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Jul 1, 2009
by Kevin Zimmerman
"There's absolutely been a trend towards the less expensive items, which in turn are of lesser quality," declares Jason Lee, CEO at No. 1 Inc., a leading distributor of hosiery. "Cheaper prices always do better, of course, but particularly right now. People are willing to accept B quality instead of A quality, and there's been a wave of cheap products flooding the market." And as is the case in most shopping segments, luxury brands are foundering. French fashion house, Christian Lacroix, whose many products include shoes, filed for Chapter 11 bankruptcy protection in May, while luxury firm, Prada SpA, which owns the Prada, Miu Miu, Car Shoe and Church's brands, reported a 22 percent decline in earnings for fiscal year 2008.
A recent online survey by industry publication, Footwear News, found that after withstanding several years of sharp price increases, consumers have revolted. Of the 146 industry executives polled (64 percent in the luxury segment), 85 percent said prices have spun out of control in recent years, and 53 percent said they've cut prices to keep pace with evolving consumer expectations. And 78 percent of those said they've dropped prices between 5 and 20 percent.
But it's not just the luxury brands that are having a hard time. Kenneth Cole Productions, long a U.S. centric, wholesale driven footwear company, whose prices generally fall in the moderate range, posted a 15.6 percent decline in net revenues for the first quarter ended March 31.
Even the brightly colored plastic Crocs line, which exploded into faddishness a couple of years ago, due in part to its more affordable pricing, has come upon hard times with a 32 percent drop in revenue compared to the first quarter of 2008. Athletic footwear giant, Adidas, announced in May that it would eliminate its regional headquarters and restructure its business model following a 97 percent drop in first quarter profits.
As a result of all this upheaval, wholesale companies like Shoe Charmers, which sold charms for Crocs, have closed their doors. "We just couldn't keep going," says Shoe Charmers owner, Shara Bowling. "We're out of business, and we're not coming back."
But as the saying goes, one man's (or company's) problem is another's opportunity, and the more nimble footwear dealers are busily strategizing to capitalize on current circumstances. "We've been doing well with men's dress shoes," says Veronica Perez of Dallas based, All Ur Shoes, which in addition to footwear also sells handbags and, intriguingly, all terrain vehicles. All Ur Shoes' line of men's dress shoes sell in 12 pair case packs for $9 to $10 per unit, while its men's leather work boots range in price from $16 to $21 each, per 12 pair pack. Ladies' boots are offered at $16 per pack, while plastic, gladiator style sandals go for $8 per pack. All Ur Shoes requires a minimum of $150 per order.
Sandals are all they sell at Inbop Flip-Flops Co., which offers a wide range of rubber flip-flops, called Cariris (pronounced "Cah-ree-rees"), named for a tribe of Indians that once lived near its manufacturing facilities in the northeast of Brazil. "Our peak season runs basically from March to September," says vice president, Larissa Hemley, who reports that so far, this year's sales look to be strong. Inbop has been experimenting with aggressive pricing, Hemley says. Its Milenio line of solid color flip-flops and wedges (essentially sandals with heels), normally priced at $3.50 a pair for adults and kids and $3.12 a pair for toddlers (with a minimum order of 25 pairs), recently went on sale for $2.95 per pair, while its, "Faith, Hope, Love," line, each with a pink ribbon screened across the bottom of the sandal and a smaller pink ribbon on the strap, to raise awareness about breast cancer, normally priced at $4.50 a pair (25 pair minimum), is now available at $1.99 a pair.
The company also does well by its custom made sandals, Hemley adds. A person or company can have their art or logo printed on the strap or on the back of the sole below the heel, with prices starting at $4.82 a pair for flats, or $5.90 a pair for wedges (100 pairs minimum), or with the artwork on the footbed and strap for $3.50 a pair (3,000 pairs minimum).
Besides its footwear, Inbop draws attention from its dedication to giving 50 percent of its profits to support Christian missions worldwide, including in the U.S., U.K., Brazil, and the Czech Republic. "It's always been part of our vision to help advance Christian missions' work," she says. In addition to the sales offers, Hemley adds, Inbop is looking at ways to better optimize inbop.com's search engine results.
