Payless

Shoesource:
Paying Less for
Fashion
A CASE ANALYSIS
 Lozanta, Emerson John
Nachor, Neil Aldrich
Villanueva, Michelle Angeli

Prof. Agnes Banzon

MGT 151 – T

I. POINT OF VIEW

For this analysis, Payless CEO Matt Rubel’s point of view was taken.

II. AREAS OF CONSIDERATION

A. Firm overview

Payless Shoesource, launched in 1956 in Kansas, USA by cousins Shaol

and Louis Pozez, showed a remarkable growth in the shoe retail industry. It sells
shoes in a self-service environment. Volume Shoe Corporation merged with the
May Department Stores Company in 1979. In the following decade, Payless was
known for its Pro Sprints line of discount sneakers with Velcro straps instead of
laces. It was in 1996 when it became an independent company. On August 17,
2007, the company assimilated the Stride Rite Corporation and altered its name
to Collective Brands, Inc.

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 It has become the largest shoe retailer in the Western Hemisphere. Its
target market is budget-minded families, and was selling 150 million pairs of
shoes annually.

The shoe company experienced decline in 2005 – it lost market and

closed several stores. The advent of giant discount one-stop shops had become
the vendors of choice for the budget conscious shoppers. An insider pointed out
that the production of shoes in monotonous styles was the culprit. People
eventually got tired of the usual and resorted for other stores offering the shoes
at the latest trends.

B. Environmental Analysis

1. Internal Analysis

Strengths

• With its market positioning, which is, thrift, it was able to capture
customers and eventually grew to be the largest shoe retailer in
the Western Hemisphere.

Transformation of the entire image had style and thrift as its new
market positioning.

• More than fifty years in the shoe industry

• Selling low-priced shoes in the avenue of luxury retailing

• Ability to create the most affordable shoes with the greatest

creativity. (It can make a $12 shoe looks like $20.)

• Greater pricing flexibility.

• Restructured branding of the products (House of Brands, Fashion

Lab, Hot Zone)

• Organized tracking of brands released under Payless (Collective

Brands)

• Acquisition of other product lines (footwear + accessories)

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 • In-house designers to create original products headed by two
designers from a well-known companies (Kenneth Cole and
Michael Kors)

• Partnership with different other brands (Airwalk, etc)

• Partnership with four New York-based designers

• Heavy advertisement of Payless (fashion show, magazine ads)

• Catering a wide range of customers

• Capacity to regain the loyalty of previous customers

• Attracts new customers

Weaknesses

• Loss of market share

• Uncertainty of the success of their aggressive repackaging

Opportunities

• Payless can still partner with other designers

Threats

• Arrival of competitors

• Previous clients are not after the price anymore. Most of them
have also resorted to style or trendy items.

C. 4 Ps of Management

Product

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 Payless, serving several segments of the market, have varieties of
product offerings. This allows them to cater to a wider range of customers. It has
shifted from offering products that are simple to luxuriously trendy creations.

Price

Positioning their self as a store that democratizes fashion, and one that
does the luxury-meets-low-price strategy, Payless offers products at prices that
are more affordable to everyone in the market. This allows them to serve all
segments of the market. Their pricing also gives them an identity as a store that
offers low-priced products.

Place

“Payless made the stores more open, light, and airy, with a more
satisfying consumer experience built around style and design rather than price”

Remodeling and transforming from a ‘dusty dungeon’ to a ‘hip merchant fashion’,

Payless has changed the look of their stores to establish a better identity. They
launched ‘Fashion Lab’ and ‘Hot Zone’ as their store formats.

Promotion

In line with their change of image, Payless has invested on several ‘big-
time advertisements. These include taking their design to New York’s Fashion
Week and running full-page advertisements in fashion magazines like Vogue,
Elle, and W, which features their tagline “Look Again”.

III. PROBLEM STATEMENT

• How can Payless Shoesource increase sales and profit while sustaining its
luxury-meets-low-price strategy?

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 IV. SWOT MATRIX

Opportunities Threats
External
Analysis A. Payless can still partner A. Arrival of competitors
with other designers and
other brands B. Uncertainty of the success of
their aggressive repackaging
B. Can offer a new product
line with distinct features

C. Expansion (placing stores

to more than 100 higher-end
malls and strategic areas)

D. Possibility to attract new

Internal
Analysis customers and regain the
lost market share in the past

Strengths SO Strategies ST Strategies

1 With its market positioning, which is, thrift, it was 13A Intensify advertisement to 2A Capitalize on its edge in terms of
able to capture customers and eventually grew to be attract more designers and style to counter the competitors
the largest shoe retailer in the Western Hemisphere. other brands
2 Transformation of the entire image had style and 14B Strategic expansion of
thrift as its new market positioning.
stores
3 More than fifty years in the shoe industry

4 Selling low-priced shoes in the avenue of luxury

retailing

5 Ability to create the most affordable shoes with

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 the greatest creativity. (It can make a $12 shoe
looks like $20.)

