Here's What the DSW of the Future Will Look Like

Footwear retailer Designer Brands Inc. (DBI) announced net sales increased nearly 31% to $853.5 million in Q3 2021 compared to Q3 2020. CEO Roger Rawlins attributed this growth in part to strength in the athletic and athleisure categories, as well as kids and men’s shoes. In a wide-ranging interview with Adweek, Rawlins traced the path of the shoe retailer and its subsidiaries through the pandemic and beyond, including the changes it is making as it focuses on the future. Hint: Expect more in-store experiences, such as stores-within-stores and immersive children's sections, as well as distribution partnerships with brands like Hush Puppies, pop-ups with retailers like Staples, and delivery within two to three days. This interview has been condensed and edited for clarity. Adweek: Could you explain how the company has grown and its major business units? Rawlins: DBI is one of the largest designers, producers and retailers of footwear in North America. It comprises three businesses—Designer Shoe Warehouse (DSW), The Shoe Company and Camuto Group. DSW is DBI’s flagship retailer for footwear through more than 500 stores across the U.S. and Canada, plus online sites. DSW’s #TooManyShoes TikTok Challenge Generates 1.7 Billion Views in a Few Days The Shoe Company was acquired in Q2 2018 and operates 145 brick-and-mortar locations in Canada. We also acquired the Camuto Group in Q3 2018 along with its global design, sourcing and production infrastructure for footwear and accessories. This heightens DBI’s ability to create footwear across dress, athletic and athleisure categories. Not only does Camuto design footwear in-house for DSW, it is also a leader in private-label footwear for brands such as Jessica Simpson, Lucky Brand and JLO Jennifer Lopez. Tell us about the state of DBI, particularly DSW, headed into the pandemic. How was the business positioned? Pre-pandemic, we continued to lean into our Camuto Group and Shoe Company acquisitions and rebranding to DBI. Along with the rebranding came a new long-term vision. We set a three-year strategy to control Designer Brands’ destiny through differentiated products and experiences, and grow market share through positive comparable store sales, new direct-to-consumer opportunities and continued partnership with other retailers. How did DBI adjust during the pandemic? Like other retailers, DBI had to adjust our offerings to meet the demand and new needs of consumers. With people in quarantine and staying at home, consumers weren’t looking for dress shoes anymore. We pivoted to athleisure and footwear that emphasized comfy and cozy styling. Athletic in particular was under-penetrated, and the company increased our offerings there. We leaned more on our already strong digital platform and used our warehouses as distribution centers. DSW’s physical stores also serve as warehouses and fulfillment centers for online orders. This allowed us to pivot to a 100% ecommerce business. And we’d always discussed providing curbside pickup and delivery, but wanted to do so when we knew customers were looking for and needed it. Covid accelerated the need to get products to our customers fast, and we were able to turn this around quickly. To Understand the Future of Ecommerce, Look at How Kids Behave As we slowly emerge from the pandemic, how is DBI repositioning each of its brands and why? Customers will soon notice our Warehouse Reimagined strategy. The updated design is bright and fresh with a differentiated in-store experience, including branded shops-in-shop where we will highlight brands. The new experience will include VIP events and opportunities for influencers to engage in person and support products. The kids section will be more immersive with digital sizing floormats and products at their eye level. While still in prototype, the new design will be more experiential for the customer and less transactional. What were the changes DBI discovered it needed to make in customer experience and product mix? We quickly optimized our ecommerce platforms to support robust digital demand. We’re seeing substantial growth in athleisure, kids and men’s categories, while women’s dress category is seeing reduced demand, although less reduced as the recovery continues. To further capture this trend, we recently announced we will be the exclusive in-store distributor of the brand Hush Puppies, giving us access to a global heritage brand. It’s been critical for us to serve our most loyal customers throughout the pandemic and into recovery. Our VIP loyalty programs remain a key support for our growth. For all of DBI, we have approximately 30 million rewards members as of the end of Q2 2021. During the second quarter, enrollments in our program for DSW grew 18% compared to 2019, building momentum from a 7% increase in the first quarter. This was the highest quarter of sign-ups in DSW history. We’re seeing our core customers return to stores, and we continue to refresh our physical locations and grow basket size. We started with some smaller initiatives that we can scale over the long term. For example, we partnered with Staples to install back-to-school pop-ups in 48 stores, something we can expand in the future. We’ve added apparel to select locations with T-shirts that suit the local market and sold those items twice as quickly as we expected. Through activations and differentiated experiences, we center everything on our customer. In Canada, we have Lids and Claire’s shop-in-shops inside our stores so customers can accessorize their most recent footwear purchases. What are DBI’s long-term goals? We are not providing long-term guidance at this time, but can share that we have been repositioning our company toward athletic and athleisure, an area we have under-penetrated. Our newfound strength in athletic and athleisure coupled with our historical success of our dress and seasonal business will strengthen our foundation for DBI to reach an even broader customer base. What are some changes we might see at DBI as it pivots to become more of an omnichannel retailer? A key area of focus in our business is our customer—deepening our understanding of who they are and their expectations, and using data to create unique and innovative experiences to deliver on these expectations. Innovation and change are constant in retail, even more so after Covid. As such, we are accelerating our push in analytics and data sciences to refine the granularity through which we view our customers and move toward frameworks that are more longer term and predictive in nature. What do you think are most important factors for DBI’s transformation? We know how critical controlling our own brand destiny is for our growth. Camuto is absolutely central to this pillar. And we are seeing the results already as sales of Camuto-produced brands were up 88% in the second quarter; sales of Jessica Simpson were up 92% compared to 2020 and up 9% compared to 2019; and retail sales across our key partners are similarly improving with sales up 140% compared to 2020 and down only 4% compared to 2019. A key to our success is our focus on design and an eye for trends in the market. Another component of the brand strategy is being heavily invested in the top 50 brands in footwear, not just our own brands. Through activations and differentiated experiences, we center everything on our customer. We will continue to prioritize growing our vertical brands and evolve our online presence so it’s closely coupled with a broad-reaching footprint of storefronts that double as fulfillment centers. Another pillar, speed, is of utmost importance. Customers expect us to have the latest product in our stores and expedited delivery. We’re developing processes to get products into our customers’ hands faster. Fulfillment has historically taken five to seven business days and we’re working to get that to two to three calendar days, while finding efficiencies along the way to contain costs. We’re optimizing our current infrastructure and expanding small parcel delivery partnerships to include regional carriers that can respond more quickly and cost effectively. Speed also means faster to market. As designers of footwear brands, we need to be early on trends, and we anticipate our direct access to millions of customers’ shopping data will give a leg up on design and development. We’re working to improve collaboration through technology and processes around DBI and gain additional efficiencies in our overall development cycle time. How to Successfully Fill the Shoes of a Larger-Than-Life Founder