Why DSW Is Expanding Overseas

Why DSW Is Pursuing Overseas Expansion
The Dubai skyline.
Shutterstock.

After covering the U.S. with nearly 500 stores, DSW Inc. has in recent years turned its focus to opportunities in international markets, including Canada and the Middle East.

The Columbus, Ohio-based company first set foot across the border in May 2014, when it acquired a 49.2 percent interest in Town Shoes Ltd., the largest multibrand footwear retailer in Canada, for $68.7 million. At the time, Town Shoes included 182 stores under four banners: Town Shoes, The Shoe Company, Shoe Warehouse and Sterling.

As part of the deal, DSW gained immediate intel on the Canadian marketplace, as well as a knowledgeable partner to help execute its own expansion goals.

Town ShoesTown Shoes in Canada. Courtesy of company

In July 2014, the two companies jointly opened the first two DSW Canada stores, in Mississauga and Newmarket, Ontario. At roughly 20,000 square feet each, they had the distinction of becoming the largest footwear stores in the country.

“DSW in Canada is probably the leading indicator of how we’ll show up internationally,” said Simon Nankervis, EVP and chief commercial officer for DSW. “Even with Canada being so close to the U.S., we’ve been able to position ourselves as we are today, not the way people typically believe us to be. The perception [of the consumer] is that this is the place where I go to get great on-trend footwear, and the pricing is a secondary element.”

Over the past two years, the partners have launched a total of 17 locations in Canada. Nankervis noted that the stores are broadening DSW’s demographic. “I do see the younger customer shopping our stores, especially with the trend in athletic and vulcanized sneakers at the moment,” he said.

The stores stock a wide selection of top brands, including Nike, Steve Madden, Ralph Lauren, Keds, Lacoste and Coach, with offerings for men and women. Children’s merchandise is not currently available there.

The Canadian operation does, however, have a strong kids’ business with The Shoe Company banner, which is focused on value family footwear. “If you think about the buckets in the way our customer shops, The Shoe Company is our mainly good customer, DSW is our better customer, and Town Shoes is our best customer,” said Nankervis, noting those different formats have provided insights to help the retailer test new store setups.

The Shoe CompanyThe Shoe Company in Canada. Courtesy of company.

“We’re learning a lot by how The Shoe Company business in Canada works,” he added. “That’s helping us learn more about running a smaller-format concept.”

After finding success in Canada, DSW next turned its sights on a more distant destination. In August, the company signed Dubai-based retail conglomerate Apparel Group as its exclusive franchise partner in the Persian Gulf. Together, the companies will expand DSW into Saudi Arabia, Bahrain, Qatar, Kuwait, United Arab Emirates and Oman, with a goal for 40 stores across the territory.

The first few locations will open toward the end of the first quarter of 2017. “We want to take the time next year to make sure all our systems are set up and make sure our vendor partners understand the way we want to work with them and with our franchisees,” said Nankervis. “And then, we’ll [roll out] in a fairly aggressive way in 2018, 2019 and onward.”

The executive noted there are several advantages to entering the Persian Gulf region, including experienced franchisees that know how to work with franchisers in the development process. “Also, it’s not a place where you’d go and set up your own business,” he added. “You’d need to be a local to actually run a business there.”

DSW is optimistic about its prospects in the Middle East because there are few multibrand retailers competing in the overseas markets. And its large selection of brands and styles means it can curate assortments that will be unique to each location.

DSWA DSW storefront. Courtesy of DSW Inc.

Nilesh Ved, founder and chairman of the Apparel Group, pointed this out in a statement at the time of the sale. “With DSW’s compelling merchandise and brand recognition, coupled with our group’s marketing expertise and knowledge of the customer,” he said, “we will create an incredible experience in footwear retailing in the region.”

Nevertheless, market analysts are maintaining a wait-and-see attitude in regard to DSW’s international growth. “Because of the similarities between Canada and the U.S., DSW will likely buy the remainder of that joint venture in the next year or two. But outside of that, there’s still a lot to be learned,” said Camilo Lyon, an analyst with Canaccord Genuity. “Time will tell if there really is a DSW story that’s translatable in other markets.”

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