The footwear industry has managed to compensate for the loss due to physical store shutdowns through online startups and brands trying direct to customer sales models using omnichannel routes.
Online Shopping
- The retailer’s value addition to the product is very low – for example: mobile handsets.
- The range is very wide and hence not easily available at stores – example: books.
- Repeat purchase is high – example: detergents.
In categories where fashion, trial, and need for touch are high, brick and mortar stores continue to play a huge role. Footwear has a higher need than apparel as I stated in Part I. Yet there has been a significant movement to buying online driven by;
- Lockdown due to Covid
- Athleisure wear
- Online booking of special launches.
- Athletic footwear where sizes are known and the design isn’t very new.
Footwear e-commerce increases online shopping
Online dedicated footwear retailers, like Boohoo and ASOS in the UK, have seen considerable growth in sportswear purchases. Their growth has helped them fund acquisitions and grow inorganically. Brands like Nike and Adidas are trying to reach customers directly through their online stores calling it Direct To Customer (DTC). DTC now accounts for 40% of Nike’s revenues. It reached this target in 2020 itself which was originally set for 2023. Nike successfully leverages its online customization store, NIKEiD, to build long-term term relationships with customers by customising shoes online. Amazon, the quintessential e-commerce player has seen high growth in the footwear segment too.
Challenges in online footwear shopping
- Reduce customer returns: Helping the customer understand size through images, online help, and through technology aids should help reduce returns. Educating customers about sizing differences in brands or changes in styles should be a big area of work for e-commerce brands.
- Customer returns and service experience: Customers will return if their experiences were smooth. Here customer feedback and references will pay a critical role.
- Plan inventory for omnichannel operations: Footwear companies do have an advantage over apparel in one area, that is, their product is generally packaged the same for brick-and-mortar as it is for e-commerce. This should make it easier for footwear retailers to create a common omnichannel inventory pool to drive efficiencies.
The biggest challenge to online retailing is returns especially in the footwear. Customers tend to leverage the easy return policy online to mitigate the shortcomings of the need for touch and trial. Barclaycard research looked at the issue of returns and the reasons for it. They found that;
- 30% of shoppers deliberately over-purchase and subsequently return unwanted items.
- 19% admitted to ordering multiple versions of the same item so they could make their mind up when they’re delivered.
Men tell me that I’ve saved their marriages. It costs them a fortune in shoes, but it’s cheaper than a divorce.…It is even more easier online.
Manolo Blahnik
Customising online footwear through 3-D printing
Additive printing lets designers customise shoes for their customers. SmarTech Analysis has projected USD 6.5 billion in sales by 2029, at an annual growth of 19.5%. Typically the outsole for example, or the midsole is 3D printed and can be given creative designs through this technique. There are a plethora of experiments in this space starting from sportswear makers like Adidas, Reebok and New Balance to dedicated minimalist makers like Prevolve or Native. More details available here: https://www.3dnatives.com/en/3d-printed-shoes-whats-available-on-the-market-today/
Adidas Native
Prevolve
Footwear startups and new online businesses
U.S. consumers spend nearly USD 30 billion each year in footwear; globally revenue tops USD 52 billion. Over the past five years, online footwear sales have soared, a trend that is expected to continue. Research firm IBISWorld predicts that online revenue will increase 6.3% year-over-year, reaching USD 19 billion by 2023. No doubt it is a good time to be in the footwear business. Venture capitalists are funding niche brands, such as Allbirds, GREATS, and many others. Reaching broad swaths of consumers out of the gate is now possible, thanks to global marketplaces such as Amazon, Rakuten, and Alibaba.
Poppy Barley
Poppy Barley, launched in 2012 by sisters Justine and Kendall Barber is a size-inclusive brand. They offer Women’s footwear in sizes 5 to 12 and Men’s in sizes 5 to 15. Their exclusive made-to-order service can deliver luxurious, calf-fitted tall boots, as well as extended width footwear from narrow to wide.
| Launched | Raison d’etre | Purpose | Head Quartered |
| 2012 | Flexibility in Sizing | Ethical Business | Canada |
Goat
Goat is an online marketplace like eBay but dedicated to selling apparels, sneakers and accessories. Anybody can list their shoes on the website and app, which the company authenticates to ensure quality and prevent counterfeits. It has over 35,000 unique styles of not just used ones but also of the most unlikely brands. The company’s platforms feature over 350 brands across sneakers, apparel, and accessories.
| Launched | Raison d’etre | Purpose | Head Quartered |
| 2015 | Resale Marketplace | Value | USA |
Allbirds
Tim Brown teamed up with Joey Zwillinger, an engineer and renewables expert to craft a revolutionary wool fabric made specifically for footwear. They believe that their products have to be sustainable as well as profitable hence they are registered as a B Corp.
