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Dunedin institution McKinlays Footwear treads its own road

Photo / McKinlays Footwear

After 140 years and through five generations, McKinlays Footwear is keeping the flame of local manufacturing alive in the South.

Graeme McKinlay reckons up to 15,000 people used to be employed in footwear manufacturing in New Zealand as recently as the 1980s.

“Now you'd be lucky,” he says. “There wouldn't be a hundred in the country.”

If that guesstimate is correct, around 20 per cent of those people now work at the McKinlays Footwear factory in South Dunedin turning out multiple lines of men’s and women’s shoes and exporting and importing under the company’s fifth generation of family owners.

McKinlays is a storied enterprise and a Dunedin institution. It was founded in 1879 by recent immigrant Robert McKinlay in what was then one of New Zealand’s most prosperous towns. Dunedin boasted New Zealand’s first daily newspaper, stock exchange, University and art and medical schools not to mention galleries, libraries, churches and museums.

But, like New Zealand manufacturing, the city has seen better times. Growth slowed for a century or more, allowing Dunedin to be overtaken by one after another of its northern rivals. Last year, Tauranga tipped Dunedin into sixth place in terms of population.

In recent years the city lost its famed Hillside railway workshops, just around the corner from the McKinlays’ factory, which in 2005 employed over 200 people. Fisher & Paykel closed its plant in nearby Mosgiel, which employed 430, in 2008 and, most recently, Dunedin lost its iconic Cadbury chocolate factory and 350 more jobs.

Through it all, McKinlays has survived and sometimes thrived with family values to the fore.

School children around the country are familiar with the McKinlays brand. Photo / McKinlays

“Our big advantage when we're looking for staff is that we are still one of the few businesses around that can offer basically an 8 to 4.30 job Monday to Friday and you have three weeks off at Christmas,” McKinlay says.

“There's not many jobs around like that anymore.”

The company’s first and perhaps biggest challenge came early in the form of industry-wide strikes in the 1880s and early 1890s by the “Fighting Bootmakers”, then one of New Zealand’s most militant unions.

Now owned by Graeme and brother David, the company is both continuing its traditional manufacturing business and exploiting new opportunities online and off.

While small, in national terms, McKinlay says his company is probably the only real footwear manufacturer of any volume left in the country.

“Our annual production is around maybe 30,000 pairs a year in a New Zealand market where they sell about 18 million pairs or footwear in a year,” he says.

“So we are a tiny, tiny piece of it and we've just sort of got our own wee niche, if you like.”

McKinlays makes school shoes, men’s and women’s shoes and boots, custom-made shoes and every now and then “get a burst of enthusiasm” and manufactures for films or TV.

“We did boots for The Hobbit, we did boots for Lord Of The Rings,” McKinlay says.

“There's a children's TV series called Power Rangers which is filmed in Auckland every year. “We make maybe 100 or 150 pairs for them and then you don't hear anything from them for another year.”

Everything produced at the factory carries the McKinlays brand, even when custom-made for retailers.

“We used to have a whole series of different brands and labels we'd put shoes out under but that's all gone now,” McKinlay says. “We just focus on the fact that we’re McKinlays and were made here New Zealand.”

A range made for Barkers a couple of years ago, for instance, carried the brand “Barkers by McKinlays”.

McKinlay says there has always been some consumer push towards “New Zealand-made” but it has become stronger in the last few years. In men’s shoes in particular, brand loyalty is also a result of habit.

“Men, in particular, are terrible shoe shoppers at the best of times. So if they find something they like they'll just stick with it.”

McKinlays sells mainly to independent retailers throughout the country and school uniform shops. It has its own small retail outlet at the factory and its e-commerce website as well.

“We get a lot of repeat business from overseas just through our website. Probably about 20 to 25 per cent of what we do goes offshore.”

The company used to export in bulk, into Melbourne and to Japan, but now all exports are to individuals ordering online.

The Japanese opportunity was killed-off by currency fluctuations.

We were expensive to start with but we just became so expensive they couldn't justify it,” McKinlay says.

“The problem we have with shipping into Australia is just the cost of getting small quantities of freight across the Tasman at any realistic cost. You just can't do it.”

Aside from repeat customers, exactly where the new online sales come from and what prompts them is a bit of a mystery.

McKinlay says some probably come from expats or people that have been to New Zealand and bought a pair.

“Every now and then you will get a flurry and they will all be in the same area in the UK or in the United States and that's obviously because someone told a friend who's told a friend.”

Sourcing raw materials are also a challenge for a small manufacturer seeking to differentiate themselves from the large industrial makers.

McKinlays buys most of its leather in New Zealand, but it can be hard to meet the minimum quantities because it wants small quantities of certain colours.

Virtually everything else - soling thread, elastic, buckles and laces - comes from offshore because they are simply not made here.

But that challenge has been turned into a new business opportunity: McKinlays now imports and distributes women's European fashion footwear, buying stock at the same time as raw materials.

Shipments of shoes and materials are consolidated and shipped two or three times a year out of Italy.

“We've decided we'll focus on European footwear rather than jump into the Chinese market where everybody is and trying to compete on price.”

New season samples are in and selling has started for next summer in February trade fairs in Auckland, Wellington and Christchurch targeting the smaller, independent retail chains.

“The bigger chains tend to do their own buying,” McKinlay explains. “Some of them will come and have a look what you've got just in case you've got something really interesting or a very good price point but otherwise you stay away from them.”

There are no rules of succession in this family business – generational change has never followed any set pattern. Those that are interested have to put up their hands and put up the money.

When Graeme came into the business his father and an uncle were running it. His father was the oldest of six children and his uncle was the youngest.

“So in effect, I was probably nearer my uncle's age than he was to my father. My father dropped out in, I think, 1990 and my uncle left maybe 10 years ago.”

Back in 1990, the factory was right in the centre of Dunedin, offering an opportunity for more than just generational change.

“If you walked out the front door of the factory you were looking at the back door of the Town Hall,” McKinlay says. “At the time we were having issues with parking and the building wasn't really working for what we wanted.”

Selling the building freed up quite a lot of cash to succession and for the new South Dunedin factory.

“Then getting my uncle out was just a matter of finding the money and paying him out the value at the time.”

A generation earlier, when Graeme and David’s father took ownership, the business was run by his father, an uncle and a cousin. Even earlier, in the 1930s their grandfather succeeded three brothers.

For now, it’s business as usual. McKinlay says the council is supportive of the business but there's not much they can do to help.

“We're not a nice glamour industry like IT or video games and that sort of thing,” he says.

“The reality is that we've been quite stable now for a number of years. We're not aiming to grow significantly but we're trying not to shrink at the same time.

“We're just here doing your own thing.”