Bob: Today, I’m talking with Matt Lafone, president and GM of the Americas for Athlete’s Foot. Welcome.
Matt: Thanks for having me.
Bob: Thanks, Matt. Well, I am an old shoe dog beginning at Nunn Bush’s brass boot division, probably generations or decades ago. So, can you tell me a little bit about your footwear journey?
Matt: Yes, yes, absolutely. I started my career with a company called Goodies Family Clothing. I don’t know if you can remember that. It goes back quite a bit. I started off in buying planning, then I went to Saks, Inc., part of Saks Fifth Avenue and managed essentially the private brands for the men’s contemporary business. And then I entered in my athletic side in a footwear experience at DICK’S Sporting Goods, started there at the beginning, probably doing $20 million, $30 million. Five years later, about a billion dollars in private brand for DICK’s Sporting Goods, where I oversaw the private brand, and footwear and apparel, including brands like Nike, ACG at the time, but they had licensed from Nike and Reebok, which was licensed for the apparels, and some of the other license and exclusive brands for DICK’S.
And then went to the Sports Authority, and ran all of private brand, not just on the apparel and footwear, ping pong balls, bicycles, sleds, all that kind of stuff. And then moved in the branded side where I was the head of global merchandising for kids’ footwear, accessories, those little charms, as well as in and out licensing. And then I was with Global Brands Group and AVG for a little over a year running the Spider brand. And then I was at footwear for about five years with Puma where I was vice president of sport style, which is kind of the fashion division, and everything from kidswear to the streetwear guys like The Athlete’s Foot, and Jimmy Jazz and SNIPES and all that, as well as Dotcom.
And then I did a quick stint at Payless Shoe Source, where I was part of that team that relaunched the brand, not quite the 4,000 stores they once had but 800, 900 stores, fairly large base, and then jumped back in pretty aggressively in the streetwear market with The Athlete’s Foot, where I am now as the head of Americas as president and general manager.
Bob: Interesting. And so, you have this whole background in private brand, everything from ping pong balls to footwear; what’s the difference between a branded experience and private label if you were to compare the two?
Matt: I put the exclusive brands into two buckets, one as a private label and one as the private brand. Private label to me is really entry-level opening price point items, commodity items that you’re trying to drive at a pretty significant value and driving a lot of volume through that. So things like core basic t-shirts, socks, the more I would say mainstream mass-marketed product categories. And then the private label...So I’ll use DICK’S Sporting Goods as an example. So, you got their DSG line they currently have, which I would consider private label. And then they’ve been developing other brands like Adidas Baseball, believe it or not, is directly owned, sourced, and operated through DICK’S Sporting Goods. So, they source out the design and all that kind of stuff.
And so, it’s a branded where they put marketing spend, and business development funds behind to drive the marketing initiatives. So, I spent my time on this, really developed those exclusive brands like the Reebok and ACG as well as more opening price point business as well that are all based on lower price points with the mentality of drive significant volume.
Bob: Okay. And in a recent article, you talked about growth plans for your franchisees. So, franchisees must be an important part of the model, not just corporate stores. Why is that?
Matt: So, Athlete’s Foot is definitely a different model, for sure. If you think about the career path within the footwear landscape industry, there’s not too many opportunities these days to really become a store owner. You got obviously corporate career paths with the brands and some of the retailers, but obviously, given the environment over the past couple of years, and really having the brands control their distribution channels, eliminate some distribution points, for example, especially in really that mom- and-pop single store owner. So, we really offer a unique experience to where if you have a strong business acumen in retail, and you’re a sneaker lover, enthusiast, that there is an entry point to get into this business and actually open a store.
And something that we’re really proud of, too, is that we also have an initiative around STAART, which stands for Strategic African American Retail Track. And it’s really about getting minorities, specifically African Americans, to more or less, call it, have skin in the game on an industry that they’ve driven culturally to now giving them the opportunity to be a part of a bigger company, but to be also a locally-owned small business owner. And actually, that’s really our secret sauce. If you look at the retail environment today, you have pretty much these big corporate companies, not that we’re small, but 550, 600 stores is a decent-sized business, but as I mentioned, really the secret sauce is that we have franchise partners that are from these communities.
