Major Industry Trends

 

US consumers became fitness crazed in the 1980s and 1990s, raising the demand for athletic shoes.

 

US consumers will not buy unbranded shoes (7.6% sales unbranded vs. 89.2% branded in 1997) so industry strategy has become all about successful marketing. Those brands with the best ad campaigns have faired best in the markets.

 

Labor has moved out of the US as a result of governments opening their boarders to free trade. Domestic companies have resorted to outsourcing to countries with cheaper labor standards (Asia, Mexico)

 

Companies are going after more international customers, thinking about more than just the US market as having buying power.

 

The Athletic Footwear Industry has moved from vertical to horizontal structures. Before the 1980s and 1990s, brand companies produced most components of shoes in their factories. Today, while brand companies exert influence over the production, individual components of the supply chain are produced by companies other than the brands themselves.

 

Since the mid ‘90s, industry demand has gone down. Retailers are now faced with excess inventory. Part of this is due to the rise in the alternative sports market. In the late 1980s and early 1990s people bought athletic shoes because they were fashionable. Fashion has moved toward the brown shoe market (hiking boots, sandals) leading to decreased demand for athletic footwear such as basketball sneakers and cross-trainers. The companies that will survive in the future are the ones that have the ability to recognise new trends and adapt to constantly changing consumer demand. Companies must expand beyond their niche markets (Nike has moved into soccer; adidas has expanded into the US market).

 

Nike and other brands have tried to bring back demand by creating a highly customized product such as the Nike ID "Design Your Own Shoe" on the Internet. Retailers have begun using technology in stores to assure perfect fit shoes.

 

The Internet has created both opportunity and problems for brand producers. Brand name companies can now sell directly to the customer at retail prices. However, by selling directly to the customer without going through retail store web sites, brand name companies risk alienating retailers in brick and mortar stores. (If Nike won’t sell its shoes through FootLocker web site, FootLocker may retaliate by not offering Nike prime store space).