Heinrich Deichmann-Schuhe GmbH & Co. KG

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Heinrich Deichmann-Schuhe GmbH & Co. KG

Boehnertweg 9
Essen, D-45359
Germany
Telephone: (49 201) 8676-00
Fax: (49 201) 8676-120
Web site: http://www.deichmann.com

Private Company
Incorporated: 1913
Employees: 24,000 (2005)
Sales: EUR 2.5 billion ($3.1 billion) (2006 est.)
NAIC: 448210 Shoe Stores

With 2,000 outlets in 12 European countries, Heinrich Deichmann-Schuhe GmbH & Co. KG is the largest shoe retailer in Europe. Headquartered in Essen, Germany, the company sells a broad variety of goodquality shoes at affordable prices in twelve European countries. About half of Deichmann’s workforce of roughly 24,000 is employed in Germany, the company’s most important market, where two-thirds of the population buys Deichmann shoes. Deichmann outlets can also be found in Austria, Sweden, Denmark, Poland, Hungary, the Czech Republic, Slovakia, and Turkey.

The company owns additional shoe retail chains, including Deichmann Shoes in the United Kingdom, Dosenbach and Ochsner in Switzerland, vanHaren in the Netherlands, and Rack Room Shoes and Off Broadway in the United States. With about 4,000 employees and over 300 outlets in 24 states, Rack Room Shoes is by far the Deichmann group’s largest subsidiary. The company’s own logistics division transports over 65 million pairs of shoes annually from shoe manufacturers in 40 countries via six distribution centers (four in Germany, one in Switzerland, and one in the Netherlands) to Deichmann’s stores in Europe. The company is owned and managed by descendants of the company founder Heinrich Deichmann.

SELLING SHOES IN TROUBLED TIMES

In 1913 Heinrich Deichmann, a shoemaker, opened a shoe store in Borbeck, a suburb of Essen in the Ruhr. Borbeck was a blue-collar neighborhood, and Deichmann’s clientele consisted primarily of miners who worked underground in the region’s coal mines. Deichmann supplied them with sturdy and durable shoes that they were able to afford and fixed them when they needed repair. With borrowed money Deichmann equipped his business with state-of-the-art machinery that enabled him to repair the shoes of his customers much more quickly and for less money than other shoemakers in the area. In 1919 Deichmann started selling ready-made shoes in his store, and, over time, industrially manufactured shoes become Deichmann’s main source of income.

As Heinrich Deichmann’s customer base grew, so did the family he had to feed. In September 1926 his wife Julie delivered a boy, the first following four girls. Heinz-Horst, as he was named, soon learned about shoes. At times, while Julie Deichmann took care of customers in the store, Heinz-Horst was sleeping in his baby buggy in the backroom where all the shoes were stored. As the business expanded in their house, shoes were also stored in the living room as needed. In 1930 Heinrich Deichmann opened a second store near the highly frequented Borbeck Market, a store which he moved to an even more central location on the same market six years later. However, the rise of the National Socialists to political power in Germany was a serious disruption for the family business.

When on November 9, 1938, Nazis terrorized and vandalized many stores in the mostly Jewish neighborhood in an anti-Jewish riot, Heinrich Deichmann’s shop windows were not spared. Afterward, the Jewish family who owned the house the Deichmann family lived and worked in sold it to the Deichmanns and fled Germany, but only after the Nazis had seized all their money. The deeply religious Heinrich Deichmann continued to visit Jewish neighbors to read to them from the Old Testament and was interrogated by the Gestapo numerous times. The worsening political situation and growing inner conflict took a heavy toll on Heinrich Deichmann’s health. In July 1940 Heinz-Horst Deichmann, then spending the summer with relatives in the countryside, received a telegram from his family telling him to rush home. His father had already lost consciousness when he arrived. On July 20, 1940, Heinrich Deichmann, at age 52, died from a stroke.

