E-commerce plays, high brick-and-mortar costs and consumer shifts toward experiential spending comprise the familiar list of challenges impacting retail in recent years.
As expected, shoe companies have not been an exception when it comes to retail’s general hardships and triumphs. But a new report by the Footwear Distributors & Retailers of America (FDRA) has zeroed in on several current trends that could be even more closely linked to the performance of shoe firms right now.
Here, we round up four of them.
The FDRA’s latest shoe-store employment recap found that average hourly earnings in shoe stores jumped 5.8 percent year-over-year in January — the latest month available for government data — which could be an early indication that footwear-company margins will get tighter. The FDRA further noted that the jump in average hourly earnings paid by shoe stores in January outpaced gains in all other key retail sectors.
Declining Sales Prices
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The FDRA’s latest U.S. Retail Footwear Price trends report showed a 1.5 percent dip in men’s footwear prices in February. Women’s prices were also down. With the industry at large struggling to combat heavy promotions as well as consumers’ growing expectations of constant discounting, a drop in retail pricing is an added concern.
“This is crimping prospects for retailers to gain more pricing leverage this year at a crucial time, as shoe store wages rise sharply,” the FDRA said.
Rising Import Taxes
Even without the potential border-adjusted tax in play, the FDRA said the footwear industry is already grappling with astronomically high taxes and tariffs on imports. Despite the fact that the volume of footwear entering the U.S. climbed again in January — this time by 5.5 percent, driven by sneakers — footwear duties rose at an even higher rate, the organization said. The FDRA estimates the industry’s duty bill in 2017 is going to be just shy of $3 billion.
Lower Synthetic & Rubber Costs
The FDRA says the price of oil has significant implications on prices for a range of materials used in footwear manufacturing. As a result, as oil prices fall, the industry is experiencing lower costs for synthetics, rubber and distribution costs, which could balance the rising cost of textiles, as cotton hits a new 32-month high.