Office is a fashion-forward footwear specialist, providing style-conscious customers with innovative shoes for every occasion. The product range has been created by the in-house design team and global brand partnerships. Office's reputation as a fashion leader on the British high street is enhanced by selling exclusive styles from global brands such as Adidas, Nike, Converse and Timberland.
Offspring has been a leader in the UK sneaker market since its launch in 1996, filling a gap in the market for fashion sportswear and being positioned as a ‘sneaker boutique'. Offspring has since led the way in product collaboration with an extensive collection of special projects with brands such as Adidas, Converse, Nike and Vans continuing to show Offspring as a footwear leader in both the fashion sportswear and sneaker arenas.
In the 2016 reporting period Office accounted for 93% of total sales and Offspring 7%.
Office also offers the specialist Poste and Ask the Missus (mens), and Poste Mistress (ladies) brands.
Third party brands comprised 67% of total sales across Office and Offspring, own-brand products 23% and exclusive third party brands 10% of sales.
MANAGING THE RISK OF FASHION
Young fashionable customer
Office is the footwear brand for the young, fashionable consumer. Whether customers are shopping for branded footwear or Office's own label product, they expect to find a skilfully selected range of ‘must-have' brands reflecting current trends.
Proven fashion formula
Office has specialist teams across a mix of product from ‘heels through to sneakers' that ensure the brand is relevant regardless of current trends. This fashion philosophy is driven by a consistent buying and merchandising process developed over many years that allows the teams to continually develop their knowledge of the brands, product and markets, which is now being enhanced with Truworths' buying, planning and sourcing knowledge.
Office is able to offer a stable of the best global brands with exclusive access to limited edition product through strong brand relationships. These relationships have been developed over many years and Office works closely with its partners to develop branded exclusives. Office is recognised as an important, strategic account with its branded product partners who value the team's understanding of the market.
Office's own-brand product is primarily sourced from Spain, Italy, Portugal, Brazil, India and China. Specialist suppliers are identified based on their ability to deliver the most exclusive desirable product at the best quality. The buyers and the design team select the supplier best suited to achieve the desired look and quality, while also meeting the required pricing, order flexibility and supply reliability. This approach is supported by frequent factory visits by buying and design teams to ensure that supplier relationships are maximised while understanding factory capabilities and honing the overall design process.
Office aims to balance longer lead sources against short lead-time product sourced from European suppliers that allows for fashion product to be tested in the market with limited risk before maximising sales once the product's potential is understood.
The buying and design process is constantly evolving to ensure Office is the first to react to trends. While design and buying continue to work seasonally, the teams have adapted to customers' desire to ‘buy now, wear now' and also recognise the need to provide relevant fast product to respond to the many new ‘micro, flash trends' that emerge in the fast-paced fashion footwear market.
Forecasting fashion trends
Designers and buyers work closely with key suppliers to track trends and ensure the products reflect the latest looks.
Trend information is sourced through international trade fairs, online subscriptions, social media, international and local retail inspiration as well as global and local street trends. Celebrity styling and events are also monitored to ensure the ‘must-have' items are available.
Initial information used to formulate seasonal trends is expanded throughout the season as further trends become evident, with the buying teams being constantly updated on fast react items and trends.
Superior quality fashion
Customers expect quality footwear and the buying and technical teams work with suppliers to ensure that the product meets or even exceeds all European Union (EU) testing standards as well as Office's own rigorous quality control process.
The buying and technical teams consider both aesthetics and fit in developing products and ensure that the best of both is achieved. Office ‘trial wear' large volume orders, and safety test to maximise sales and minimise customer returns.
Frequent visits are undertaken to suppliers' factories to review manufacturing, ethical and quality standards.
Office is committed to providing customers with product manufactured under ethical working conditions. This means footwear should be produced lawfully, through fair and honest dealing, in decent conditions and without exploiting people or damaging the environment.
All own brand suppliers and manufacturers are required to adhere to the Office code of conduct which is based on International Labour Organisation conventions and recommendations. The code is designed to be fair and achievable, and to promote the ongoing development of suppliers.
OPTIMISING SUPPLY CHAIN EFFICIENCY
Merchandise is held across Office's 29 000 m2 of UK warehouse space. UK store merchandise is replenished five days per week based on an algorithm of each store's sales. Merchandise in stores in Ireland and Germany are replenished three times per week.
Online sales are fulfilled directly from all warehouses, allowing Office to meet each demand opportunity such as next day home or work delivery, international delivery and ‘click and collect' from store.
The quick response relationship with European suppliers is core to Office's supply chain strategy.
Several key suppliers have developed strong relationships with the Office buyers, designers and senior management and have been integral to the quick-response model that allows late styling changes to be made based on the latest sales and trend information.
Key suppliers hold leathers and other components that can be adapted quickly based on sales reactions. European factory suppliers source leathers and other materials from local suppliers so lead times are minimal.
