Brands and retailers across the country have been dealt heavy blows by the spread of COVID-19, and comfort footwear brand Vionic has proven no exception.
Owned by footwear giant Caleres—whose portfolio boasts brands like Sam Edelman, Vince, Dr. Scholl’s Shoes, Via Spiga, Naturalizer, Franco Sarto and retailer Famous Footwear, among others—the Bay Area-based label has been plagued by flagging sales since the retail lockdown went into effect this spring.
As retailers have languished amid shuttered storefronts and cautious consumer spending, Vionic is reworking its once wholesale-heavy strategy to focus on the digital realm. In the wake of these changes, the brand’s headcount has contracted significantly.
Notably, a source close to the brand said that while some marketing roles were eliminated, along with others across the company, Vionic’s e-commerce team has remained intact—and in fact, two new customer service representatives have been hired to deal with the influx of online orders.
Though direct-to-consumer web sales made up just 15 percent or less of the brand’s total business before COVID-19—with the remainder heavily supplemented by independent brick-and-mortars, department stores like Dillard’s, Lord and Taylor, and Nordstrom, and QVC home shopping—executives are intent on building up the brand’s online presence in an attempt to future-proof its strategy.
In the near-term, massive summer discounts have bolstered the brand’s e-commerce play. Many styles are on sale for 40 percent off their original price, and a source familiar with the brand’s DTC efforts said sales have surged 150 percent due to the deals.
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As the retail shutdown rages on in cities across the country—including Vionic’s California home base, where a second round of store closures have taken effect—brands and retailers are increasingly prioritizing the web as the shopping venue of the future.
Olivier Schott, CEO of e-commerce solutions platform Scalefast, told Sourcing Journal in May that self-reliance is critical during the era of the coronavirus. Brands that have funneled their efforts into retail presence are likely finding themselves in hot water now, he added.
Schott touted Nike as a footwear brand that, while globally recognized and heavily penetrated at retail, maintains a Teflon DTC business. Taking control of its brand message has allowed the athletic titan to secure its place in the market and break up with retailers like Amazon that have caused countless headaches. For most brands, a brush-off like that would be sales suicide. But, Schott said, more brands should endeavor to find themselves in the position to cut out partners that no longer serve their interests.
And, he added, it’s yet unknown which retailers will emerge from this crisis in one piece.
Steven Borelli, CEO of direct-to-consumer men’s wear brand Cuts, had been contemplating courting wholesale partners before the pandemic began, but the retail shutdown put an end to those ambitions. “When running a business you have to react to the current situation,” he said earlier this month.
Instead, Cuts has implemented new services and tools to optimize the online shopping experience, inspiring confidence in sizing and extending the window for returns. “We were born online, and that’s really been a benefit,” Borrelli said. “If you were digitally native going into COVID, you’re at an advantage, because you really know how to operate.”
As Vionic works to bolster its fledgling DTC presence during this unprecedented time for retail, it has had to significantly restructure its team.
The brand source told Sourcing Journal that on March 26, Vionic employees, who had been working from home for weeks due to the coronavirus lockdown, were notified of changes to their employment status by phone. Twenty-three employees across multiple departments were told they would be furloughed indefinitely, beginning on April 9. The company’s remaining workers would be subject to 20 percent pay cuts across the board.
The source estimated that at the time, Vionic employed around 150 workers, including sales representatives based in different cities across the country. They also revealed that chief operating officer Bruce Campbell and CEO Chris Gallagher forfeited their salaries in response to the growing crisis.
On April 29, in a brand-wide email obtained by Sourcing Journal, Gallagher informed employees of further developments. “I wanted to let you know that today, we have made some changes to our U.S. sales organization,” he wrote. “These changes are necessary for our continued commitment to the success of Vionic through this challenging time and in a post COVID-19 world.”
Gallagher went on to say that all of the company’s national sales representatives—around 23 in total, according to the source—were let go, along with eight corporate office employees supporting the company’s wholesale retail and medical product channels. A spokesperson for Caleres noted Friday that some of these employees were independent contractors.
In March, a Caleres earnings report showed the company missing its 2019 estimates significantly due to the shuttering of its own retail stores, along with those of its wholesale partners. Net sales for the first quarter ending May 4 were $397.2 million, compared to $677.8 million in the first quarter of fiscal 2019.
In late March, 368 employees were laid off at the company’s St. Louis headquarters, according to a notice filed with the state of Missouri under the Worker Adjustment and Retraining Notification Act (WARN). The company also filed notices in March with the California WARN saying that it would be laying off a total of 291 employees at its distribution centers in Chino and Lebec. The Caleres spokesperson said that the distribution centers “are operating at full capacity to meet demand now.”
On May 27, Caleres CEO Diane Sullivan weighed in with an email to all portfolio brands, explaining the need for a company-wide restructuring in light of the coronavirus’ continued impact on retail sales.
“As we move from the protect and prepare part of our journey to restarting our operations, we recognized there was an additional need to realign our company and its expense base,” she wrote to employees in May. “It is essential that we match the size of our organization to support a new level of consumer demand and find new ways of working smarter and more efficiently.”
Sullivan said that some of the existing furloughs implemented in March across all brands would be extended through the second quarter, while some employees would return to work. Pay reductions for active employees would also be extended through the second quarter, she said, and a number of positions would be permanently eliminated.
Caleres’ goal, she said, was to simplify the organization’s structure and create fewer layers. “This will streamline decision making, increase agility and maximize innovation, creativity and sharing,” she added.
Campbell and Gallagher echoed the strategy in an email to Vionic employees the same day, saying that although the brand’s direct-to-consumer and QVC home shopping business represented “bright spots” in brand performance, sales were down 26 percent year over year at the time of writing on May 27.
“The path forward is to realign our resources around our areas of growth and opportunity, maintain and increase our focus on consumer and brand, whilst embracing the concept of creating smaller and tighter teams to drive speed,” they added.
According to the source, at least three furloughed employees returned in May, four returned in June, and the remaining staff were notified throughout the month of July about their employment status. The source estimated that more than half of the furloughed workers were made offers to return to their posts with a 20 percent pay reduction at least through the end of July.
The Caleres spokesperson told Sourcing Journal, “The majority of Caleres associates that were furloughed are now back including at our [distribution centers].”