| Launched | Raison d’etre | Purpose | Head Quartered |
| 2014 | Eco-Friendly Wool Shoes | Sustainability | USA |
Rothy’s
Rothy’s started by making artfully designed shoes from single-use plastic water bottles. They believe that a better way to do business, is by putting the planet and its people first. It nowadays uses recycled marine plastics to manufacture shoes and bags. Considering every step of production, Rothy’s owns and operates its state-of-the-art production workshop and uses a proprietary 3D knitting process to significantly reduce material waste. Since launching in 2016, Rothy’s has repurposed over 60 million water bottles and today is approaching two million customers worldwide.
| Launched | Raison d’etre | Purpose | Head Quartered |
| 2012 | Re-cycled Material | Sustainability | USA |
vFit
vFit is a free smartphone app that allows online shoe buyers to scan the exact shape of their feet and compare those images to the inside shape of branded shoes to visualize the best size and fit. With over 80 online shoe sites participating, they receive commissions per sale averaging 15% per sale. They hold 3 published US patents & have several international patents pending.
| Launched | Raison d’etre | Purpose | Head Quartered |
| 2012 | Online Shoes Sizing | Technology Support | USA |
Tamara Mellon
Tamara Mellon is a designer who was one of the co-founders of Jimmy Choo. High on fashion, Tamara has launched her brand of high fashion luxury shoes for women. They offer a complimentary Cobbler Concierge service which will pick up your shoe directly from your home and return it like new.
| Launched | Raison d’etre | Purpose | Head Quartered |
| 2010 | Luxury Shoes for Women | Fashion | USA |
Birdies
Birdies, founded in 2015 by Bianca Gates and Marisa Sharkey, is a footwear brand that was originally designed as a comfortable and stylish slipper for home. As their customers started wearing it outdoors they evolved to invent a new category of footwear merging luxurious style and ultimate comfort with technology exclusive to them called 7-layer cushion technology. The technology combines the support of a sneaker, the softness of a slipper and the style of a designer flat.
| Launched | Raison d’etre | Purpose | Head Quartered |
| 2016 | Comfortable Home Wear | Fashion | USA |
I actually have more shoes than anyone will ever know
Tamara Mellon
Footwear sales through user-generated content
Your brand can extend this simplicity even further into your online shopping journey by connecting your products directly to authentic UGC. That way, customers go from shopping your brand’s latest street looks to finding the stellar shoes that create them – all in a matter of seconds.
UNISA, a footwear e-commerce retailer in Spain, has built the whole commerce around user-generated content (UGC). Users talk and write about their experience with UNISA and this content is integrated into their website and across other social media. This helps build a customer connection with the brand. With this UGC integration, UNISA saw a 16.03% increase in conversion rate. Another example is a brand called Muroexe, again from Spain selling shoes and backpacks. The brand has collected 3,231 user-generated images and videos. The results they saw were really quite impressive: 25.38% of their visitors interacted with these UGC galleries and they saw a conversion rate increase of 125%.
Finally my take!
Footwear is today highly influenced by fashion. The businesses dominating the space are either large brands or individuals with high-quality fashion expertise. Breakthrough products like Birkenstock or Crocs come once in a couple of decades.
There is space for innovation in plastic shoes with high quality, fashion and suitable for tropical and temperate regions, and we should see some large scale action there when incomes in countries with high rainfalls rise. This could also spawn machine washable footwear as they should have similar features to rainwear minus the water protection feature of rainwear.
The last couple of decades has seen immense work on sneakers which has moved from being basic sport footwear to become fashionable, multi-occasion wear. Covid has impacted footwear sales; formal wear has reduced, sports shoes have also reduced, and brick and mortar retail stores have shut down. This should see an increase in home wear, loungewear and workman products for medical professionals.
Technology-led disruption is being led by online stores which in the process have managed to compensate for the sales losses incurred by closed brick and mortar stores. Internet first footwear retailers like Boohoo and Asos, will see considerable growth.
Given the current crop of startups in the footwear space, there don’t seem to be any which have a dramatically unique value proposition. Allbirds which is a unicorn has reached that level primarily because of its sustainability feature suited for colder climes.
Hence my belief is without a major distinguishable factor other than style and fashion, mass retail will be led by e-commerce sites that can build a personalised connection with Shoppers. Websites with intimate user-generated content and shopping reassurance through purchases made by similar customers will become a go-to destination. A shoe brand called, Loake has done some very interesting shopping experiences. In some case studies done by Photoslurp an e-commerce technology solution provider, they have explained how this brand has built the shopping experience on Instagram. The image below shows a happy customer attending a wedding with their Chelsea boots from Loake. This is on their site with the product directly connected to the image so shoppers don’t have to guess where to find the boots.
Take bets on startups like Unisa, specialised footwear platforms with the ability to create customer intimacy and credibility to cover up for the lack of physical trial and purchase methods available in physical shopping.
For more extensive analysis and Market Intelligence reports feel free to approach us or visit our website: Venture Capital Market Intelligence Reports | VCBay.
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3-D printing is everywhere right now. It takes less time and makes incredibly good shoes. Thanks, very well-written article. Footwear startup became a little easier with this technology.