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Clothing makers see value in adding retail divisions

Stores act as testing sites for new fashions while increasing brand awareness
Native Shoes president Kyle Housman joined the company last year after being Lululemon’s general manager for Australia and New Zealand | Chung Chow

The trend of Vancouver clothing manufacturers morphing into becoming retailers is set to continue in 2018 with Herschel Supply Company set to open its first corporately owned store, in Gastown, this summer.

This follows Native Shoes last month opening its first store, at 14 Water Street, a couple blocks east of Hershel’s future store at 347 and 349 Water Street. Dish and Duer briefly operated a pop-up store and then last year opened a flagship store at 118 West Hastings Street, a couple blocks south of the planned Herschel store.

Each of the manufacturers already sells its products through third-party resellers.

Native Shoes president Kyle Housman told Business in Vancouver that his company sells shoes through hundreds of independent retailers in the U.S., including chains such as Nordstrom, which alone has hundreds of locations.

Native Shoes also sells products through 17 distributors to retailers in 40 countries worldwide, said Housman, who joined the company in April after spending eight years at Lululemon Athletica Inc. (Nasdaq:LULU) in positions such as director of e-commerce and general manager for Australia and New Zealand.

E-commerce sales at Native Shoes account for more than 10% of the private company’s revenue, while other sales come from online behemoth Inc. (Nasdaq:AMZN) and its subsidiary.

Housman declined to reveal Native Shoes’ total revenue, but he said its sales are not in the hundreds of millions of dollars annually.

The company employs 55 people in Vancouver and five others around the world, and it outsources its manufacturing to Asia.

“We are hiring into our marketing groups, operations and, I believe, there’s a designer role still open,” Housman said. “We just hired a human resources manager, and we continue to grow.”

He said his rationale in opening corporately owned stores while continuing as a manufacturer and wholesaler is primarily that he believes his company can get better and faster feedback because customers will be speaking directly to Native Shoes employees.

Executives now get feedback on customer preferences from resellers and distributors, but it’s hoped that getting that information directly from customers who are in a corporate store will help Native Shoes quickly incorporate that insight into new designs.

The company will likely use its 1,400-square-foot store as a testing ground for new shoe designs before they’re sold through resellers.

Having corporate sales venues also boosts brand recognition, which in turn helps sales at resellers and encourages resellers to carry more products, Housman said.

“It is possible that we could have a second store in 2018. We’re looking at how this experience goes for us and we’re looking for opportunities in the U.S.”

Herschel has taken a different approach to opening its own branded stores in that it licenses partners to run approximately 45 Herschel-branded storefronts across Europe and Asia.

Co-founder Lyndon Cormack told BIV last year that Herschel decided not to allow any of its partners to open Herschel stores in North America because the company considers the continent to be its home turf, and it wanted to be the one to open the stores when the time was right.

The 5,000-square-foot premises that Herschel is set to open in Gastown this summer will be the largest Herschel store in the world, but most of the company’s sales will continue to be made through thousands of third-party resellers.

“There are certain [manufacturers] that are recognizing that retailers are the middlemen and the middlemen are taking a cut – they don’t want that,” said retail consultant and Retail Insider Media owner Craig Patterson.

“Go to Canada Goose’s [TSX:GOOS] annual report and you’ll see that their margins from their retail stores are considerably higher than margins from their wholesale accounts.”

Toronto-based Canada Goose was a clothing manufacturer for decades before opening its first retail stores in 2016. •

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