So, for example, in Atlanta, or Raleigh, North Carolina, or Chicago, these are guys that grew up in this area that, in most cases, their average lifespan of a franchisees is really around 20 to 25 years. So, you have local business owners that are driving the local community, the engagement. Some circumstances, they’re servicing the grandfather, the son, the grandchildren. And I always talk about this a lot with the brands because that really differentiates our business model from a lot of the bigger corporate guys that we have that ability to be ingrained in that local community. And when we’re really determined to open a store, we don’t go into it with the expectations, like, hey, we just want to sell a lot of shoes and to have it to be 100% transactional.
Our goal is to focus on neighborhoods where we cannot flip the communities. We’re focused on underserved communities that we can go into these locations and help really drive neighborhoods where consumers can be proud of, that they can shop our stores with ease and consistency, that the local assortment or the assortment in that location is very specifically focused on who that consumer is. And really, I think it separates us apart from the rest of the guys within the pack.
Bob: And how do you market that to the local areas? Because I mean, getting that right person to partner in your brand takes a lot, especially when it comes down to franchises qualifying for SBA loans, and business acumen, and location, and all of those kinds of things. How do you go about recruiting people in those lower-served areas?
Matt: Yes, it’s challenging. To put it in perspective, we have probably 400 people that applied to the STAART program specifically. And we definitely are looking for that kind of, call it, young and up-and-coming entrepreneur, that they might have worked as a store manager for, another retailer in the footwear space, that they understand how to own and operate the platform, and they also have that passion for footwear. And it makes it quite challenging, believe it or not because you have a lot of individuals that might love shoes, but they don’t have that strong business acumen, or they’re just getting started and they don’t have quite that nest egg. And although we help support that financial opportunity for them in helping them get low-interest rate loans, potentially grants, depending on if it’s a minority applicant, etc., but it definitely makes it challenging because you really got to find that
Bob: Well, I think that’s great, and it’s important because I think an awful lot of money is spent on trying to develop communities but I think the partnership with a franchise where you have a business owner who, your point, has skin in the game is always going to lead to...well, it should...As long as you got owner-operators, you’re not looking to get someone who says, “Oh, I’ll just have anyone in there.” You need someone who really wants to be in that job with you. Right?
Matt: Exactly. It goes back to passion, but making sure that they’re good at what that passion is, right?
Bob: Yes. I love that.
Matt: We got some really strong current franchisees, I mean, guys that are super aggressive about, you know, obviously driving the businesses, but have really strong infinities to their local communities and ultimately really want to drive that uplifted community experience with the consumer. And that’s where a lot of our marketing efforts go. We really focus in on hyper-local connectivity, making sure that we got the right product, that we have a whole impact board that we just announced within the past 30 days. These are the likes of Robert Golden, former Pittsburgh Steeler captain and now CEO of Charter Golden Academies. Danielle Geathers, the first African American female head of student body president MIT, Cheresse Thornhill-Goldson, who’s head of S.E.E.D. at Adidas. These individuals are really focused in on impact, but how we can take our local communities and uplift them, whether that’s through philanthropy, mentoring programs. So, I believe around about a quarter of our marketing spend actually goes directly back into the community, no smoke and mirrors where it’s an activation tied to, philanthropic and opportunity, but it’s really direct money that goes back to uplift those communities.
Bob: Nice. So, you’re competing with vendors through direct-to-consumer initiatives like, let’s face it, Nike. I mean, how does a brick-and-mortar brand that carries multiple brands, how do you coexist and grow your sales, and not be looking over your shoulder all the time?
Matt: It definitely makes it challenging for sure. And I think that, look, the brands are going to do what they want to do. I mean, obviously, the DTC businesses, it’s profitable. There’s advantages and disadvantages living on both sides of the table. You’re on the branded side, you sell a product to a retailer, more or less, you wipe your hands clean of that inventory. And, don’t get me wrong, there’s always gross margin giveback, and RTVs, and things along those natures, but at the end of the day, it’s a very clean model. You’re pretty much passing that on to the third party. And it always sounds like a good idea until you have one bad season of retail, and all of a sudden, it crashes, and then you’re in this domino effect for the next couple of years. So, it’ll certainly be interesting to see what the brands do with it. But, certainly, as a brand, being part of a brand before, the brands should control their own narrative to a certain degree. They’re looking for retail partners, especially their highly influential retail partners, which I would consider The Athlete’s Foot one of those, to really storytell for them and give that premium consumer experience in brick and mortar.
