Footwear Retailers Step it Up

January, 18th 2011

Footwear is Hot Right Now, but how do footwear retailers compete with the all-in-one big box operators with more square feet (pardon the pun) in their shoe sections?  A recent fact-finding mission of this vertical reveals the trends, innovations and niches led by specialty footwear merchants – and what all retailers can learn from them

When we learned from our Interactive Floor Plan early last year that women’s was surpassed by footwear (for the first time ever) as the most sought after category by buyers coming to the OFFPRICE Show, I guess it came as no surprise.  Accessories had been hot during the past few years, and footwear was the next natural step to updating the look.  But with shoe sections growing in the bigger stores, and other types of fashion and general retailers adding foot and leg wear to their mix, it begs the question – how do the niche footwear retailers remain competitive?

A recent query of the industry through our PR efforts yielded an enormous response from the specialty footwear retailers and suppliers that, not only is their vertical still alive, but they continue to grow as they cater further to the specific needs of their demographic.

Flip Flop Shops Don’t Settle for anything but the best brands

Enterpreneur Brian Curin has the magic touch when it comes to starting and growing franchises.  Cold Stone Creamery and Moe’s Southwest Grill (North America’s largest Tex-Mex franchise) were the first 2 franchises on his resume that give evidence to his success.  He eventually sold his interests in the aforementioned concepts in favor of pursuing a business that was a better fit for his lifestyle.  One day he walked into a Flip Flop Shop and knew that he was home.

“Why didn’t I think of that?,” was Brian’s first reaction once inside the store.  “I loved the name, idea and vision and decided to acquire the company.  I kept the original founders as partners, since we shared the same passions in life.  We always grew up around the water, always wore flip flops.”

The results so far indicate a solid franchise model, with 84 shops in the system (from Guam, Canada, United States and the Caribbean).  30 are open currently, while others are in development.  The main factors for their success, according to Brian are twofold.  They created a niche brand new retail scheme that wasn’t there, and the economy played into their hands.

“People turned to franchising in down economy.  Franchising has been stale over the past 5 to10 years – always another burger joint or ice cream shop.  We heard a lot from people saying ‘I’m looking for a new franchise concept.  I just got laid off and want to start my life over.’  Real estate was also an advantage for us.  We don’t take much space, but we bring people to the mall.  Flip Flop sandals are a $20 billion industry.  They are pretty utilitarian, and becoming more fashionable.”

In 2010, Flip Flop Shops won the International Council of Shopping Centers’ (ICSC) hot retailer award.  Brian says that his team applied the same approach to marketing as they did for Cold Stone Creamery.

“When times are tough, people won’t go to Morton’s for dinner, but they will go pay $7 for ice cream to feel better.  It’s the same with footwear.  There’s always a need for flip flops and they make you feel good.”

While Flip Flop Shop customers pay much more than $7 for a pair (more like $45-56), Brian holds that the value is there because they carry the hottest 20-plus brands and only the hottest styles of flip flops.

“Flip Flops are only 5% of a typical store’s sales because they carry average or inferior brands.  We draw 80% of the flip flop crowd to our stores because we are the #1 source for anything flip flops or sandals.  We are for flip flops what Sunglass Hut is for sunglasses.  You’ll find 9-12 retailers in the same mall carrying sunglasses, but you’ll only see 1 Sunglass Hut.  It’s the same with Flip Flops.  And the name Flip Flop Shop is like herding cattle.”

Brian maintains that the success of Flip Flop Shops comes down to iconic real estate.  They have great relationships with the top developers, with whom they also have a great reputation.  According to Brian, Flip Flop Shops are in the top 1-2-3 retail centers in a given metro area.

Flip Flop Shops are riding the wave of what Brian calls “amazing evolutions” in flip flops.  This includes men’s style flip flops.

“Originally the ratio of flip flop sales were 60% female, 40% male.  Women will buy 4-5 pair each year, men will buy 1.  Brands like Flojos and O’Neill are starting to drive new trends in men’s.  Like the women, more guys are looking for beach flops, AND date night flops made from high-end leather.  The daytime styles meet demands of people wanting more athletic type flip flop to wear throughout the entire day – around the house, and going to the store.  In the evening, they want the more stylish kind, including some adorned with crystals.

