For many wholesalers, Nike is the crown jewel of their athletic footwear assortment. Luckily, this was never case for DSW.
According to Bill Jordan, president of DSW parent company Designer Brands Inc., sales of Nike products accounted for less than 4% of revenue in 2019. So when Nike stops selling products through DSW in 2022, Jordan does not expect to see a severe impact in sales.
“The good news for us is that the hole that needs to be filled is not such a big hole that we can’t do it,” Jordan said, noting the selling power of other popular athletic brands, such as New Balance, Skechers, Brooks and Ryka. In some categories, such as women’s running, these smaller brands have actually grabbed market share from Nike in recent months.
Other than DSW, Nike is set to cut ties with a variety of other stores in 2022, leaving retailers such as Zappos, Dillard’s, Urban Outfitters and Shoe Show without access to products from one of the largest athletic footwear makers.
The move represents a trend across the footwear industry, as brands direct their focus to key accounts and direct-to-consumer channels. Adidas, Under Armour and Crocs have all made similar moves as they look to maintain more control over brand image, distribution and pricing.
In the case of DSW, Nike’s decision to close its account comes as the retailer undergoes a major pivot to athletic footwear. In Q2, athleisure penetration grew to 57% in DSW compared to 44% in Q2 of 2019.
“We are killing it in athletic,” Designer Brands CEO and director Roger Rawlins said in an August call with investors. The shift to athletic footwear has also helped DSW lift sales for all styles across men’s and kids’.
But as Jordan noted, Nike is not the only athletic brand driving sales for DSW. And dress and seasonal shoes, which include sandals and boots across brands like Steve Madden, Crown Vintage and JLO, are still core to the retailer’s business. (In 2018, the company acquired Camuto Group, which designs and develops the Vince Camuto brand and licenses footwear for Jessica Simpson and Lucky Brand.)
DSW is also leaning into exclusive distribution partnerships. In August, it inked a three-year agreement to be the sole wholesale and brick-and-mortar distributor of the Hush Puppies brand in North America beginning in 2022.
Executives said these types of partnerships will help DSW establish an element of exclusivity. They will also help ensure that other brands can fill the space left behind when Nike ultimately departs.
“There won’t be as many orange boxes on the floor,” Jordan said. “There’s going to be a whole array of brands. And I think that will open up the number of choices we’ll be able to offer customers.”