Footwear Market Research & Business Solutions

The U.S. athletic footwear industry grew by 2 percent in 2017, generating $19.6 billion in sales, according to global information company The NPD Group. Unit sales also grew by 2 percent and average selling price remained flat, at $58.16.

Shifting consumer attitudes, behaviors, and demographics; an evolving marketplace with ongoing channel and digital disruptions; and increasing competition for consumer mindshare and dollars are changing the playing field for food companies and foodservice operators, reports The NPD Group, a leading global information company. The key shifts are how consumers shop, define convenience, use restaurants and foodservice outlets, and personalize health and wellness, according to NPD’s recently released Eating Patterns in America report.

The three key components of the $334 billion retail fashion segment, apparel, footwear, and fashion accessories, are each in different positions when it comes to the business, according to leading global information company The NPD Group. The apparel industry, which represents 65 percent of total U.S. retail fashion dollar sales and spans everything from basics to jeans, continues to enjoy the consistent growth experienced over the past few years. Conversely, the more trend-driven footwear and fashion accessories industries are now experiencing sales declines, keeping overall retail fashion sales in the 12 months ending February 2017 even with results from the prior year.

The U.S. athletic footwear industry grew by 8 percent in 2015*, generating $17.2 billion and marking one of the best performances the industry has had in a number of years, according to global information company The NPD Group. Unit sales grew by 3 percent and average selling price by 5 percent, to $61.15.

It’s been quite some time since Nordstrom announced that they were going to be opening their first Nordstrom Rack store in Canada; and since then, there has been significant buzz around when this was going to happen. Well a few weeks ago the doors to the first location at Vaughan Mills Mall finally opened and with all the anticipation and buzz, I decided to go check it out for myself.

The first question I keep getting asked is why did it take so long and why do you think there was such a delay. As we have seen with most successful retail imports, slow and steady seems to win the race. However, it was interesting to me that Nordstrom went ahead and expanded their regular banner stores before opening their off-price banner - kind of the opposite strategy that we had seen with Saks Fifth Avenue. This is made even more interesting by the fact that the off-price channel in Canada was the fastest growing channel in 2017 and continued to outperform the market growing +12 per cent from last year.

After visiting the first Nordstrom Rack store it became obvious that this was done with a very strategic approach and every detail of the opening was thought out in an effort to ensure that the Rack would be successful and the buzz would not fade. Here are a few insights I took away from my visit:

1. There was clearly a strategic decision here to use the regular Nordstrom stores as the branding vehicle. Essentially keeping the essence of the Nordstrom brand intact while offering discounted options. Nordstrom had brought a certain “cool” factor and younger energy to the Canadian landscape that had been missing and using that voice in the off-price space would fill that void that the channel has been lacking. This would also help acquire a stronger presence with the Millennial consumer as off-price is under indexed in the only generation cohort that posted In-store growth from a year ago.
2. The level of transparency in labeling was fascinating but also so needed in the off-price space. At Nordstrom Rack everything was clearly labeled without any hidden agendas, such as “Designer Shoes” and “From Our Nordstrom Stores”. To me this removed the disarray out of the hunt and created a guided shopping experience.
3. A major difference between Canada and the US is that Canada is specialty focused with over 50 per cent of apparel dollar sales traced to specialty stores vs. only 25 per cent in the US. Nordstrom Rack really played into this by merchandising by commodity not department as each key commodity was labeled and merchandised so it was very easy to shop.  This really engages the way Canadians shops.

The second question I get asked is there room for another off-price player in the Canadian landscape, isn’t this space already crowded?

If we look at the US, 12 per cent of the apparel dollar sales are traced to off-price where in Canada only it’s only 7 per cent - that’s a 3pt. gap of opportunity. And to take that further in Canada 93 per cent of the off-price channel sales are traced to 2 major players where in the US 95 per cent of the off-price channel sales are traced to 7 retailers.

So whether this increases competition, thereby driving market growth, or opens the door for the channel expansion, one thing is for certain – the Canadian market does in fact have room for more off price players.

