If the succession fits

Getting online early helped 101-year-old Wittner Shoes weather the retail storm. They've also managed two successful family successions and are hoping for a third.

The second succession of a family business is almost always easier than the first – in fact it’s usually only death that loosens the founder’s fingers from the tiller.

And then what often happens is that the second generation leader of the business decides that he or she wants to enjoy a normal retirement, rather than dying in the office like dad did, so an early, orderly succession is arranged.

Wittner Shoes is an example of that. The 101-year-old, market leading ladies shoe fashion business is now in the hands of the third generation – joint CEOs Michael and Peter Wittner and their sister Debra. Their father David stepped down from day-to-day management 10 years ago, at the age of 70, and at the same time he put in place an ownership succession event and family constitution.

It was quite neat: David set up a unit trust with 41 units. He and his wife got 11 units and each of the kids got 10, which meant the parents would only need to have one of the kids onside to control the business if there was a dispute.

Like all shareholder agreements it was designed for the worst case that you expect will never happen, with the hope that the existence of the agreement itself means that problems don’t get to that point. And so it has been: in ten years nothing at Wittner Shoes has been put to a vote, and five years ago they won the Family Business Australia award for best third generation family business in the land.

Wittner Shoes was founded in 1912 by HJ Wittner, the son of Romanian immigrant Arnold Wittner. Arnold was a general trader who bought and sold consignments. One day he got a bad consignment of shoes that he couldn’t shift so he gave them to his 17-year-old son, HJ, and set him up in a shop in Leeds Street, Footscray, an inner Melbourne suburb.

HJ was young, but he was an innovative, energetic bloke and he built a very successful shoe retailing business from the first crook consignment with only two sizes of shoes.

He was the first to sell shoes by mail order and introduced an x-ray machine into the stores so customers could see how their feet fitted into the shoes. His son and grandchildren launched the first online shoe store in 1997, which is now their biggest store by far, and two weeks ago they installed a holographic image in one of their Melbourne stores.

Wittner Shoes’ first management succession event occurred in 1967 when Arnold departed the business.

In 1973, aged 78, HJ Wittner died. He had had 10 heart attacks; the 10th one got him. David inherited a controlling share of the business with his sister Anna also a shareholder until he bought her out in the early 1990s.

At that point only about 30 per cent of the shoes sold were branded Wittner, but in 2000 the family decided that to ensure their survival with rising rent and labour costs they had to move to a fully integrated design, manufacturing and retailing business with 100 per cent Wittner branded stock – to increase margins.

They had already decided to focus entirely on women’s shoes 20 years earlier for much the same reason: the lease renewal at the Doncaster store was at twice the rent so they decided to halve the size of the store and remove all the men’s and children’s stock.

Now they have two factories in China making Wittner shoes exclusively and the designs are all done in-house in Melbourne.

Three years ago the business had its best year ever but things have been more challenging since for both Wittner and Australian Retailers generally. To combat the problems of high labour and occupancy costs here, the Wittners are now looking at offshore expansion, and have registered the brand in the United States, the United Kingdom and various parts of Asia.

They have 73 stores in Australia and have also set up a discount online store – heelsteal.com.au. The main online store, wittner.com.au, is doing twice the sales of their largest bricks and mortar store.

The VIP loyalty program has an astonishing 360,000 members, increasing at 10,000 a month, so although trading conditions are tough at the moment, the business is still growing.

As for the fourth generation, the three third generation Wittners – Michael, Peter and Debra – have eight kids between them, ranging in age from 9 to 26.

When the constitution was written ten years ago it laid out the conditions under which Wittner children would come into the business: that they can work in the stores serving customers any time, but if they want a career in the company they needed a minimum of two years’ experience outside the business as well as relevant qualifications and skills.

Like all old family businesses, the Wittners are very proud of keeping it in the family for 100 years and there seems little doubt that it will end up in the fourth generation, maybe as an Australian-based global shoe business operator.

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