Frequent travel is undertaken to close-to-home sources including Spain, Italy and Portugal, as well as to longer lead-time sources, to improve communication and relationships, and speed up product development.
Risk in the supply chain is minimised by spreading volume across a group of key suppliers. The collaborative partnerships with top suppliers, who consider their relationship with Office as integral to their own business, ensure that exceptional service levels are achieved.
MANAGING MULTI-CHANNEL RETAIL PRESENCE
Office is a multi-channel retailer with a portfolio of 159 stores and concessions in the UK, Republic of Ireland and Germany, and a fast-growing e-commerce business which accounts for 24% of sales across a range of digital platforms.
The Office brand has 131 outlets (stores and concessions) in the UK, with 7 stores in Germany and 5 in the Republic of Ireland. Offspring has 16 outlets.
Trading space was increased by 2.4% to 15 600 m² at June 2016 following the opening of 6 and the closure of 8 stores during the reporting period.
Store location and design
External market data is used to regularly review the 250 most popular shopping locations to evaluate the best opportunities to open Office stores. New markets, including retail parks and affluent market towns, are considered as opportunities for growth for both the Office and Offspring brands.
The concession strategy for both the Office and Offspring brands involves working closely with concession partners to review performance and assess the need to either open new space and expand or relocate existing space within the host store portfolio. Concessions are currently held with Selfridges, House of Fraser and Topshop/Topman.
The Office store design has evolved with the aim of improving light and ambience for the customer to shop and to ensure the product is the hero. Fixtures and fittings are therefore carefully considered with the customer and product in mind.
Offspring is a different concept to Office. Each store is unique and local architecture is included in the shopfit, for example exposed brick walls, stripped floorboards and ceiling beams, which has the advantage of also being cost-efficient.
Office stores are typically between 80 to 150 m2 while Offspring stores are typically between 75 to 95 m2.
Office operates a sophisticated e-commerce model where continual innovation and development have been the drivers of success in this fast-moving and evolving sales environment. Office was rated in the top 1% of retailers researched in the 2016 Internet Retailing UK Top 500 report.
The e-commerce model continues to be enhanced with the focus on website design and functionality, customer relationship management, convenience and delivery capability, while also developing the mobile and in-store digital offering.
After the successful launch of the German language website during the period, further international websites will be developed, initially focused on Europe.
Office has an extensive social media presence across Facebook, Twitter and Instagram.
Developments in 2016
Employee retention has become a key focus for the retail operations division following the increase in the legislated national living wage in the UK which is making the retail environment more competitive in terms of remuneration and benefits for all employees.
Flexible working hours were introduced at the head office in London to aid work-life balance and improve retention, while remaining ahead of the competition.
Training has focused on Office's service values being rolled out to all stores together with toolkits to enable managers to continue to train and develop their teams and needs to be reinforced during 2017.
The first workforce management system was introduced to improve efficiency, accuracy and centralisation of time and attendance data for store operations, with over 500 employees trained in the use of the system.
Employee recruitment has been enhanced by introducing the ability to automate the selection of candidates and matching their skills and experience. This will improve the current manual process and increase efficiency and accuracy in sourcing suitable candidates for roles within Office.
The appointment of employees from stores to positions at head office has enabled Office to transfer significant store and customer knowledge to the central functions, with 33% of head office employees having previously worked in stores.
Plans for the 2017 reporting period
Employee recruitment and retention remains a challenge for the business. Reward packages for all employees will be reviewed to ensure Office remains competitive as an employer in the buoyant London employment marketplace.
Brexit has created uncertainty relating to immigration and future employment of EU residents. The potential for labour shortages in the UK will be dependent on new legislation introduced once the UK exits the EU.
New and pending legislation in the UK is likely to increase payroll and compliance costs in the year ahead, including the new apprenticeship levy, the governmental pension contributory scheme, and the national living wage and national minimum wage.
Changing data protection legislation in the UK will be a key focus, particularly in relation to integration planning.
INTEGRATION AND EXPANSION PLANS
The focus of the integration plan in the 2017 reporting period will be on applying Truworths' retail principles, processes and systems within Office, where appropriate.
Stock management is a key focus with the aim of improving stock flow from the warehouse to stores to improve stock turn. Target weeks of stock and stock turn measures will be implemented to monitor performance.
The integration benefits are expected to start being realised midway through the 2017 reporting period.
Currently Office does not have stand-alone stores in many of the top UK retail destinations which creates the opportunity for sustained store expansion. Trading space is expected to increase by approximately 6% in 2017 with the planned opening of 11 and closure of 5 stores. Capital expenditure of R31 million has been earmarked for store development in the 2017 reporting period.
The Office store concept is currently being redesigned and modernised, and this design will be implemented in all new stores and upgrades.
Management plans to open approximately 15 to 20 stores over the next three years across the UK and Germany, while closing less profitable stores and relocating others as opportunities arise.
Office will evaluate expansion into neighbouring European countries in the medium-term.
Office will be introduced into South Africa under the Office London brand in the second half of the 2017 calendar year.