Josh McDonnell talks footwear with RCG Group Co-CEO Daniel Agostinelli.
RCG Group owns footwear chains including The Athlete's Foot, Hype DC, Platypus. How was trade into the new year?
We had a great year right up until Boxing Day. Things were looking terrific. Then Boxing Day onwards, it just fell off. There is no reason why. It just fell off in the January/February period but of late we've started to see all businesses start to perform better. And there seems to be a bit more zing in everyone’s step which is good. That has been helped a lot by our supply partners delivering some fantastic new products and the good news for the sneaker business, colour is finally back. We've been flat out selling black and white shoes now for the past two years. We have just started to see some really fresh pastel colours coming into the new products.
So how have supply partners assisted?
New ranges and new colour palettes predominantly led by Nike, Adidas and Vans. They are the big winners at the moment but once they all fire you end up with a fantastic business.
Were these drops in Jan/Feb across the board?
It was across the board and it wasn't that it was a complete disaster. It certainly was not allowing us to hit forecasted budgets. So we had to do a couple of different things. If the market asked 'why you think that occurred?' We don't know, there is no real answer, just that the sentiment across the board seemed to be down.
What are the plans now that things have started to pick back up?
We've just inherited Hype DC and we are busy getting that back on track and thankfully some fantastic new products have hit in that business as well. Given how tough it has been we have decided to go slow on new store openings at the moment. Keep in mind we opened 49 new stores on the Accent Group side last year. So we are being very very cautious so absolute bullseye stores are the only ones that are getting through. Otherwise we are simply say no not for the moment.
Having said that though, in our Hype business we are expanding four or five key stores: Melbourne Central, Swanson Street and Robena. All three are serious expansions and on the Athlete's Foot side, we are just about to open our brand new concept store at Bondi Junction which is really going to be focussed on the category Run, as in running products. We are very very confident that our customers are going to love it.
How are these Hype DC stores expanding? In sqm?
Swanson Street as an example, we are taking over the site next door. So the store will essentially double in size.
What is it now?
It is about 123sqm and we are going to go to about 250spm with a 17 metre shopfront. Very impressive new store.
Is that similar for the other two?
Yes.
The founders of Hype have departed, what is the plan for replacement?
Danny and Cindy have been doing this for a long time, they did a great job building that business.
They've decided to take a nice break and work out what they are going to do in the next phase of their lives.
So we have promoted Matt Hapgood who is the current retail GM of the accent group businesses. Hype will now be reporting to him and then effectively report to me.
From that is it a change in role?
It's business as usual, the focus will be on costs as a percentage of sales. They will need to go down. We are rebuilding what we believe is the correct culture across the whole business. Essentially, we need to see tangible evidence that the culture lives, as we are going through this, disruption. That is the magic word we are using here, the disruption going on all over in every category, in every business and we believe you have go to get your costs right, your culture right and also your people to be spot on. And these young kids today they want to be identified, incetivised and motivated.
How do you get that cost of percentage down?
Well in terms of cost of percentage of sales, we are looking at all areas. As an example, where we normally carried a certain amount of stock we may try and do similar sales with less stock. So looking at stock turns they need to improve. We are doing our best to have a stronger margin. Stores that are not paying their way on terms of investment, from a landlords point of view, we are simply having to say unless we can do a deal that makes it worth staying, we have to close that site.
Is that something that has come up or is that an attitude you are taking hereafter?
It is not just an attitude, it is more of an necessity that is the new way of viewing what they business must do moving forward. Particularly as we have got a very solid online business that we operate.
What are the percentage of online sale?
We haven't divulged that to the market but what I can tell you is our number one store in every business is an online store.
So online is now dominating the sales?
Absolutely, as an individual store online is our number one store across all businesses.
We are spending a lot of money in the back end to beef up our systems to allow for ever further growth as we move forward.
So CRM changes and the like?
Absolutely. We've just got on a new platform across all businesses and it has been game changing. Better distribution agreements, faster delivery processes. We've just launched Click And Collect across all stores and it has been amazing from that. At the same time little added incentives for customers is great. After payment has been very solid for us. So the word disruption allows you to look at everything, I mean it is all change, it's changing faster than I’ve ever seen it.
What is this culture that you have been trying to focus on?
Well first and foremost, we talk about internally that if you're going to run a culture, there needs to be tangible evidence that it lives. So you know, little things like, you need to have a can do attitude, you need to know how to sell product, you need to know how to really deliver great customer service. You need to show appreciation, it's all those things that make up the culture. But essentially, we are a 'can do' business that is prepared to have some courage to try different thing and we need the right team to deliver those. We feel that is an area we are putting a lot more time in too.
How do your buyers get inspired?
They follow all the channels: Snapchat, Instagram, simply search online but also currently I’ve got seven people travelling. They've travelled to Berlin, Amsterdam and London and that is a buying trip and that is purely to see well lets go to the source and see exactly what is happening over there so we can at least start to think about what we should be buying in six months time.
Why Amsterdam?
For whatever reason, we feel in terms of sneakers you get such a diverse congregation of youth in that city. That if you go there, you see what many many different types of Europeans are wearing. Forever and a day, it has been a strong sneaker market so we tend to visit it out every time we go to Europe.
What are some of the key challenges and opportunities going ahead in the retail space?
Most retailers always seem to move it towards product; that the product's not right. That's a very solid argument but we believe in our business it is more than just product. You've got to have the special sauce as well and unless you get that special sauce then you'll be dead and buried.
We are a business that is still spending and investing in our store fitouts. There is no store fitout that is the same. Every one we do, we try to add some element that allows us to take the whole look forward. If you look at our latest stores Parramatta and Chadstone, you can easily see they are next level for us.
Culture as I mentioned before is just critical for us. If you can't get the right people in your stores, I think your target consumer is very quickly going to go somewhere else.
So we are spending a lot more time on training and development that we have before. We are giving the ammo which is product to actually achieve their budgets.
We try and drive a culture that is fun. We are selling high end fashionable sneakers to a very exciting group of core customers.
What sort of training are we talking about?
Mostly it is has all revolved around customer satisfaction. If we are not here to satisfy customers, we've really got to ask what the hell we are doing. Because without them, we have got nothing. We've put a lot of emphasis on training in terms of the way you should look, the way a sale should be handled, the way the merchandising of a store should look and just general operations at all levels.
How is the training being run?
We have three people internally who run that department. We see them being on the A-team who are essentially driving the difference between making the business right or wrong. Right now we couldn't be happier with that investment.