So welcome to the Great White North, Nordstrom Rack!

A lot has been written about improving the customer “experience” in sports retail. No one would argue the importance of great customer experience. But experience can mean different things to different people, and even different things to the same person depending on circumstances. Let’s explore the different kinds of customer experience and how sports retailers can respond.

Retail must be easy. The transaction experience must be as stress-free and frictionless as possible. Once a purchase decision is made, get the product and customer out of the store as quickly and simply as possible. Lines at the register or multi-step checkouts are not conducive to a great experience.

Retail must be personal. “Brand Me” is your customer’s favorite brand. Well curated assortments are critical to serving “Brand Me.” Personalization through special offers and loyalty programs leverage the retailer’s best customers. Elevated and knowledgeable service adds to the personalization.

Retail must surprise and delight. Part of a memorable experience is discovering the unexpected. Retailers must feature newness, and the newest products must tell great stories. Today’s consumer wants unique products, made by unique brands, and sold in unique retailers. Private label, if well executed, can be a component here.

Retail must offer value. Like it or not, the price equation is firmly part of the retail experience today. Price has never been more important to the consumer. At the same time, value also means getting the most for your money. Understanding this balance is key.

Retail must be flexible. Not all of the same characteristics apply to every encounter. Sometimes consumers just want to get in and out of the store as quickly as possible, while sometimes they want to be pampered. Not every new initiative works. Astute retailers will test and respond.

The retail experience has never been more complicated, or more important. The successful retailers will be those who offer the greatest experience.

Overall for 2017, U.S. team sports equipment sales declined in the single digits, but below the surface it was a mixed bag, with notable pockets of growth.

Baseball equipment sales for the full 12 months were down in the low singles; however, a solid increase in sales during Q4, as new regulation compliant bats hit the market, was a bright spot for the category. The strength in bats carried the other baseball categories with it. This baseball boost helped the team sports equipment market as a whole for the quarter, with Q4 sales up in the low-single digits and closing the year on an optimistic note. I expect the positive baseball trend to continue through springtime, and provide a nice lift for the market as we move through 2018.

Basketball sales fared well, growing in the low single digits for the year, as participation continued to improve. Racquet sports also grew in the low singles, as Baby Boomers are looking for an easy entry and inexpensive fitness activity.

Soccer had a challenging year, with sales down in the low teens. With 2018 being a World Cup year, I expect sales to bounce back.

Sales of American football equipment were down in the low singles, as parental concerns about injury weighed on the sport.

On the other hand, heightened safety concerns have been a boon for protective gear sales, which grew in the mid-teens for 2017. Parents are spending more on ways to keep their kids safe from injuries and concussions while playing sports, and this will continue to be a growth opportunity for the equipment market. Protective gear should be a major thrust for every sports retailer. There are three protective gear makers in the winners column for 2017: Shock Doctor, McDavid, and Battle.

In terms of brand highlights, Rawlings had a good year, even in the face of the changeover due to the baseball bat regulation. Easton could not quite overcome the switch in bat regulations, but I expect it will have a better 2018. Everlast grew on interest in mixed martial arts.

Overall, I expect the team sports equipment business will remain challenged for 2018 as participation continues to slide in a number of sports, but leveraging the growth areas and unlocking new opportunities in the activities that can use fresh attention, will likely boost sales in the months ahead.

I really wish I came up with that simple yet clever term, but the credit goes to a New York Times columnist, writing about the fourth snowstorm to hit the Northeast in March, which arrived after the official start of spring. Now of course no one is under any illusion that come March 20 it will, all of a sudden, be sandal weather, but 12 to 18 inches of snow post-vernal equinox does seem a bit excessive. 

A week or so ago, on the day of the third Nor’easter of the month, I noted the number of promotional emails related to spring in my inbox: “Spring is just one week away!”  “New season, new styles!”  “Warmer days ahead!”  It was like someone clearly missed the memo.  A few days before that (just after the second storm in March), I walked by a prominent independent shoe store in my neighborhood and saw a letter paper-sized printed sign in the window that read “WE HAVE BOOTS!” The window was full of sandals, so the sign was needed, or else someone looking for boots might have just kept walking.  

