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Monday, May 23, 2022

El Segundo Shoemaker Sees Larger HQ as Big Step

The offices for women’s shoe company Matisse Footwear were so cramped that executives said they were embarrassed to bring clients in for meetings.

“I found myself making excuses for the place because we were so crowded,” said founder Michael Katz. “It got to the point where we were literally sitting elbow to elbow.”

For the 11 years it has been in business, the El Segundo company’s revenue grew by up to 30 percent each year and employee after employee came on board. Earlier this month, it finally announced a move to bigger quarters.

Katz said the old space was so limited that the company had to wait to bring in six long-needed employees – two designers, two salespeople and two customer service representatives. Today, the company has 25 employees, up from 19 last year. Last year’s revenue was $35 million, up from about $28 million in 2010.

What’s driving the growth? Online sales in the direct-shipping method, which means that instead of sending out pallets holding thousands of pairs of shoes to distributors, the footwear goes out one box at a time directly to customers.

“Every year since day one has been bigger than the prior year,” Katz said. “Last year was an especially big year because we’re doing so much online business. It’s probably the fastest-growing aspect of the business.”

The company sells women’s shoes in department stores and boutiques, through some print catalogs, and it does some private-label business, creating shoes for brands such as Barefoot Tess, which sells oversized shoes.

But sales increased more dramatically when Matisse began to sell single pairs of shoes online through Zappos.com, Shoes.com and Nordstrom’s online marketplace, among others.

Katz launched the firm in 2001 out of the guest house at his West L.A. home. He had sold a previous shoe company, Seychelles, in 1998.

He bought the 30,000-square-foot building that Matisse now occupies for $4.4 million and spent $1.5 million renovating it.

Adding space

He said one reason for the move was the added warehouse space the property allows. In the new building, half the space is devoted to warehouse shoes. The company has two third-party warehouses: one each in Carson and New York. The new building in El Segundo is used specifically to fill online direct-ship orders.

Howard Davidowitz, chairman of national retail consulting and investment banking firm Davidowitz & Associates Inc. in New York, said sourcing online sales is more challenging for a shoe company than for a lot of other businesses.

“Shoes come in lots of sizes, unlike, for example, the sweater business,” he said. “What that typically has meant is you need more inventory, and the inventory turns a little slower. That’s going to be one of their challenges.”

The company offers hard-to-find widths and sizes, which Katz said makes the shoes attractive to shoppers.

“Today more than ever, people are comfortable buying shoes on the Internet,” he said, “especially people who otherwise have a difficult time finding their size.”

The company’s relation to the retail websites works this way: Nordstrom or Zappos forwards orders to Matisse, and the company ships the individual orders to customers. That’s in contrast to the way larger apparel manufacturers work. Davidowitz said those companies typically insist that online retailers purchase the merchandise they wish to peddle, but that Matisse may still be too small to make such demands.

“I don’t think they feel they have the power to tell somebody like Zappos or Nordstrom, ‘Look, we design the goods and we source the goods. How many do you want?’” he said.

Shipping thousands of pairs each month to individual customers may make Matisse more desirable to the retailers, but it requires that the company have a lot of space and manpower.

Of course, as a fashion business, Matisse faces a constant battle to stay a step ahead of trends.

“They have proven so far to be great product developers,” Davidowitz said. “Without that they wouldn’t have a business. The question is: Can they keep going?”

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