In the 30 years since the first Designer Shoe Warehouse opened in Dublin, Ohio, the company and the greater footwear retail industry have experienced an evolution — much of it coming in accelerated form throughout the pandemic.
For the CEO of Designer Brands Inc. — now parent to DSW, Camuto Group and a Canadian retail division — the key to future success is to maintain that same remarkable pace. “We talk a lot about being nimble and disruptive in our tempo. This is our opportunity to take what we’ve learned through the pandemic and now move aggressively with the strategies we have in place,” Roger Rawlins told FN last month, speaking via video conference from his home in Columbus, Ohio — another hallmark of these altered times.
To understand whether Designer Brands is capable of major evolution, the executive simply points to the company’s innovative past.
“DSW had the very first open-sell concept, we started a rewards program before anyone else was playing in the rewards program — and it’s now 90% of [the DSW U.S.] business. We had everyday value before others did,” said Rawlins, who took over as CEO in 2015. “So when we say we’ve got to go learn from our customer, to build brands and move at a speed that no one can compete with, we can look back into what we’ve done in the past to show that we can go accomplish those things.”
After seeing revenue plummet in 2020 as its fleet of DSW stores were forced to close and demand evaporated for dress styles from Camuto Group, Designer Brands has leaned into its strengths in omnichannel and the athleisure and kids’ categories to emerge even stronger.
In Q2 ended July 31, 2021, the company exceeded expectations, with a 66.9% increase in revenue to $817.3 million. And the U.S. retail division turned in a record-setting quarter for both sales and gross profit.
Steven Marotta, analyst with CL King & Associates, said DSW is making all right moves with its merchandising strategies. “They’re going after athleisure, which they’re still under-inventoried in,” he said. “They’re very known for dress and seasonal footwear, which is making a comeback, and I expect to see even more growth in those categories.”
He also noted that the company’s digital prowess, which was a major asset throughout the pandemic, will continue to be beneficial. “By obtaining data, it gives them the ability to speak directly with their customer base,” said Marotta.
Here, Rawlins shares more detail about the company’s recent wins and his vision for bringing the DSW experience to everyone’s doorstep.
What are some of the biggest learnings that have come out of the pandemic?
Roger Rawlins: “That our business could demonstrate a level of embracing change that none of us ever, ever thought we could do. [For example], we knew we had opportunities to grow the athletic space in a meaningful way because our market share was so small in relation to our total footwear market share. We had talked about it and talked about it, and then we said, you know what, the consumer is only wearing athleisure. We’ve got to make this happen. And when I look at the kind of comps that we generated [in Q2] compared to 2019, it’s unbelievable. It was up 45%. That just doesn’t happen. By adjusting to change, that sets us up for success as we move forward. Because what we’re talking about nonstop is that the pace of play has to be kept up. We must have that kind of open-to-listen, open-to-change attitude that we’ve done over the last two years. That has to be part of our go forward.”
How do you maintain that kind of speed going forward?
RR: “It all starts with the work we’re doing to better understand our consumer, to inform decisions about what we do with our brands. By having a design team, a merchant team and a sales team working together, we can leverage all of our sales data to move at an unprecedented pace. We’re accelerating replenishment on items that we source ourselves, and then taking that information and sharing it with other retailers. So we’re able to go to other retailers and say, ‘These are the things we are seeing selling in Vince Camuto, Lucky, Jessica Simpson and here’s how we can bring them to you.’ That’s something Camuto never would have been able to do as a freestanding organization.”
That’s unusual for a retailer to share its intel with other retailers.
RR: “That’s what’s so different — we cannot think of ourselves as just a retailer. We have to think of ourselves as a brand that has 30 million consumers who love footwear. And then how do we leverage data from our customers to accelerate product to all of our consumers? Around 30 million of them are through DSW or The Shoe Company [in Canada], but there are millions of them that also engage with Dillard’s, Macy’s, Nordstrom, Amazon and other people. So we are trying to broaden our lens to look at the consumer not as just a consumer that fits inside a DSW, but across our brands in all retail channels.”
That’s a very different mindset. How have you gotten buy-in from all the teams?
RR: “Because of COVID, it accelerated the change curve, and you could see the sense of urgency. So as odd as it would sound, these kinds of moments have set a tone for the speed at which we’re going to operate. And I’m proud of our team that they’ve embraced it. It’s still a challenge day in and day out because it’s so different from how we’ve operated. But it is absolutely the right direction for this organization.”
In navigating the past year and half, how important has omnichannel been?
