The industry is experiencing skyrocketing sales driven by strong fashion trends and technical innovation that has consumers interested and willing to spend. At the same time, growing uncertainty about the long-term future of manufacturing in China and the chaotic influence of social media has kept retailers and vendors on their toes.
With that in mind, Footwear News invited four power players in the outdoor footwear industry to share their perspectives on what will impact the market in 2011, during a panel discussion at the most recent Outdoor Retailer trade show.
Speakers included Jamie Lipman Abish, owner of New York-based outdoor retailer Tent & Trails; James Curleigh, president and CEO of Portland, Ore.-based Keen Footwear; Denise Friend, women’s footwear buyer for Kent, Wash.-based retailer REI; and Brian Moore, VP of global men’s footwear for Stratham, N.H.-based Timberland.
What follows are highlights from a wide-ranging discussion that covered retail trends, outdoor’s fashion influence and the not-to-be-underestimated importance of the $100 shoe.
FN: What’s the single biggest issue affecting the outdoor industry right now?
James Curleigh: The most exciting thing we’re seeing is the more permanent shift toward outdoor. And that’s proven when you see a number of brands that traditionally aren’t operating in the outdoor realm knocking on the door.
Denise Friend: Outdoor is fashion now. When you see a Sorel boot in some of the fashion magazines, then you know you’ve arrived. The question is, how long is it going to last?
Brian Moore: To me, when we look at the next two to three years, or even the next 12 months, the idea of minimalism in terms of how we run our business — not just in the products we make — is really critical. When I say minimalism, I don’t mean barefoot. Barefoot is a technology that’s based on geometry and gait cycles. When you look at the challenges we all have in Asia, [and] the desire we have to be greener and more sustainable, and the desire to make better-performing product, what I’m talking about is doing more with less.
Jamie Lipman Abish: Right now, 70 percent of my sales are not going out to the mountains, they’re going to streetwear — people who want to look like they’re climbing Everest and are really walking the dog.
FN: What does “outdoor as fashion” mean for your businesses, and how long can it last?
DF: Fashion really [brings in] the person who is not going outside but wants to look the part. It’s actually additional customers for us.
JLA: Once they realize how comfortable, how durable, how functional these products are, they’ll stay with it. I have seen some [fashion customers] actually go on to become outdoor enthusiasts.
JC: Our challenge is to understand fashion and to make sure that as an industry we’re not the “what’s hot this year” industry. As long as we don’t take ourselves too seriously, but we take our product design and functionality really seriously, that will be the balancing point that will turn it from an item-trend dynamic to, hopefully, a trend that resists time and fashion pressure.
BM: If you look back to the early 1990s, when the economy tanked and grunge came along, people wanted shoes that were dark and dreary because they were in a dark and dreary mood, and they adopted a lot of trail running shoes. And then the trail running category blew up: Consumers went to it for fashion, but they found they were really functional, durable shoes. We’re coming out now from two to three years of a really bad economy, when people went to authentic, heritage things. What they found were outdoor products that really functioned. And just like basketball and running before that, you attract people because of a consumer shift in dynamics. They’re looking for a trendy thing, but if it really works, you can have a long-term relationship.
DF: People want durable, but they still want good-looking product. And outdoor is starting to realize we have a license to do color. If we were still just your functional brown boot, then I don’t think we’d be where we are. But we took some risks around color and design and, all of a sudden, there’s a convergence.
FN: Clearly, the industry is worried about higher prices in 2011 and going forward. What will affect pricing most?
JLA: I’ve noticed a few manufacturers have lowered their prices. And they did not change the eyelets; they didn’t hollow out the soles; they didn’t cheat.
DF: We’ve seen just the opposite: A basic winter boot for less than $100 is hard to find. We’ve had two seasons now of some pretty steep [wholesale] price increases, and it looks like we’ll have another season coming up. The only thing that gives me hope is that the product is great. It looks good and it functions, and there’s a value in that to the consumer that goes beyond that $5 or $10 price increase. But I have some concerns that folks who can’t afford more are shut out of some really good product.
JC: In my opinion, $100 is the magic number at retail. Our footwear business in the outdoor [category] centers on that number. If it’s now $105, your consumer starts going, what happened to $99.99? It’s almost a reason not to buy.
FN: Is a $100 outdoor shoe realistic as we go forward?