Clearly the footwear (and broader retail) industry is still challenged to adapt the flow of product.  Industry players have talked at length about the fact that the retail calendar does not align with the actual seasons, nor with the mindsets of consumers as they look to “buy now, wear now.”  Since I’m on the topic of snow, it’s worth pointing out that dollar and unit sales of winter/snow boots have declined by 10-15 percent during each of the past two boot seasons*.  But, while we don’t have March 2018 results yet (as it is still more than a week away from month-end as I write this), looking back at March dollar and unit sales for 2016 and 2017 reveals small dollar volume, but double-digit growth each year. This suggests that consumers have an increasing appetite for this type of product in March, whether it be out of actual need or just acting opportunistically, taking advantage of post-season clearance sales (which are apparent given the rapid deterioration of price points versus earlier in the season).  Not surprisingly, the top growth designated market areas (DMAs) for winter/snow boots in March for the past two years combined are New York, Philadelphia, Chicago, and Boston.**

So you know the saying “March comes in like a lion and goes out like a lamb?” Well, that lion seems to be hanging around a bit longer these days, so perhaps there is some opportunity for brands and retailers to take advantage.  In addition to the spring email marketing I received on the day of a snowstorm, I have been pleased to see a few other messages over the last week that recognize the fact that it is still cold and snowy in the Northeast, promoting the appropriate products. But, what if we took it one step further? With seasons blurring together and late winter/early spring seemingly colder and snowier than ever, February/March could be a good time to release a limited quantity of new snow boot styles scheduled for full launch during the upcoming fall/winter. This newness and limited supply could potentially entice consumers who have not yet bought a new pair to do so, and/or create demand for the full launch later in the year.

*The NPD Group/ Retail Tracking Service, 6 months ending February 2018 and 2017
**The NPD Group/ Retail Tracking Service, March 2017 and 2016

Of the 20+ industries NPD tracks, one of the fastest growing in 2017 was the beauty industry. Sales in the U.S. were up a robust 6 percent compared the tepid, low single-digit growth in the sports industry.

I asked my colleague Larissa Jensen, NPD’s beauty industry analyst, for some thoughts on why beauty has done so well, in hopes of learning some lessons that may be applied to improving the sports business.

Here are the top five trends Larissa identified as driving the beauty industry’s successes today, and where I see the applications for sports retail:

Natural/Wellness – Natural brands are outpacing the growth of all beauty categories in the U.S. (makeup, skincare, and fragrance). In skincare specifically, natural brands are the largest brand type and made up half of the category’s dollar volume gains in 2017. In fragrance, natural brands make up only 1 percent of sales, but grew 8X faster than the category.

The sports industry has always had a strong connection to sustainability. Perhaps a renewed focus on this goal and a greater understanding of Gen Z’s interest in “clean living” could benefit sales. Brands that share the values of their consumers will win in 2018.

Indie Brands – Legacy brands are looking for ways to remain relevant in today’s market. In skincare, brands outside the top 20 make up the majority share of dollars; they are growing the fastest and gaining the most share points. But more generally, smaller brands are winning in beauty because:

• They are nimble and able to react to trends more quickly.
• They look to consumers, not other brands, for inspiration on what to launch.
• They have a clear focus and a targeted market.

I’ve written on several occasions that “small is the new big” in sports. Today’s consumer wants unique products, sold by unique retailers, made by unique brands. Mega brands must come up with ways to “act small.” Brands and retailers that try to be all things to all people will struggle. Curated assortments, clearly defined muses or niches, and fresh retail approaches will be the keys to success in 2018. No brand or retailer has gone out of business by listening more closely to their consumers.

