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.
448210 (Shoe Stores)
Every year U.S. consumers spend over $20 billion in footwear. Shoes are sold in a number of venues, including specialty shoe stores, family shoe stores, department and discount stores, and vendor-owned outlets. According to the Census Bureau's Statistical Abstract of the United States: 2002, the number of shoe stores in 2000 dropped to 29,700 (from 37,200 in 1996). Along with the entire U.S. retail sector, the footwear industry has been adversely affected by the recessive U.S. economy during the first years of the twenty-first century and by low consumer confidence that has stagnated spending. The bright spot in shoe sales has been in the teen market, as teenagers continue to buy at a strong pace, seemingly unaffected by the sluggish economy or the U.S. involvement in war with Iraq in early 2003.
Establishments in this industry are 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, increasing market share in 1998 to 19.9 percent from 19.4 percent in 1997. Other outlets, such as department stores, apparel stores, vendor outlet mall stores, and mail-order catalogs, also generate shoe sales.
Products. Products sold in this industry fall into several general categories: athletic footwear, dress shoes, casual shoes, sandals, work/duty footwear, hiking/hunting/fishing boots, western/casual boots, and "other." While athletic shoe sales dominated the marketplace for several years, Sporting Goods Manufacturers Association (SGMA) reported that during the second quarter (April through June) of 1999, total spending for athletic shoes declined 10 percent, to $3.056 billion from $3.403 billion for the same period in 1998. Sales of men's models rose during that period, the association reported, but sales of women's and children's models declined.
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 this 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 became highly competitive by the 1950s, when 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 throughout 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 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, sales 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 the operation 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 shoehappy malls." A NSRA survey 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 shoes 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 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 two decades ago, industry advertising on television and in newspapers and magazines has grown significantly; much of this media attention, however, highlights manufacturers or manufacturing divisions of shoe store chains. Advertising campaigns in the 1980s and 1990s that featured sports celebrities have been credited with popularizing athletic footwear among all age groups. But while younger people remain this segment's largest buying group, the overall aging of the U.S. population and increasing participation in sports by women and girls have 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 who knew that the same shoe brands were available 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, SGMA measured 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 sweat-pants towards casual shoes and khakis. In 1999, Sporting Goods Business reported Faye Landes, footwear analyst with Salomon Smith Barney, as saying that 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 "20-25 percent too much store space dedicated to athletic footwear in malls" across the United States. Second quarter results for 1999 did reflect 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.
In line with other apparel and accessory sectors, during the 1990s and into the 2000s, dominance in the footwear market has made a fundamental 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, have taken center stage in the industry.
The next major struggle for market share on the horizon appears to be forming between vendor-owned stores and traditional retailers. Under previously normal business conditions, vendors developed shoe styles that were then sold at wholesale to retailer, who carry a range of selections from numerous vendors. During the 1990s vendors began opening outlet-based stores to sell off overstocks and discontinued items. By the 2000s numerous vendors had discovered that the outlet locations—relatively cheap real estate compared to a mall-based store—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 argue that retailers too often demand price breaks and mark downs on their orders and often only buy a small segment of the vendor's shoe line to display on the independent, chain, or department retail shelves. Vendor-owned retail settings give the company a chance to set out its entire product line in one place, which allows it to test trends and new products before selling to retail customers. The vendor can then attest to a shoe style's popularity and sell-through value so the retailer knows the shoe is a good choice for the store's product line. At the same time, retailers, who must compete with the new spread of vendor outlets, do not tend to agree with the vendors' belief that "what's good for us is good for you." However, despite retail disapproval, vendors including Aerosoles, Rockport, and Johnson & Murphy have plans for continued retail expansion.
Overall, the shoe store sector will ride out the sluggish economy as well as possible by cutting back on inventory, reducing product lines as well as color and size selection. They will also focus on increasing sales to the teen and young adult markets, which tend to spend a larger portion of their income on apparel and shoes and tend to be less economically and emotionally affected by a recessive economy or wartime conservative spending.
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 2002 Payless reported a net income of $105.8 million on $2.9 billion in sales and employed 28,400 at its 4,970 stores.
Footstar. Through its Meldisco division, Footstar, formerly a division of the Melville Corp., operates leased footwear departments in approximately 5,800 discount stores, including Kmart. The company sells private label as well as licensed brands that include Everlast, Route 66, and Thom McAn. Footstar's athletic division includes 500 Footaction stores and 90 Just for Feet stores. In 2003 the company struck a deal with Wal-Mart to provide the mega-discounter with its Thom McAn line of footwear. Sales for 2001 totaled $2.5 billion.
