Montreal — From Saturday's Globe and Mail Published on Friday, Sep. 03, 2010 7:32PM EDT Last updated on Saturday, Sep. 04, 2010 8:16AM EDT
Aldo Bensadoun peers at rows of strappy high-heeled shoes, bejewelled sandals and soft loafers.
Standing in a mock retail space in his headquarters in Montreal, the founder of Canada’s least-known global retail juggernaut is pondering a window display destined for his Aldo shoe stores more than 10,000 kilometres away.
He suggests dropping a few styles to simplify the presentation. The changes made, an employee snaps a photograph of the reworked display and e-mails it abroad. Within a week, the exact same parade of footwear will appear in scores of his Middle East shop windows.
Welcome to a typical day at Aldo Group Inc., Mr. Bensadoun’s $1.5-billion-a-year international shoe empire. Anyone who has stepped into a Canadian mall knows the company’s namesake Aldo brand, as well as its FeetFirst, StoneRidge and Spring chains. But few appreciate the breadth and depth of this company that has quietly sprouted 1,500 stores in more than 55 countries.
With remarkably little in the way of fanfare, it has become one of the most successful shoe retailers in the world. In a tough economic environment, its emphasis on bringing products to markets lightning fast and constantly tempting customers with new trends makes this low-profile powerhouse a beacon to other merchants.
Mr. Bensadoun built his global empire by constantly re-inventing his privately held company. Nobody is quicker at adjusting shoe styles, retail concepts and factory sourcing to suit the demands of fickle, fashion-obsessed customers. His team races to stay on top of the latest trends by chasing down street fashions and runway hits in fashion capitals. Once it spots a workable idea, Aldo Group requires a mere five to 12 weeks to get shoes to stores, compared with an industry average of 17 weeks.
“You have to be fast and you have to renew yourself constantly,” Mr. Bensadoun, 71, said in a rare interview. “Our strength is to adapt. As the customer is changing, we’re adapting to the new face of the customer.”
Mr. Bensadoun has adapted his fast-fashion formula not just to different market segments in Canada, but to countries around the world. Aldo Group is prospering in the United States – where most other Canadian retailers have flopped – and in Europe and Asia as well.
“This is the most successful global retailer that Canada has ever built,” said Tim McGuire, a senior partner at consultancy McKinsey & Co., which has advised Aldo. “They’re the best in the world at what they do, and they’re doing it everywhere in the world.”
The numbers tell the story: By spotting emerging trends and jumping on them faster than competitors, Aldo manages to produce $1,000-plus sales per square foot in Canada, more than twice that of other mall shoe chains.
Even rivals pay homage to Aldo’s prowess. “They’re great in the world they live in – they’re the best,” said Stephen Applebaum, president of the group that runs Nine West and other shoe chains in Canada.
But Mr. Bensadoun can’t rest on his laurels. Today, battling for much the same customer as cheap-chic chains such as Zara and H&M, and facing limited growth opportunities in his core North American business, he’s raising the stakes by moving in new directions. His company recently launched an upmarket chain called Locale. It also set up a wholesaling division to supply shoes to U.S. retail heavyweights, while starting to help other companies set up shop beyond their borders.
“Everybody has shoes – there is no shortage of competitors,” said George Hartman, a former retail analyst on Bay Street and now a partner in investment banker Capital Canada. So how will Mr. Bensadoun find success? “He has a sense of control of where he’s buying and whom he’s targeting as his customers – better than anyone else,” Mr. Hartman said. When he’s not re-jigging window displays, Mr. Bensadoun and his team must spot the trends that will allow his company to reinvent itself yet again.
Aldo Bensadoun, founder and CEO of Aldo Group Inc., at the company's head office in Montreal.
For The Globe and Mail
Aldo Bensadoun, founder and CEO of Aldo Group Inc., at the company's head office in Montreal.
MASTER OF CHANGE
Mr. Bensadoun never intended to follow in the footsteps of his father, a shoe retailer in Morocco and France, or his grandfather, a cobbler in Algeria. He attended boarding school in Paris and studied engineering at Cornell University in Ithaca, N.Y. But after falling in love with Montreal on a weekend visit, he transferred to a commerce program at McGill University.
