Schuh’s sure-footed approach to multichannel retail

In 2001, Schuh’s then merchandise director Colin Temple was certain the business could not sell shoes online. In fact, he was so convinced he volunteered to look after its first online experiment personally, thinking it did not merit hiring anyone else.

Within just a few months he was picking, packing and wrapping 30 to 40 shoe boxes each morning to fulfil internet orders before starting his day job. Temple, now Schuh managing director, recalls: “I wanted to prove to the rest of the team we couldn’t sell shoes online.”

These days, the footwear retailer has a turnover of more than £100 million a year and sells about 3.5 million pairs of shoes. Between 12 and 15 per cent of that comes from internet sales. Turnover at its biggest store, on London’s Oxford Street, is about£8 million, but its web sales are 50 per cent or more above that.

The key to this is its fully integrated approach, which is based on and controlled by its in-house developed IT systems. Its bespoke business management system, called Shark, existed before 2001 and, when Schuh began building its own web site, the primary requirement was that it had to be fully integrated with Shark. Today, its 50 standalone stores, 22 concessions in branches of the young fashion chain Republic and eight web sites are all linked, almost in real time, so that all staff know the stock situation across every part of the business.

“With Shark, we have one view of the business and everyone believes it and trusts it,” says Temple. “There is no store sales incentive scheme, so no resistance when we ask a store to dispatch some best-selling shoes that someone’s ordered via the internet.”

In Schuh’s stores, all tills are internet-enabled, allowing staff to check stock availability in every branch and at the warehouse at its Livingston headquarters near Edinburgh, which can hold 400,000 pairs of shoes. With 3,000 style options from more than 100 brands and its own-label ranges, no high street branch can carry them all, but shoppers can order any style through any branch. The team refers to this as a “seamless” approach. As well as inter-branch transfers, internet orders can be collected from stores and internet returns can be taken to stores.

One of the biggest opportunities for the business is to effectively communicate with and integrate the different groups of customers it has attracted, such as store, regular internet and internet Sale customers.

Temple says: “We want to win customers’ loyalty and lock them in to us,” he says. “If you can get a customer on board through the internet, I would argue they are more likely to come back to us. We are putting a lot of emphasis on getting customers on our database to buy a little more from us. In the industry it typically costs£10 to£20 to acquire each new customer – we can’t afford to spend that sort of money.”

Schuh has stopped producing its well-regarded quarterly customer magazine and has redirected that spend to develop e-mail campaigns. It has a database of more than 190,000 shoppers who have opted to receive communications. This year, the marketing team will focus on finding the most effective method of increasing sales through weekly e-mails tailored to different groups.

Customer segmentation and web analytics go hand-in-hand. In the near future, Schuh wants to be able to personalise home pages, so a male customer gets one home page and a female one gets another. Similarly, there would be appropriate home pages for a regular full-price customer and an infrequent Sale customer.

Humble beginnings

It’s a far cry from those early days when Temple wrapped orders himself. In 2001, Schuh first approached the internet via a tie-up with Shoe-shop.com, the pioneering web site run by the privately owned York-based Pavers footwear group, with which it still runs a commission-paying concession.

In August 2002, Schuh launched its own transactional site, Schuhstore.co.uk. It was intended to be a simple, functional site and was designed by in-house developer Claire Steyert, who wrote all the codes herself in longhand. Everything was automated so that no one has to spend hours keying in style numbers, which is essential because the site carries all of Schuh’s 3,000 style options. Steyert now has two assistants and there are another six people working on Shark. “Having nine programmers is a lot for a company of our size, but we get what we want and we save money on paying licence fees for software,” Temple explains.

The next online extension, three years ago, was a tie-in with Vivaladiva.com, a women’s footwear site developed by JD Williams. Part of the strategy was to learn from a larger player.

