Shoe Stores

SIC 5661

Industry report:

Establishments in this industry are primarily engaged in the retail sale of men's, women's, and children's footwear; these establishments frequently carry accessories, such as gloves, socks, and hosiery.

Industry Snapshot

According to the National Shoe Retailers Association (NSRA) in 2008, the footwear industry generates $48 billion per year, of which independent retailers contribute about $9 billion annually, or approximately 20 percent of footwear distribution.

Establishments in this industry were either chain stores or individually owned stores. The National Retail Federation categorizes the vast majority as franchises that belong to large chain operations. Parent company involvement varies in daily franchise operations. This industry further divides itself into family shoe stores, which sell a broad range of sizes and styles, and specialty shoe stores, where a specific selection (such as athletic footwear or women's footwear) is offered exclusively. Athletic shoe stores were the largest specialty category. Other outlets, such as department stores, apparel stores, vendor outlet mall stores, and mail-order catalogs, also generate shoe sales.

Every year U.S. consumers spend over $20 billion in footwear. Products sold in this industry fall into several general categories, including athletic footwear, dress shoes, casual shoes, sandals, work/duty footwear, hiking/hunting/fishing boots, western/casual boots, and "other." In 2006 casual shoes made up 52 percent of the market, athletic shoes made up 31 percent, and rugged and dress shoes accounted for the rest. In 2003 1.97 billion pairs of footwear were sold in the United States. Sales in stores devoted only to footwear earned $22.6 million that year.

According to industry statistics, there were an estimated 29,360 shoe stores valued at more than $27.9 billion with industry-wide employment of about 188,866 workers in 2009. Shoe stores constituted the majority or 69.3 percent of the industry total with sales of an estimated $24.3 billion. The athletic footwear category was responsible for 11.4 percent with shipments totaling $502.7 million. On average, shoe stores employed seven workers who generated sales of about $2.2 billion. The majority of shoe stores were located in California, Florida, New York, Texas, and Pennsylvania.

Of the estimated 30,000 shoe stores reported in 2010, about 50 shoe stores were responsible for 80 percent of industry sales. Women's casual and dress shoes account for 30 percent of the industry total; men's athletic shoes constitute 20 percent; men's casual and dress shoes held 15 percent; and women's athletic shoes the remaining 10 percent. More than half of shoe retailers are considered family shoe stores, which carry shoes for women, men, and children of various styles.

Background and Development

History.
This industry developed from the cobbler stores that date back to medieval times and the mass manufacturers that emerged during the late nineteenth century. Modern stores that exclusively sold shoes began operating at that time. One of the oldest shoe retailers in the United States, Thom McAn, began when McAn opened several stores to sell his footwear.

Like other retailers that benefited from the country's growing population, shoe stores did well from the beginning of the twentieth century through the 1920s. During the early 1930s, however, they were badly hurt by the Great Depression, and sales dropped by an average of 20 percent. The industry expanded rapidly as the economy strengthened, and it became highly competitive by the 1950s as fashion trends changed and footwear styles grew more diverse. At that time, the improved post-war financial conditions also allowed new small-business owners to enter this industry by purchasing franchise outlets.

The retail shoe industry experienced another boom during the late 1970s and the 1980s as athletic footwear sales increased dramatically along with America's infatuation with fitness. Stores specializing in running shoes, tennis shoes, and general sport shoes spread rapidly across the country. Sales of these shoes doubled during the 1980s, and by 1990 athletic footwear became a $5 billion business as some retail price tags topped $100. The industry was impacted even further by this segment when the athletic shoe leader Nike, Inc., opened its own giant Niketown retail outlets, led by a 90,000-square-foot flagship store in New York City, as well as others in Japan, Germany, and the United Kingdom. During the late 1990s the athletic footwear segment experienced a leveling off of sales due to the oversupply of retail selling space and as consumers' fashion taste moved away from athletic shoes to "brown shoes." For the first time since 1992, wholesale figures for athletic footwear declined by 8 percent in 1998 to $8.7 billion (wholesale). The Sporting Goods Manufacturers Association "1999 State of the Industry Report" noted that "many traditional athletic footwear companies expanded into the 'brown shoe' and fashion categories, enabling them to continue to increase sales and expand their market reach."

