Cels Milestone: Q&A With Bob Goldman

Bob Goldman holds the unique position in the industry of being both one of its old guard and one of its most proactive futurists.

The founder and CEO of Cels Enterprises Inc. and Chinese Laundry has a reputation for spotting future business trends and positioning his company to take advantage of those emerging opportunities, from product trends to sourcing.

“We change to stay ahead,” Goldman said. “That’s what the footwear industry is: change.”

And for the 69-year-old executive, that’s not just a good thing, it’s a profitable thing.

Goldman said he expects the company’s profits to increase 18 percent this year, even as it invests in new retail stores, expands international distribution and adds product extensions.

Not bad for a man who never intended to run a shoe company.

Goldman launched Cels Enterprises in 1971 as a fixturing outfit, selling the Modumode self-service footwear rack, which he created with his wife, Carol. “When we put it into the juniors’ ready-to-wear department at Abraham & Strauss, they sold out 90 percent of the inventory in one week,” he said.

But difficulties with unions and restocking proved problematic, so Goldman reengineered the fixture for home use.

It sold well, and in 1973, Sears gave Goldman an order for 1 million units for the Christmas season. “I thought I was a millionaire,” he said. “Three days later, the Arab-Israeli War broke out and the price of plastic tripled and we couldn’t deliver.”

Prior to entering the fixturing business, Goldman had served as national sales manager for a shoe factory in New England, so now lacking a product, he turned back to what he knew: selling shoes.

He began making footwear for a variety of chain and department stores as a volume business, and eventually signed a contract to produce footwear for Esprit. “Then I asked, ‘Why don’t we start our own brand?” he said. “So in 1981 we started Chinese Laundry.”

Today, the company continues to expand, even amid the current economic turmoil. The company is building its international business, branching out with line extensions, growing its kids business and establishing its own retail store base. Goldman also is diversifying the company’s sourcing base to minimize the impact of price increases.

Footwear News sat down with the executive at his Los Angeles office last month to talk about the industry’s future, why sourcing anxieties may be overblown and how he plans to keep Chinese Laundry ahead of the game.

What’s the biggest issue facing the industry?

BG: The industry is so short of qualified people. There’s a void. For years there were the shoe factory people who then found jobs in importing. But today they’re all retired or don’t want to do the job anymore. They really didn’t do a good job of training their replacements. It’s [a problem] in China and here [in the U.S.], and [with] both designers and product people. They don’t have the background. They don’t understand leather. You have to teach them all the basics, and it’s a challenge.

The real issue — and I’m in this group — is that when you look at the industry, what’s the age of the owners? They are at least 50, and some go to 80. Have we seen the 20- and 30-year-old [innovators come into the industry] like in the computer industry? No, we haven’t seen that.

What are you doing to ensure there is a new generation of qualified footwear pros?
I’m working with a number of schools right now, supporting them and helping them get started in China. The education thing needs to be addressed. That’s a big issue in the industry that we must overcome.

What younger or smaller brands are running their businesses well and are poised to become footwear leaders?
There are a lot of smaller companies that are on the right track, but the question is, can they duplicate that on the next level. There is a lot of opportunity, but I don’t think anyone is positioned to get to that next level, to where [Chinese Laundry is]. Jeffrey Campbell, Irregular Choice, United Nude and a lot of other people are trying different things, but I’m not sure they will make it to that next level. There will be new top players, but I don’t think we know who they are yet.

How has the mentality of the business changed?
It used to be an industry of shoe people with doctor mentalities. If you made shoes, you had to know about feet, fittings, widths, sizes. Today, it has really deteriorated into a financial business, compared with being a more professional industry.

How are you dealing with the rocky economy?
You go global. You need international distribution because you can’t grow solely in one country anymore. Manufacturing costs are going up, factory needs are going up and consumption is retracting. Footwear consumption hasn’t increased in 30 years. And the cost of doing business is getting higher.

Are you worried about the sourcing situation?
I’ve changed [to different manufacturing] countries so many times that this is just another change. We’re better suited than some of our competition because we started in mainland China — not in the joint-venture factories but in the local Chinese factories, so we’ve been able to grow with them. We have better positioning and relationships [with our factories] than most companies. But there is always somewhere else to go. We’re in India, we’re in Eastern Europe. We just bought some shoes from Chile. The consumer right now is a value consumer, but value has no price ticket. It comes down to what does the consumer feel [the shoe is] worth. As long as we attract a thinking consumer as opposed to a [price-minded] buyer, we’ll be OK.

How do brands attract that thinking consumer?
By sticking to what you believe. The real problem today is convincing [retail buyers] that something more than dollars and cents is going on. How do you convince them of what the consumer wants when they aren’t as exposed to them as we are? We’re exposed to the world. We spend $3 million or $4 million a year traveling and seeing what’s out there. They see a lot of vendors; we see what customers want.

Where is the biggest opportunity for growth from a distribution standpoint?
The Internet. The growth of the Internet is far beyond what anyone in the shoe business ever expected, and it’s continuing. Landlords are so difficult to do business with [that people aren’t opening stores]. What they’re doing in brick and mortar is, in my opinion, the biggest reason why the Internet is so successful. The costs are so prohibitive in brick and mortar. How do you compete? Footwear requires a lot of space. Mall costs are through the roof if they’re decent malls.

But you’re still opening brick-and-mortar shops.
We’re pursuing them only if they’re [going to be] profitable. We want to be in the best malls to build the brand and raise consumer awareness, but we’re not taking leases that are loss leaders.

How do retail stores fit into the overall strategy?
[They’re] very important. The testing of new product is a good springboard to our wholesale business because we’re much faster and willing to take more chances, and we’re testing a lot of interesting things. [But] I don’t think we ever want it to be more than 10 percent of our business.

How has your consumer changed?
The new generation is all about what she wants. The mass herd mentality of the last 20 years is really changing. There isn’t a semblance of order. They are just buying things they like. Before, [the consumer] looked over her shoulder more to see what her friends bought. Now she doesn’t want to buy what [someone else] bought yesterday. This generation is going to be much more difficult because they really have their own opinions.

What does that mean from a product development perspective?
Broader lines, broader product venues, not as much depth and more change.

If you were starting out all over again, would you still get into footwear?
Hopefully not. It’s too tough of a business. It’s a very difficult industry. Today, the capital requirements are so high, and it’s pretty tough to do it without significant capital.

Would you consider selling the company?
We’re always interested in looking at what the potential opportunities are. We have a lot of people who have been here for a long time, so I would take them into consideration first [before making any decisions]. Financially, I’ve done very well in this business. It’s really about the people we have and that they be taken care of. If it were the right situation, of course we’d be open to it.

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