He later took a job at a plastics company and sold a shrink-rap system to Yellow Shoes, a Montreal retailer that wanted a way to protect shoes from pilferage. The work was so appreciated by the chain’s CEO that he hired Mr. Bensadoun. The young executive was put in charge of the Salon Six shoe chain; then in 1972, he mortgaged his house to buy the shoe division of Montreal-based fashion retailer Le Château Inc.
That was the year Mr. Bensadoun’s footwear career was truly launched, when he noticed hippies in Europe wearing wooden-soled clogs. He sensed that the footwear could become a hot trend in Canada, and he was right. Crafted in Italy and shipped to Le Château, the clunky footwear became a hit, with 500,000 pairs sold.
“I’m a strong believer that fashion starts on the street with political and economic events happening in the world,” Mr. Bensadoun said. His team, for example, recently introduced combat-style boots using distressed leather in reaction to what they were seeing on the evening news. “You have so many wars going on in the world.”
The success of the clog also taught him another important lesson: He needed to produce something different and run fast with new styles before others caught up to him. “If we were the same as every other retailer, then we never would have succeeded.”
He started his Aldo chain in 1980, rushing to find the next new fashion at an affordable cost – in effect, practising fast fashion before the industry coined the term.
In an era when retailers depended on domestic middlemen to source products from European manufacturers, he went directly to the source. After taking lessons in Italian, he travelled to plants in Italy, putting in his own orders and modifying a heel, sole or buckle as he saw fit.
His practices didn’t make him popular with the Canadian middlemen he was replacing, but it helped bolster profit. “He just broke the rules,” said David Bensadoun, 40, heir apparent and the elder of two sons who are on Aldo’s executive team today. “The reward was that his prices were sharper and his margins were a bit better.”
Today, Aldo Group sources about 60 per cent of its products in China. It also has shoes made in other Asian centres as well as in Brazil, Eastern Europe and Italy. Being able to switch quickly to a factory with the capability to produce, for example, wooden-based clogs – as the company did last year – is an advantage in an industry where success depends upon getting the latest fashions on the shelf within weeks.
Mr. Bensadoun insists on staying nimble in other ways as well. For instance, he runs multiple retail chains, each of which caters to different customers. His constantly shifting mix of banners and brands allows him to test new looks and adjust quickly to trends. “They are far better at understanding, interpreting and leading fashion trends than any other retailer I’ve seen,” Mr. McGuire said.
Aldo remains the company’s flagship banner, geared to serve 18- to 30-year-olds with a bit of disposable income. To draw a younger customer with less money, Mr. Bensadoun started Transit (now called Spring). “He defines segments of his business and he very astutely targets his stores to serve those different segments,” Mr. Hartman observed.
If a chain isn’t working, Mr. Bensadoun doesn’t hesitate to change it. “The worst thing is to run a concept that has gone stale,” his son said.
Case in point: FeetFirst, which the company launched in the early 1990s to appeal to baby boomers who wanted comfortable shoes. Today, boomers want fashion first rather than “granny shoe” comfort, David said. “So we figured out we just needed to make fashionable shoes that are secretly comfortable.” Starting late last month, Aldo Group began to convert its FeetFirst stores to a new higher-end chain – called Locale – which the company sees as its next global brand.
BEYOND CANADA
Aldo Group’s bumpiest ride came in the mid-1990s, when it struggled to break into the cutthroat U.S. market. Snatching prominent store locations was tough because landlords were unfamiliar with its name. The company’s handful of U.S. stores gave it no bargaining power.
That’s when Mr. Bensadoun took the unusual step of spending about $1-million to hire McKinsey to advise his tiny firm on its transformation into an international player. The high-power global consultancy rarely works with small private companies.
What did McKinsey see in Aldo? “Even when Aldo was only in Canada, its fashion footwear business was better than anyone in that segment in the world,” Mr. McGuire said.
McKinsey’s advice to Aldo Group was simple: Go big in the U.S. or go home. The retailer moved rapidly to open U.S. stores. With a minimal marketing budget, it managed to make a splash by buying up billboard space at just one conspicuous spot in each big city it entered.
