports flooded into the UK, challenging Beaconsfield Footwear’s profit margins and instigating a fall in sales. While researching new manufacturing processes, Stewart discovered the value of direct-moulded shoes with light, shock-absorbing polyurethane soles. He launched the Hotter Comfort Concept brand in the mid-1990s.
In 2003, the company invested £6m in a new factory in its hometown of Skelmersdale, Lancashire, and now claims to be the UK’s largest shoe manufacturer - making 1.6 million pairs a year, or one pair every 20 seconds.
The Dune Group executive chairman Daniel Rubin says Hotter is one of the “major successes” in the British footwear industry in the last two decades: “To have created a leading brand in this growing sector - one that is both retail and wholesale, UK and international - is an amazing achievement.”
Following the sale of the company in January to Electra Private Equity, Taylor says more development is on the way: “The site can grow another 50% to 60%. Having our own factory is a major point of difference - it gives more flexibility. If a style is selling well, we’ve got the ability to put more into production quickly.”
Manufacturing in the UK is a core part of the business - the entire collection is produced in Skelmersdale - and one that continues to be a priority.
Taylor says: “Made in Britain is important, it reassures customers of the quality of the product. The key thing is not to just pay lip service. It genuinely has to be a core part of the business.
“The founder [Stewart Houlgrave] made a lot of great decisions. The rest of the industry was getting out of UK manufacturing and he was investing millions of pounds. He built the brand by taking risks. That entrepreneurship is still important to Hotter - we’re not corporate, there’s a down-to-earth feel.”
Harvey Jacobson, chairman of footwear supplier Jacobson Group, says the fact that Hotter maintains a strong UK manufacturing base is “highly commendable”, particularity in a time when the lion’s share of consumer purchases are for footwear made overseas: “The business model is enhanced with [Hotter’s] vertical operation, from manufacturing to brand positioning, to retailing through shops and online.”
Taylor insists one of the key factors in Hotter’s success is the quality of its customer service: “It comes back to product and service. The customer is number one. It doesn’t matter how the customer engages with you as a brand, it has to be consistent. In our call centres, for example, we don’t work off scripts. Our origins are about customer service, communicating across a range of channels.”
Hotter is now concentrating on adding more stylish elements into its comfort footwear designs, as Taylor recognises its target market “feels much younger than the previous generation”.
“There has been a real change of attitude in the last 15 years,” he points out. “Mothers want to dress more like their daughters and people are staying active for longer. For us, it’s about recognising this and adapting the product. We’re aiming at a particular sector of the market and perhaps we are more niche than others - but you can’t rest on your laurels, you have to keep evolving. To keep new customers coming in, you have to keep them excited and that’s what we’ve managed to do.”
Taylor adds that his strategy is “not a revolution”, but keeping its core customer at the heart of the company is essential for future success.
“We are still small, but as we’re beginning to become more widely recognised, people’s preconceived perception of us is changing,” he says. “However, we can’t forget our target shopper. As we drive forward we have to remain true to the core ideals of the brand, which are style and comfort, made-in-the-UK principles and stellar customer service.”