The footwear industry is known for producing an array product in an endless variety of colorways in styles ranging from high-fashion pumps to low-impact running sneakers. Since creativity is often the name of the game, it seems more and more shoe companies are tapping outsiders to fill vacancies in their top ranks. Just last month, Adidas hired Kasper Rorsted, former CEO of consumer goods maker Henkel AG & Co., as its new CEO; in December 2015, Under Armour tapped former Petsmart Inc. CFO Chip Molloy for its CFO slot; and Dick’s Sporting Goods brought on former Kraft Foods Group EVP and CFO Teri List-Stoll as its new CFO in June 2015.
Insiders say many top-level decisions makers often hope that by combining a variety of creative backgrounds under one banner, they can reinvigorate the industry by bringing freshness to the space.
Sure the role of CFO or auditor, for example, requires much less creative influence than a CEO or marketing officer — and maybe a CFO for a large food and beverage company is a great fit for a shoe company of comparable size — but nevertheless, when someone enters the shoe industry from a completely different background there are several important things that he/she needs to know to make the transition seamless.
Here are three things new executives should know about joining a shoe company.
Competitive But Highly Fragmented Landscape
From Nike to Adidas to Skechers to Under Armour… need we go on? The competition in the shoe industry is thick.
And, we haven’t even delved into luxury brands, comfort footwear, lower-price-point fashion footwear or kid’s shoes yet. But, in some ways, that is sort of the point: the industry has a lot of competition but is also highly fragmented — meaning one or two big players do not dominate the entire space.
Sure, Nike has a pretty solid corner on athletic footwear but with Under Armour and Skechers climbing the ladder and gaining market share rapidly, it’s evident there’s still plenty of consumers to go around.
A new executive should know that it will take some work to find the holes that need to be filled in the industry and to create product that consumers will find irresistible.
Hefty Production Costs
As much as we love shoes, they’re a lot more expensive to produce than apparel and some kinds of food products — making the cost associated with failure in this industry markedly higher, comparatively speaking.
As it stands, 99 percent of shoes sold in the U.S. are imported and the tariffs, according to the Footwear Distributors & Retailers of America, are among the highest on any consumer good — averaging 10 percent but reaching as high as 67 percent for certain types of footwear. While the Trans Pacific Partnership deal — finalized in October — could eventually reduce some import-related costs, other footwear production expenses remain high. In addition to the cost of lasts, which are available in different shapes, sizes and volumes, and considerations regarding raw materials and inputs, quality footwear does not come cheap.
The Current State Of The Industry
Amid quite a bit of retail turmoil in recent months, the shoe industry has shown a level of agility — compared with its handbag-and-apparel counterparts — that market watchers have lauded. While not immune to woes like the department store slump and unseasonable weather, insiders have said shoes rank high on consumers’ lists of buy-worthy, non-necessity items. In fact, even during economic downturns, experts have found that shoes continued to be an important investment for many Americans.
In order to sustain the momentum — for a couple years, consumers have bemoaned the lack of freshness in the space — it is important for new executives to bring out-of-the-box ideas and exciting options to the table in order to propel the industry ahead.