Two months after Heinrich Deichmann was buried, Heinz-Horst turned 14. For the past few years he had taken on the role of a delivery boy, delivering new and repaired shoes to Deichmann’s customers, at first by foot and by tram and later by bicycle. After his father’s death, his mother looked after business matters while his sisters worked in the stores. Two years into World War II, shoe production began to dwindle. Julie Deichmann, however, was an exclusive distributor of Salamander brand name shoes and as such received extra deliveries from the manufacturer, which helped keep the shelves stocked for a time. However, as more and more men left Essen to serve in the army, and their wives and children moved to the countryside where it was less dangerous, fewer and fewer customers frequented the Deichmann stores. In 1942, at age 16, Heinz-Horst Deichmann was called upon to fight in the war. After the Germans were defeated, the 18-year-old, badly wounded, managed to escape the typical German soldier’s fate as a prisoner-ofwar and, after a two-week-long march on foot, returned to Essen-Borbeck on May 25, 1945.

GETTING CREATIVE AFTER WORLD WAR II

When the war was over, the Deichmanns recovered their remaining inventory of shoes, part of which had been stored in one of Essen’s coal mines. Selling them was no problem at all. However, once they were sold, there was no supply of new product. Heinz-Horst Deichmann’s imagination and his sense for business opportunities helped the family business survive and even thrive in the postwar chaos, even as he worked on completing his high school diploma. He hired about a dozen shoemakers and opened a shoe repair shop in the backyard. He cut down a few poplar trees in a friend’s backyard and had the wood made into soles for shoes. He secured a load of parachute lines made from heavy jute fiber, which were cut into shoe straps. At a time when many people did not own even a single pair of shoes, Deichmann’s “wood sandals” were in high demand. Altogether, some 50,000 pairs of these shoes were manufactured during the postwar years.

COMPANY PERSPECTIVES

Our Values. The Deichmann family is dedicated to the Christian view of man and endeavors to adhere to these values in its everyday business practice, well aware of the fact that reality always lags behind the ideals toward which we strive.

Our Goals. We have formulated our overarching corporate goal on the basis of these values: The company must serve the people. By this we mean our customers, employees, suppliers as well as people in need. In this sense we want to be the best shoe dealer for our customers in the markets in which we are represented. This means that Deichmann offers good products at the best possible prices based on cost leadership. In this regard, the profit motive in and of itself is not a goal for us. Profits are necessary in order to maintain the health of the company, to secure existing jobs and to create new ones, to enable the company to expand on its own and to recognize its obligations to society.

Our Customers. We want to offer fashionably modern and qualitatively good shoes to a broad crosssection of the public at an extremely reasonable price. We consider this not only a corporate duty, but also a social duty.

It was another creative idea that soon became the Deichmanns’ main source of income. Heinz-Horst and his youngest sister Hannelore organized a “shoe exchange” in which, for a small fee, people who had acquired a pair of ill-fitting shoes on the thriving barterbased black market were able to exchange them for the right size at Deichmann’s store. The Deichmanns registered every deal on individual cards, a system that eventually included cards on some 5,000 customers.

In spring 1946 Heinz-Horst Deichmann began studying theology, philosophy, and medicine at Bonn University and again took on the role of delivery boy, this time to supply the family business with Salamander shoes. The shoe manufacturer was located in Kornwestheim near Stuttgart and in desperate need of coal, to which the Deichmanns had access, due to their close ties to many miners in the Ruhr. Thus, Heinz-Horst Deichmann delivered coal to Salamander, attended school in Bonn, picked up six dozen pairs of shoes in Kornwestheim on his way back, and brought them home to Essen-Borbeck, making the round trip journey in a freight car.

The introduction of a new currency in June 1948 turned things around literally overnight. Every citizen received a total of 40 deutschmarks (DM) and, seemingly miraculously, the very next day a variety of merchandise not seen since before the war suddenly appeared in many store displays. When the former Jewish owners of the Deichmann house returned from exile in 1948, the Deichmanns paid them the selling price of 40,000 DM a second time. To raise the money, Heinz-Horst Deichmann convinced the still existing shoe manufacturers who knew his father to give him credit in return for orders worth ten times the sum he borrowed for two years in a row.

After Heinz-Horst transferred to Dusseldorf University, Deichmann’s third store was set up there in 1949. One year later Deichmann married Ruth Fischer, a teacher, who moved to Essen with him and soon started working at the family business. The young couple had acquired an old car which was packed full of shoes every day before Heinz-Horst Deichmann set off for Dusseldorf. As life slowly returned to normal once again in Germany, Deichmann’s family business began thriving. In fact, business was going so well that a second store was opened in Dusseldorf. After Deichmann graduated from medical school in 1951, he worked as an orthopedist at a Dusseldorf hospital for five years while helping his mother and his wife with the family business in his spare time. In 1955, however, Deichmann decided to solely focus on the shoe business. He bought his mother’s and his sisters’ shares and became the sole proprietor of Deichmann.

