The footwear industry has struggled with a sales slump during the pandemic, but the outdoor market has performed well — even seeing substantial growth as the weather has improved. Today, FN hosted several industry experts in its latest virtual roundtable discussion, presented by Afterpay, about what is to come for the outdoor industry and its consumers.
In “Outdoor & Fashion: The New Frontier — How Reinvention Will Reshape The Market,” executives from Birkenstock, Merrell, NPD Group and Afterpay came together for a conversation about both short- and long-term trends. With more consumers participating in sporting activities and shopping differently, the industry is facing a new retail landscape.
FN senior outdoor and athletic editor Peter Verry moderated the conversation. He was joined by Melissa Davis, chief revenue officer at Afterpay; David Kahan, CEO at Birkenstock; Chris Hufnagel, global brand president at Merrell and member of Wolverine Worldwide executive leadership team; and Matt Powell, senior industry advisor for sports at NPD Group.
For a replay of the roundtable, click here.
Highlights of their conversation are below.
The Shift from Pinnacle to Novice Consumer
Matt Powell: “The specialty industries — snow, ski, bike, run outdoor — have always been focused on the pinnacle consumer and have left business on the table. The people who are shopping today, where we have seen the surge in the business, is coming from the novice, from a family consumer. We look at the bikes that have sold: the hottest categories of bikes are family bikes, transit bikes, electric bikes. They’re not expensive road bikes that the pinnacle consumer uses. I think all of these industries have got to embrace this new consumer, this novice consumer who’s coming into the marketplace and understand that this is the future of the business. If someone comes and says ‘I want to run three miles a day, three days a week’ — they don’t need a $150 running shoe. And yet that’s what we have in the running shops. There’s no shoe under $125 on the wall and these folks are looking for $75 shoes. So it’s really critical of the specialty industry, in particular the brands who cater to those retailers, to embrace this novice consumer.”
Chris Hufnagel: “One of Merrell’s biggest challenges right now is, as these new young consumers engage in the outdoors, how do we convince them that they need to trade up from the athletic shoe that they wear every single day, to buy a more performance-based outdoor shoe? For us, our responsibility then is we have to make sure that we’re more democratic in our price point. So we have a tip of spear product that someone could go do an ultra-run or ultra-hike in; [at the] same time, someone could just go to their local outdoor specialty shop, or local department store or local sporting goods store, and pick up Merrell at an entry price point to get them into the brand. We’re encouraged by the people coming to the outdoors. Now our pivot is to get them out of what they wear as a casual shoe and get them into one of our shoes.”
David Kahan: “People do want to get out, but they may want a different choice of footwear for when they’re actually on the trail. So the belief is, when our brand fans might be sitting in their backyard or just barbecuing, there’s one [pair of] Birkenstocks. But when they actually drive to a trail and take that family walk, there is another pair of Birkenstocks. I think it comes down to creating compelling product and products that’s very democratizing. I think the idea of having pinnacle products is great. But for the average family, for the average person that’s buying this — not as their primary pair of shoes, but it might be pair of number two or pair number three — having something that is over the top technical may slice the pie, to the point where you’re not getting it on as many feet as should be, quite frankly, enjoying the benefit.”
On Connecting with Gen Z
Melissa Davis: “Like millennials and the financial crisis of 2008, this pandemic and this crisis will stunt Gen Z’s finances and outlook for many years to come. So many of them have already reassessed their spending, making cuts and prioritizing savings. Prior to COVID, Gen Z really favored the in-store shopping experience; it’s all about experience. So how do you actually bring that online? And what can you do to help create a better, holistic digital shopping experience for them? Engaging with them in terms of honest, authentic communication: Let them know if you have shipping delays or short stock or things like that. They’ll be much more forgiving if you’re honest and open upfront, rather than buying an item and then finding out two weeks later, it still hasn’t shipped. Anything that you can do from a personalization standpoint: They don’t want it to be generic to everybody, they want it to be much more about them. And then being inclusive. So much of Gen Z really wants to help design the solution with you. It’s not just about telling them what you’re going to do, but ask for feedback, ask for ideas, ask for how you can build that better community. Have them weigh in. It’ll go a long way in building a much more authentic relationship with them and being much more endeared to your brand and willing to advocate for you, if they know they’ve been a part of building that.”
