Charles David Focuses On Fresh Product, Lower Prices

Continues To Shift More Production
To China; Looks Overseas For Growth;

Migrates Ad Dollars From Print To Internet

By Richard Collings

Published: August 26, 2009

  Charles David, the privately held Culver City, California-based footwear company, is riding the recession by enticing customers with fresh product and more value, said Joelle Malka, the company’s retail director.

   Malka, who is also daughter of owner and founder Charles Malka, said customers in this environment are looking for something new to liven up their wardrobes, yet they don’t want to feel guilty about it.

   For pre-fall, the brand had a good reaction to its boots, reaffirming to the company that women still want something new, but only if it is priced well.

   While continuing to offer basic styles is part of the strategy, her company is focused on getting customers in the door. The company does not “want to write off basics,” Malka said, but it is fashion, and offering newness is the reason for being in this business.

   Yet, Malka said, her company understands that consumers either do not have the money to afford, or do not want to pay the same amount for, a pair of shoes as they had in the past. She said when times are difficult, customers desire something uplifting without being extravagant.

   Most women won’t be spending more than $600 for a pair of shoes, she said, with a lot of aspirational spending likely disappearing. “Everybody had to adjust how they think about money. Living on credit is scary. People realize the value of money now,” Malka said.

   Charles David hopes to offer these consumers an alternative by lowering its own prices.

   The footwear label’s shoes, for example, typically retailed between $215-to-$275 per pair before the downturn, but now sell for between $125-to-$215, Malka explained. About 50 percent of the company’s product was over the $200 mark, but that percentage has decreased.

   Regardless of the drop in price, Malka described the shoes as still being quality and a good investment for its customers.

   Sourcing manufacturing to China has allowed the company to cut costs while still offering a beautiful product, she said. And while the company continues to provide great product from Italy and Spain at between $125-to-$195 per pair, the company on occasion holds up similar styles it sources to Italy to those made in China, and it is difficult to tell the difference, Malka claims.

   Key to those efforts is the company’s creative director Colin Robertson, who has held the position for several months now. He is currently in China, working with Charles David’s manufacturers.

   Robertson echoes Malka, stating that China has made tremendous strides in quality by hiring technicians from places such as Brazil, Italy and Spain.

   The consumers’ demand for lower prices, added to the fact that Chinese factories are willing to produce smaller quantities, has only sped up the migration of sourcing from Europe to China, according to Robertson.

   Chinese factories are taking smaller orders because larger orders for mass products are down.

   Initially, what made China increasingly attractive was Italy and Spain’s switch from their domestic currencies to the Euro, which made it much more expensive to produce footwear in those countries.

   All designers are having product manufactured in China, Robertson said, from Prada to Marc Jacobs. He added that consumers have either adjusted to the idea of buying high-end product from China, don’t care, or aren’t aware of it.

   Robertson concedes that the factories in China have to be more closely monitored so that flawed product is filtered out, but shifting production to that region is necessary when you’re trying to maintain a certain price point.

   The advantage is that, “in Asia, anything is possible,” he said. And while in Italy, the workers have more experience and a deep, almost artistic, understanding for what a shoe should look like, it is sometimes difficult to get Italian factories to do certain things.

   Regardless, Robertson said he believes that China will be as expert at producing the highest quality shoes in 10 years as it gains more experience.

   He reminded that most shoe production once took place in the U.S., the U.K., and France, but then left for places such as Italy and Spain because of cheaper labor, and now the same is occurring with the switch to China.

   Besides, younger generations in Italy and Spain are not interested in taking the older generations’ places in footwear factories.

   More factories in China are adding smaller production lines, because so many large manufacturers, employing some 8,000 workers in one location for example, have gone out of business due to lower demand and fewer orders as a result of the downturn.

   By producing smaller quantities and footwear requiring more specialized production methods or techniques, it is a way for factories to diversify and survive. The effect is that Chinese factories will now take an order for 400 pairs of shoes, which used to be too small a number. In Italy, it is still not difficult to have a factory produce 100 pairs of a single style.

   While the company has more of its shoes made in China, it would always desire to have at least some product made in Italy and Spain, to retain some of that heritage, Malka said.            

   In terms of advertising, the company has cut its budget, whereas it used to advertise in all of the major magazines, Malka said.

   She said an increasing number of  Charles David customers are online, and dollar for dollar, viral marketing, which is conducted by utilizing tools such as Facebook, Twitter and e-mail blasts, is more affordable and more targeted.

   With magazine advertising, the company wasn’t always confident it was reaching its target audience, Malka said.

   Gathering information on its customers at its 24 boutiques, such as obtaining their e-mail addresses, offers the company an amazing opportunity to market the brand in a more precise way.

   Selling product over the internet is a possible source of growth for the business, but Malka said bricks-and-mortar will continue to be the foundation for the business. Most of Charles David’s core audience is older, and so less wired than an Urban Outfitters’ customer, which tends to be part of a younger demographic.

   Between 5-to-10 percent of the Charles David’s revenues are generated online.

   Malka said the retailing of shoes online is a bit more difficult, because the customer’s experience trying on the shoe to measure comfort and fit can be vital to closing the sale.

   For now, the company is comfortable with its 24 retail locations in places such as New York, California, Florida and Chicago, and does not plan to open any new stores. Charles David desires to have a store in Manhattan, New York City, Malka added, but is very cautious in how it is running its business right now.

   Instead, the company is eyeing opportunities internationally to open store-within-store concepts all over the world through partnerships.

   Malka characterized her company’s sales as down a bit, or soft, year-over-year, and the company could recover some sales in the fourth quarter relative to last year’s terrible fourth quarter, yet she believes the second half of this year is still going to be difficult, and doesn’t expect a hoped-for recovery until 2010.

   “I’m waiting for the next shoe to drop,” Malka said, citing a likely bloodbath in commercial real estate, which could further deteriorate sales.

   If the company can maintain while pursuing growth opportunities in Europe and China, where the brand has yet to penetrate, it can emerge from the downturn a thriving business, Malka said.

   Malka, in general, is excited to see the fruits of what creative director Robertson has brought to the company.

   Robertson, for his part, said fashion will always have an emotional element, but that we now live in an environment in which consumers have to really love the design of the product before they buy it, and it has to be priced right. The challenge is difficult, he said, but strong design will survive.

   Robertson agreed that shoppers were no longer buying because of the name on the label. Instead, they need a compelling reason, and concurred that while simple classic styles will play a role, most women aren’t “looking for another black pump.”

   He said it’s difficult to figure out people’s shopping habits in this economy, but the way in which he is approaching design, for example, is to provide interesting detail, yet still have it be something that could be worn to work.

   For product hitting stores this fall, Charles David is offering a range of bright lights or colors in interesting finishes, such as snake, as well as shoes featuring suede in rich colors, and unusual constructions by mixing materials, such as cork wedges with snake skin and wood espadrilles.

   In the fall of 2010, Charles David is also planning to launch additional versions of its comfort shoes that retain a stylish edge, while utilizing traditional methods and materials.

   The comfort shoes, for example, will have more padding, showcase higher quality leathers, incorporate leather linings that breathe better, and feature ultra-flexible rubber outsoles. Such shoes will also achieve enhanced comfort through cut and fit. But the shoes won’t be “tech-y,” or “dowdy,” he added.

   Robertson said some of the company’s most successful product has been in the comfort category.

   While the downturn has tested the resilience of many companies, Malka said it does force brands and their designers to make difficult decisions, become more creative, and be more in-tune with the customer.

   Before, there was an ‘anything goes’ mentality, in which brands simply slapped their name on the label and consumers bought it. It’s not so easy now.

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