Interview: treading the path of profitability
Pavers Shoes continues to grow its business across channels and internationally by strictly focusing on delivering profitability, which is a discipline that the family-owned business believes has been forgotten by many other retail organisations.
Stuart Paver, managing director of Pavers Shoes, says: “Often companies go for growth without profits. They take cash out and do not re-invest and it seems that a lot of people have moved away from the fundamentals of retail and it then falls apart. They are shifting sales online but it is not profitable, which is not a great model.”
He highlights how the company’s business in India – that comprises 40 Pavers England Stores – competes with big private equity-backed retailers that sell online at reduced rates, which sucks sales from their stores and so both channels end up not making money.
Charging for delivery makes sense
In contrast, Paver says the channels at Pavers Shoes have to earn their keep: “We started online very early and it has continued to do well. But we’re a strange company in that we insist on making profits online! We put the costs to the transaction - we charge for delivery and it is normal prices. We do not get the same sales growth [as some others] but we have a similar margin to our stores.”
What has helped the business over the last two years to run more efficiently – and profitably - across channels is its focus on the visibility and accuracy of its stock positions. This has been very beneficial to the click & collect proposition that now includes delivery to stores for orders where stock is not available at the time the order is taken.
“Our stock discrepancies have diminished greatly over the last two years as we’ve invested in growing our IT capabilities,” he says, adding that unusually 90% of the company’s technology solutions are developed in-house.
Developing in-house technology
“We realised that to be IT-savvy we needed our own team to develop our system and to not get in someone else’s system. We’ve found that most software has 1,000 features but only two of them are useful. We’d then have to look for the other two that are also useful and it costs a fortune,” explains Paver.The “simple system” that has been designed incorporates an in-house metric that helps with the decision-making by making it easy to buy, replenish, and choose where products are stocked.
“We’ve developed this metric that we finesse over time and it generates a definitive number about the products that determines what items go into which branches. We take it down to sizes so we get the right mix. If there is not a sense of profitability then we will not do it,” he says.
Avoiding own goals
Paver believes that some of the problems faced by retailers today are “own goals”. “The model of sensibly growing and doing what you do best and making money and re-investing it has gone out of fashion,” he suggests.
It is this rigour that the company has applied to the Jones Bootmaker business that it bought last year when it made a loss of £8 million. In the year to January this has been turned into a profit of £1 million and there is belief that the store estate could be grown by two or three times from its current 38 units. In addition, the Pavers branded stores in the UK could be doubled to around 250 outlets.
The Indian business is also primed for expansion beyond its existing 40 units, which is a market Paver regards as providing a “massive opportunity”. “It’s a high cost market [in terms of logistics and traffic problems] but in the long-run it could be exceptionally good. But we’re not going to spend all our money [investing in the market] in the first five years,” he explains.
This patience and focus on profitability along with the family ownership structure that enables it to take a long-term perspective are the key factors that underpin the company’s roadmap.
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