SIC 5139
FOOTWEAR WHOLESALERS

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

NAICS Code(s)

422340 (Footwear Wholesalers)

Industry Snapshot

In 2003, according to the U.S. Census Bureau, the total number of establishments in the footwear wholesalers industry was 23,925, with total annual sales of $12.5 billion. The average sales per establishment was $7.2 million. States with the highest number of establishments were California with 504, New York with 294, Florida with 225, and Texas 115. Shoes accounted for 1,107 establishments, and controlled 54 percent of the market. Total sales in this sector were $6.7 million. Footwear accounted for 629 establishments, and controlled more than 30 percent of the market, and generated $6.7 million in sales.

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 had grown 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 U.S. 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 produce footwear in the factories of foreign shoe firms, can take advantage of the extremely low wages paid abroad and solidify their positions. South Korean manufacturers, who dominated the high-quality U.S. import market in the early 1990s, fell from favor in recent years 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 continues to represent over 15 percent of China's entire light industry sector's exports.

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—now account 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.

Current Conditions

The primary function of independent footwear wholesalers operating in the United States is 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 have 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, remaining at about $35 billion per year with a mere one percent rate of annual growth. Industry insiders attributed this stagnancy to oversupplied inventories, especially in athletic footwear (which makes up about 40 percent of the overall market) and to poor sales for women's nonathletic shoes (which account for over 35 percent of market).

According to the Market Share Reporter, Nike continued to control the market, 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 to be incorporated into the rest of the lineup, which include Cole Haan and Hurley brands.

Industry Leaders

Besides Reebok and Nike, the big names in the Footwear wholesale industry were the St. Louis-based Brown Shoe Co., with $1.8 billion in fiscal 1998 sales; Spalding Holdings Corp., with $800 million in 1998 sales; and Items International Airwalk Inc., with $236 million in fiscal 1997. Brown's sales increased 4.2 percent to $429.1 million in the third quarter of 1999, with wholesale sales slipping from $119.2 million to $116.7 million. Airwalk took advantage of the cash infusion resulting from the 1998 buyout by Sunrise Capital Partners to diversify into apparel, buying into the brand's appeal internationally, where it was not as well known as a shoe company as in the United States.

Workforce

The changes in the industry all but eliminated the role of so-called jobbers, or middlemen who resold close-out, 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.

In 1992, according to the Commerce Department, there were 21,826 employees in the footwear wholesaling industry. Of those, 18,710 worked for merchant wholesalers; 1,689 for manufacturers' sales branches and offices;

and 1,427 for agents, brokers and commission merchants.

According to the U.S. Census Bureau, there were a total of 26,170 employees in 2001, a slight decrease from 26,592 in 2000. The majority of companies were small in this classification were small—employing less than five persons. In 2001, 802 companies had less than 5 employees; 235 had between 5 and 9 employees; 146 had between 10 and 19; 173 had between 20 and 99; 102 had between 100 and 499; and 73 had 500 or more employees. The total annual payroll was $1.5 million in 2001. In 2003, the total number of employees increased to 23,925.

America and the World

By the mid-1990s, once successful foreign producers in regions like Taiwan and South Korea were suffering losses similar to those experienced by domestic manufacturers during the 1970s and 1980s. 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, Indonesia, and Mexico. As a result, Taiwan and South Korea dropped from being the fourth- and fifth-largest importers of shoes to America in 1992 to the seventh- and eighth-largest in 1995.

The overall value of U.S. imported footwear continued to climb at $15.3 billion in 2004. The largest importer was China who contributed 1.6 billion pairs. Other top importers included Brazil, 99.7 million pairs; Indonesia, 56.1 million pairs; Italy, 39.4 million pairs; Vietnam, 31.9 million pairs; Mexico, 27.1 million pairs; Thailand, 25.9 million pairs; Taiwan, 12.9 million pairs; Hong Kong, 10.3 million pairs; and Spain contributed 8.7 million pairs. The heated foreign competition, though, is good news for American footwear wholesalers and, ultimately, the U.S. consumer.

Further Reading

American Apparel & Footwear Association."February Import Numbers Show Slowdown in U.S. Apparel & Footwear Market." 14 April 2004. Available from http://www.apparelandfootwear.org .

——. "Increasing Imports Show Improving U.S. Market." 14 January 2004. Available from http://www.apparelandfootwear.org .

D&B Sales & Marketing Solutions. Available from http://www.zapdata.com .

Lazich, Robert S. Market Share Reporter. Farmington Hills, MI: Gale Group, 2004.

Scardino, Emily. "Nike Has Completed Its Acquisition of Converse, Purchasing 100% of the Equity Shares for About $305 Million." DSN Retailing Today, 22 September 2003. Available from http://www.findarticles.com/cf_0/m0FNP/6_42/99289819/p1/article.jhtml .

U.S. Census Bureau. Statistics of U.S. Businesses 2001. Available from http://www.census.gov/epcd/susb/2001/US421420.HTM .