Other evolutions, according to Brian, are health-related.

“5 years ago all flip flops were pretty standard.  Now, there are semi-orthotic, ergonomically correct flip flops, with high arch support.  My daughters, for example, only wear 1 brand that promotes good posture.”

Overall, the flip flop makers are using better materials and better technology, and Brian is very enthusiastic about how his store promotes this.

“Sanuk started a hanging shoe program.  It’s a closed-toe sandal with a sandal bottom that looks like a pair of slippers or shoes.  They’re light, super comfy and protect your feet from rain or snow – and you don’t wear socks.  Vans introduced something similar.  OluKai now has a very high-end cross trainer.”

Flip Flop Shops are not just in the sun belt locations, but are in Delaware New Jersey, and are opening locations in Denver and Chicago.

“There are amazing spikes during holiday season.  Eveyone’s getting ready for that trip to Florida, the cruise, or some other warm weather travel.  We bring in a healthy fall line that is fleece-lined from brands like Ugs. We also have a high-fashion rain boot line.”

Flip Flop Shops aren’t interested in adding accessories or related apparel that fits their theme.  “We have a ‘Free your toes’ mentality that requires a strict focus on footwear.  We believe that in retailer you should focus on what you do great.  Do it better than anyone else, and you’ll win.”

Running Stores

With 22 million Americans actively running, and more than 15 million of them running more than 100 times per year, running stores that can market to these active consumers are still relevant.

“What we’ve seen in dealing with these independents is that they have such a loyal following of devoted runners and athletes, and not just weekend warriors,” says Brendan Leonard, whose company, Healthcare Enterprises, develops foot care relief products that do well in the running stores.  “These are the guys picking up the Running World magazine.”

Chief among the products from Brendan’s company that are moving in the running shops are foot massagers.  “They are popular with the avid runners, as well as the women in heels all day.”

They also have a new anti-fungal tea tree oil product that’s starting to find its way on the running store shelves.  “This will do well in the pharmacies, but a runner will look in his or her specialty store first.”

Sorita Averill-Fitzgerald, owner of A Running Start (www.arunningstart.biz) in West Reading, Pennslyvania, understands this loyalty and passion among her customer base.

”We are a running specialty retailer. I only hire employees that are passionate about running and have a commitment to help more people get into the sport. We have a very dedicated knowledgeable staff.

”We are staying profitable by good old fashion service. We custom fit our customers with the right shoe for their foot and training needs. Our staff asks a lot of questions of our customers regarding how they will be using the shoe and what issues if any they have experienced. We analyze our customer gaits and look at their arches then make a recommendation of the correct shoe and let them test walk or run them down the sidewalk. I believe we add a lot of value and our prices are no more expensive than the big boxes.”

Growth in Foot Care Reflective of Trends in Footwear at Retail

When Healthcare Enterprises received a seal of acceptance from the American Podiatric Association years ago, Brendan claims it was with the intention for new product development in foot care that’s responsive to both the greater emphasis on health and fitness among consumers, as well as the continuing demand for more style in their footwear.

“We’ve seen it translate in our traditional channels like pharmacies.  Check out a CVS or Walgreen’s and see how the footwear care sets have grown.  When its fashion driven, it’s not directly related to foot health, BUT, look at the growth of flip-flops and crocs.  Where that foot category has gone, there’s tremendous adoption and proliferation.  There’s more of an emphasis on beauty, even in the pharmacy set, and more of a consumer need – either for beauty or health and wellness.”

Briendan cites the heavily-advertised custom in-soles as an example of growth in the category.  “It’s a downstream effect from growth in people running more.”  He also mentions that flip-flops and crocs need more accessories, including heal support.

Jennifer Chu of New York noticed that a lot of women leave the work shoes under the desk, and don’t walk the streets in them.  “Whether you wear heels or flats, shoes without socks become more worn on the outside than on the inside.”  She was looking for a solution to my own shoe woes, and that was the inspiration for Silver Lining – an ultra thin liner for shoes without socks that Jennifer developed under her new start-up company, Chu Shu.

