DSW is testing a layout to draw attention to brands like Adidas, Crocs, Birkenstock

DSW is testing a new look and layout for the Houston store that opens this weekend to bring shoppers to key brands.

It will feature stores for national brands such as Adidas, Brooks, Birkenstocks and Crocs, as well as Vince Camuto and Crown Vintage. It is a stark departure from the current DSW store layout, which features shoe brands mixed in aisles organized by style and category. Designer Brands, the parent company of DSW, calls the new concept “Rethinking the Warehouse”.

At the company’s investor day last month, Designer Brands CEO Roger Rawlins set a goal of doubling the sales of his brands while maintaining national brand sales. “In order for us to achieve both of these goals, the physical experience that we create for our consumer, as well as for these national brands, must evolve,” Rawlins later said in an interview with Zoom for CNBC.

DSW is testing its new format as consumers return to in-store shopping after more than two years of lockdowns and restrictions due to the pandemic. Total U.S. retail sales, excluding autos, rose 7.2% year-over-year, Mastercard SpendingPulse said Thursday. E-commerce operations fell 1.8% and in-store sales rose 10%.

“They have to create excitement and ‘wow’ to get people off the couch and into the store, which requires more creativity,” Dana Telsey, CEO of consumer goods consultancy Telsey Advisory Group, told CNBC in a phone interview.

Much of the new layout is based on the behavior of online shoppers, Rawlins said. He said that nearly 90% of DSW shoppers visit the website before heading to the store.

“These national brands are so important to consumers that they look up their name before they look for DSW,” he said.

Deutsche Bank analyst Gabriella Carbone told CNBC via email that DSW’s new store format “could have an impact in the long term.” However, she said the real linchpin for the chain is “a more visible showcase of national brands through curated in-store stores, which should help Designer Brands Inc. continue to build relationships with suppliers.”

DSW’s “Warehouse Reimagined” store will have an open sale format, where customers can purchase products on their own without the help of partners. For shoppers who are not at all interested in help from employees, a self-service option will be available. QR codes will be integrated so that consumers can access more information on their in-store phones, not just displaying the current brand and price.

While the new format is smaller – about 15,000 square feet rather than the typical 25,000 square feet – Rawlins said he’s committed to offering consumers the same level of inventory while aiming to stay in stock for all sizes. He added that the smaller square footage helps lower fixed costs, and the new design also allows the same number of items to be sold.

Rawlins does not publicly disclose the financial goals of the Rethink Warehouse strategy. But to gauge its success, industry observers like Telsi will want to know if there’s any uptick in sales as a result, and how sales compare to non-remodeled stores, among other metrics.

Based in a different retail subsector, Target is reporting significant sales improvement across hundreds of stores that have been remodeling since 2017. At Target’s 2022 Investor Day in March, COO John Mulligan said traffic boosts help increase average sales by an average of two to four percent. growth in the first year after reconstruction and another one or two percent growth in the second year.

DSW will look to the pilot program for some lessons. Rawlins said that about one in five DSW stores annually renew their lease. Designer Brand will potentially consider rolling out what works to stores after the lease expires. It has about 700 stores.

One major national brand DSW goes without? Nike. The sports kingpin ended its wholesale partnership with the retailer this year as part of expanding its own consumer-facing business.

“Losing Nike is a big deal,” Telsi said. “Replacing Nike is a difficult task, for this you need to reinvent yourself. I think that’s what [DSW is] trying to do.”