And we certainly go in places where you’re not going to see a Nike store for the most part. Don’t get me wrong, they have their Nike local hubs in certain markets, but at the end of the day, we’re really looking for underserved communities. We’re not looking to put up, in some cases, a Taj Mahal in the local neighborhoods. Most of the stores that we have are anywhere from 1,500 to 2,200 square foot. The strategy is not to put those in malls. It’s really to put them on the local streets to where the consumer can walk to it. So, we’re always going to be in places that I would say Nike probably, at least within the near future, is not willing to go. But then there’s a certain level of responsibility when you do do that, when you put a store in the neighborhood, and what does that truly mean? It’s a lot different than putting the store in Times Square, and you have tourists and multiple different level people; you’re putting these into these underserved communities with the intent to improve the quality of life around them. So, although we say that we’re here to drive shoes, which we are, we’re here to run a profitable business model, I would say a very close second is really making sure that it’s not a transaction and it’s really focused on, again, uplifting our consumers in the neighborhood.
Bob: Well, to your point, Nike had pulled back so many of their wholesale accounts because they didn’t like the way their brand was being represented, which frankly, that’s what I think most brands would say. It’s like, “We’re not just going to give you the package if our merchandise is either always going to be discounted, or it’s going to be displayed anything less than what we would do in our own stores.” So, they’re looking for what you add to the brand as well, which is always the goal, I think, of everybody. And you’re in charge of a lot of people, and a lot of stores, and a lot of initiatives, and what steps do you take to make sure that your team members are all heard?
Matt: Definitely that’s so critical. And I would say, in general, given the consumer and, obviously, retail landscape, I mean, it’s probably the most dynamic I’ve seen it in 25 years of doing this, for sure. You’ve got, certainly, inflation, and gas prices increase, and social challenges within the last few years, Covid, wars overseas. And it’s been challenging. I think that, certainly from an overall business model, the kind of catchphrase nowadays is to be nimble. There’s certainly things that we can control, but there’s things we can’t control like supply chain. Within our organization, I would say we run a very flat organization. I would say everybody has a voice within an organization. No matter if you are an assistant, a receptionist, or head of marketing of product. We really try to make very quick decisions, but we also try to become laser-focused when you see our overall, call it, holistic goals.
We really try to focus on three things per quarter that we can get right. And I’d say generally speaking, where especially when you got such a dynamic environment, is that you can’t have this laundry list of things you got to accomplish, and peanut butter spread. You got to be laser-focused on the key initiative you got right. And where we’re focused is in-store experience, upgrading our stores to TAF 3.0, which is a whole new omnichannel digital approach and community. I call it hub versus, really, stores. The second is digital transformation.
And the third is really our merchandising and product hyper-localization strategy. But to me, when your cascade goals there a little bit too broad, what do you tackle first? So, we spend a lot of time talking about is the juice worth the squeeze? Do we have enough resources? Is it a process problem? Is it a resource problem? Is it a strategy problem? And then we really focus bi-quarterly on three, call it, big initiatives, and then make sure that we’re driving those in our weekly and monthly touch bases, but less is more these days, for sure.
Bob: That’s true. I was CMO of It’s a Grind coffee franchise decades ago, and I took it from a startup to 135 locations. And that’s why I got out of franchising, frankly. It’s not for the faint of heart. So, what advice do you have for somebody in the franchise world to have good partners? What does it take for you?
Matt: I would say that it definitely makes it complex because just in the U.S. alone with, call it, the 50 stores, 60 stores with the islands, we’re looking at 13 different partners. Some of them might have 1 or 2 stores, some of them might have 20. And a lot of my role is, A, setting process, tone, marketing, investments, budget spending, etc., but it’s also making sure we’re setting up a process to where we’re bringing in the partners at the right, call it, stage gates to review product, to understand their local environment. So, I think communication is certainly critical. As to having open direct conversations, from my point of view, I’m pretty direct, for sure. I think it cuts out the fat of situations. I think you’ll find with most of the guys that own their own stores, they’re pretty direct. I mean, these are definitely alpha type A male and females. They love shoes, they love their community, but they are there to win.
