Famous Footwear

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Famous Footwear
Type Wholly owned subsidiary
Industry Retailing
Founded Madison, Wisconsin (1960)
Founder(s) Neil Moldenhauer
Headquarters St. Louis, Missouri, US
Number of locations 1,110 (January 2011)[1]
Products Footwear
Parent Brown Shoe
Website famousfootwear.com

Famous Footwear is a nationwide chain of retail stores in the United States dealing in branded footwear, generally at prices discounted from manufacturer's suggested prices. Established in 1960 as a single store, "Famous" is regarded as both a forerunner and champion of the trend towards the establishment of discount shopping malls in America.[citation needed] The chain is currently a division of the St. Louis-based Brown Shoe Company and maintains over 1,125 storefronts in 2010.

Company history[edit]

Formation[edit]

Today's Famous Footwear began in 1960 with the establishment of a single shoe store, Neil's Factory Shoe Outlet (launched as "Neil's Shoes"), in Madison, Wisconsin.[2] The store was launched by 29-year-old Neil Moldenhauer and was financed by a $10,000 loan.[3]

In 1963, Neil's Factory Shoe Store hired a college student named Brian Cook as a stock boy, a man who would rise up the company ladder to become President of Famous Footwear in 1979.[4] Nearly half a century later Cook recalled:

"We were one of the first factory outlets in the Midwest.... The store bought all closeouts and was primarily a women's store. The market had never seen anything like that... Most of the stores that shoppers went to were mom-and-pop stores, department stores were all very expensive, not at all like they are today. The market was wide open for big, open formats selling discount product. As a result, we started a rapid store expansion program. We ended up putting a lot of little stores out of business....

"Eventually, in the early 1990s, everybody was a discounter. Everyone was opening shoe stores like ours. Everyone copied our concept. We were groundbreaking and very revolutionary at the time, and not very popular with a lot of regular-priced retailers.[4]

The name "Famous Footwear" was launched in 1964 when Moldenhauer opened a second store in Cedar Rapids, Iowa.[3] By the end of the decade of the 1960s, eight Famous Footwear and Neil's Factory Shoe Outlet stores were in operation, with combined annual revenues approaching the $1 million mark.[3]

Expansion[edit]

Famous Footwear store, Oak Valley Shopping Center, Ann Arbor, MI.

By 1974, all stores in the chain—which now consisted of 15 storefronts—were unified under the Famous Footwear banner.[3] Ninety percent of the chain was purchased from founder Moldenhauer in this year by a leveraged buyout led by longtime employees Dave Orfan and Brian Cook, along with a group of outside investors.[3] Orfan initially assumed the role of President with Cook Executive Vice President, a relationship which changed in 1979 when Cook assumed the mantle of the presidency.[3]

By 1980, the midwestern chain consisted of 36 stores generating total annual sales of $30 million.[3] The company became an attractive investment opportunity for the St. Louis-based Brown Shoe Company, which acquired the firm and immediately set about with plans for rapid expansion.[3] By 1986 the chain consisted of 230 stores.[3]

In 1990, Famous Footwear launched a 740,000-square-foot (69,000 m2) distribution center in Sun Prairie, Wisconsin, near Madison.[3] This was followed by another 800,000-square-foot (74,000 m2) distribution center in Lebanon, Tennessee, constructed in 1993.[3] Fueled by Brown Shoe Co. money, the chain had expanded to 722 stores in 44 states by the end of that year.[3]

Prior to 1974, due to its discounting policy Famous Footwear was unable to purchase footwear from the two leading athletic shoe giants of the day, Adidas and Puma.[4] Consumer demand for this emerging product category was enormous. In response, Famous Footwear opened up a number of little sporting goods shops called All Star Sports Centers, facilities which were directly promoted by regular Famous stores.[4]

The move accelerated the growth of the Famous Footwear chain again, albeit the company's typical business model, which was historically based upon the long margins possible through bulk buying of discontinued products.[5] In the ensuing decades, Famous gradually moved to a more-traditional markup structure based upon the bulk purchase of current goods, while remaining a leading distributor of closeout branded merchandise.

Company today[edit]

In 2008, Brown Shoe Co. closed down the Madison headquarters office of Famous Footwear and consolidated central operations under headquarters in St. Louis.[3] Approximately 270 people previously working in the Madison office were offered jobs at the new consolidated headquarters in Missouri.[3]This was a difficult "opportunity" to ask of its employee's who were not high earning individuals. Most of whom were part of families that realistically had no choice but to decline moving across the country. This change was implemented to cut these jobs and save money for the company. Famous was able to shrink the overall size of their corporate headquarters to a much smaller staff of newer employee's who, more than likely earned less money. They instituted a system that relied on the already payroll strapped stores managers to process most of the Human Resource protocol. By doing this, they took valuable customer service man hours and demanded that managers spend hours inputting information into a system that Famous Footwear gave zero training hours to its staff. Requiring their managers to learn SAP with not a single minute of in store training was a difficult process. In addition Famous stabilized allotted work hours for stores regardless of meaningful sales gain, meaning less time available to devote to its customers. Currently they are paying the price for these gaffs and quarterly earnings and stock price have plummeted through the nearly the last two years.

