Belgian shoe store chain Schoenen Torfs has seen its profits more than halved, due to the success of its web shop. Turnover went up, but costs soared.
Lower margins
Torfs saw its turnover grow 2 % to 145.6 million euros last year, but the operating profit fell from 4.1 million to 1.4 million euros and net profit also fell sharply. Profitability has been under pressure for some time, because the retailer saw its EBITDA margin (gross operating profit divided by turnover) systematically decrease from 15 % to 8 % over the past five years.
The fact that the profit falls is mainly due to the high costs associated with e-commerce: Schoenen Torfs sells an increasing number of shoes through its web shop, but online the margins are a lot lower due to the sky-high costs. “The shipping costs are high“, CEO Wouter Torfs told Belgian business newspaper De Tijd. “In addition, we also pay for the costs of shoes that customers send back. And we have to invest in online advertising and technology. These are all costs that we did not have in the past.”
Zalando and bol.com
In a sense, Torfs is therefore a victim of its own (online) success. The company now sells 17 % of its shoes online and the web shop grew by 20 % last year. However, the shoe retailer cannot help but invest in e-commerce, Els Breugelmans (retail expert at the University of Leuven) says: “Those who are not selling online, see their customers leaving for Zalando. And as an entrepreneur, you really have a problem when that happens.”
The chain will now take a critical look at e-commerce, but is not thinking about introducing shipping costs: “That would be a heavy competitive disadvantage.” The company will, however, review its Dutch web shop and the collaboration with bol.com, because those channels were loss-making last year.