JC: It’s not about the holy quest to have $100 as the only price point, but it’s the relative price point to which innovation, functionality and all those things are going to be measured against. If you start going into $120, $130, $140, it’s measured against what you can get for $100. The consumer is aware that things are happening around them that will impact prices, and it’s our job to continue to leverage it in terms of value, so when they walk out with a box of shoes, they feel good about it.
JLA: Certain boots that we sell are over $200, but if [the product] does what it’s supposed to do and [has] value, then the $100 shoe might look like it’s of no value.
DF: It’s really important that we have a range of prices because we have customers in different economic buckets. We are finding not as much resistance to these higher prices as we might have thought, which has been really good, but at the same time, if we just keep raising prices and the bottom tier keeps going up, then we have a problem. Collectively, as an industry, we need to figure out how to make sure we offer a really great price ladder so that person who can afford $200 is satisfied, but the person who still needs that $99.95 [shoe] also has some options.
FN: How will the situation in China affect business this year and beyond?
BM: China is no longer truly sustainable long term because they don’t have access to labor. When you look at where it goes beyond China, is Africa an option? Possibly. But you have a lot of instability. Is Bangladesh an option? We and a lot of our fellow vendors are looking at all of this, but the reality is that a [production] base as large and as stable as China has been for the last 10 years doesn’t exist. And if we don’t radically change our approach to manufacturing and products by being more simplistic and less labor-reliant, we’re all going to be looking at prices that continue to go up.
JC: One of the things we did recently was we opened a factory in Portland, Ore. I’ve read a ton of earnings reports from the big guys, and they talk about margin pressure: transportation, access to raw materials, capacity, duty dynamic shifts. One of the things that doesn’t hit the cost of goods but is a huge cost under the table is the battle against counterfeit product — the tolerance levels that are accepted in Asia today are frightening. So as a young company, we say, why not get closer to home? Transportation [costs] get reduced, we have access to our material base, we control our manufacturing, we control our quality, we control our proprietary innovation.
BM: As China evolves and becomes [a more expensive sourcing spot], lead times are getting longer, transportation costs are getting much higher and so is labor, which is why we went [to China] in the first place. We have a facility in the Dominican Republic that we own and we operate, and from a pure human rights standpoint, we can set our own standard and have a factory that is run predominately on solar energy. We’re not doing a small business down there; we’re doing millions of pairs. Right now, our labor prices in the Dominican Republic are equal to some of our factories in China. We’ve moved our entire Timberland Boot Co. range to Maine. We can move product development creation back into the U.S., train some new workers, but not do it in an old way. You need to come back and ask, “Is there a more efficient way to make this stuff?” Then, we can do it closer to home.
FN: What role will social media play in the coming months?
DF: Customers are in control now, and their expectation is for instant gratification and lots of information. In my mind, that’s as important to our long-term business as what’s going on in the sourcing and product area. The customer is going to tell us how they want that product.
JC: I completely appreciate what Denise is saying, but that notion of the customer telling us how it’s going to be? I wouldn’t rely on that. The challenge is that they’re not going to tell us. It’s up to us to understand where it’s going and to just seamlessly provide those solutions to them.
DF: Who could have predicted Facebook five years ago and how that has changed things? We didn’t invent that, but we’ve gone with the flow because the customer went there. It’s a fundamental shift going on that we need to be really aware of.
BM: What’s shifting is that the immediate endorsement — or lack thereof — that consumers get from blogs is having a huge impact. It raises the bar on us. If we don’t deliver that price/value relationship right out of the gate, [blog reviews] can make or break a new intro.
JLA: I do believe in social media, but I sometimes think we’re being held hostage by the big mouths. You’ve got to listen to the people who are right in front of you who are going to tell you, “I like this boot, but maybe they should have done X, Y or Z.”
FN: Barefoot has been one of the hottest industry stories in the past 12 months. Is it a fad or a permanent new category?
BM: Minimalism is here to stay. Barefoot, I can’t tell you.
DF: [It’s a] fundamental shift going on in footwear, one that I haven’t seen for quite some time and that everyone needs to embrace. If you don’t, you’re going to be left behind. It doesn’t mean all footwear will go that way, but it’s certainly a segment that we need to be very aware of. And we need to do it very carefully because it’s not appropriate for every end use and every customer. But it’s here to stay and it’s not a fad.
JC: We’re in a little bit of a fog today, but I expect what will emerge is compelling, longer-term solutions around the individual. And our challenge is to ask the consumer to know yourself better so we can actually help you in terms of what you need. Let’s educate our consumer on themselves first, and if we do that, the solutions will come.