Marketing.
The shoe store industry, like other retail industries, relied heavily on marketing departments and advertising agencies to generate consumer interest. One key marketing consideration has involved store location because, by the 1980s, the majority of U.S. shoe stores were located in malls. This arrangement allowed chains to operate small stores without high overhead costs, but operations became increasingly competitive as many footwear retailers often competed within the same mall. In 1993 Harlan S. Byrne told Barron's that Famous Footwear owed its considerable success to "its locations in strip centers, where competition is less than in shoe-happy malls." A survey by the NSRA in 1995 confirmed this conclusion, finding per-store profits were 4.1 percent at strip stores and 0.7 percent at mall stores.

Another important marketing device was store design. Off-price or discount shoe stores, like off-price clothing stores, typically drew bargain shoppers with large undecorated spaces filled with racks of shoes. Moderately priced and upscale shoe stores generally used simple, modern designs to attract a target audience. Seeking new ways to differentiate themselves from the competition, some innovative retailers began using additional aids to attract sales. Footwear+ reported in 1997 that the subtle use of "sensory merchandising; the process of appealing to consumers' sense of smell, sight, sound, color, and touch" had been shown to increase sales by up to 20 percent.

Since the U.S. fitness craze took hold in the last two decades of the twentieth century, industry advertising on television and in newspapers and magazines grew significantly. Much of this media attention, however, highlighted manufacturers or manufacturing divisions of shoe store chains. Advertising campaigns in the 1980s and 1990s that featured sports celebrities were credited with popularizing athletic footwear among all age groups. But while younger people remained this segment's largest buying group, the overall aging of the U.S. population and increasing participation in sports by women and girls caused many retailers to refocus programs to reflect these new demographics.

One additional trend of significance reported in the mid-1990s involved the development of outlet malls, which offered huge selections of brand-name products at lower prices. According to the International Council of Shopping Centers, outlet malls brought in $12.2 billion in 1997 sales. Footwear companies such as Birkenstock, Rockport, Easy Spirit, Florsheim, Naturalizer, Nike, and Reebok opened stores in outlet malls in the late 1990s. Some retailers carrying the regularly priced brands felt that outlet malls diminished the image of brands and took customers away from their stores to find the same shoe brands at a cheaper price at the outlet stores. Manufacturers countered by saying that outlet stores carried a different mix of styles than the full-price stores, usually past-season styles and colors or factory seconds.

The widespread popularity of athletic footwear helped shoe stores through the recession that impacted other retailing segments more seriously during the late 1980s and early 1990s. In 1995, the Sporting Goods Manufacturers Association estimated the value of the U.S. athletic footwear market at almost $11.4 billion and said it accounted for approximately 40 percent of all shoes purchased. Additionally, this segment's overseas market expanded rapidly through the first half of the 1990s. A weakened economy and the highly competitive nature of this industry, however, forced many stores to close. Total sales in the athletic category were basically flat from 1992 through 1998. According to the 1998 Sporting Goods Business Year-End Survey, 19.1 percent of stores surveyed reported flat sales in athletic footwear.

Many stores attributed low sales growth to the "glut of inventory" carrying over from 1998 to 1999 and the fashion trends moving away from sneakers and sweatpants toward casual shoes and khakis. In 1999 Sporting Goods Business reported that Faye Landes, a footwear analyst with Salomon Smith Barney, said an industry-wide slowdown could be expected throughout 1999 as companies consolidated their business and closed stores. John Shanley of Van Kasper and Company estimated that there was "20 to 25 percent too much store space dedicated to athletic footwear in malls" across the United States. Second-quarter results for 1999 reflected a 10 percent decline in athletic footwear sales. "Results for the first six months reflect what we expected going into the year, an unsettled and difficult market," said Gregg Hartley, executive director of the Athletic Footwear Association.

