Footwear

SIC 5139

Companies in this industry

Industry report:

This industry consists of establishments that engage in the wholesale distribution of athletic and other footwear of leather, rubber, and other materials.

Industry Snapshot

According to Dun & Bradstreet, 4,239 establishments engaged in the wholesale footwear industry in the United States in 2010. The industry generated a total of $9.1 billion in revenues in 2009. California had the most establishments in the industry, with 908, followed by Florida with 477 and New York with 402. Missouri was the leading state in terms of revenues, accounting for more than $2.4 billion or about 27 percent of total sales. Other top states for industry sales were Massachusetts ($1.7 billion), California ($1.4 billion), and Illinois with $801.6 million.

The Commerce Department divides footwear wholesalers into three categories: merchant wholesalers, who take title to the goods they sell; manufacturers' sales branches and offices, which are kept apart from manufacturing plants for marketing purposes; and agents, brokers, and commission merchants, who buy and sell products owned by others on a commission or agency basis. Additionally, the footwear market is divided into several sections: women's and misses' footwear; men's, youths' and boys' nonrubber footwear; children's, infants', and babies' nonrubber footwear; leather athletic footwear; sneakers, rubber and plastic protective footwear; and house slippers. By way of imports, wholesalers play a major role in each of these markets and dominate several.

Background and Development

According to the 1992 Census of Wholesale Trade, almost 80 percent of the total establishments in the industry were merchant wholesalers, which accounted for nearly 75 percent of all sales. Manufacturers' sales branches and offices comprised 1.5 percent of the total establishments and tallied less than 9 percent of sales. Over 19 percent of the establishments and 16 percent of the sales were attributed to agents, brokers and commission merchants.

Footwear wholesalers benefited greatly during the 1980s and 1990s from the booming popularity of athletic and other sport-oriented casual shoes. Nearly 180,000 employees at domestic manufacturers lost their jobs between 1968 and 1995, according to the Footwear Industries of America (FIA) trade group, but footwear wholesalers flourished by importing inexpensive models. Nike, Inc. and Reebok International Ltd. fueled the industry by making casual footwear a fashion staple.

The distinction between domestic manufacturers, wholesalers, and retailers grew fuzzier due to the domination of imports in the U.S. footwear market. Traditionally, footwear wholesalers served as the middlemen between footwear manufacturers and footwear retailers. In the 1990s, however, more and more of these manufacturers were based outside the United States. In addition, with many domestic manufacturers seeking to replace lost sales by boosting their own foreign production and powerful domestic retailers sourcing directly from factories abroad in an attempt to reduce costs, smaller wholesalers began facing stiff competition from firms that were once their partners.

Nike and Reebok, along with other U.S. firms that produced footwear in the factories of foreign shoe firms, took advantage of the extremely low wages paid abroad and solidified their positions in the market. South Korean manufacturers, who dominated the high-quality U.S. import market in the early 1990s, fell from favor as wages increased. Major U.S. companies like Nike and Reebok gradually moved their higher-level production to other countries in Southeast Asia, causing employment in South Korea's footwear industry to drop 40 percent between 1990 and 1993. Chinese manufacturers, on the other hand, continued to dominate the low-priced footwear market because their wages remained extremely low. Footwear represented over 15 percent of China's entire light industry sector's exports in the early 2000s.

Industry sales for footwear wholesalers was $19.9 billion in 1996, more than 22 percent higher than 1990 and almost 52 percent greater than 1987. More than 21,800 people were employed by 1,534 footwear wholesalers in 1996, drawing an annual payroll of $1 billion. Millions of other workers around the world also found employment as a result of the American demand for footwear and imports from their production--mostly from China, Brazil, and Indonesia--accounted for almost 89 percent of all U.S. shoe sales.

The payrolls of footwear wholesalers grew substantially in the 1990s, largely mirroring the increased activity as domestic production declined and imports rose. Annual payrolls at all footwear wholesaling establishments jumped 13.7 percent between 1992 and 1996, and the sales per establishment increased 43.9 percent. By 1995, average annual pay for agents, brokers, and commission merchants was $61,015; employees in manufacturers' sales branches and offices received $50,557; and merchant wholesalers were paid $37,825.

In the 2000s the primary function of independent footwear wholesalers operating in the United States was to stock the shelves of shoe retailers with a wide variety of brands and products. The operations of these companies, however, were dwarfed by those of the wholesale divisions of America's two leading athletic footwear manufacturers, Nike and Reebok. These two firms established themselves as major consumer brands of footwear and other related athletic apparel products with the power to act as their own wholesale importers.

