HAROLD RU1TENBERG A Super Show for the Public

I you've ever had to put shoes onto an uncooperative one-year-old, you know it is no mean feat. One-year-olds are more interested in touching the ground with what they were horn with. But there you are at a Just For Feet store in West Nyack, N.Y., trying hard to impel your son's wriggling toes into the same New Balance model Daddy wears and having as much luck as you would trying to drive an 18-wheel Mack truck through a doughnut.

Most sneaker stores have about two models for infants, Just For Feet more than 20. But you expect that kind of selection at JFF, which, boasting around 5,000 SKUs per store, is to sneaker retailing what Home Depot is to hardware stores. Just For Feet, on the other hand, was supposed be the category killer with service. Employees attend three-week training courses and are given healthy sales incentives, a la that seminal "destination store" run by Walt Disney Co. And so, JFF has grown into a $479 million business in the past decade, on the basis of superior selection and merchandising, but also on the backs of employees like the one who shows up in the "Combat Zone" discount section of the store and soon finds the right shoes and personal magic to get them on one-year-old feet. Before you get to the cash register you're signed up to the family plan (buy 12 pairs, get the 13th free), assuring your return.

Ka-ching! Ring up another sale for founder and CEO Harold Ruttenberg, the South African expatriate whose hands-on management style and belief that shoppers nowadays need entertainment, selection and service, have allowed him to build the only category killer that can boast about its employees. Ever try to get the folks in Home Depot to match screw for you?

America has an avaricious landlord t( thank as far as the genesis of Just For Feet a chain of almost 300 stores, more than 100 of them 15,000-25,000-square-foot big box emporiums. Ruttenberg decided t go big when he couldn't foot the usurious, New York City-style rent increase Birmingham, Ala., mall operator was asking for what was then his only store, started 10 years before in 1977 with the $30,000 he was allowed to leave South Africa with. Ruttenberg headed out the door, not thinking so much about revolutionary retail concepts as becoming his own landlord. He built an 11,000-square foot building near the mall and filled it almost exclusively with athletic footwear at a cost of what he says was about half what a new lease would have run.

Other than selection, he started the big box without a clear vision. But as the store went up, entertainment concepts began forming: a video wall and a basketball court later became as integral to every store as cash registers. Free popcorn and hot dogs, even restaurants in some stores, and visits from local sports heroes added up to a retail environment well-suited to the flash of what was then an exploding sneaker industry, not to mention a purchase more often than not unmotivated by actual athletic endeavors: eight of 10 sneakers aren't used for sports.

"Above all else, Harold is great merchant in the classic sense of the word" said Fila president John Epstein. "and in an environment where kids aren't looking for athletic product the way they once were, his merchandising skills really shine through."

Innately, Ruttenberg understood enough about what makes consumers buy sneakers to build a retail emporium chain that is growing exponentially while the rest of the industry is lost in a morass of ill-defined sneaker and athletic specialty retail brands with me-too marketing. Top retail chains like Foot Locker and FootAction are expected to post flat to infinitesimal growth in sales this year, even as Just For Feet's comparable-store sales grew 2.8% in the first half of 1998. In addition, Ruttenberg and his wife own 20% of the publicly traded company, as opposed to the corperate-owned competition at Foot Locker and FootAction, give the peripatetic 56-year-old ample reason to keep his hands on the business. He prides himself on staying in remarkably close contact with both the trade and the consumer, and, even now, running a half-a-billion-dollar business, he's still prone answering his own phone. "Other people I know play tennis or golf," he said. "This is all I do."

"Ruttenberg has as much, if not more, tenacity and vision than anyone else in this industry and in a shifting market, he' one of only a few industry leaders with some real direction," said Robert Erb, Adidas director of sports marketing, whose own brand might also be described in those terms. "As far as his (retail) competitors, he's in a good position, because it is his ship. So when he says 'f--k the ice bergs' they listen."

"I don't think Harold has changed his philosophy a whole lot since he opened his first store," said New Balance sales vp Fran Allen. "Particularly now, if con sumers know what you stand for, it means a lot."

"People call me a visionary, but really I was doing what was right for me at the time," Ruttenberg said. "I don't have a lot of respect for most retailers in America. Having come from another country, I know what kind of buying power America has. Most retailers are just too lazy to take advantage."

"Most of my ideas actually came from the Super Show (the annual athletic equipment industry trade fair). There's a lot of flash there and I wanted to host a trade show for the public."

But even with his customer focus, Ruttenberg never lost sight of his vendors, enticing them with the opportunity to showcase their brands like nowhere else. As his concept evolved, he gleaned a welter of ideas of while walking the floors of the Super Show, the annual athletic equipment industry fair in Atlanta, which entertains retailers with slick, brightly lit modular booths, celebrity and sports star appearances, perky show-floor models and sometimes even scantily clad dance teams. Ruttenberg decided to make his stores into a "trade show for the public." Each store has shoes displayed by category and in separate brand shops. Precious few manufacturers, if any, get to tell conventional retailers how they want their merchandise displayed, at least in the athletic wear biz, but here was a retailer asking them. A practical matter, really, according to Ruttenberg

"When we were building our first stores, we didn't have a tremendous amount of money," he said. "So I went to my vendors and said, 'If you will help us build our store, twill carry everything you guys make and showcase your goods like they have never been showcased before.'"

