FN Poll: Price Increases a Huge Issue

NEW YORK — Footwear firms are feeling the pressure from sourcing and fuel costs.

A majority of top executives told Footwear News in a recent online survey that rising costs is their biggest concern going into the second half of the year. Their second-biggest worry is consumer spending, which has been improving recently but could stall once companies start to pass along the costs to customers.

And indeed, 90 percent of the survey respondents said they plan to raise prices to some extent this year, with the most popular option being an increase of between 1 percent and 10 percent.

One vendor president said, “[We’re] holding prices down on the styles that are more price sensitive [and] raising prices on new styles that are not so price sensitive. [We’re] looking for margin builders.”

At the same time, consumers are expected to be “somewhat price sensitive” in the back half of year, according to 76 percent of footwear players. In addition, about half of the respondents said that the retail environment will likely be “somewhat promotional.”

To offset pressures on the sourcing and sales sides, shoe companies are getting more creative with their management strategies. In the survey, conducted May 17-24, executives from both retail and vendor firms outlined their survival tactics.

“We are looking for various factories that can give us competitive prices and a wide variety of styles,” said the president of a small vendor. “It becomes a bit more time-consuming; however, the adjustment has to be made.” Similarly, the director of a large vendor-retail firm said, “We have diversified our supply chain to low-cost locales in southeast Asia, the Caribbean and lower-cost Central America.”

Meanwhile, a small independent retailer said their strategy is to watch markdowns closely, take advantage of vendor discounts and focus on add-on sales of accessories, which help drive margins.

In spite of larger industry concerns, the majority of footwear execs said they were feeling more optimistic about the coming months compared with the start of 2011. And 38 percent of respondents predicted the economy would improve further in the second half.

Aiding with sales, they said, will be must-have footwear, especially wedges, which were chosen as the most important trend of the coming season. Other hot trends will be minimalist running, ankle boots and menswear-inspired looks.

Footwear styles that are losing traction are toning and rocker-bottom sneakers, and platform pumps, according to respondents. One small brand owner said, “Toning shoes [are on the decline] because consumers are realizing that they are not delivering on their promises.”

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