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RIGHT FOOT FORWARD

New Payless ShoeSource format helps the chain to shed its warehouse image

By Meredith Mannino

It’s a busy year for Payless ShoeSource, the Western Hemisphere’s largest family footwear specialty retailer. Coinciding with the shoe giant’s 50th anniversary, its new president and CEO, Matt Rubel, has launched an extensive campaign to reinvent the Payless brand.

As the name implies, Payless offers inexpensive shoes. The trouble is, its stores have looked cheap too. Now the retailer is working to change that and to enhance the product and service as well. “Payless is focused on democratizing design and fashion in footwear and accessories,” said Rubel, who was chairman of shoe chain Cole Haan before joining Payless. In other words, fashion doesn’t have to come at a price, he says. “Our goal is to inspire fun fashion possibilities for the family.”

Critics note that Payless stores have traditionally resembled retail warehouses: utilitarian, with dimly lit racks of shoes tucked away in boxes and stacked beyond the reach of even the tallest shoppers. The chain’s newly designed stores offer comfortable seating areas and display shoes on tables and low racks. To make the shoe-buying experience easier for mothers with young children, the retailer has introduced a play area in its stores. (About half the chain’s sales are women’s shoes; an additional quarter are children’s.) The new stores will measure between 2,800 and 4,000 square feet — not considerably bigger than the current format, but the bright light, lower stacks and less cramped arrangement make them look and feel larger.

The Topeka, Kan.-based chain’s new stores fall into two categories: “fashion lab” and “integrated.” Both store formats bear the new Payless logo, launched in June of this year. The fashion lab design is reserved for stores in high-volume malls or central business districts, such as the unit on New York City’s Fifth Avenue. The first of these opened last month at Oak Park Mall, in Overland Park, Kan., and in five additional premier locations in the U.S. The retailer says it plans to have roughly 10 Payless Fashion Labs in operation by year-end, with perhaps 20-30 more in the pipeline for next year.

The integrated format combines the fashion lab’s front-of-store layout, with its opened up design and brightly lit shoe displays featuring product stories and the latest trends, and the traditional Payless layout at the rear, with its more conventional shoe racking systems. About 250 such integrated stores are slated to open this year, 40 percent of which will be completely new and the rest will be renovations of existing stores.

At press time, Payless was operating about 4,600 units. The chain intends to spruce up every one of them in a phased approach based on customer response. Payless declined to disclose how much this is likely to cost, however.

Seattle-based Callison designed the new formats but was charged with much more than simply producing a pretty store. “Design is important, but it’s the total experience that counts,” said Paula Stafford, a Callison principal and board member who worked on the design. “The real magic happens when you get the product, the presentation and the environment really working together.” Callison designed the fashion lab format in strict alignment with Rubel’s exacting consumer research, which analyzed how the Payless customer shops. “The customer still wants it all, even in self select,” said Stafford. “So we designed the store around her preferred way to shop: Explore, Experiment and Find. Now she has the sense of discovery, a place to play and the ease of finding her style and size.” (Such experimentation with the product is what suggested the “lab”, Stafford says.)

Payless has been paying considerable attention to product of late. The company paid an undisclosed amount for Jimlar Corp.’s exclusive rights to the American Eagle footwear brand worldwide. Rubel’s goal with this acquisition was to appeal to the young adult market. Payless already offers Champion, Airwalk, Spaulding and the Shaquille O’Neal-endorsed Dunkman line of basketball shoes at its stores and online.

This spring Payless teamed up with the American Ballet Theatre to co-brand a line of ballet shoes and accessories. This venture will further enhance the company’s connection with girls and moms and provide the best-quality dance shoes at the greatest value, says Rubel.

Stafford says it’s rare to get the opportunity to redesign a store’s look even while the brand itself is upgrading. “To do this kind of reinvention wouldn’t have been possible otherwise,” she said.

Rubel describes his business strategy as developing an emotional connection with customers and speaking to their needs, encouraging self-expression through footwear. A key element in reinventing Payless, he says, is to focus on quality and style while adhering to the original Payless tenet: affordable merchandise. “We’ve moved from ‘look smart, pay less’ to a brand positioning which is inspiring fun fashion possibilities for the family.”

Outside of the U.S., Payless operates in Canada, the Caribbean, Latin America and has a single store in Japan. The company sells one out of every 10 pairs of adults’ shoes and one out of every six pairs of children’s in the U.S., says Rubel. The chain raked in $2.67 billion in sales for the 2005 fiscal year, which ended in January, virtually flat with the year before. Same-store sales, meanwhile, rose 2.4 percent.

Similarly, for the 13 weeks ended April 29, total sales were about flat with the previous year’s comparable period, at $694.8 million, while same-store sales edged up 0.4 percent.

According to The NPD Group, a Port Washington, N.Y.-based consumer and retail market research firm, for the 12 months through May, some 23 percent of Payless’ sales came from households earning upwards of $75,000 a year — with more than half of that coming from the over $100,000 bracket.

Roughly 40 percent of Payless stores operate in open-air centers, while just over a quarter run in enclosed malls. The rest comprise freestanding and central business district units.

Numbers, face-lifts and brand reinvention notwithstanding, consumer analyst C. Britt Beemer says he is not sure these changes will satisfy current customers or entice new ones. Beemer, chairman and founder of Charleston, S.C.-based America’s Research Group, points out that Payless shoppers’ biggest gripe is the lack of friendly and helpful sales staff. All it takes is one or two aloof and unaccommodating clerks to leave a lasting impression on a first-time consumer, Beemer says. “If they don’t change the attitude of the employees, Payless will never see the benefit of the new store format,” Beemer said. “The rebranding effort and new store design may do well, but Payless needs to improve the quality of the people working in their stores.”

No one seems to know that better than Payless itself, so the chain is busy putting together A-teams of enthusiastic, knowledgeable clerks who will make a priority of getting the right shoe onto the right foot.