True to its integrated approach, the Schuh internet business is controlled by Andrew Ellison, a company veteran and former merchandise manager who ran its high street concession business. Using people who understand the high street operation has been essential to making online work. The earliest web recruit was Dan “The Internet Man” Lumb, who moved from the Hull store to Schuh’s headquarters to assist Colin Temple’s wrapping efforts in 2001. It was initially a temporary secondment, but more than six years later, having driven the entire internet development, Lumb is still at Livingston and runs one of the most significant parts of Schuh’s internet business, the Schuhstore eBay site.

“People were buying our shoes in the Sale in our stores and then selling them at a higher price on eBay, so we decided to try it ourselves in 2005,” Lumb says. “Our first try was with a garish Red or Dead court shoe that we would have probably got £3 to £5 for if we’d jobbed it out. It went on eBay for £33, so we knew immediately we were on to something.” In fact, Schuh is selling more than 5,000 pairs a week on eBay.

Just before Christmas 2007, Schuhstore.co.uk took a site within Amazon to create another full-price route to market. All Schuh’s internet sites and high street stores sell at the same price – and they all go on Sale at the same time. The eBay business is the only part that permanently sells on discount. Having this platform has enabled Schuh to keep its stocks – and stores – clean throughout the season. This winter it went into the Sale period with 30 per cent less Sale stock. Through either auctions or fixed prices, it usually gets higher prices on eBay than from even the first markdown in stores.

The multichannel approach has certainly helped profitability. After a drop from £11 million to just short of£10 million in 2006/2007, according to finance director Mark Crutchley, EBITDA for the present financial year is forecast to hit £11.5 million, thanks largely to better margin management. Turnover is likely to hit£135 million, against £125 million the year before.

Intriguingly, the latest web initiative from Schuh carries no Schuh branding. Branch309.co.uk is an online clearance outlet that involves 15 brands – including Puma, Converse and Rockport – and more are being recruited. While a team led by husband and wife David and Roz Spencer buy for the main Schuh business, Lumb and two other buyers are responsible for sourcing product for Branch309, which include styles that the main business has never carried. Branch309 has a presence on eBay and Amazon too.

The absence of Schuh branding allows the site to have a different tone and, of course, it is a way of attracting the loyalty of another set of customers. “We’re going head-to-head here with the likes of TK Maxx, M and M Direct and Soled Out [the discount business run by Sole Trader],” says Lumb.

Schuh is not overlooking the high street, which still generates about 85 per cent of sales. It believes there is scope for another 50 to 60 stores in the UK and Irish Republic. But it is also clear that it no longer looks at its business as being made up of separate parts. “If we look at our e-commerce platforms as a whole, the internet is the best-selling store for most of our lines,” says Temple. And, with results like that, Temple is happy to admit he’s overcome his scepticism about selling footwear online.

Stepping up

-The first Schuh store was opened by former shoe rep Sandy Alexander in Edinburgh in 1981. He was originally going to call it Lizard Shoes
-In 1990, the company was restructured and the assets acquired by a reconfigured management team that included Alexander, Terry Racionzer, a director of Glasgow-based stores group Goldbergs and merchandise director Colin Temple
-In 2004, a£55 million management buy-out was led by Temple with finance director Mark Crutchley, HR director Lyn Ferguson and retail operations director Tom Lynch
-Schuh employs about 2,000 staff. It has 50 stores, 22 concessions and sells though eight web sites
-Schuh stocks more than 100 brands and has an own-label business that accounts for more than 12 per cent of sales

Internet advantage

A slick system gets new products on to the web sites on a daily basis. When a new style arrives at the Livingston warehouse, it is photographed from eight different angles (pictured above) in an in-house studio, a brief description is written, it is all converted to a web-compatible format and then uploaded to the site. There is no manual inputting of any codes.

Files of new stock are sent to Schuh’s e-commerce partners, such as Amazon, at the same time. Normally, any new stock arriving by 2pm is on the web site that evening, giving web customers the first chance to buy – stores would not receive new stock until the following day at the earliest.