Major changes took place in 1996 and 1997 at the Melville Corp., which started with a small string of shoe stores in the 1890s and within a century became one of the largest retailing conglomerates in the United States. This company created one of its most recognized subsidiaries, Thom McAn Shoes, in 1922 when it developed a method to mass produce shoes and sell them at low prices through chain stores. The Thom McAn chain grew to more than 300 stores within five years and, despite a setback during the Great Depression, increased to more than 650 stores by the end of the 1930s. Sales of Thom McAn shoes continued to climb, and in 1955 Melville owned 12 factories and 850 stores. By the end of the 1960s, Melville was America's largest shoe retailer, operating 1,400 stores.
Melville moved into other retail markets during the 1970s by purchasing drug stores, household furnishing outlets, and toy store chains. Diversification shifted the company's emphasis from shoes, and during the 1980s it closed more than one-third of its Thom McAn outlets. In 1990, Melville operated more than 7,700 stores and employed 119,000 people. Two years later, Melville's three shoe subsidiaries—Meldisco, Thom McAn, and the Footaction USA athletic chain—tallied more than $2.1 billion in sales.
Footaction 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 Melville spun it off as part of a footwear subsidiary called Footstar Inc. The parent company also converted some 85 of its Tom McAn stores to Footaction stores and closed the rest. Melville then changed its name to CVS Corp. to reflect a new emphasis on the drugstore business it had first entered in 1969, sold off Footstar, and exited the footwear business.
The Brown Shoe Company. The Brown Shoe Company 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 440 operated in North America; and F.X. LaSalle, with more than a dozen Canadian locations. In addition to its own brands, including Naturalizer and Buster Brown, Brown also sold licensed brands like Barbie, Lion King, and Dr. Scholl's. In 1995 the company acquired the upscale Larry Stuart Collection and Le Coq Sportif athletic shoes and began selling off several non-shoe operations. For the fiscal year ending January 2003, the company reported $45.2 million in income on $1.8 billion in sales and employed 11,500.
Sales and marketing personnel comprise the bulk of the retail shoe industry's workforce. According to the Department of Labor, Bureau of Labor Statistics, in 2001 about 86 percent of the industry's 187,080 jobs were sales related. On average a shoe sales associate earned a mean annual salary of $16,260. Supervisors earned $29,530. Management occupations, which accounted for just over 3 percent of the workforce, reported a mean annual salary of $59,610. Office and administrative support occupations, totaling 7 percent of the workforce, reported a mean annual salary of $21,140.
The job outlook for retail sales and marketing staff is expected to improve faster than the average for all workers through 2005. Part-time positions in this industry have often been available due to a high turnover rate, and sales staff is often 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.
American shoe retailers have performed well in overseas markets and are expected to continue to grow internationally through the remainder of the twentieth century. Mass manufacturing techniques have largely been responsible for this success. American-owned athletic footwear stores also gained a strong advantage outside the United States because of the popularity of American sports celebrities and the athletic goods they endorsed.
The SGMA "1999 State of the Industry Report," reported that "China, Asia, and Mexico will continue as preferred sourcing locations by companies planning expansion. Export sales will continue to grow, but U.S. manufacturers can no longer expect the international market to counter the sluggish growth in the United States." The SGMA expected that while the Asian economic crisis may be over, the economies in these regions will need time to improve. Due to high unemployment in Western Europe (about 11 percent) and tax policies, consumers in European markets will have less disposable income to spend on imported U.S. goods. According to the SGMA, the "European trade pact and unified currency (Euro) will help contribute to an environment more conducive to growth for U.S. manufacturers."
Because they simplify many routine ordering procedures and improve sales staff efficiency, establishments in this industry have continued to increase the reliance on computers. Product counts and point-of-sale data, which includes 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.
Industry trade journal Footwear News declared in 1995 that all shoe stores, no matter how small, must computerize in order to stay competitive. It also reported on special software that allows footwear retailers to order directly from many major manufacturers and wholesalers, often at a discount.
According to a study conducted by Ernst & Young, the number of retailers on-line, selling products to consumers, grew from 12 percent in 1997 to 39 percent in 1998. The interactive capabilities of the Internet allow retailers to customize messages and services. In 1999, the Venator Group announced a partnership with Excite, "a global media company which provides its Foot Locker brands a presence on Excite shopping, sports and lifestyle channels, as well as search and banner integration." The effect of Internet shopping for footwear on the traditional "bricks and mortar" stores will be seen as retailing moves into the next century.
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