Social Media – This is the biggest driver in makeup as it provides the biggest impact via social sharing; it’s easy to see a ‘before and after’ effect. The top 10 brands in makeup are often the most buzzed about brands on social platforms. Influencers play a big role here, and we have seen in our data how influencer collaborations typically generate more sales than the more traditional celebrity collaborations. 

“Rent-a-celebrity” is starting to play itself out of sports. Athletic endorsers no longer produce significant retail results. Paid celebrities are viewed by the consumer as phony, but honest, unpaid influencers continue to have sway in the market. Peers remain the most important influencers. Brands that can harness this trend will win.

Experiential Retail – Brick-and-mortar still holds the largest share of sales, and brands need to win here to win overall. Strong online sales alone will not drive growth. Specialty stores are where consumers shop more often, enticing consumers with unique brand and product offerings in a fun retail environment. Also, we have seen an influx of pop-up and pop-in stores in high volume cities including NY, LA, and San Francisco, which allow manufacturers to immerse the consumer in their brand experience, and provide Instagrammable photo ops for consumers to share on social media.

Retailers need to “surprise and delight” their customers. Retail stores that look the same, visit over visit, are uninspiring. Products, brands, and retailers must tell exciting and provocative stories to attract consumers and get them returning to their stores.

Beauty specialty stores are particularly hot right now. Some feature a “mass to class” product lineup, and offer sampling add-ons, and hair and nail services. Consumers can spend hours in these stores and share that experience with their friends. Sports retailers must think about how they can replicate this kind of experience.

Dotcom – This area of the beauty market has seen double-digit growth since NPD began tracking it. At the highest level it’s about convenience across all categories, but the dynamics of online differ by category. In fragrance, where penetration is the lowest, it’s about replenishment. In skincare, where online penetration is highest, it’s about easy access to online reviews, providing consumers the confidence to purchase this more complicated and higher price-point category. In makeup, replenishment and experimentation (new launches) play a role in the gains. Online only brands (like Kylie Cosmetics and ColourPop – before it went into Sephora) draw lots of excitement through social media and their limited edition strategy, leveraging the “fear of missing out” (FOMO) trend.

Footwear is one of the highest e-commerce penetrated categories. Yet, it seems that the sports industry’s online approach is purely transactional, rather than relationship building as we see in beauty. The big challenge is how to get customers to visit websites often, not just to shop but to build a relationship with the retailer or brand, as the beauty industry has done.

There are many important teachings for the sports industry to learn from beauty. In today’s retail landscape, industries cannot live strictly in their silos, but must see the bigger pictures and learn from each other. Retailers and brands that take a more progressive approach can expect success in the future.

In my previous blog, I wrote about the ways in which retailers can revolutionize the in-store environment to survive the internet age. Shopping must be an experience for today’s consumer, but each consumer has a different definition of “experience.” So, how do retailers strike the right chord? 

Retailers must develop their own “muse,” or an iconic customer that represents the core of their business. In creating their muse, retailers must target and tailor the experience to their core customer. Brands and products that do not line up with this muse must be exorcised. Retailers must challenge their thinking periodically on their muse, but they must always have a “north star” to lead them.

Once the muse has been created, retailers must curate their assortments to be focused on this muse and its tangents. Their brands must illustrate a clear point of view in their product assortments.

Not every brand will survive this contraction. Retailers must pick the brands they think will be winners and elevate them. Brands that are predicted to win in the future must be nurtured and over emphasized. This does not necessarily mean dropping brands not designated as winners, but retailers must wean themselves off these brands. Remember, brands and retailers no longer create trends; the consumer is in charge now. Brands and retailers must feed these trends.

In addition, consumers want to know where a retailer stands on key social issues, and this must be reflected. Retailers must take positions on social issues that are important to their core customer, even if it risks alienating others.

Loyalty programs are also beneficial, but then again must be tailored to the muse. Retailers should not waste consumers’ time with meaningless features and too many communications.

To tie everything together, retail must be omnipresent – available to consumers whenever, wherever, and however they want. Retailers must have one common pricing, one common inventory, and one common message. Anything short of that is failure.