As of October 2010, Famous Footwear consisted of 1,126 retail stores in the United States, including 947 Famous Footwear stores and 179 thematically-structured outlet stores.[6] The company indicates that it has plans to close 126 underperforming stores by the end of 2012, approximately matched by planned openings of additional new locations.[6] Some 26 new stores were launched or are planned to debut in calendar 2010.[6] The company indicates a long-term desire to add another 400 to 500 stores to the company's ranks.[2]

Famous Footwear still struggles in the area of being recognized by shoe manufacturers as a discount retailer. Their pricing structure leads to Outlet stores often being much more expensive on the same items as in their retail stores. Coupled with the fact that retail stores will run BOGO sales, this can be upsetting to customers who have both retail and outlet stores near them. Famous Footwear is not allowed to carry certain high dollar athletic footwear items in their stores because they are considered a discount chain where customer service isn't the commitment. So trying to find items like Nike Shox, or other high dollar items is quite impossible. This is why Famous Footwear's committed customers see a lot of the same items through the years. Famous cannot sell higher end product, so they are limited to selling 2nd tier items at non-discounted prices, minus stores that run BOGO. Famous opened five athletic driven stores named "Mind Body and Soul" with the intent to be able to show manufacturers like Nike, Reebok, Brooks, Asics, Adidas, and Mizuno that they have a capability to sell these items through commitment to training and customer service. This move was a stroke of genius, in that once these small sales stores were unable to move certain high dollar items, the company would be able to move them into the outlet stores under the assumption of them being clear outs being shifted into the outlets. What ended up happening though was these items were moved into the outlets and the price was placed at or near retail price, regardless of age or the business trend of the price of such items. A quick scan through any local Famous Footwear Outlet store and you will find that a significant portion of their athletic footwear is at or within a 5-dollar markdown of MSRP. Famous also alienates their customer base by taking a manufacturer's MSRP price, removing the suggested retail price tags and increasing stated "Our Price", then slating a sale price at the manufacturers MSRP. Often tags get missed in store showing MSRP price, allowing customers to see this business practice.

In today's Famous Footwear, they have trended away from customer service by running bare bones staffs with large square footage stores. The typical Famous is indeed about 7,000 square feet and often runs with a staff of only one person, for large stretches, in the vast majority of their small stores. Even during very busy peak times it is very common to see no more than two or three employees on the floor attempting to accomplish work. This leads to a serious conflict of actually being able to find time to help most of their customer base. Most of their stores run for hours with only one employee trying to accomplish work, and help all customers.

While store layout is based upon available space, the typical Famous Footwear store averages about 7,000 square feet (650 m2) in size and includes about 60 percent of centrally-purchased universal products and 40 percent customized to the needs and tendencies of the specific store.[6] Exterior decor tends to be austere and internal store layout simple to facilitate casual navigation.[6]

In 2010, Famous claimed to be dealing with some 800 brands as a company.[7] In that year about 18 percent of the chain's business involved the brands of Famous' parent corporation, Brown Shoe Company, which include Naturalizer, Dr. Scholl's, Franco Sarto, Fergalicious, Libby Edelman, and the chain's private label, Connie.[7]

In November 2010, Famous Footwear planned to launch a new five-store test of an outlet concept called "Mind Body Soul", concentrating on footwear related to the toning and fitness category.[2] Test stores will average 2,000 square feet (190 m2) and will be initially launched in Denver, Tulsa, Orlando and Palm Beach, Florida, and Burlington, Massachusetts.[6]

References[edit]

  1. ^ Brown Shoe 2010 Annual Report - Financials (10-K)
  2. ^ a b c Wayne Niemi, "Fame Game: Famous Footwear Isn't Stopping at 50," Footwear News, vol. 66, no. 36 (October 4, 2010), pp. 20–21.
  3. ^ a b c d e f g h i j k l m n Gerald Flores, "Rise to Fame: Famous Footwear's Evolution from a Single Outlet Store to a National Chain of Family Shoe Shops is a Story of Vision and Value," Footwear News, vol. 66, no. 36 (October 4, 2010), pp. 52–55.
  4. ^ a b c d Neil Weilheimer, "Fast Cook: Former Famous Footwear President Brian Cook Shares His Thoughts on the Chain's Rapid Growth," Footwear News, vol. 66, no. 36 (October 4, 2010), pp. 40–42.
  5. ^ Former company president Brian Cook recalled in a 2010 interview that "The company just took off again, even though they were much lower margins than we were used to. And we couldn't really sell shoes at that kind of margin, except to raise our buying. It changed our whole cost structure. It changed the way we did business; it changed the face of athletics." Weilheimer, "Fast Cook," pp. 40, 42.
  6. ^ a b c d e f Kristen Henning, "Fitness Test: To Expand its Presence in the Toning and Wellness Area, Famous Footwear is Banking on a New, Fitness-Specific Concept," Footwear News, vol. 66, no. 36 (October 4, 2010), pp. 24–26.
  7. ^ a b Marcie Young, "Mix Mastering: Famous Footwear Has Bolstered Its Product Assortment From Athletic to Dress and It Is Eyeing Ways to Expand Its Portfolio Even Further," " Footwear News, vol. 66, no. 36 (October 4, 2010), p. 28.

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