Jul 17, 2017
Sneakernomics: The Future Looks PUNY!
There has certainly been a lot of bad news for the U.S. sports industry recently. We cited the dramatic slowdown in the sneaker purchases by Hispanics, as well as a pessimistic prediction for back-to-school. The short term prospects for the industry are not very bright.
Nevertheless, there are some bright spots for the industry which may help reverse its fortunes. I describe those opportunities as PUNY: Premium, Unique, New, and Young. Let’s explore these ideas.
The athletic shoe business in the U.S. has always been built on aspiration and inspiration, with emphasis on better price points. Conspicuous consumption has been a hallmark of the industry. While today’s highly charged promotional environment would seem to argue against this trend, we are still seeing strength at the top price points.
In every channel, much of the growth is coming from the high end of each channel’s pricing. The top seller list is dominated by higher priced items.
There is bifurcation in pricing where the growth is split between better prices and opening prices. Premium products can serve as an effective strategy to build the business.
When asked to describe themselves in one word, Gen Z most frequently called out “unique.” Gen Z has indicated a willingness to spend more for unique products that help this generation define themselves. This cohort wants to buy unique products from unique brands, sold through unique retailers.
However, this uniqueness must not stray too far from the core. I describe this attitude as, “I want to be different, just like my friends.” This opportunity should bolster smaller brands and retailers. Exclusive styles and colors are one way for brands and retailers to leverage this trend. Personalization and customization are also effective strategies.
Millennials and Gen Z are both attracted to the new. They are early adopters of everything from tech to fashion. Technology and innovation are driving their attraction to the new. New products are often unique as well as premium.
Combined, Millennials and Gen Z now represent more than half of the U.S. population. The share of each cohort to the total grows every day. On top of that, Gen Z is now old enough to enter the workforce and become an even stronger economic force.
On the other hand, the Boomer rank has declined by about one million per year – a rate that will only accelerate. Chasing a declining Boomer population is not a recipe for success in this industry.
The one issue with these PUNY opportunities is that not all of them are at scale to offset the weaknesses elsewhere. Brands and retailers must seize these opportunities to reverse the declines the industry faces.