At the turn of the century, predictions called for continuing flat sales for footwear wholesalers, with a mere 1 percent rate of annual growth. Industry insiders attributed this stagnancy to oversupplied inventories, especially in athletic footwear (which made up about 40 percent of the overall market) and to poor sales for women's nonathletic shoes (which accounted for over 35 percent of market).

According to the Market Share Reporter, Nike continued to control the market in 2003, with 39.1 percent, followed by Reebok with 12 percent. Others were New Balance with 11.6 percent and Adidas with 9.6 percent. In 2003, Nike acquired the popular Converse brand that was then incorporated into the rest of the lineup, which included Cole Haan and Hurley brands.

Current Conditions

Although many industries in the United States saw large decreases in revenues as a result of the economic downturn that began in 2007, the market for athletic shoes in particular held steady. According to The America's Intelligence Wire, "Even during the recession, athletic shoe sellers have recorded growth from customers willing to pay $85 to $140 for high-quality footwear." In addition, Reed Anderson of research firm D.A. Davidson & Co. (Minnetonka, Minnesota) called athletic shoes a "recession-proof, nondiscretionary purchase."

Although this was good news for retailers, footwear wholesalers continued to struggle with the trend of bypassing the middleman. Retailers were their largest market, but more and more retailers were buying directly from manufacturers, eliminating the need for the wholesaler. Due to this trend, growth in the footwear wholesale industry was expected to be slow into the 2010s.

Industry Leaders

Nike and Reebok remained the two industry leaders in the United States into the early 2010s. Founded in 1972 and based in Beaverton, Oregon, Nike was the world's largest shoe maker, with sales of more than $19 billion and 34,400 employees in 2009. Reebok International of Canton, Massachusetts, was purchased by Adidas (based in Germany) in 2006, a company that registered sales of $14.8 billion in 2009. Another big name in the footwear wholesale industry was the St. Louis-based Brown Shoe Co., with $2.2 billion in 2009 sales and 12,100 employees. Brown Shoe Co. supplied more than 2,000 retailers with brands such as Buster Brown, Aerosoles, Connie, LifeStride, Nickels, and Dr. Scholl's. Collective Brands Inc., owner of Payless ShoeSource, became a major player in the wholesale arena in 2007 when it purchased The Stride Rite Corp., a supplier of children's footwear. Brands included Stride Rite, Keds, and Saucony, among others. Based in Topeka, Kansas, Collective Brands had sales of $3.3 billion and 30,000 employees in 2010. Other important companies in the industry included Genesco Inc. of Nashville, Tennessee, with 2009 sales of $1.5 billion; New Balance Athletic Shoe Inc. of Boston, with $1.6 billion in sales in 2009; The Clark Companies North America of Newton, Massachusetts, with $750 million in annual sales; and Skechers USA Inc. of Manhattan Beach, California, with sales of $1.4 billion in 2009.

Workforce

The changes in the industry all but eliminated the role of so-called jobbers, or middlemen who resold closeout, seconds, and overrun shoes to retailers, as manufacturers sold directly to merchants and computerized their inventories. Estimates pegged the number of jobbers in 1997 at half the number of a decade earlier.

Employment continued to decline in the 2000s. By 2010, the number of people employed by the wholesale footwear industry was 30,579, according to Dun & Bradstreet. A majority of firms were small, with more than 76 percent employing only one to four people. Approximately 62 percent of total industry sales, however, was generated by firms with more than 50 employees. The top five states in terms of employment in the industry were California (5,443), New York (4,072), Massachusetts (3,068), Missouri (2,466), and Florida (2,236).

America and the World

In the late 2000s and early 2010s, China was the largest importer of footwear into the United States. In fact, in 2007 that country accounted for more than 86 percent of all U.S. footwear imports, according to the American Apparel & Footwear Association. Vietnam, Brazil, Indonesia, and Italy held the remaining spots in the top five, in that order, although these countries had only 3.8. percent, 2.2 percent, 1.4 percent, and 1.0 percent of the U.S. footwear import market, respectively. Former leaders Taiwan and South Korea had suffered losses similar to those experienced by domestic manufacturers during the 1970s and 1980s, and an increased standard of living in these countries led to rapidly rising wages, which made it increasingly difficult for them to compete with other lower wage countries such as China. As a result, Taiwan dropped from being the fourth-largest importer of shoes to America in 1992 to the seventh largest in 2008, and by the late 2000s South Korea, formerly the fifth largest importer, had dropped out of the list of the top 10 altogether.

The overall value of U.S. imported footwear continued to climb throughout the 2000s, from $14.5 billion in 2000 to $18.9 in 2007, whereas the value of exports remained well below the $1 billion mark.

© 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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