The next major struggle for market share on the horizon appeared to be between vendor-owned stores and traditional retailers. Under previously normal business conditions, vendors developed shoe styles that were then sold at wholesale to retailers, who carried a range of selections from numerous vendors. During the 1990s vendors began opening outlet-based stores to sell overstocks and discontinued items. By the 2000s numerous vendors had discovered that the outlet locations, with their relatively cheap real estate compared to mall-based stores, were generating significant traffic and providing impressive sell-through figures. As a result, vendors began opening additional stores that provided a full selection of first runs and new trends, thus directly competing with their wholesale customers, the local retailers.

Vendors argued that retailers too often demanded price breaks and markdowns on their orders and often bought only a small segment of the vendor's shoe line to display on the independent, chain, or department retail shelves. Vendor-owned retail settings gave the company a chance to set out its entire product line in one place and allow it to test trends and new products before selling to retail customers. The vendor could then attest to a shoe style's popularity and sell-through value so the retailer knew the shoe was a good choice for the store's product line. At the same time, retailers, who must compete with the new spread of vendor outlets, did not tend to agree with the vendors' belief that "what's good for us is good for you."

In line with other apparel and accessory sectors, dominance in the footwear market made a shift away from department and mall-based specialty stores to favor large discount chains. General discounters, such as Wal-Mart and Target, as well as shoe discounters, including Payless Shoe Source, Famous Footwear, and Shoe Carnival, took center stage in the industry. But by 2003 and 2004, as the market recovered and the economy stabilized, there was a return of specialty, high-end stores. Of the 1.97 billion pair of shoes and other footwear sold in the U.S. in 2003, $22.6 million in products were from specialty stores. Discounters still held the lion's share of the market, but luxury retailers were seeing strong growth patterns. The NSRA reported in 2008 that independent shoe retailers sold more than $9 billion in a total footwear market of $48 billion.

Only those in the middle were still suffering. Mall-based retailers were faced with losing market share at alarming rates, and they were attempting to bring customers back in by redefining themselves and the shopping experience. Overall, the shoe store sector began cutting back on inventory by reducing product lines as well as color and size selection. It also focused on increasing sales to teens and young adults, who tend to spend a larger portion of their income on apparel and shoes and tend to be less affected by economic factors. Another winning segment was in comfort footwear, buoyed by the needs of the aging Baby Boomer population.

Current Conditions

The U.S. footwear industry was not only struggling through one of the worst economic downturns in 2008 and 2009, they had to contend with increased costs. Thus, the industry called upon the U.S. Congress to pass the Affordable Footwear Act (H.R. 4316/S. 730) during the lame duck sessions following the November midterm elections of 2010, arguing "This common-sense legislation would eliminate the hidden and regressive import taxes that drive up prices on low-cost and children's shoes."

Shoe stores not only compete with department stores and mass merchandisers, they were losing valuable customers, as well as profits as counterfeit goods continued to penetrate the U.S. market from overseas. According to the U.S. Customs and Border Protection (CBP), counterfeit footwear alone entering the U.S. totaled about $100 million in 2009. International counterfeiters caught on to online retailing providing them another avenue to deter potential footwear buyers away from U.S. shoe stores.

Overall footwear consumption fell 8.2 percent in 2009, however, despite the weak economy and rising costs of doing business, there was no indication that consumer demand was negatively impacted when it came to women's shoe purchases. On a national level, women's shoe sales rose by nine percent to $44.2 billion for the 12 months that ended July 31, 2010. Unfortunately, while "�cash registers are humming at larger retailers, small independent shoe shops are getting stomped on," Adrianne Pasquarelli wrote in an article published in Crain's New York in August of 2010. Online shoe retailers like Zappos.com and ShoeBuy.com were also competing with shoe stores for their share of the market by offering perks such as free shipping and free returns.

By mid-2010 some shoe retailers began to emerge from the economic slump. One industry leader, Brown Shoe Co.'s revenues climbed 14 percent to $585.8 million for the quarter that ended July 31, 2010. New styles were hitting store shelves enticing shoppers to buy. Unfortunately, footwear manufacturing was expected to increase five percent to 15 percent and retailers may have no alternative, but to pass the extra costs onto consumers.

