In the Customer's Shoes

Before the slowdown, Larry's Shoes president Elliot Goodwin thought he knew just what people wanted from stores like his. Then he asked his prospective customers, and the race to remake his business was on

Welcome to America's largest shoe store for men. You're in north Dallas, at a shopping center called Prestonwood Court East. And here is Larry's Shoes, one of a 10-store chain, and impressive even by Texas standards.

Picture 10,000 square feet of sales terrain, nearly a fourth the size of a football field. With dress, casual, and athletic shoes -- we're talking one-stop shopping for a guy's footwear needs. The selection is huge -- some 2,000 styles from 60 manufacturers, everything from river sandals to Swiss-made Ballys. The stockroom is packed with 30,000 pairs, an inventory worth more than $1 million, about 10 times what an average shoe store carries.

There's a lot to see here -- the celebrity-shoe museum, for starters, which displays around the store footwear of the famous: Golf shoes worn by Gerald Ford. John F. Kennedy's wing tips. The shoes of Cher, Clark Gable, and many more -- even the telephone shoe used by Don Adams, the goofball spy on the old Get Smart show. "They only made one, and we got it," says the president of Larry's, Elliot Goodwin, who picks up these curios at auctions. The most valuable exhibit, suede pumps worn by Marilyn Monroe, cost him $6,300.

Then there are the vendor shops -- stores within a store. Larry's has seven of them here, showcasing its top brands. Recessed into one corner is the Timberland shop, decorated with old snowshoes and backpacks to play up the brand's claims of ruggedness. Sebago's shop sports a maritime motif; nautical charts cover the walls. All that shopping making you thirsty? Visit the cappuccino bar, done up in red and yellow tile. It's got a big espresso machine and blenders for frozen coffee concoctions and fruit juices. No charge, mind you. While sipping cappuccino, you can catch sports action on the five big-screen TVs around the store, or enjoy a free foot rub from a massage therapist. ("I stole that idea from an old hippie grocery store in Austin," Goodwin admits. "They had somebody giving back rubs.")

Flashback to the same store site, circa 1989. Nobody could bemoan the selection; there were 1,500 styles in stock, so no one could mistake it for an old-time men's shoe store. The company, headquartered in Fort Worth and making its money on high-volume business at 10% to 15% off full retail prices (shoe retailers typically add 50% to the wholesale price), was closing in on $22.2 million in annual sales from eight stores in Texas; there's no question Larry's had critical mass.

But Elliot Goodwin was not a happy man. He was looking at a set of horizontal sales numbers and a bottom line that was yielding to gravity, and he was wondering what was going wrong. One thing seemed clear: doing it bigger didn't mean doing it better.

Plenty of entrepreneurs have been in Goodwin's shoes -- enjoying surging demand, cutting the ribbon on new units, operating on instinct instead of systematic customer feedback, and then hitting the wall, not knowing why it's there. As Goodwin discovered, they have two choices: they can do nothing, in the hope that the wall is only temporary, or they can look for tools to start pulling the wall down. Goodwin wanted Larry's to grow. He chose the latter course. And in the process, he was forced to relearn something he should never have forgotten: that he had to communicate with his customers. That meant discovering who they were, asking what they wanted, listening to their answers -- and believing them enough to start doing something about it.

"We always thought people lived to buy shoes," recalls Goodwin, a bit disappointed. "I had no idea it was a pain in the ass."

Larry Goodwin, Elliot's dad, went into business in 1949, running a pawnshop in Fort Worth. When a local haberdashery folded in 1955, he snapped up its shoes -- some 5,000 pairs. A fifth of them were huge sizes, like 18s. Larry played up that niche, and in time he built a following among the hard-to-fit crowd. The Dallas Cowboys, for example, became regulars. By 1964 Larry's had annual sales of $485,000. The elder Goodwin grew his company on a few core principles: offer a big selection of quality shoes, with an extensive range of sizes; sell them off-price, at about 10% below the full retail price; and provide superb customer service. "When he started out, a good men's store would roll out the red carpet," Elliot says. "He trained his salespeople to pamper customers. We try to do the same."

Elliot started working in his dad's store at age 10 and skipped college to enter the business full-time at 18. He steeped himself in marketing, buying, and merchandising -- the basics. By 1974 the company had three locations in the Dallas-Fort Worth "metroplex." By 1987 Larry's had become an $18.6-million company with seven stores -- five in Dallas-Fort Worth, two in Houston. That year the elder Goodwin handed operating control to Elliot, then 29.

The new president's ambitions for the business grew along with his acumen and authority, and he moved briskly, opening a third Houston location in 1988, using bank debt and internal capital, along with landlord discounts. Each store averaged 10,000 square feet, compared with 1,485 in a typical men's shoe store, and stocked an inventory worth $770,000, seven times greater than the norm at the time. In 1989 Elliot Goodwin, with his new top team of managers, wrote up a five-year plan, aiming for sales of $50 million, with perhaps 15 stores. As it stood, Goodwin's 8 units were averaging nearly $2.8 million each, more than seven times the sales number for a typical men's shoe store. Sales per square foot were running well above the industry average. Goodwin and company even hoped to go public, using the proceeds to fuel expansion.

But the flurry of expansion activity blinded the management of Larry's to some dramatic changes in the marketplace. When Larry Goodwin started out, footwear selling was very much a world of tiny local independents. Retailing then meant knowing customers by name, knowing their preferences -- and measuring their feet. These days Goodwin battles precious few independents. But he has plenty of competition. The department stores account for colossal volume: Dillard and JCPenney are big in the areas where Larry's operates, and Nordstrom, famous for its shoes, is coming to Dallas. Then you have Foot Locker, Payless ShoeSource, and other big chains. Also, catalog companies such as Orvis and L.L. Bean sell shoes. And how long, Goodwin wonders, before those home-shopping TV shows get in on the act? "Ten or 15 years down the road we're going to be competing with a lot more people," he says.