By blending the experience with core values, retailers can improve every aspect of the physical store, which is a must if they are to survive the internet age.

In 2017, growth in the U.S. athletic footwear and activewear markets meagerly improved. While sales in physical stores declined, online sales grew in the high single-digits. We can expect this pattern of online sales driving industry growth to continue.

At retail, a record number of physical stores closed in 2017 and it’s expected that even more will close over the next two years. Some have predicted that there will be 25 percent fewer malls in the U.S. Sports retailers are facing a very challenging time, especially in the brick-and-mortar channel.

Of course brick-and-mortar sports retail will continue to exist, but the industry must accept the fact that there will be fewer physical stores in the future, physical stores will contribute a smaller portion of total sales, and that profits in physical stores will get squeezed.

In this downsizing, which doors will close? Retailers must look towards building models that predict which stores are the likely closure candidates and move swiftly to get those units behind them. Stores that just break even today are never going to make money again. Stores that are in malls with vulnerable anchors will likely not survive. We cannot expect stores that are not growing now to return to growth. Closing marginally profitable or unprofitable doors improves the health and profitability of the remaining smaller companies. Retailers must be ruthless in their rationalization strategies.

Retailers must respond to this new normal. To compete in this new world order and hold onto their territory, they must elevate the shopping experience.

Today we have the ability to make the shopping experience more personal than ever before. With contextual marketing, retailers can know what their shoppers bought and can find ways to add on to or enhance that purchase. Consumers want to shop at retailers that know their needs and desires, sometimes even before they know themselves.

Shopping must also be easy and frictionless. Too many steps and too much time wasted are all negatives for today’s consumer. In addition, all shopping is social today. A consumer’s most important influencers are his/her peers. Retailers must make it easy for shopping to be more social.

Part of making shopping easier is to bring the internet into the store. Physical and virtual shelves need to be more fluidly intertwined. Retailers should arm sales associates with devices that can easily access inventory. These devices can also be great training tools for the sales associates.

Physical retail also needs to elevate the quality of their sales associates. With a tight labor market and increasing minimum wages, we can now demand more from our sales associates. If we pay peanuts, we get a different level of quality than if we pay top dollar and can demand the best.

Not all of these suggestions are easy. Many are complicated and expensive, but retailers must transform shopping into a unique and cohesive experience if they are to survive in the age of the internet.

Like the rest of the sports world, the U.S. outdoor retail business was challenged in 2017. For the 12 months ending November 2017, sales declined in the mid-single digits. The void created by The Sports Authority and Sport Chalet bankruptcies made the comparisons even more difficult. One bright spot was that the trend improved, with sales flat rather than down, in the last three months. Whether that positive momentum can carry into 2018 remains to be seen.

For the last 12 months, outdoor industry sales declined in the high single-digits within the athletic specialty/sporting goods channel. In outdoor specialty sales were flat, and in sport specialty e-commerce, sales grew in the low singles.

By category for the 12 month period, footwear declined by about 10 percent, apparel and accessories in the mid singles, and equipment in the high single-digits.

Apparel is the largest category in the outdoor market, driven by outerwear. By channel, apparel sales declined in athletic specialty/sporting goods, but grew within sport specialty and e-commerce.

Outdoor equipment sales were down in all three channels. Sales in outdoor specialty were the most concerning, down in the high single-digits.

Outdoor footwear sales were down sharply in athletic specialty sporting goods, and were also down in outdoor specialty. A bright sport was the sport specialty e-commerce channel, where sales were up in the high single-digits.

For the 12 month period, many of the smaller brands had nice increases, as did Patagonia, Arc’Teryx, Kuhl, Hydroflask, Sorel, Carhartt, and Adidas. Nike, Under Armour, The North Face, Yeti Coolers, and Columbia all posted declines.

Given the reported weak gun sales, I expect that the outdoor categories will be challenged in the athletic specialty/sporting goods channel for 2018, as weak gun sales could lead to weaker traffic for other outdoor products. E-commerce should be the best performing channel, tracking the rest of sports sales online.

