The ever-defiant balance sheet bottom line has long been the bane of many a manager’s existence. But these days, with Wall Street beats proving hard to come by for publicly traded firms and private companies counting their blessings that they can stay mum about their profits, margin growth may be at the peak of its evasiveness.
As shoe firms and other retailers grapple with the today’s increasingly digital environment as well as macroeconomic hurdles, it can be tough to distinguish between roadblocks and pathways to business success.
Nevertheless, understanding the factors that are helping or hurting one’s business is critical to managing challenges and opportunities.
Here, we round up the three biggest barriers to profit growth for footwear and apparel firms right now.
Everything Is On Sale
Unseasonable weather and consumer shifts — toward experiential spending and e-commerce — are just two of the reasons footwear and apparel companies are upping the ante in the marketing realm these days.
While promotions can be an effective way to boost traffic and revenues, hefty sales and markdowns are often at the expense of profit margins. What’s more: When popular firms start engaging in heavy discounting, their peers are often compelled to follow suit, which creates a trickle-down effect.
Unfortunately, the “everything on sale” approach doesn’t appear to be going anywhere anytime soon. Early reads on this year’s back-to-school season have suggested that footwear and apparel retail remains highly promotional.
Stalling Brick-and-Mortar Traffic
For anyone who is actively watching brick-and-mortar traffic trends, it can be hard to recall the last time the numbers eked above negative territory.
Holidays, back-to-school, Black Friday and every other tried-and-true shopping catalyst have fallen flat for the better part of the past two years.
These days, consumers unwaveringly display a preference for experiences over things, while high real estate costs continue to offset modest revenue growth for many businesses.
Indeed, moving more resources to the digital space offers an array of growth opportunities for the fashion industry and can help balance losses from storefronts. But the struggling brick-and-mortar channel remains an important component for many companies, particularly sit-and-fit footwear shops.
Ineffective or Outdated Leadership & Strategy
There may be slight variations in opinions here, but most experts agree: Retail is in a rough patch. Since businesses must be properly managed to be profitable, a lot of the fallout has been attributed to poor management techniques.
Specifically, in today’s digital and mobile age, managers at all levels of retail are encountering hurdles when it comes to understanding the new consumer.
While researchers have poked and prodded them for years, millennial shoppers continue to challenge brands. Meanwhile, individualism-obsessed, up-and-coming Gen Z-ers are throwing traditional marketing leaders everywhere for a loop.
If business techniques are not modified to address the needs and wants of consumers, then profits will suffer. At the same time, adapting new techniques and making technological improvements to ramp up areas such as omnichannel can be a double-edged sword for margins. These changes require costly investments and can take a long time to turn profitable.