Tradehome marching off to bigger markets

  • Article by: DICK YOUNGBLOOD , Star Tribune
  • Updated: June 27, 2006 - 8:22 PM

A chain of small-town shoe stores has prospered while bigger competitors failed. Now it's looking for success in metro areas.

Think of Tradehome Shoe Stores Inc. as the Little Footwear Retailer That Could.

Founded in 1921 as a regional vendor of private-label footwear in small Midwestern cities, Tradehome survived the rise of small-town shopping malls that initially excluded it, the invasion of big discounters that undercut it, and fierce competition from national chains such as Kinney's and Thom McAn that could afford to outpromote it.

The upshot: With all of its stores now located in shopping malls, generally in choice locations, Tradehome continues to grow at more than double the rate of the footwear industry while both Kinney and Thom McAn have disappeared from the retailing scene.

Meanwhile, under new ownership involving nine longtime Tradehome managers led by CEO Pat Teal, the Cottage Grove company is launching its own invasion, stepping beyond its small-town history to seek new opportunities in the suburbs of big cities across the Midwest and beyond.

The results so far: Since the new owners took over in 1999, sales have grown from $42.7 million in 1998 to $69.2 million in 2005. That's an annual growth rate of 7.2 percent, with 2006 sales on track to rise another 8 percent, to $75 million.

By comparison, footwear industry sales since 2000 have been flat or rose less than 2 percent in four of the years and grew just 3.4 percent in 2005.

The new owners have closed 14 stores and added 46 to take the total to 94 in 14 states, with three more openings scheduled this year. The list includes suburban stores in the Twin Cities (Blaine, Burnsville and Eden Prairie) and the St. Louis, Des Moines, Oklahoma City and Denver areas.

All of which led Don Mains, the soft-spoken gent who ran the company with brother-in-law Harold Smith for nearly 30 years, to suggest that "[we] probably should have stepped aside much sooner and let these guys take off."

Teal earnestly disagrees. In his view, the solutions that Mains developed for the challenges of the past 30 years armed the company for the growth it has enjoyed in recent years. Consider:

• It took Mains two years to persuade small-city mall developers to take a chance on Tradehome, which he argued already had a loyal local following and knew the market better than any newcomers. Even so, he had to accept unfavorable mall locations for more than five years.

• In response to discount chains such as Wal-Mart, Mains switched from private-label to name-brand merchandise, a strategy buttressed by a rising demand for athletic shoes that now account for nearly a third of the company's total sales.

• Most important, Mains began promoting what he termed "a slavish devotion to customer service." What does that mean?

"You greet 'em, you seat 'em, you measure their feet and consult about prospective use so you can find the perfect shoe match," Teal said. "Oh yes, and you clean, polish and waterproof the shoes the customers wear into the store."

The company supports the service focus with internal promotions to management positions, 12- to 24-month training programs and bi-monthly performance reviews, Teal said.

There also is a profit-sharing plan to which the company contributes 12 to 15 percent of earnings and a competitive pay scale that offers $10 to $12.50 an hour to part-time workers and an average of $60,000 a year to store managers.

This approach has been so successful that the new owners have eliminated lower-end merchandise with which they competed with the discounters and have focused on high-income consumers who are looking for "high quality, high comfort and high service," as Teal put it.

All of which is not to suggest that Teal and partners have not had their own challenges beyond the impact of the recent recession and the 2001 terrorist attacks. For one thing, there has been continuing pressure on the company's small-city stores from nearby regional trade centers.

Tradehome's response: Since 1999 it has closed stores in smaller cities such as Red Wing, Winona, Fergus Falls and Janesville, Wis., and opened stores in nearby trade centers such as Rochester, Duluth, Madison, Wis., and Fargo, N.D.

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