Industry Leaders

Payless ShoeSource.
Payless ShoeSource, the country's number one shoe retailer, began as a private subsidiary of the May Department Stores Company in 1956. Its stores are characterized as off-price discount outlets because they use the self-service concept to offer low prices. Payless was one of the fastest-growing shoe chains in the United States during the mid-1990s, increasing 55 percent in sales, 27 percent in stores, and 33 percent in employees between 1992 and 1996. In 1997 Payless ShoeSource Inc. acquired Parade of Shoes in a deal with J. Baker, Inc. In 1998 Payless employed more than 24,000 workers and had 4,549 stores in the United States and Puerto Rico. These stores were leased to franchise owners for a period of 10 to 15 years with renewal options. In 2006 Payless reported $2.8 billion in sales and had 4,600 stores.

Foot Locker.
Foot Locker was the top athletic shoe store in the country in 2006, with sales of $5.75 billion in 4,000 stores. Foot Locker, Inc., purchased Footaction USA stores from Footstar, which filed for Chapter 11 bankruptcy in 2004. Footaction USA had become the nation's third-largest athletic shoe retailer by the fall of 1996 with 438 stores and about $500 million in sales when it was spun off. The parent company also converted some 85 of its Tom McAn stores to Footaction USA stores and closed the rest. The Thom McAn brands were sold in Kmart stores in the 2000s.

The Brown Shoe Company.
The Brown Shoe Company sells numerous brands and owns three chains: Famous Footwear, the largest branded family shoe chain in the United States with more than 900 stores in 44 states; Naturalizer stores, of which more than 360 operated in North America; and F.X. LaSalle, with 16 Canadian locations. In addition to its own brands, including Naturalizer and Buster Brown, Brown also sold licensed brands like Barbie and Dr. Scholl's. In 1995 the company acquired the upscale Larry Stuart Collection and Le Coq Sportif athletic shoes and began selling several non-shoe operations. For 2006 the company reported $2.47 billion in sales and 12,700 employees.

Payless ShoeSource, a unit of holding company Collective Brands, Inc. operated 4,470 discount stores. Collective Brands was formed in 2007 with the acquisition of Stride Rite with revenues of $3.3 billion in 2010 with 30,000 employees. Foot Locker, Inc. reported revenues of $5.2 billion in 2009, down to $4.8 billion in 2010 with 38,764 employees. The Brown Shoe Company posted revenues of $2.27 billion in 2009 and $2.24 billion in 2010 with 12,100 employees. The company planned to open new stores, while closing the doors on those that proved unprofitable.

Workforce

Sales and marketing personnel comprise the bulk of the retail shoe industry's workforce. According to the Department of Labor, Bureau of 0Labor Statistics, 194,000 people were employed by shoe stores in 2004 (an increase from 185,000 in 2000). The total payroll for retail shoe stores in 2004 was $3.0 billion. There were 27,300 shoe stores in 2004, compared to 29,700 in 2000. Although the total number of shoe stores grew to 29,360 in 2009, compared to 27,300 in 2004, industry-wide employment fell to about 188,866 workers in 2009 from 194,000 reported in 2004.

Part-time positions in this industry often have been available due to a high turnover rate, and sales staff often is hired on a temporary basis during peak selling periods, such as Christmas and tourist seasons. Other occupations in this industry include bookkeepers, accountants, and secretarial and clerical staff.

Research and Technology

Because computers simplify many routine ordering procedures and improve sales staff efficiency, establishments in this industry have continued to increase their reliance on computers. Product counts and point-of-sale data, which include price, model number, color, and size imprinted on an item's bar code, are regularly gathered electronically to provide managers with current inventory and sales information. For sales staff, point-of-sales systems have proven useful in calculating discounts, approving credit, and scheduling deliveries. By the mid-2000s, Radio Frequency Identification (RFID), forced forward by Wal-Mart, was set to become an industry standard for inventory and ordering management.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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