Last September, her new company and product won first place in a Business Plan Competition sponsored by the New York Public Library & The City Foundation. The award came with a prize of $15,000 for her business.

“My product is in a couple shoe repair shops.  Footwear retailers are next.  We’ve received great PR from Wall Street Journal and US News & World Report.

When doing market research as part of her start-up, Jennifer discovered a 30% increase in shoe repair since 2008.  She’s filling this demand for better foot care with her Silver Linings.  She established a relationship with what she calls a great factory near San Diego, California, that is producing 4,000 5,000 units.  She will be introducing her new product at one of the Las Vegas Fashion Week shows.

In addition to foot care products, there’s also a trend toward healthier footwear in direct relation to society’s push to better overall fitness.  In 2000, Dr. Ray Margiano, founder of the Heel Quik Shoe Repair franchise, crossed over into the medical market when he opened his first Foot Solutions door, a quasi-medical/spa concept where people can come in and get custom-made shoes.  While there is a focus on comfort and fashion, the shoes are designed to fit people properly.  They have their own lab and they make their own orthotics.

Today there are 250 Foot Solutions stores in 60 countries.  Each location is only 1,200 – 2,000 square feet, with 3-4 employees who have to be trained pedorthists (nationally certified and trained health care professionals who help design, make and fit therapeutic shoes for relieving pain).  Customers can make appointments or walk in to any store.

“We are boutique-ish,” said Ray, who is the founder and CEO of Foot Solutions.  “We have more certified and trained pedorthists than any other company in the world.  70% of our customers are referrals from existing customers.  Customers feel schmoozed with us, feel like they are being taken care of when they’re here.”

Price points at Foot Solutions range from $85-100 to $300-400.  And the custom shoes are in the $600- $1,000 range.  When asked how the down economy has affected his stores, Margiano holds that “people are more selective, but we’re still doing well.  It’s not unusual for people to drop $600 in our stores.  People are looking for more value.  We deliver on the value side to justify the cost because of the quality of our products and materials.  WE DON’T DO DISCOUNTS.”

Ray admits that they lost a few stores during the tough market of the past few years, but mostly due to an inability to get financing that would have been approved for 3 years ago.  Now that credit is starting to loosen up, Foot Solutions is expecting to open 40-50 new stores each year.  Ray attributes their success during tough times, as well as their projected growth, to the uniqueness of his concept and how it attracts people looking to improve their general health.

“We don’t compete with the big boxes because the customers are fitting themselves.  When you come into our store we’re going to spend 30-45 minutes with you to figure out the right shoe for you. It’s more spa-like.  Plus, when people feel like they are out of shape, we reach out in ways that have nothing to do with Foot Solutions, but helps people look and feel better, and those people become customers.  We contribute to the President’s challenge, children’s obesity programs, and corporate wellness programs.”

In 2002, Foot Solutions introduced a new footwear category called toning shoes that were designed for body alignment.  The toning shoe contributed to customers’ weight loss and went mainstream almost overnight.

“There are 150 copies of toning shoe thanks to us,” Ray asserts.  “We expect it to implode in the next couple years.”

The Foot Solutions market is the 40-65 age range in which people are changing their approach toward better fit and not style or lowest price.  They cover several categories of comfort shoes that have a longer shelf life.  They have to continually spice up their line with in-style products, but they won’t do high heals.  They will do pumps but they have to be a certain height.  The emphasis is still on comfort and fit.

“Most people don’t know what proper fitting footwear feels like,” Ray holds.  “They think it feels loose.  The Podiatry Association (American Podiatric Medical Association – APMA) claims that 95% of the population is not wearing the right shoes for their feet.”

Another innovation Foot Solutions rolled out is a concept called “Balance Walking” that is a low impact exercise involving special shoes with walking sticks.  It is known to have a multitude of healthy benefits that include better posture, more efficient calorie burning and stress reduction.  They work with the Susan G. Komen for the Cure and other walks to promote the activity along with their custom products.

With “being out of shape” as the biggest factor for attracting new customers, Ray advocates a much bigger focus on wellness (as opposed to health care reform) for improving our overall health as a society.  And, pun intended, footwear from Foot Solutions is a great first step.  But other players are getting into the footwear innovations, both from within and from outside the shoe retail vertical.  A prime example is Steven Sashen of Bouler, Colorado, who founded InvisibleShoe.com.

