Growing up as a kid in the 80s and 90s, there was one sentence you dreaded to hear from your classmates. That sentence was, “you got those shoes from Payless!” We knew the shoe store for providing inexpensive shoes for any occasion. Parents loved the store, but children above 7 hated the Payless “experience”.
Pay-Less National was founded in Topeka, Kansas, in 1956. The store was founded by two cousins, Louis and Shaol Pozez. The goal of the store was to provide a self-service shoe store that offered budget shoe wear. Within a year, three other stores opened. The company quickly expanded into Oklahoma, Texas and Nebraska, opening 12 new stores. The self-service format of the stores led to its success. Payless could limit staff with this approach and also keep the average price of a pair of shoes below $3.00. The store’s immediate success led to more expansion, and they were able to purchase all the Kansas City, Missouri locations of the original Hill Brothers Shoe Company. They converted all 25 of the stores to the Payless name. Payless primary market were women’s and children’s shoes, which represented 90% of their total sales. The now 38 locations of the stores racked up $6 million in sales. By the end of the decade, the company would have over 100 stores and $10 million in annual sales.
In 1971, Payless buys all the St. Louis, Missouri locations of the Hill Brothers shoe store. This part of the chain had 103 locations in the midwestern and southern United States. The stores were known for their barebones minimalism and a catchy slogan of, “two for five-man alive!” The slogan meant you could get two pairs of women’s and children’s shoes for five dollars a steal, even back then. By 1975, Payless operated 486 retail locations in 31 states, with net sales of $75 million. Payless was the largest chain of family shoe stores in the U.S. It was during this time frame that Payless started operating stores in malls, a growing shopping destination for families. In the 70s, Payless started developing its own in-house brands, which allowed it to maintain tight control over shoe style and quality. These were two issues other discount shoe chains had problems with.
In 1979, Payless was acquired by the May Department Stores Company. There were 1,089 Payless stores in 34 states in 1981. In the 80s Payless introduced its Pro Wings line of sneakers. The shoes were known for having velcro straps instead of laces. In 1991, the company officially changed its name to Payless ShoeSource, Inc. The chain had 3,295 locations and $1.5 billion in sales. The 90s brought intense competition from Wal-Mart and Kmart and a decline in the off brand apparel market. These factors led to Payless becoming an independent company again in 1996, when May spins it off to shareholders.
After becoming independent, Payless operated 4,270 stores. The company closed or moved 500 of its less profitable locations. In 1997, Payless acquired a rival company called Parade of Shoes. The company also expanded into Canada. By 1999, Payless had 180 stores in Canada. Payless moved into e-commerce in 1999 with the launch of payless.com. By 2000, Payless operated 4,500 stores and 220 Parade of shoe stores.
Payless expanded into South America and the Caribbean in the early 2000s. The company also expanded to Australia, Philippines, Indonesia, Singapore, Malaysia, Thailand and the United Arab Emirates. The chain faced increasing competition from Wal-Mart, Target, Kohls, Amazon and Shoe Carnival. In 2002, Payless closed 104 stores, cut 230 corporate positions and sales dropped to $45.4 million. In 2004, Payless announced it would close the Parade chain and close hundreds of Payless outlets. Payless acquired the Stride Rite Corporation and changed its name to Collective Brands in 2007. The company had a positive revenue of $3.4 billion in 2011.
Collective Brands (Payless) was sold for $2 billion in 2012, to Wolverine Worldwide, Blum Capital and Golden Gate Capital. Payless continued to struggle with the rise of e-commerce and was forced to file for Chapter 11 bankruptcy in 2017. The company filed for bankruptcy again in 2019 and was forced to close all 2,100 of its U.S. stores, and all of its Canada stores. The rest of the international stores were not affected.
In 2020, Payless emerged from bankruptcy, dropped shoesource from its name and relaunched its ecommerce site. The company announced its plans to open between 300- 500 stores in North America over the next five years.
Mistakes Were Made:
Payless was a victim of the retail apocalypse. The event was the closing of many name brand brick and mortar retail stores. Some factors leading to the brand’s collapse were:
1. The Amazon effect
More and more consumers are buying material items, including shoes online. In 2016, online holiday sales increased by 20%, while physical department store sales declined by 4.8%. Fast forward to today and add in the added effect of the COVID-19 pandemic and those figures have only grown worse for physical retail locations. Amazon has been generating greater than 50% of the growth in retail sales. This trend is only growing by the day.
2. Too many malls
Malls grew at the rate of 2-1 compared to the population growth between 1970 and 2015. The result is the U.S. has/had too many malls. Mall visits declined by 50% between 2010 and 2013. These numbers have only grown worst with the pandemic.
3. leveraged to the hilt
Another pattern you see in these corporate fall from grace stories is over expansion. The companies over expand at a rapid pace or buy up a competitor to expand. The result in both cases is the company becomes overloaded with debt. One down retail cycle, or underperformance and the company goes into serious financial trouble. Payless made this mistake when it bought Parade of Shoes first, then also when it acquired Stride Rite.
4. Big Box effect
The rise of Wal-Mart and Target really put a dent in Payless sales. A mom could shop for shoes, groceries, clothes and household goods all in the same store, instead of making a one off stop at Payless for shoes. Convenience is the name of the game in today’s retail world and besides Amazon, it doesn’t get more convenient than Wal-Mart and Target.
It’s interesting Payless is considering opening up retail stores again. My guess is they will copy the DSW and Famous Footwear formula of selling name brand shoes at discounted prices, instead of off brand shoes at discounted prices. Hopefully Payless can learn from the mistakes of its past and keep abreast of the retail/ ecommerce trends. Who knows, getting your shoes from Payless may not be a bad thing in the future.
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