KEY DATES

1913:: Shoemaker Heinrich Deichmann opens a store in Essen, Germany.
1919:: Deichmann starts selling ready-made shoes in his store.
1930:: A second outlet is opened in Essen.
1949:: The third Deichmann store is set up in Dusseldorf.
1956:: Heinz-Horst Deichmann assumes responsibility for the family business.
1973:: Deichmann acquires Swiss shoe retailer Dosenbach.
1984:: The company enters the United States by taking over Lerner Shoes, Inc.
1990:: The first Deichmann store in East Germany opens in Coswig near Dresden.
1992:: Deichmann opens its first store in Austria and takes over Swiss shoe retailer Ochsner.
1997:: Expansion into Eastern Europe begins with the first Deichmann store opening in Poland.
1999:: The company founder’s grandson Heinrich Deichmann heads the company.
2001:: The first Deichmann stores open in Belgium, Hungary and the United Kingdom.
2006:: The company celebrates the opening of the 1,000th Deichmann outlet in Germany.

EXPANDING IN THE RUHR-RHINE REGION WITH NEW STORE CONCEPT AFTER 1955

As soon as Heinz-Horst Deichmann assumed full responsibility for the business, he introduced a couple of fundamental changes. The first one was that he canceled Deichmann’s membership in an association of shoe retailers that bundled their purchasing power to achieve better wholesale prices from shoe manufacturers. They also cooperated in matters of product selection and promotions, but Deichmann wanted to be independent with these decisions in the future. Secondly, he changed the way shoes were presented in his stores. In the mid-1950s it was still common that only one shoe of each kind was displayed in the store. If a customer was interested in trying a pair of shoes on, the shop assistant had to hand him or her a shoe from the shelf or a display cabinet to see if it fit and get the second shoe from the backroom. If a customer wanted to try on a lot of different shoes or if there were many customers in a shoe store at the same time, this could be very time consuming. On one of his business trips to London Deichmann noticed that the British Shoe Corporation, one of the country’s leading shoe retailers, presented their merchandise in a different way. One shoe of each kind, or sometimes both shoes of a pair, was put on mobile racks, where customers could pick them up themselves. When they approached a shop assistant, they already knew what they wanted, which saved a lot of time for both, the sales personnel and the customers. When the fourth Deichmann store was opened in Oberhausen, a city west of Essen, in 1955, it was modeled after this new concept. It was the first self-service shoe store in Germany.

In the next fifteen years, Deichmann began to put his vision of a shoe retail chain with a nationwide presence into practice. While he was busy setting up new stores and getting them going, his wife was responsible for purchasing men’s and children’s shoes and entertaining business partners—in addition to raising four children. By 1963, the year of the company’s 50th anniversary, there was a total of sixteen Deichmann outlets, most of which were located in the Ruhr and in the Rhineland. The first Deichmann store outside of that region was opened in Osnabrück, a large city northeast of the Ruhr.

In the 1960s fashion trends had an increasing influence on the shoe trade. Customers were looking for shoes that matched their outfit, rather than for shoes that lasted for a decade. That meant that, just like in fashion, a shoe collection lasted only one season and the unsold merchandise was moved out of the stores when it ended. Shoe racks as well as bins with marked-down products were put outside the store to attract more customers into the store. To better keep track of his sales, Deichmann introduced a new tracking system that organized his inventory by target groups, such as “men’s sandals costing up to twenty Marks.” That way it was easier to find out who was buying which articles at a particular store.

As the number of Deichmann outlets grew, the small administrative office in Borbeck, staffed with three employees and equipped with one typewriter and one calculating machine that had handled all the paperwork until 1961, had to be expanded a few times until, in 1968, Deichmann’s administration moved to a larger building in Essen-Borbeck. In order to keep costs as low as possible, Deichmann decided to avoid dealing with middlemen. Instead, the company took control of the whole value chain from ordering shoes directly from manufacturers to shipping and distributing them among the stores by the company’s own logistics division. Between 1978 and 1998 the company set up four distribution centers in Germany. During the same time period Deichmann kept growing at an accelerating pace, adding about 40 new outlets per year by the 1980s.