6 Greater pricing flexibility.

7 Restructured branding of the products (House of

Brands, Fashion Lab, Hot Zone)

8 Organized tracking of brands released under

Payless (Collective Brands)

9 Acquisition of other product lines (footwear +

accessories)

10 In-house designers to create original products

headed by two designers from a well-known
companies (Kenneth Cole and Michael Kors)

11 Partnership with different other brands (Airwalk,

etc)

12 Partnership with four New York-based designers

13Heavy advertisement of Payless (fashion shows,

magazine ads)

14 Catering a wide range of customers

15 Capacity to regain the loyalty of previous

customers

16 Attracts new customers

Weaknesses WO Strategies WT Strategies

1 Positioning the firm as having low-priced 1D Capitalize on its limitation to 1A Capitalize on its limitation to
products, which limits their capability to increase the increase the price of the increase the price of the product
prices of its products product to attract new to compete with the other players

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V. ALTERNATIVE COURSES OF ACTION
Alternative
1. Strategic expansion of stores
while retaining the price of its
products
2. Intensify advertisement to attract
more designers and other brands and
to strengthen its edge in terms of style
while retaining the price of its
products
3. Capitalize on its limitation to
increase the price of the product to
attract new customers and regain the
lost customers and to compete with
the other players in the market
customers and to regain the in the market.
lost market share
PROS CONS
• Assured increase in market share. • Costly
• Increase sales and profits • It would be a waste of resources
if the luxury-meets-low-price strategy
• The products will be more fails
accessible.
• Difficult to implement
• Regaining the previous buyers.
• Time-consuming
• It will encourage partnership • Relatively costly
among designers and other brands.
• Tedious implementation
• More designs to add to the
Payless’ shoe collection
• No additional cost • Limited distribution areas
• Ease of implementation
• Preserve the positioning strategy
while regaining the lost customers and
expand the market share.
• It can serve as the determinant of
the effectiveness of Payless’ major
transformation
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P a y l e s s S h o e s o u r c e | 10
 VI. DECISION CRITERIA

Analysis thru the use of Design Criteria

The assessment of the strategies greatly depends on their effectiveness and projected
success and feasibility. The criteria are given respective percentages based on their perceived
degree of importance. Strategies will be rated from one to five, one being the highest. Below are
the criteria, their weights, and the table for rating of the strategies.

A. Effectiveness and projected success - 30%

B. Feasibility - 30%
C. Cost of Implementation - 15%
D. Acceptability to the management - 15%
E. Ease of implementation - 10%

Table 1. Table containing the ratings for each strategy per criteria and their total points

(A) 30% (B) 30% (C) 15% (D) 15% (E) 10%
Total
Strategy Ratin Ratin Ratin Ratin Equiv
Rating Equiv Equiv Equiv Equiv (100%)
g g g g
(1) 1 0.30 1 0.30 4 0.60 2 0.30 4 0.40 1.90
(2) 3 0.90 2 0.60 3 0.45 2 0.30 3 0.30 2.55
(3) 2 0.60 1 0.30 1 0.15 3 0.45 1 0.10 1.60

Table 2. Table containing the rating scales for each criterion

Effectiveness and Feasibility Cost of Acceptability to the Ease of

projected success implementation management implementation
1 - most effective 1 - most 1 - least costly 1 - most acceptable 1 - easiest
feasible
2 - effective 2 - feasible 2 - less costly 2 - acceptable 2 - easy
3 - moderately 3 - moderately 3 - moderately 3 - moderately 3 - moderately easy
effective feasible costly acceptable
4 - less effective 4 - fairly 4 - costly 4 - less acceptable 4 - difficult
feasible
5 - not effective 5 - not feasible 5 - very costly 5 - least acceptable 5 - very difficult

P a y l e s s S h o e s o u r c e | 11
 VII. DECISION AND IMPLEMENTATION

It is recommended that Payless Shoesource capitalize on its limitation to increase the

price of the product to attract new customers and regain the lost market to compete with the
other players in the market. This basically means no price increase in the price of their products
at all. With this move, there is a great chance for Payless Shoesource to regain its lost market
with its current positioning on style and design combined with low and affordable price.
Likewise, due to its improved product designs that are in line with current fashion trends, it could
attract new customers and expand its market share. There will neither be additional costs for
this strategy nor additional tasks to be done since the point of this is to stick with its current
strategy.

VIII. CONTINGENCY PLAN

On the event that the move to retain the current price of its products in order to attract
new customers and regain the lost market to compete with the other players in the market, it is
recommended that the firm undergoes strategic expansion of stores while retaining the price of
its products. The following table shows particular actions that Payless Shoesource must perform
as well as the people, money, and other pertinent information that will be involved in its
implementation:

WHAT WHO WHEN WHERE HOW HOW MUCH

Inform the highest CEO During a Conference Discussion ---

administrative conference Room
body about the
firm’s current
situation and
present objectives
to address the
problem

Formulate a Marketing During a Conference Discussion ---

criteria that will be and conference Room
used to determine operations
strategic areas department

P a y l e s s S h o e s o u r c e | 12
wherein new of Payless
stores will be
established

Selection of Marketing 1 month Different Ocular visits and ---

strategic areas and municipaliti assessment
operations es
department
of Payless

Coordination with Marketing 1 month Selected Personal ---

necessary and strategic communication
institutions in operations locations
municipalities of department
the strategic and
locations as well construction
as with firm
construction firm/s representativ
and regarding the e/s
construction of the
new stores

Construction Construction 2 to 3 months Store site; Hiring process 500,000 to 1M

period hiring of firm and Payless per store
new employees human Shoesource
resources main office
department (for hiring of
employees)

Training for new Human 2weeks Payless Workshop, seminar Approximately

employees resources Shoesource 10,000php per
department main office store
and hired
employees

Final preparation Store 2 weeks Store Store check, inventory ---

for grand opening manager and store design, etc.
newly hired
employees

Grand opening of Store 1 day Store --- ---

new stores manager and
newly hired
employees

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