The appeal was irresistible. And it cemented good vendor relationships that Ruttenberg used as building blocks.

"A lot of stores want everything to look the same," said Seth Berger, president and co-ounder of niche basketball sneaker and apparel brand And 1. "But he has built his own brand by developing a floor space where other brands can show off what they've got."

"They are continually asking us, 'How can we do more business?'" said Bill Sweeney, Reebok's senior vice president and general manager, North America. "At the point in the conversation when everyone is talking about the sell-in, they are concentrating just as much, if not more, on the sell-hrough."

While Ruttenberg claims never to have heard the term "destination store" until recently, early on people were comparing Just For Feet to Disney, terming it "the Magic Kingdom" of sneakers. In a retail marketplace populated by uninterested teenage clerks, many in the consumer marketing business are predicting that retailers will need an "experiential" point of difference to stay afloat amid the coming encroachment of online purchasing into terrestrial, stock-keeping businesses. As prototypes of "entertainment" retailing, many point to The Gap's Old Navy chain, or Stew Leonard's, a 100,000-plus square-foot grocery store in Connecticut that boasts singing point-of-purchase displays and a dedication to customer service similar to Ruttenberg's.

"The thing we have in common that is not synonymous with most retailing is fun," said Stew Leonard Jr., proprietor of the eponymous chain. "We both want to make boring retail experiences exciting."

The better to keep consumers returning to a retail environment where customer loyalty, particularly for commodity products like shoes and food, is normally dictated by price and location.

But for all the sideshows in JFF, Ruttenberg says his real lessons from Disney center on the value of well-trained employees. He sent his own management team to Disney University and ended up building his own version. Taking a lesson from no less a retailer than Sam Walton, he grants stock options to all of his employees after just six months, and sales incentives are bountiful. The results are obvious.

"They have the best floor people in the industry," said New Balance's Allen. "When you are growing, that is particularly hard to maintain. I haven't seen anyone else do it that well, outside of Nordstrom's."

Another lesson from Disney: Build and maintain the infrastructure to accommodate expansion before you need it. The result is a satellite and EDI system that allows unparalleled training and store-by-store data exchange for quick response when the fickle shoe-buying public's taste changes. No wonder JFF's per-square-foot sales ring in at more than twice the industry average. "I've been to Disney 20 times and it wasn't to see Mickey Mouse," Ruttenberg said. "I saw the value of a well-run operation and how one bad experience could ruin a customer for life."

"As large as they've gotten, they still have been able to keep their entrepreneurial spirit," said Logo Athletic president Tom Shine. "The management group is very close to the (retail) floor, with very few layers, and all the decisions roll to the top three people."

"[Ruttenberg has] always kept it personal," said New Balance's Allen. "He's still the only retailer that we have a regularly scheduled monthly call between our top executive group and his. When you remain that close to both your retail and your trade customers, its difficult to make mistakes. Or at least it's easier to correct them because you see them more quickly."

Down the road, Ruttenberg is also trying to establish Just For Feet as a national brand and has committed to spend a minimum of $25 million on an image campaign in 1999 to accomplish that (Brandweek, Sept. 28), bringing his annual marketing outlay close to $100 million. He is also moving into more competitive locations. JFF will open a 25,000-square-foot store in Times Square next year. Typically, he's already thinking how he can stand out in what has recently become an area crammed with national retailers like Disney, Warner Bros. and Foot Locker.

"I'd like to put a Starbucks in that store, that'd really be different," he mused. "Do you have Howard Schultz' number?"

Selection, service, merchandising-these are the cement blocks of a brand-building process that has made Just For Feet a new standard in retailing, not to mention the only category killer that doesn't have to sell on price. Now, with consolidation wracking the athletic goods and athletic wear retail market, it is difficult to believe Ruttenberg won't be there to pick up the rest of the chains as they fall. The company has gobbled up Sneaker Stadium, Athletic Attic and Imperial Sports within the past 18 months. With stalwarts like Sports Authority in play, no one is betting that Ruttenberg won't control the market within the next five years. At a time when most of the market is trying to find its way, Ruttenberg is sailing ahead, with Venator's 2,500-store Foot Locker chain next in his sights, one way or the other.

"Athletic specialty is so over-retailed you have to believe Harold will pick up a lot of the fallout," said Michael Rubin, founder and president of Global Sports, which markets the Ryka, Apex and Yukon shoe brands.

To that issue, all Ruttenberg would say was, "In the next three or four years, it will be interesting to see where things fall out."

HAROLD RUTTEN BERG

CEO, Just For Feet

College:

Damelin College, South Africa

Personal motto:

"The speed of the leader determines the rate of the pack."

Where I get my best ideas:

"Disney has always been an inspiration because they get people to smile while they hand over their money, but I also love Vince Lombardi, which is pretty unusual for a South African."

I define my role as ...

"The proud eader of a dynamic organization."

Job I'd want if I didn't have this one:

"Something for myself, whether it was selling shoelaces or whatever. I learned a long time ago, that working for yourself mean you will never be bored."

COPYRIGHT 1998 BPI Communications, Inc.
COPYRIGHT 2000 Gale Group