So, you get that, but...And you also have to manage that as well, too. You got to get the best of those guys and you got to, obviously, identify blind spots too. But we try to keep the communication going. We have a very robust process in merchandising marketing-driven strategy. So, I think a lot of people think, “Oh, I’m going to franchise.” Well, you got certain guardrails around that. It’s not like you got guys at McDonald’s that are saying, “Hey, I want to change the menu, and I want to do the Big Mac, or I want to do this.” They work within a certain amount of framework, and their goal is to make sure that they got the right tools to drive their business, and that we’ve got specific strategies by market, but we’re also, in a way, putting a little bit of guardrails around it so there’s consistency and the consumer gets that same experience, no matter if they’re in Atlanta, or Chicago, or New Orleans.
Bob: Well, that’s, I think, the great lesson the brands that were franchised before you stood the test of time and people realized, “Oh, that’s what it is to be a McDonald’s,” which is why they get a million dollars if you wanted to buy one, or a Chick-Fil-A, or typically, I think, in fast food. But when it comes to retail, I think there’s just an awful lot of room still to go. I always say unless you’ve got proven systems that help them out, most franchisees always question what that percentage they’re giving to you every month. So, if you can give more value and keep them from saying, “But they’re not letting me do this and this and this,” then you’re halfway there. Would you agree?
Matt: Yes, I totally agree. I mean, I think that, look, if you’re any kind of business owner, you’re always going to be questioning whatever is in your overhead, whether that’s royalty, marketing, development funds, whatever. And what we try to do to the partners as well...and I’ll be honest with you, they’ve given us a lot of trust. We substantially increased our marketing funds this fiscal year. And, in some cases, when you go to a franchisee that may have 20 doors and you say, “Hey, this is going to be an additional $400,000 in marketing spend,” you really got to develop a very robust program, a complete strategy, where is the ROI? How are you going to pay for this? If things go wrong, what’s contingency plan B, C, and D? But to have a business partner, in some cases, willing to give up that type of money, you got to make sure that you’re counting every nickel and dime.
And it’s a symbiotic relationship. Their success is our success. If they don’t drive sales, we don’t drive royalty. If we don’t create key marketing campaigns, and customer demand, and engagement opportunities, what tools do they have? From a merchandising lens, how do we create and have the right product in the right place at the right time? So, to me, yes, I would totally agree with you. I think that it’s just a very process-driven environment, lots of communications. In some cases, it does slow it down a little bit versus a complete direct-to-consumer model where you’re just making decisions in a vacuum. But, certainly, we have a lot of talented franchisees with a lot of great resources and experience from different market and we really try to suck the marrow out of that.
Bob: Nice. Well, The Athlete’s Foot was founded in 1971, rooted in sneaker culture back when I was in junior high, and yet you said you plan to double-down on apparel over the next three years. So, why is that?
Matt: It’s interesting, Athlete’s Foot was the really first cross-branded retailer of footwear. And, obviously, huge growth projections and, obviously, the paradigm shift in the franchising model. But, for us, where I see the biggest opportunity really specific in the U.S., and I would say globally too if you really look at the stores in the rest of the geographic locations, is that we’ve always been really driven heavily by footwear. Whereas we find our consumer, though, is looking for multiple categories, whether that’s apparel, accessories, whatever it may be. And we also have a consumer that’s very driven by head-to-toe storytelling. And then what we found is that when we looked at our retail box or square footage of our average store is that we had a lot of, call it, white space within the stores to be able to increase that capacity of apparel.
