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Payless Reboots After 2019 Liquidation—Here’s What’s Different This Time

Affordable footwear franchise Payless is making its second play for a North American empire after liquidating its business more than a year ago.

But as the company opens its doors again, it’s relying on a digitally driven, omnichannel-enabled strategy to keep from repeating past mistakes.

And according to new CEO Jared Margolis, who joined Payless in October after serving as president of Creative Artist Agency and Global Brands Group (CAA-GBG), the company’s value proposition is more relevant than ever.

“Payless has always equaled value, but even more so, on top of the list is our social responsibility to our community,” Margolis said, acknowledging that shoppers feel cautious about spending given everything that’s taken place in 2020. “It’s important to be able to provide quality, fashionable product to help people feel good and look good—at the best price.”

The brand has always offered its footwear at an entry-level price point, he said. Though it is looking to elevate those prices slightly to accommodate growth and increased quality, Margolis said he plans to make sure Payless options are more cost conscious than others on the market.

“There is the consumer who is used to paying $50-100, and they may be feeling more cautious about their spending,” he said, in light of economic anxieties that are sweeping the country. “They’re not trading down in value—we’re still going to give them that quality that they would have been expecting at a higher price point.”

Though the company’s 4,000 North American stores shuttered in 2019, two years after first filing for bankruptcy, Margolis said Payless has maintained a strong business internationally. It has 700 stores across Central and South America, as well as 300-plus locations in Southeast Asia, the Middle East and India. “In those markets, we’re producing about 30 million pairs of shoes on an annual basis,” he added.

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The business’ international success has bolstered Margolis’ confidence in a second foray into the U.S. market. But he also knows that times are changing, and the company must evolve to meet shoppers on their own turf.

“Payless has been so successful over the years—but it had its hard times, too,” he said. “We studied and learned from what we could have done better, and we have the historical data to inform our new strategy.”

Affordable footwear franchise Payless is reopening stores and its online business in North America, three years after filing for bankruptcy.

A new website launched last week, and Margolis said the user-friendly experience is “different than anything Payless has ever offered before.” The company is looking to grow its digital business substantially, he said, as many shoppers are turning to the web for their product needs.

The company’s legion of physical stores, which once numbered in the thousands, were ultimately one of the factors that contributed to its downfall, he admitted. “We used to have 4,000 stores, and there were about 1,000 that were very profitable,” he said. “It was one of the reasons that the business was not able to survive.”

Now, Payless is looking to open 350-500 stores across North America, taking into account that a robust brick-and-mortar presence was always a brand hallmark. Families make up the bulk of the company’s business, and it can be easier for parents to find shoes for their fast-growing kids in person.

“Based on what’s happening with malls and the overarching trends, I think we’re going to be most successful in standalone or strip centers,” he said. “That’s going to be the primary focus for us going forward.”

Still, Margolis said the current retail climate, along with the inevitable digitization of consumer experiences, has pushed the brand to adopt more omnichannel solutions. The company’s new, spacious stores will be optimized for social distancing, and if shoppers aren’t able to find what they’re looking for in-store, they can have products delivered to their homes.

New augmented reality technology from Zappar enables busy parents to scan their child’s feet with their smartphones and receive information about sizing. Payless has partnered with a retail tech company that offers smart mirrors, he said. “While the customer is trying on shoes, there’s a touch screen that allows them to see what other color ways it comes in, and look at other recommendations.” Plus, intelligent touch screens yield information on the Payless loyalty program as well as exclusive in-store offers and experiences.

Margolis is also eager to branch out beyond shoes into complementary products like accessories and even some apparel.

But as many adults continue to work from their home offices and many kids look forward to another semester of distanced learning, the company is looking to prioritize certain product categories. “Comfort, leisure and active are really the driving categories across men’s, women’s and kids,” Margolis said. “It’s really sneakers and sandals that will be huge drivers for us.”

Payless is also doubling down on a product line called SafeTStep, which contains a patented anti-slip feature along with comfort technology that’s optimized for essential workers, hospitality staff and restaurant servers. The brand is looking to deepen its ties with logistics providers and the medical community, and has made inroads with companies that serve those workers.

Traditional work wear categories—like heels and brown shoes—will likely continue to contract for some time as shoppers remain at home. But kids’ shoes—which have consistently driven more than 30 percent of Payless’ business—are likely to remain strong, Margolis said. He’s working to ensure that young shoppers stay engaged with the brand by facilitating relationships with their favorite pop-culture personalities.

“The collaborations we’re doing with influencers and designers will allow us to capture the Gen Z customer,” he said. “We want to work with everyone, from young, talented up-and-coming designers who would like a spotlight, or a person on the front lines who is passionate about what they do and wants to give back to the community.”

Currently, features the Kendall + Kylie collection of shoes, backpacks and other accessories from the Kardashian-Jenner celebrity sisters. Margolis said he’s particularly enthused by an upcoming partnership with Brian Perez, the Ecuadorean pro surfer who ranks among the sport’s top 20 athletes.

Sneakerhead whisperer Jeff Staple, one of the original designers for action-sports staple Airwalk, collaborated with Payless in 2009, and according to Margolis, the company will be reinstating that relationship. “He’s made $20,000 shoes for Nike, but we’re partnering with him because he wants to create something affordable and accessible,” he said.