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Why Designer Brands Wants to Be the Best Buy of Footwear

Three and a half years ago, Designer Brands Inc., then known as DSW, began a journey that saw its entire business model changed, including major turnover among the executive team and additions to its brand portfolio. Now, the company is speaking out about what it has accomplished and what can be expected as it continues to move its business into the future.

At the head of the transition is DBI CEO, Roger Rawlins, who took over the reins for the group at the beginning of its restructure, when it became apparent that something was amiss with its business model. Rawlins said the company began to make structural changes as early as 2015, building the infrastructure needed to compete in an omnichannel space.

It was that digital infrastructure, Rawlins said, that laid the groundwork for DBI’s modern-day plans, a move generated by a desire to stay relevant and avoid becoming obsolete like so many of its retail peers.

“We had to think differently. And the [industry] that we kept referencing was electronics. We are not going to stand by and let that happen to our company, to our 16,000 associates that we’re so passionate about,” Rawlins told investors and journalists in the group’s earnings call in March. “We are not going to stand on the sideline and be ‘HH Greg-ed,’ or ‘Radio Shack-ed,’ or ‘Circuit City-ed.’ We’re going to be Best Buy of our space. That’s the approach we took when we were looking at how we were going to evolve our business, which led to this.”

When DSW gained joint ownership over Vince Camuto and its brand group in October of last year, Rawlins said it was the digital improvements the brand made in its own business that opened the door for the acquisition. According to the CEO, digital sales penetrated just 1 percent of Camuto’s total revenue in 2018—a distressing statistic but evidence of the brand’s strong position of growth.

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Combined with DSW’s retail experience, the group has high hopes for the future of Camuto, which will now act as a kind of own brand for the retailer.

“Our integration of the Camuto Group into Designer Brands is running ahead of our original timeline and during the quarter I was able to view production samples of our entire private label assortment,” Rawlins explained in the group’s most recent conference call. “All I can say is ‘wow.’ This Group executed exactly as their legacy said they would and the product is incredible.”

Based on the quality of the samples produced for the first private label collection, Rawlins doesn’t think there’s a single product category the group can produce where the Camuto version would not eventually be the No. 1 or No. 2 bestselling brand at DSW and The Shoe Company.

Additionally, over the past few years, DBI has invested heavily in the testing and implementation of various services and experiences to pair with its retail offering. Notably, DSW has begun to implement nail studios to target its loyal customer base of female consumers—and it doesn’t plan to stop there. Rawlins has long suggested that refreshment services could be the next avenue where service is concerned.

Both the acquisitions and the new focus on services have put the modern-day Designer Shoe Warehouse—now just the largest brand in the cluster—in a unique position. According to Rawlins, the retailer was previously only able to access about 20 percent of the total footwear market. Now, he believes that number is now closer to 80 percent, with room to grow.

“We have a retail network that drives hundreds of millions of visitors to our physical warehouses and digital platforms where shoppers can find one of the largest, most compelling assortments in footwear and accessories anywhere in North America,” Jared Poff, executive vice president and chief financial officer at DSW, explained on the call. “Additionally, we leveraged the physical plant in these warehouses to optimize digital demand fulfillment and engage with customers in ways, including our test of high-end nail services, a full complement of shoe repair services and custom-made orthotics.”

The group has its sights set on 17 percent compounded annual growth rate for earnings for the year, a rate it expects to maintain into 2021. To be in a position to capture this growth, DBI has had to become something entirely different—but, to hear it from Rawlins, DBI is stronger than DSW ever was.

“While there is so much noise out there about things that are not in our control, I’m excited that we have been able to build a model that gives us tremendous advantages and flexibility,” Rawlins said. “We now have greater control of our own destiny helping us navigate our way through these external factors better than nearly any other model competing in our space. I’m excited for our future and I look forward to continuing to share our progress.”