Steven Sashen is an internet entrepreneur, software developer and master sprinter who still runs competitively at age 48.  3 years ago, he was turned on to barefoot running as a healthier alternative – believe it or not – for feet and posture.  He joined a local barefoot running club and discovered an ancient barefoot running shoe called huaraches.  Relying on minimalist materials and design, a sufficient pair is relatively easy to make.  Steven felt confident that he could make his own, but with a high-tech rubber sole material for ideal performance and bright chords for a better aesthetic.  The feedback from his club members that he made shoes for was ecstatic.  He was encouraged by both friends and coaches to take his product to market and InvisibleShoe.com was born.

“Naivete and stupidity gets entrepreneurs into new business,” Steve maintains.  “And my wife and I already had successful online businesses in the works.  But with Invisible Shoe, we launched a website and I started making money right away. 3 months later it became our full time income.  Now, we play catch-up with opportunities that weren’t even on the radar.”

Some of these opportunities include very big names in the shoe trade.

“We met someone who discovered our barefoot shoe and said ‘do you know what my family does for a living? We own the North American distribution and mfg rights for Tevas.’ We hooked up with some shoe industry people who built Reebok from a hundred dollars to a billion!  We are launching our wholesale business.  In the interim, we’ve been doing online sales.  They go crazy at street fair sales.  We want to set people up for that.”

Invisible Show has been getting a lot of “fashion” attention, including inquiries from a couple big retailers in Europe and some smaller stores in the US.  However, Steve decided to hold back in favor of developing further his online model of “shoes on demand.”

“Our huarache is custom-made for your feet!  (Traditional) shoe companies are doing standard sizes that they know are not a fit for most of the population.  We are doing something ‘internet-y’ to better serve consumers – we do shoes on demand!”

Steven is currently involved in changing the product line to improve it to add a number of different pieces to the puzzle.  One is a kit to make your own invisible shoes, as an alternative to having Steve’s team do it for you.  A Kids’ ‘do-it-yourself’ kit is $12.95, and Adults’ version ranges from $19.95 to $25.  Adult shoes that are custom made by Invisible Shoe are priced at $49.

During the ongoing product development, Steven has also made some “soft” presentations to the retail trade, including a display at The Running Event (a trade show serving the specialty running store niche) last November in Austin.  With his minimalist and on-demand approach to shoe-making, plus the fact that he is successfully revitalizing an ancient she design, Steven is positioning himself to – in his words – “bring retail back to the stone age!”

As runners are loyal to their specialty stores, barefoot runners and other minimalists appear to be highly enthusiastic in their endorsements of Invisible Shoe’s huaraches.  This includes a “Barefoot Running University” and Tracy Jones, author of The Caveman Diet. Steven has returned this support by contributing to the Tarahumara Children’s Hospital Fund (in honor of the Native American people who invented the huarache shoe).  With this strong following and continually growing interest, there is nothing “stone-age” about Invisible Shoe’s potential for growth.

“Minimalist and barefoot footwear will be 10% of the $500 million running shoe market in 2011,” Steven maintains.  “We’re in Boulder and people are calling us the Crocs of the minimalist world!  With that kind of a reputation, we are very optimistic about our future.”

Conclusion

There is no doubt that the economic challenges of the past few years have negatively impacted the smaller footwear retail independents.  According to Ray Margiano, “landlords haven’t been helpful.  If you don’t have a unique niche, it’s hard to get people to come back.”

It’s that unique niche that puts footwear product innovators and retailers on the map.  Buyers in the OFFPRICE community, especially those looking to add a footwear program to their stores, need to be aware of these trends and the innovators driving them.

As we grow and open new stores, our buying power puts us in a unique position, especially in a vertical with lots of independents.  Buyers should especially pay close attention to the shifting focus on wellness and proper fit, as well as on the related products that address the pain and discomforts caused by stylish footwear.  And, in spite of what’s happening to niche independents, recognize from the success of the innovative retailers, and the growing demand for footwear from consumers is very much real.