CONQUERING THE REST OF THE WORLD AFTER 1970

The year 1973 marked the beginning of Deichmann’s international expansion. In that year the company acquired the well established Swiss shoe retailer Dosenbach, a family business founded in 1865. Within a decade Dosenbach almost doubled in size under its new owner. A major step followed in 1983 when Heinz-Horst Deichmann met Morton S. Lerner, the Jewish-American owner of Charlotte, North Carolina-based Lerner Shoes, Inc., on a business trip. Lerner was looking for a buyer for his business, but was skeptical at first about selling it to a German. However, after the two entrepreneurs found out that they shared a strong interest in studying the Old and New Testament, they not only became business partners but also friends. In 1984 Deichmann, by then West Germany’s largest shoe retail chain with 260 outlets and 3,000 employees, acquired a majority stake in Lerner Shoes, which at the time consisted of 19 units in North Carolina, South Carolina, and Georgia. Rack Room Shoes, as the company was later renamed, expanded aggressively within the next 15 years, growing four to five times faster than the shoe retail industry in the United States. In 1985 Deichmann followed up with his expansion efforts in Western Europe when the company acquired the Dutch shoe retailer vanHaren. In the second half of the 1980s the company switched its focus back to Germany where the number of outlets increased by 100 just between 1986 and 1988. In that year Deichmann bought the traditional-style men’s shoes retailer Roland.

The fall of the Berlin Wall in 1989 coincided with Heinz-Horst Deichmann’s only son Heinrich joining the family enterprise after finishing his studies in business administration and gaining practical experience at other large German and American retail chains. In the 1990s the company’s main focus turned by 180 degrees—toward East Germany, and later Eastern Europe. The first Deichmann store in East Germany opened in Coswig near Dresden in 1990. Five years later, there were 140 Deichmann stores in the five new Eastern German states. Further expansion into Eastern Europe began in 1997 with the first Deichmann store opening in Poland.

In 1999 Heinz-Horst Deichmann stepped back as the company’s executive manager, handing the task over to his son. Under Heinrich Deichmann’s leadership, the company continued on its dynamic growth path. After 2000 Deichmann ventured into Belgium, Hungary, the United Kingdom, the Czech Republic, Slovakia and Denmark. In 2002 Deichmann acquired Off Broadway Shoe Warehouse, another American shoe retail chain with large warehouse-style outlets in Florida, Georgia, Virginia, North Carolina, Tennessee, New Hampshire, Massachusetts, and California. By that time, Rack Room Shoes operated more than 300 outlets in 20 states as well as its own distribution center. To become even more attractive to American consumers, Rack Room Shoes adopted a store concept similar to Off Broadway’s, offering a huge selection in huge warehouse-size stores, which were called Rack Room Shoes MetroMart. Because of the two chains’ commercial success, the United States became Deichmann’s single most important market besides Germany.

When Heinz-Horst Deichmann turned 80 in 2006, the company celebrated the opening of the 1,000th Deichmann outlet in Germany. Before handing over the responsibility for carrying on his life’s work to his son Heinrich, the senior had the junior pledge that the Deichmann shoe empire would remain a family affair, no matter how large it would grow in the future. In the same year the company opened its first outlets in Sweden, Turkey, and Slovenia.

Evelyn Hauser

PRINCIPAL SUBSIDIARIES

Rack Room Shoes Inc. (United States); Off Broadway Shoes, Inc. (United States); Roland Schuhe GmbH & Co. Handels KG (Germany); Deichmann-Schuhvertriebsgesellschaft m.b.H. (Austria); Deichmann-Shoes UK Ltd. (United Kingdom); Van Haren Schoenen B. V. (Netherlands); Dosenbach Ochsner AG (Switzerland); Deichmann-SKO ApS (Denmark); Deichmann-International Sourcing Ltd. (Hong Kong); Deichmann-Obuwie Sp. z o. o. (Poland); DeichmannCipökereskedelmi Kft. (Hungary); Deichmann-Obuv s.r.o. (Czech Republic).