So, we slowly started to test more apparel, increase our penetration. Historically, we’ve been roughly around about 14% penetration within apparel. We’re trying to grow that to roughly 20% to 25%. But really, the goal is, is that, number one, apparel obviously turns a little bit faster than footwear. Generally speaking, it’s higher IMU, and it should be incremental business. That consumer that’s coming in the store looking for a pair of sneakers is also looking for a cool t-shirt. Is there a reason why we shouldn’t be selling a pair of socks for every person that comes in the door that buys a pair of shoes? But also bringing in some of these brands that are having heated moments from a fashion line to get that consumer in the store. And you can create a different narrative with apparel too. Footwear, it’s on a wall, it’s on a shelf space with apparel, you can now cross-merchandise it. You can tell the consumer what’s fashionable, what’s hot, and really take that narrative to the next level and create a unique environment where you can cross-sell multiple things. And versus transactionally selling footwear, you’re creating...you’re selling a lifestyle. So, we definitely think that there’s opportunity out there and certainly as we launch our first 3.0 in April, we’ll essentially be doubling the capacity of apparel.
Bob: Wow. Well, that’s the whole thing is if retail doesn’t move from transaction and relationship, I think it’s going to be a really hard future because I think an awful lot of employees are selling from their own wallets. I think they can’t imagine spending the most money for sneakers, jacket, doesn’t matter what it is. And so they start at the bottom and they give minimal advice and service in a lot of retail times. And then the problem is that the very thing that if I just wanted to buy that one sneaker, I could have done it online. There’s a million places I could buy it and probably cheaper. But the fact that I walked into your store probably means there’s something more that I want. The example I always use is finding an HP 64 printer cartridge, I’m not going down to Staples to have them take them a little sacred scrunchie and unlock the $35 cartridges cabinet. But if I go into that store, if Staples believes that I’m just going in there for that $35 cartridge, then they’re probably missing out because we go into a store to discover, we go online to buy. And that’s really I think the difference, right?
Matt: A hundred percent. And totally, totally agree. And this channel is slightly different from, call it, mainstream in the sense that when you’re serving underserved communities, typically e-commerce tends to be less of a penetration level. Underserved communities, you’re getting a Nike sneaker. Imagine getting a Nike sneaker box within an underserved community, more or less shrinkage stuff, that box is gone within five minutes. So, you have a lot of customers that are still shopping in brick and mortar, a lot of them are still shopping with cash only. So, we try to create this environment to where...When I say stores, again, I get back to we really call them community hubs. So, for example, we might have an after-school kids program on a Friday afternoon, a tutor comes in and talk to kids about helping them with their homework. We might have a town hall in that local community on a Saturday. We might have a sneaker customizer that may come in or, call it, a minority small business owner that’s teaching community lessons about financing.
So, our goal is to get them in, obviously, with the right product, but also to be able to procure and train our associates to talk the talk. These are enthusiasts of sneakers. They know what’s trending, they’re there to talk shop. But it’s to walk away with more than just looking for a shoe. And so, that’s the goal, to your point, I think that’s what the future looks like. If you can’t engage with your consumer above and beyond just offering product, then you’re dead in the water.
Bob: Let me cut you there. You have to go back. So, you have a town hall in one of your community centers/stores? What does that mean?
Matt: Well, when I say town hall, so, for example, I’ll use...We just had Robert came to speak in Savannah to where we brought in, basically, Savannah Saves Youth, and he gave a very powerful, inspirational lecture of what his career looks like, what were the challenges to a bunch of underserved foster kids. We’re utilizing that store to use as teaching kids the right lesson, mentorship programs, especially where our stores are...like I mentioned, where the average family income is about $45,000 to $60,000 per year, where a lot of these kids, they don’t have the mentorship that they need to strive and to be successful in life. So, for us, we utilize the stores as the opportunity to further connect and either educate or expose. We use our social media platform the same way, whether that’s Suicide Prevention Week, Mental Health Care Month. Whatever it may be, our goal is to use our platform to create change within our environment.
Bob: That’s pretty amazing. We should have started with that, man. That is pretty amazing.
Matt: I know we should have. That’s what we’re most proud of. Honestly speaking, a lot of people in this company could be doing other things. And we all have an affinity around sneakers and the footwear culture. But I would say, if you asked all of our executives, probably the number one reason outside of just wanting to be in this business is that we do want to give back. Our model is we’re 98% franchisees, where 90% of them are minorities, and then in our corporate and store structure, we’re 92% African American, both corporately in the stores. So, for us, we understand the challenges of not only our consumer but, frankly, our associates that are in the same communities. And at the end of the day, we want to be profitable and we want to have a successful business, but we want to drive change.
