Photo: Topo Athletic/Designer Brands
Will DSW’s owned brand push pay off?
Designer Brands Inc., the parent of DSW, recently set a goal to double sales of its owned brands in response to direct-to-consumer (DTC) efforts by national brands. Its acquisition earlier this week of the Topo athletic brand furthers that effort.
The in-house brands push was marked by the 2018 acquisition of Camuto Group, which owns the Vince Camuto, Lucky Brand and Jessica Simpson footwear brands.
The shift came after management recognized the fastest footwear channel in recent years by far was brand DTC.
“While we’re investing a billion dollars in opening stores, they’re going DTC,” said Designer Brands’ CEO Roger Rawlins at an Investor Day event this past April. “Today, roughly 20 percent or one out of every five pairs of shoes are purchased direct from a brand.”
The change also reflected how online selling, mobile phones and social media are supporting a brand-direct approach. Owned brands also promise higher margins.
Owned brands also include Crown Vintage, Mix No. 6, Lucky Brand and Kelly & Katie. The brands continue to pursue third-party distribution while partnering closer with DSW. Also as part of the push to offer more exclusive product, DSW has secured North American rights to Hush Puppies and an agreement guaranteeing differentiated colors and styles exclusives with Reebok.
The Topo acquisition adds a road and trail running shoe to DSW’s mix. The retailer will also soon launch Le Tigre athletic sneakers and slides as an exclusive. The athletic deals come as Nike recently stopped selling to DSW.
In the third quarter, owned brand sales grew 25 percent, increasing share to 27 percent of Designer Brands’ revenue, versus 22 percent the prior year. The goal is to reach one-third by 2026.
DSW expects to maintain its sales in national brands. In recent years, a shift that narrowed DSW’s focus to its top 50 brands has helped strengthen relationships with key brands.
Mr. Rawlins said at Investor Day, “We are brand builders. We own and control brands that we can take DTC. We also have the top 40-or-50 brands in the world that we’re able to offer to consumers, and we have built differentiated experiences to ensure they don’t want to pick up their ball and go play with someone else.”
- Designer Brands Acquires Topo Athletic, Accelerating Owned Brands in Leading Shoe Sales Category – Designer Brands
- Designer Brands Inc. Reports Third Quarter 2022 Financial Results – Designer Brands
- Designer Brands (DBI) Q3 2022 Earnings Call Transcript – Motley Fool
- Designer Brands Inc. Outlines Long-Range Plan, Leveraging Key Capabilities to Drive Growth at its 2022 Investor Day – Designer Brands
- Designer Brands Inc. Investor Day 2022 – Designer Brands
- Designer Brands Adds Le TIGRE to Growing Portfolio – Designer Brands
- Hush Puppies & DSW Announce Exclusive Wholesale Partnership – Designer Brands
- What Do We Mean by “Owned Brands,” and Why Does it Matter? – Designer Brands
Discussion Questions
DISCUSSION QUESTIONS: Do you see more benefits than drawbacks to DSW’s move to increase emphasis on in-house brands? What recourse do footwear sellers have to their vendor partners’ moves to increasingly sell direct-to-consumer?
Poll
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If owned brands and private labels are severely underdeveloped at DSW, it makes sense to grow those businesses faster — as long as the company maintains a focus on national brands. DSW built its brand equity on those national brands, and there are plenty of cautionary tales among other retailers who pushed the “private” button too hard.
On my last visit to DSW this fall, I saw plenty of exposure for Crown Vintage but I didn’t know what the brand stood for. An “owned brand” doesn’t provide a halo effect to any retailer without brand equity of its own. And the margin benefit of private label only works if the consumer wants the product.
DSW’s owned brand push will pay off, as long as their merchandising strategy has a clearer POV and data driven product decisions.
We don’t know what their own brands stand for and what gap they are trying to fill. The last thing retail needs is another muddled merchandising strategy like that of Bed Bath & Beyond or Gap Inc.
Retailers need to learn from the mistakes of others and leverage data to drive product and assortment decisions as well as the right pricing strategy. The purpose of private label is to fill gaps in the assortment that branded products leave open. A better understanding of what the customer is looking should be the center of DSW’s owned brand strategy and should push past filling the Nike gap.
There’s no doubt that the loss of Nike leaves a pretty big hole in the business. But DSW’s stable of owned brands packs a decent amount of its own horsepower. Those acquisitions were smart and timely. It may or may not be possible to develop a powerful private label in the shoe business, but if anyone can do it, it’s DSW.
Here’s the thing: The store is called Designer Shoe Warehouse so consumers expect to find designer shoes at DSW.
That being said, my favorite brand at DSW happens to be a house brand, but I never realized that until recently. As long as DSW continues to have a strong representation of actual designer and name brand shoes on its sales floors I don’t see a problem.
The company actually seems to prefer the acronym DSW: maybe it’s a subconscious way of de-emphasizing the “designer” aspect.
Maybe, but it still stands for Designer Shoe Warehouse. It could easily be confused with Discount Shoe Warehouse. Like you said, Craig, emphasizing “designer” just makes sense!
Online and DTC have continued to emerge as preferred consumer shopping options. This makes sense for DSW given its evolution the past few years. This is another warning to vendor partners that online and DTC options need to be made available to their customers.
Emphasis is fine. If they discontinued other brands (altogether), that would be another matter; but they aren’t doing that. Buyers of course have to share in the enthusiasm; whether they will or not is of course the Four Billion Dollar Question.
DSW will have work to do in order to make in-house brands gain traction. What will their product stand for? Designer style wear and quality on par with other brands? Lesser quality and price but being design forward? Style and performance like Nike?
REI is a retail example of this being figured out. They are leaders, experts in outdoor adventure. They offer high quality competing brands, technical expertise, along with their own in-house brand which stands for high-quality, high-value at a fair price.
One of the best illustrations around this is Nike. It’s remarkable how Nike gradually built their brand, pulled out of most marketplaces, and strengthened their DTC offering.
Since establishing a direct relationship with customers has become crucial, brands going D2C must ensure:
On another note, with more and more brands going direct-to-customer, marketplaces must implement new strategies to adapt to changes and shifts in retail.