After last week’s Outdoor Retailer show, it is clear that there is no new hot item or must-have category that is of scale to move the industry. While some brands will outperform, some of the larger brands will still lag the industry. I expect 2018 to be a year of discovering and transitioning for the outdoor industry, to better position it for the long-term growth it needs.

In my annual predictions here, I explained why 2018 is positioned to be another mediocre year for the U.S. sports industry, as it is following in the footsteps of the tepid sales growth, heavy promoting, and weak profits of 2017. What can the industry do to reverse these fortunes? There is no magic bullet, but there are several steps that brands and retailers can take to improve results and get the industry back on track.

First and foremost is the need for great product. Brands have continued to make and sell products that consumers don’t care to buy, which has further fanned the flames of promotion. Technology as fashion is out of style right now (and may never come back). It’s sportswear and athleisure that rule the runway, and brands and retailers must feed this trend.

The industry also needs a new hot look. The modern runner trend which has carried the market for the last few years is getting ubiquitous. The industry must quickly address this and find the next new idea, before the modern runner gets played out.

Brands and retailers must also carefully curate their assortments to address their core consumer. Gone are the days of being all things to all people. Likewise, retail formats must be more diverse and focused; cookie cutter formats are antithetical to the market. Personalization is the new currency, and “Brand Me” will be the most important brand of all.

That said, there is a crying need from the consumer for uniqueness and differentiation -- small is the new big. Across the landscape, we see growth coming from smaller brands and unique items. Brands need more items, not fewer, to address this need.

Private label looks more appealing every day, as retailers seek shelter from the promotional storm. Brands and retailers must collaborate to create private brand footwear and apparel.

Celebrity collaborations must either become commercial in nature or be abandoned. Microscopic releases might drive Instagram likes, but they do nothing for the business.

The line between what is an athletic shoe and a casual shoe continues to blur. We only need to look at Steven Madden’s athletic business last year to see the future. The nimble brand and retailer will be the winner.

Our business must be omnipresent, available to the consumer wherever, whenever, and however they want to shop. Physical stores must be places of discovery to surprise and delight our customers. At the same time, the retail transaction must be frictionless. All impediments to speed must be removed.

Last but certainly not least, data must drive decisions. In this fast-changing fashion environment, rich data will inform the best decisions. Forecasting and predicting have never been more essential.

Expectations are that 2018 will be a challenging year for sports retail; however, retailers and brands that adopt these recommendations will find it to be a more successful year than their peers.

The golf retail market in the U.S. remains challenged, largely impacted by the fact that Millennials are not picking up the game at the rate that Boomers are aging out of it. As I wrote about here, there are major structural issues which have hurt this business.

Golf equipment sales were challenged in 2016 and look to be even worse in 2017; total golf sales year-to-date through November 2017 declined in the mid-teens. Across key categories including golf clubs, balls, and gloves, sales have not fared positively.  

Specifically, golf club sales—an indicator of new players entering the game—were down by more than 20 percent. Nike’s exit from the category accounted for about 13 percent of the total decline in clubs. Of the major brands, only Cobra picked up a low-teens sales increase and +260 basis points in share. Callaway and TaylorMade both acquired share from the Nike void, but have experienced a decline in club sales over last year. A bright spot for the category, however, was a 5 percent increase in the average selling price.

Golf ball sales—an indicator of rounds played—declined in the mid-single digits. The Nike golf ball clearance has had a negative impact on the category, as has a sales decline from category share leader Titleist. TaylorMade, Callaway, and Top Flite, who appear to have benefited from Nike’s exit, grew between 110-250 basis points year-to-date.

Of the top 15 brands in golf, Cobra, Top Flite, and Pride were the ones to show gains year-to-date.

The golf equipment business is a market share game right now; for someone to win, others must lose. What the golf industry needs to focus on is participation, both in terms of holding onto their existing participants and adopting new ones.

Source: The NPD Group / U.S. Retail Tracking Service, January-November 2017