Bob: What happened when Black Lives Matter came on the scene? a big...
Matt: That’s what started the expedition of the whole STAART program really with the brainchild of Darius Billings, who is our head of marketing at the Athlete’s Foot, really sat in a room post-George Floyd and said, “This needs to change. This is an industry that is driven by not only just minorities but African Americans.” And significantly, not only does it drive a lot of the sales but it drives the culture. And it’s our responsibility as retailers to be more than just a shoe seller. And that’s really where that strategy with the start franchising program came from and the really focusing on minorities, as we were already minority driven, but really focusing on African Americans, where they’ve given so much to this industry, and frankly speaking, they haven’t gotten a lot back, not just from retailers, but from brands. And that’s our mission to change that.
Bob: Well, that’s an amazing story. My dad was a very big social justice warrior in the ‘60s. And so he marched with King and some other things. So...
Matt: That’s amazing.
Bob: I think it is up to us to make the world a better place. I believe we can change the world by people working and shopping and retail. You’ve taken it to another level, and to look at how all these opportunities have come together. And we’re coming to the end of our time. I have a couple more questions for you. Has the way you thought about retail changed from when you worked at Payless to now with Athlete’s Foot?
Matt: Yes, definitely. I would say that Payless was a different model, but at the end of day, they still do serve an underserved community. And a lot of the reasons I decided to leave the branded side of it was part of being...I was actually that kid that had the four stripe instead of the three stripe. And we make it hard enough, to begin with, with peer pressure, etc. to have sneakers as such an important part of your outfit. So, I do like the fact that we are still serving a somewhat similar consumer, certainly, slightly different demos for sure. But I would say that how it’s changed is that more so really just within the past few years, in general. People are not looking any longer, especially millennials and Gen Z’s, they’re not looking for just corporations where they can buy a good product. They’re interested in how are they socially responsible? Are they sustainable? What do they stand for?
And people have choices today, and they’re not willing to settle anymore, nor should they, frankly speaking. We should be living by what their word is. And I think we create, A, a platform for local small business owners to be successful, which is another dynamic to the bigger, we call it, financial environment and platform. But I think, at the end of the day, that we’re really trying to drive this thing to the next level, create a unique experience, further engagement parts. And it’s all going to be driven by, to your point, making change. And I know that sounds naive, but I truly believe that boots on the ground running where people have conversations about product, especially a culturally-driven product like sneakers are, I really do believe change can be made by doing the right thing. And I think we all did a better job at that as retailers and brands and partnered a little bit more...And I’ve said this to many other retailers, I’d be happy to go in it with Footlocker or whoever else on any philanthropic program. And we do crossover in a lot of places. I would love to work with more retailers changing that game. Kids should not have to wait in line for shoes and be worried about their life anymore. They should walk into an environment and know what that brand stands for. And I definitely think within the next five years, if you do not stand for something more than just transactional selling, then you might as well just close shop.
Bob: Wow, great words, man. Well, I’m almost embarrassed to ask you to say one more thing, but the name of the podcast is “Tell Me Something Good About Retail,” and pretty positive part about how we can change the world. But what else would you add to that? Tell me something good about retail.
Matt: I got to tell you, I love retail. If you want to learn something about somebody, just sit there and watch how they shop, watch what people do. And the joy of buying something and it’s therapeutic in a way to going out, finding a product, researching, and have conversations, and going to a place where they know you, that you’re more than just a number, that you’re part of that community. And I just love the conversations. I mean, I travel and market all the time. Even with Covid, I’m the guy that sits, and watches, and has conversations, and pontificates on why people are going right versus left, and what conversations, but it is so exciting to see. I mean, again, that very detailed conversations at retail and making those connections is just you can have a customer life within a 10-minute conversation.
Interviewee: Only happens face-to-face in community centers or as I call them stores. Thanks very much for joining me today, Matt. I really appreciate it.
Matt: Thanks so much. I had a great time. I appreciate you having me.
Interviewee: Thanks, man.
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