Retail Week On The Road: Scotland

Regular readers of Retail Week’s ‘21 Years Ago’ column will over recent months have been reliving the demise of Scottish fashion empire Goldbergs. Out of the wreckage two success stories were born.

The better known of the two was Ted Baker. But there was another, one that had a lower profile and remained Scottish-based. It’s a 60-store business that as it celebrated its 30th birthday in June was sold to US shoe group Genesco for £125m. That company was Schuh.

It was a deal that made not only its owners – managing director Colin Temple and finance director Mark Crutchley – very happy, but 2,310 of its staff too, who shared £37.3m of the proceeds of the sale among them. Someone who had worked for between three and six months made 10% of their salary, while those who had worked for Schuh for 10 years got the equivalent of two years’ salary.

In addition, up to £7m was set aside to create a charitable trust to support causes close the hearts of Schuh’s staff and customers. Walking round its headquarters and warehouse on a fairly bleak industrial estate on the edge of Livingston, it’s clear that staff morale isn’t much of a problem at the moment.

It was a move that provoked a mixture of surprise and admiration in the wider world. After all, the corporate world isn’t used to known for such acts of generosity. Yet Temple and Crutchley are humble guys and seem genuinely bemused at the reception the bonanza for staff received. “These guys put the value into the business,” says the finance director. “It was a privilege to be able to do it.”

The American dream

Genesco, based in Nashville, Tennessee, has a raft of chains in the US operating more than 2,000 stores. Its biggest brand is Journeys, which, like many US retailers, was interested in coming to the UK. Buying Schuh saved them the trouble.

“Around Christmas we had an approach from Journeys, we went across to Nashville and we really liked the people,” says Temple. “They have a retail operation in Journeys that is probably the closest thing in the US to what Schuh is in the UK, and for us it was a one-off opportunity to sell to a trade buyer that has empathy with what we do.”

Having existed for 30 years, Schuh is  much older than most of its staff, whose average age is just 21. Yet the key to its success is not just at the leading edge of fashion footwear but also, behind the brand’s youthful personality, a relentless focus on systems and processes.

When it comes to developing systems, Schuh has kept it all in house. This hasn’t just ensured maximum efficiency but delivered uniqueness and competitive advantage. Its systems have always given complete visibility of stock and a common stock pool, something that has proved invaluable when it came to moving online.

It has been a successful early adopter of multichannel retailing in a part of the market that has been slow to adapt. “You can’t dictate which channel consumers want to use,” says Temple. “Having a young business helps – the average age of our staff is 21 – so if you want to return an online purchase to a store you won’t get the Spanish inquisition.”

Schuh sells 90,000 pairs of shoes a week, 2,500 of them on eBay, where end-of-line or damaged stock is sold off, allowing store space to be focused on core stock. It has considered acquiring some of the rival shoe retailers that have hit difficulty in recent years but Schuh’s unusually high ratio of storage space to shop means it has been better off ploughing its own furrow.

Under the deal with Genesco Schuh will retain its own identity and its own way of doing things. Best practice will be shared, but there will be no compulsion for Schuh to adopt practices such as commission sales just because that’s what Journeys does.

What the deal will do is allow the company to accelerate its store opening programme, and the number of openings is likely to double from four a year to eight. Shops are due to open in Stratford, Watford, Bournemouth and Portsmouth before Christmas with three more in legals.

The business remains underexposed in London.

“There is definitely four or five years growth in the UK,” but Temple says that international growth is on the agenda, with local currency websites to start followed by stores. Like everything Schuh does, however, it will be measured. The key thing, both online and in stores, will be service – Schuh is a full-price branded retailer and everything it sells is available elsewhere so offering a better experience than elsewhere is a vital point of difference.

Especially when its customers are feeling the squeeze now more than ever. With the average age of leaving home now 27, Schuh offers what Temple describes as “affordable escapism”, but he is acutely aware that “we are a wants business, not a needs business”.

Neither Temple – who is from the Northeast of England – nor Crutchley – who hails from Northern Ireland – is a Scot. Temple describes Schuh as a “Scottish-based UK retailer”. But they laugh that there is some stereotypically Scottish thrift in how the business is run. Explaining the eBay operation in the warehouse, Temple expounds the mantra: “Look after the pennies, and the pounds look after themselves.”

From Mackays to M&Co

Being a truly national retailer, with stores in some of the smallest market towns across the nation, is an increasingly unfashionable idea. Try telling that to M&Co.

In the reception of its head office, a modern industrial building located at the end of Glasgow Airport’s runway, is a map of the UK, with every one of its 280 stores marked on it. There are a lot of places most people won’t have heard of, and conversations with chairman and managing director Iain McGeoch are peppered with the names of towns where M&Co has stores: Buckie, Blairgowrie, Oban. While its roots are in the west of Scotland, and a quarter of its stores are north of the border, it is the epitome of a UK-wide retailer and, from Penzance to Lerwick, Aberystwyth to Deal, it goes places other fashion retailers long since abandoned.