No. 1 Inc. is also considering significant changes to its website, according to Lee. "We're thinking of using our website more as a catalog and no longer offering purchases through it," he says. "We've found with our footwear that it's easier to do a deal in person or over the phone, where you can negotiate price easier, than through the website, where the prices are generally fixed." On the site, fashion socks are priced at $3.99 per dozen, sports socks at $4.49 to $4.99 per dozen, and women's leggings at $14 to $20 per dozen. While No. 1 actively works to uphold its reputation for higher quality footwear, Lee says, that practice has become more difficult to maintain of late.
"The biggest problem we have is the number of cheap socks coming into the U.S. from places like China and Pakistan," he states. "It's hard to compete with their prices; our only real means of fighting back is to emphasize the quality of our goods." However, he adds, "The economy will start to pick up, sooner or later, and people will again be looking for more durable socks. Until then, we will continue to focus on seeing that our brand is known for its quality."
Relatively impervious to the vagaries of style and price is Long Island based, Goaltex Corp., which manufactures and distributes canvas, vinyl and leather footwear, primarily for security, construction, and like minded customer segments under its Big M Footwear brand. "A lot of what we do is government sales," remarks president, Robert Grubman. "That puts us in a fairly unique position of not having to keep up with what the rest of the shoe industry is doing." In addition to the expected steel toed work boots and shoes, Goaltex also offers vinyl work boots and Oxfords, canvas and leather sneakers and deck shoes.
Also working somewhat outside the norm is St. Louis based, M.K. Weil Shoe Company, whose president, Ken Agatstein, says deals strictly in brand name closeouts and cancellations. "So far this year, sales have been soft," he says, "but we are starting to see some bright spots, particularly in orders for next season." Weil's current stock includes shoes from such notable names as Easy Spirit, Enzo, Anne Klein, and 9 West; what Agatstein describes as, "moderate to better grade shoes that you'd find in the better department stores."
Weil's website notes that all colors and styles may not be available at a given time. "We don't really sell off the website," he says, "because we can't publicize our prices. Instead we use it as an informational tool, and most of our sales come through trade shows and direct customer sales." Besides its St. Louis headquarters, Weil also operates a showroom in Manhattan. Agatstein says there are no current plans to open additional showrooms.
Alternatively, Califootwear is looking to expand its web presence in a big way, according to Pang. "We're planning on putting a lot more on our website," he says. "We're definitely looking to do more in ecommerce." By far the company's current best seller is the, "Brenda," shoe styled sandal, which sells for $12.50 a pair, 18 pairs to a box, in a variety of colors. "They have a special mold and cushion that make them extra comfortable to wear," Pang says.
Califootwear also does well with its men's casual lines, which range from the sneaker-ish ($32.50 per pair, 12 pairs per box) to loafers ($13 per pair, 12 pairs per box), faux leather work shoes ($13 per pair, 12 pairs per box) and work boots ($30 per pair, 12 pairs per box). The company's leather work boots range from $16 to $42.50 per pair, and its leather dress shoes all sell for $13 per pair. "Mens' casuals and women's shoes have really been the company's strength for the last five years," Pang declares. "Our children's shoe sales have been kind of slow."
The following were interviewed for this feature:
Brian Pang, manager
618 Reyes Drive
City of Industry, CA 91789
Jason Lee, CEO
No. 1 Inc.
1585 Rio Vista Ave.
Los Angeles, CA 90023
Toll Free: 800.634.3690
Ken Agatstein, president
M.K. Weil Shoe Company
5021 Fyler Ave.
St. Louis, MO 63139
Toll Free: 800-966-9345
Robert Grubman, president
146 Split Rock Rd.
Syosset, NY 11791
Larissa Hemley, VP
Inbop Flip-Flops Co.
5519 Forest Hills Lane
Milton, FL 32570
Topic: Product Trends
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