In New York City, for instance, it invested in a “killer billboard” at the edge of the trend-setting Soho district, David recalled. “A lot of people said, ‘Wow, they must be a big player because they’re on this amazing billboard.’ But we didn’t have any other billboards anywhere. We just put all our money into that one.”
Pinching pennies on advertising helped to preserve one of Aldo Group’s key advantages: lower prices. By selling its products through its own stores, it could undercut competitors such as Nine West and Steve Madden, which sold much of their merchandise through department stores.
While offering low prices, Aldo Group was also careful to invest in well-designed stores, removing any perception that it was merely a discounter. “People want style and they want it at a good price, but they don’t want it to be perceived as cheap,” said Tony Grossi, a New York retail real estate consultant.
Today, Aldo Group operates 475 stores in the U.S. and another 471 in Canada. It is also a force in the U.K., Mexico and much of the Persian Gulf. In its core English-language markets, stores are company-owned; outside of those markets, Aldo Group teams up with seasoned local retailers as franchisees.
Those local retailers provide head office with a window on local preferences that can tilt footwear selection. In its Persian Gulf markets, for instance, Aldo Group stocks more men’s loafers and open-toed sandals than it does in North America, because Muslim men like footwear that can be easily slipped on and off for prayers five times a day.
Back in North America, though, sales growth is slowing. Aldo Group’s burgeoning competition includes discount titans such as Payless and Wal-Mart, as well as the fast-fashion trendsetters like H&M and Zara. It is also up against a sluggish economy, especially in the U.S.
To find new avenues for growth, it is trying to sharpen its fast-fashion advantage in what it internally calls Project Sunshine. “It’s actually not that hard when you’re growing at two stores a week to hide your mistakes,” David said. “Now that we’re not growing as much, we need to be a lot sharper with how we do our buying and inventory management.”
Head office now gets hourly – rather than weekly – sales data, allowing it to make faster decisions about restocking top sellers or ditching losers. The speedy updates shave the time it takes to get shoes on the shelf by as much as 30 per cent.
Mr. Bensadoun wants to expand in North America without the huge spending needed to open new stores. The solution: Wholesale products to other retailers. His company recently struck deals to supply products to department stores Kohl’s and J.C. Penney and online retail giant Zappos.com. And starting next spring, Aldo Group will ship its revived Pegabo line to the Bay department stores.
In yet another evolution, Aldo Group is using its retailing savvy to help other companies such as Italy-based Miss Sixty run their shops in foreign markets. “We said, ‘There’s got to be other ways to make money than just keeping on opening stores,’ ” David said.
Aldo Group itself is eyeing new markets, including China, Japan, Brazil, Italy, Germany and France. It believes it can double annual sales to $3-billion within five years. “It’s a playing field that’s in constant evolution and we’re always trying to change our recipe to fit into it,” he said.
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HIT AND MISS
Aldo is not the only Canadian retailer to enter the U.S. market. But it’s one of the few to succeed.
HIT
Lululemon Athletica
The Vancouver-based yoga wear chain expanded rapidly in the U.S. after it went public in 2007, and now operates 75 of its 130 stores south of the border.
MISS
Le Château
Montreal-based Le Château entered the U.S. market in 1985, but has struggled since. This spring it closed one of the four U.S. stores it had left and will shut the remaining three when their leases expire.
Danier Leather
In 2005, the Toronto-based leather chain closed three struggling U.S. stores after four years in the market.
La Senza
In 2005, the then Montreal-based lingerie retailer was forced to shut its five U.S. stores after about two years in the market. Almost two years later it was taken over by the U.S. parent of rival Victoria’s Secret.
Mark’s Work Wearhouse
The Calgary-based work and casual wear chain entered the U.S. market in 1981 and peaked at nine stores before the U.S. operation filed for bankruptcy six years later.
Canadian Tire
Toronto-based Canadian Tire wasn’t able to turn around a U.S. chain it scooped up in 1982; it failed again in the early 1990s in its second attempt at the U.S. market.
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