Yet when Iain McGeoch came into the business in 1964, it was primarily a pawnbroker. The business has been in his family since it was set up in 1834, but the pawnbroking gradually took a back seat until being phased out completely in favour of retail in 1970. Iain McGeoch has been in sole control since 1998 and the company ditched the Mackays name for M&Co in 2006. It remains a family concern, and McGeoch’s son Andy is business development director The key to M&Co is the breadth of the offer, which is edited to suit demand in each of its markets. “When you trade in these small towns you need to have a broad approach: a range of womenswear, lingerie, kids, menswear, home,” he says.

As for all retailers trading on high streets, the pressure has only mounted with the arrival of supermarkets selling fashion into M&Co’s core towns. Differentiation is key, as is the ability to flex the offer depending on the local market. “More and more you have to be at your best for everybody,” he says. “If you’re in Oban and you’ve got a couple of supermarkets there, you have to offer something different.”

But he warns that the arrival of supermarkets will inevitably affect the viability of retailing in some places. “There are towns that were on our target list but which aren’t any more because of supermarkets opening out of town.”

Having so many stores in places where there are few, if any, other multiple retailers is proving advantageous in the multichannel age. 25% of web orders are collected in stores, and the company is experimenting with kiosks to offer the full range in what are often small stores.

M&Co has an office in London – where its product team led by former Arcadia brand director Sim Scavazza are based – but its roots lie in Paisley, where its 215,000 sq ft warehouse as well as its head office is located. In its windswept location, even the bus shelter across the road has M&Co branding. Many of its staff have worked there for a long time and participate in a share scheme.

As for all retailers, the current conditions are challenging, and the higher proportion of Scots working in the public sector, and inclement weather hasn’t helped – McGeoch says you’re more likely to put off a shopping trip to a local town centre than you are one to a big city if the weather’s bad. The average customer age has come down fractionally to around 50, helped by the name change, although McGeoch says it had another benefit as well.

“People pronounced it differently in different parts of the country: Mack-eyes, Mack-ays, even Mackies in the north of England. You don’t get that with M&Co.”

Slaters: A Glasgow institution

It may be the largest menswear store in the world – as the sign above the front door proclaims – but looking at 165 Howard Street in Glasgow, you might struggle to work out how. Inside the doorway, a receptionist sits in a kiosk as though she were selling tickets to the cinema, and a chrome sign points to the ‘lift to showroom’.

This is Slaters, a Glasgow institution but also a chain of 25 stores. Most of them are in Scotland and northern England, although the company has ventured south as far as Canterbury and Crawley. Like all Slaters stores, the Glasgow headquarters has one difference to almost every other retailers’ stores – it doesn’t trade on the ground floor.

Slaters’ prices are very low – you can buy a suit there for £49. One of the ways it can remain so affordable, while maintaining a reputation for service that managing director Paul Slater is obsessed with, is by being on upper floors in off-pitch locations.

“We’re a destination,” says Slater. “Some retailers save on staff, we save on property. People like to see where they’re going, but once a customer has taken that big step and come in, they tend to come back.”

The key, says Slater, is offering attentive service that puts a man at ease. The aim is to create a one stop shop that can meet the needs of reluctant male shoppers by making life as easy as possible  – for example, suits are grouped on rails by size, not by brand. “Men are not prone to impulse buys. But while they’re here their wife might say, while we’re here, you need some new golf gear.”

Slaters in Howard Street is endearingly traditional. The floors are long and thin, and with a high number of immaculately turned out assistants waiting to help. Uniformed housekeepers tidy the store, while on the top floor there is a team of seamstresses altering garments, as does every store.

Slaters is probably the best-known remnant of what was once a thriving garment industry developed by Jewish immigrants in Glasgow. Slater’s late grandfather arrived from Smollensk penniless and unable to speak English. What he could do was sew, and he built a manufacturing business in the city.

It was the classic family firm until disaster struck in 1973 when a fire destroyed the factory. The family managed to start the company back up in its current city centre location, and around the same time Slater’s father Ralph was introduced to a Dutch suit from a brand called Macintosh. “Dad said I’ve just seen the world’s finest suit,” says Slater. “It had zipped inside pockets, lined trousers – it was better than he could have made and half the price.”

That was when the penny dropped that there was more money to be made as a retailer than a manufacturer. And the bonus was that even by charging rock-bottom prices, Slaters could still get a better margin as a retailer than it did as a supplier. The original Howard Street site grew from 3,000 sq ft to 36,000 sq ft “in little dollops” as what was the garment district dissipated, says Slater, who himself joined from school in 1976. “You get the first and second generation Jewish immigrants coming in, working in the textile industry, but then they want their children to be lawyers, doctors, dentists.”

It’s a traditional business but one that is looking to the future. A launch of a transactional website is imminent, womenswear has been introduced to stores, catering for the underserved mature market, and there’s even an area of slim fit suits to introduce younger shoppers for the brand.

“Young lads aren’t used to getting service, but here they get a better price and they someone treating them well, calling them sir, they’re not used to that.” And with shoppers needing to look smart but keep their spending down, Slaters is well positioned to fit the current mood.