MP: “There are some really interesting predictions out there, very dire ones. There are a lot of retailers, particularly mom and pops, who are not going to make their way out of this. Retailers who did not have a robust Internet business are very vulnerable here, as we’ve seen so much of the business shifting to the web. And then stores themselves are going to change. Consumers are telling our partners that they’re very nervous about going back in the malls right now. They’re much more comfortable going into strip centers and free-standing stores so they can walk in and out very quickly. Does that change the paradigm? It’s a whole new world here. And losing these stores, or retail rationalization, is very, very painful but it’s so necessary – and we’ll be a stronger industry for it on the other side.”
CH: “First and foremost, we are privileged to have built this Merrell brand for the past 40 years on the strength of our great partners across the landscape. And we’re going to try to be great partners through this. At the same time, there are going to be winners and losers coming out of this. And as the landscape changes, how does our model have to change? And then where do we choose to invest? Everyone has limited resources, time, people and money. We have to be thoughtful about what happens. How do you take this moment in time to hopefully accelerate coming out of this, steal market share and hopefully be in a better position once we get through it? So that’s how we’re approaching it.”
DK: “When I look at retail rationalization, it’s also going to carry through to supplier rationalization. If you’re a retailer right now, you’re going to be looking at the brands, looking at your vendors, and you’re going to be deciding where am I investing my money? The overall pie may not get bigger, the North American footwear market may not grow over the next 12-24 months; that doesn’t mean that there aren’t great opportunities for brands that are going to break through and connect with consumers. We need retailers to be healthy and to be vibrant. And we need retailers to do what they do best, which is to act as a conduit for our brands to their consumers. I think we can all say on the brand side, if we’re trying to partner with people that are trying to survive – that’s a loser’s game. We want to partner with the few who are planning to thrive.”
On the End of Seasonality
MP: “People are buying things when they need them and that changes the whole mentality of seasonality. I do worry, though, that we’re going to try to make assortments so plain vanilla, so safe, so seasonless, that we end up with really boring presentations at retail. And that’s a death sentence for retail. We have to be fashionable. We have to be fresh. We have to be forward. But we also have to understand that the timing of the purchases has changed: Don’t expect to sell heavy boots in warm weather; expect to sell sandals late. The sandal business used to be a June business, now it’s really a 12-month business. So, yes seasonality does totally change, but it’s very dangerous to think that we’re going to have one season’s worth of product.”
CH: “Certainly buy now is an important characteristic. But I think this idea of first half, back half – from a weather standpoint it certainly is important but that’s really not where the consumer is. Consumers know that they can order today and get tomorrow. So for us, it’s not doing 18-month ‘go to market’ calendars. It’s how quickly can we bring things and how quickly can we react? And it’s not just speed in supply-chain: How do we make shoes faster, get them across the ocean faster. It’s how we make decisions better and faster. Being closer to trend, closer to consumer insights, to consumer testing on styles. We leverage all these digital tools so we can just make decisions at a much more rapid pace, to get product in front of consumers. If we wait until we’re 100% sure, it’s going to be too late.”
DK: “The beauty of our brand is we have this number of iconic styles. We probably have more iconic silhouettes than the athletic brands. So, you can play Mr. Potato Head on top of the chassis any which way and come up with something fresh and exciting. I think that our brand fans now expect us to be very fast, very agile, and to constantly breath fresh products to market. We’re made in our own factories, we’re by and large handmade in Germany, so obviously our timelines are very long. But the creativity that goes into it changes very quickly, based on the reality of the data and the reality of the sell-throughs. So I think it’s just about keeping it exciting, trying to make sure that people have that degree of comfort and recognition in the styles. That I bet that eight out of 10 of the top selling athletic shoes in the market have silhouettes that have been out for 25 years. So there is this degree of the base needs to be recognizable. But the detail needs to be exciting — and the detail doesn’t need to be light years beyond. It’s just some subtle shifts that I think sometimes engage people.”
On Creating a Superior Omnichannel Experience:
MD: “It’s looking at it as a holistic experience and making sure that you have all options available wherever the consumer is. And that’s really what Afterpay is trying to do. If your inventory online is different from in-store, that doesn’t meet a consumer expectation. They don’t really understand why something would be different from one place to another. So how do we holistically serve them? And that’s how we look at payment options as well: Having the option to pay however you want. Whether it is online or in-store, it shouldn’t matter — and it doesn’t matter with us. We just launched our in-store product yesterday, it’s a contactless solution so that you have a more seamless experience regardless of where you’re buying. You have to meet the consumer wherever they are and give them the flexibility and options to buy, to shop, however they choose to do so.”