Footwear Insight

Look for footwear brands of all sizes to invest more in their digital capabilities given the everchanging landscape and consumer desire to engage with them in various ways whenever they want in the easiest way possible. Murphy, a longtime dress brand, used the pandemic to "re-imagine" itself, shake-up its product assortment and begin to attract younger consumers to the label, whose collection is now dominated by dressy uppers on lightweight outsoles. The brand now generates less than 10 percent of revenues from legacy dress styles. Traditional athletic brands may pivot to more retro-inspired silhouettes and hybrid aesthetics, but will they make pure casual offerings a bigger part of their assortments in the seasons ahead? R ising Prices: Many fo otwe ar companies were forced to take "surgical" price increases on at least part of their assortments in 2022 due to higher transit and supply chain costs that were magnified by pandemic impacts. Both expenses have begun to recede, but don't look for any significant product price cuts from manufacturers, who are likely to face squeezed operating margins and lower U.S. unit volumes in 2023. Already, some retailers have reported customers "trading down" and looking for "lower-priced alternatives" from their typical purchase. While some large retailers such as DSW will lean on their expanding owned-brand assortments to increase foot traffic and the changing purchase and price demands of their customer bases, independent shoe retailers and specialty running shops will have to be increasingly savvy with their open-to-buy dollars and perhaps, even more nurturing to the whims and needs of their loyal customer bases. Key vendors have already cut order volumes for 2023, in anticipation of lower volume demand, which might force these specialty retailers to again chase "hot selling" key introductions throughout the year. e scenario will be eerily similar during certain periods during the height of the pandemic when there were product scarcities due to supply chain bottlenecks. Inventory Issues: While footwear manufacturers and retailers worked diligently to reduce bloated inventory levels during the fourth quarter of 2022 and annual holiday season, NPD Group Senior Industry Adviser Matt Powell believes their remains "far too much," especially in footwear and apparel. "is will cause brands to cancel or delay new products to clear the old," Powell recently opined. "Footwear and apparel already look tired at retail. ese actions will not freshen assortments… If it took 30 percent (or more) to move stale product in 2022, what will it take to move product in 2023? Every retailer knows the slippery slope of discounting. e brands have yet to figure this out." 4. Acquisitions: Big & Small Experts expect M&A activity to accelerate, albeit in a slower process due to the macroeconomic environment, this year aer a tough 2022. But there will need to be more attention to compliance issues in the current economic climate with its higher interest rates to get deals completed. Antitrust risks in the U.S. and internationally are also potential M&A roadblocks today despite an increasing number of distressed assets. In late 2022, DSW gobbled up footwear industry vet Tony Post's Topo Athletic brand for its growing own brands portfolio and Wolverine Worldwide announced the divestitures of Keds and tannery businesses with deals likely closing during the first quarter. Other companies with portfolios of footwear brands may be forced to rationalize them if the economy bears down on them and a particular company fails to meet sales and profit objectives. Meanwhile, at the independent retail level, expect to see more acquisitions in the year ahead. As smaller, family- run stores see ownership looking for exit plans, fellow independents have shown willingness and eagerness to take those businesses over. 5. Retail Trends Look for footwear brands of all sizes to invest more in their digital capabilities given the everchanging landscape and consumer desire to engage with them in various ways whenever they want in the easiest way possible. e latter means new payment methods such as Venmo, Paypal, Klarna, and Aerpay and ways to checkout more simply. On the brick-and-mortar front, CB Insights contends that technology that cuts costs and makes stores more efficient will remain a priority, including the concept of unattended checkout that includes cashierless checkout solutions such as mobile device self-scan. Also, the research firm says more retailers and brands have begun leaning on Artificial Intelligence (AI) to help with the draing of detailed and specialized product descriptions, blog posts, emails, and advertisements. Larger footwear retailers are already examining their store portfolios for potential closures due to underperfor- mance and more reliance on DTC in the region. Academy Sports + Outdoors intends to open 80 to 100 new stores by 2026 and may eye former Bed, Bath & Beyond doors if that specialty chain files bankruptcy and eventually liquidates as some retail analysts have speculated. On the independent retail front, look for nimble storefronts to continue finetuning their product offerings — moving on from brands whose DTC policies don't take independent partners into account and increasing offerings from brands that make independent retail a priority. Also, look for independent footwear retailers to continue to increase their run and athletic offerings as they've shown they can excel in that side of the business. n footwearinsight.com January/February 2023 ~ Footwear Insight • 13 OUTLOOK

• Cover