RR: “The omnichannel infrastructure that we had put in place pre-pandemic, it saved us because we were able to take all of those ‘fulfillment centers’ that are customer-facing every day, and while we had to shut the front door, we were doing more business than we ever could imagine out the back door, acting as fulfillment centers. And the fact that our workforce was already trained, the fact that we had that whole infrastructure in place, that allowed us to avoid markdowns in certain cases.”
How will you continue to evolve those capabilities?
RR: “I’m really excited about this — we are now testing this concept of hub stores, looking at how we can divert product to a group of stores that can accelerate the speed at which we deliver goods to a consumer. We now have a couple of hub stores up and running and more will open this year and into 2022. We’ve found we’ve been able to cut multiple days out of the delivery window for a consumer. I always talk about Domino’s Pizza. As a kid it was 20 minutes or less for delivery. I would love to be in a position where our store associate — or whomever it is that we are leveraging for this relationship — knocks on your door with your Vince Camuto shoes and accessories. Think about that experience! That’s the vision we have, and the way you do that is by narrowing your assortment, going deeper in those brands, putting that product closer to a consumer, and then leveraging our 12,000 store associates to go engage with you in a place that’s different than how [retail] would have historically been viewed.”
What is your strategy for the big-box locations?
RR: “Our average store is roughly 20,000 square feet — we’ve got to find a way to make that more productive. That can come through making that a smaller box, putting more product in to get a higher conversion rate. We have a new store design rolling out this fall that incorporates the learnings for how we’ve been operating during this pandemic and blends them with a test concept we’ve been using here in Columbus, where we had higher fixturing and were able to fit more product on the floor. And we’re able to also tell brand stories. We’ll have four shops embedded in the store where, on any given day, it could be one of our brands or a national brand on a wall, like Ugg in boot season or Birkenstock in sandal season. Those are all things we think will evolve our store experience and help us drive engagement with the DSW brand.”
How has the pandemic changed your perspective as a leader?
RR: “Frankly, I never thought we’d be faced with some of the decisions we’ve had to make. I’m real proud of the fact that as an organization, we put the safety and health of our associates at the forefront of those conversations. And in doing that, it gave me a different perspective on the role I play. In the past, the role was more about strategy and how it related to a bottom line. But when you have an ‘elite’ group of leaders and talent in your organization, that is your priority, and the sales and strategy and operating income, they flow from that. Putting your associates first is what drives the outcomes that we’re all looking for.”
Twice this year, you’ve rewarded your associates with bonuses. Why was that important?
RR: “You know, we went from 100% of our workforce to 15% in one week [at the height of the pandemic]. So to say, please stick with us and for them to go on this journey with us and for us to have the turnaround that we’ve experienced, it’s the easiest thing we should be doing, to reward them for their support.”
How will you remain competitive in this tight hiring market?
RR: “In an environment where you’re going to continue to see wage rates go up, you’ve got to be at market. But we believe that if we have the right leaders in place, that churn that you’re seeing a lot of people have, you’re able to avoid that because people want to work with you. And, you know, we’re celebrating 30 years of building an organization that has proven that we care about our associates. That’s what is so important to our culture.”
Speaking of culture, how is Designer Brands working to address diversity and inclusion?
RR: “We have a very diverse board, which has helped lead to conversations about what does our management look like. We looked at our organization from the top down and were very proud of the fact that, when you look at the broader organization, we could be seen as very diverse. But as we moved up the ladder, that that broke down. So we’ve had a real focus over the last couple of years to open our eyes to how we recruit, how we engage our associates, how we provide development opportunities for people.”
As you continue to evolve the organization, could there be more acquisitions?
RR: “We have to continue to pursue brands and look for opportunities to acquire assets that allow us to go direct to consumer. Everyone is doing it, so we’ve got to find those opportunities, whether that be through partnerships like we’ve recently announced with Hush Puppies, acquiring brands like we did with Camuto Group or building our own brand like we’ve done with Jennifer Lopez. If you see who’s winning right now, it’s the big brands. So by finding a way to build those for yourself and deciding where you want to distribute them, you can control your own destiny.”
In these uncertain times, what does the plan hold?
RR: “It used to be everyone talked about five-year plans. Now, we’re sort of looking at 18- to 36-month windows. But it’s about casting the vision that we believe is our mission, which is inspiring self-expression. If we are constantly thinking about how can we bring product experience to life that allows that consumer to express themselves through footwear, if we are doing things to differentiate things for our consumers toward that mission, we feel very confident that we will have success.”