How Rack Room, DSW and Zappos Are Adapting to an Athletic Footwear Category In Flux

As people return to offices and live events, the athletic footwear market is at a crossroads. Performance footwear sales have started to come down, with the category dipping 4% in 2022 compared to the prior year, according to The NPD Group. Meanwhile, fashion footwear sales grew 7% over 2021.

More broadly, sneaker sales growth, while still positive, has begun to slide.

“The market for sneakers is still huge, but the elevated growth seen during the pandemic has come down to earth with a big bump,” said GlobalData managing director Neil Saunders, citing the firm’s research that shows that growth rates of sneaker sales are now in the low single digits. “This trajectory looks to be the norm for at least the next couple of years.”

Amid this change, retailers in the family footwear channel and larger chains are reframing the way they consider the athletic footwear category as consumers move from strictly performance brands to more versatile options. But that doesn’t mean they’re backing down. In fact, for some the answer is to double down.

Take DSW. Athletic and leisure sales accounted for just about 30% of total sales in 2018, before the Designer Brands Inc.-owned chain decided to invest more heavily in the category.

“We strategically decided to start to emphasize our athletic and leisure offerings to a much greater degree,” said Jim Weinberg, EVP and chief merchandising officer of DSW. “[In 2020], we moved athletic to the front of our stores, where before it used to be on the sides.”

DSW store
DSW is making its stores more kid-friendly.
CREDIT: Courtesy

Fast forward to 2023, and athletic and leisure footwear is now a cornerstone of the shoe chain’s growth strategy, accounting for more than 50% of total revenue at DSW.

Athletic, the foundation of the company’s back-to-school season, is also driving its owned-brand strategy. The chain in April announced a goal for brand-owned sales to double from 19% of the company’s revenue to almost one-third by 2026. In early February, DBI acquired the Keds brand from Wolverine Worldwide, adding to its existing roster that includes Topo Athletic and Le Tigre, both of which were acquired within the last year.

“All of a sudden, we have three really strong offerings in the athletic space,” Weinberg said.

Owning these brands gives DSW an edge in an increasingly competitive category, especially as certain brands, such as Nike, pull back on the amount of product they sell via wholesale retailers like DSW.

The athleisure niche is the sweet spot for the big-box chain, which is seeing a shift in demand from performance to more fashion-forward sneakers. Court shoes (for pickleball and basketball) and retro styles are showing signs of growth. But the shoes that blend trendiness and sport are dominating.

“The fashion pieces of athletic are trending better than their performance pieces,” said Weinberg. “But both are doing well.”

The ‘cool’ factor

Running performance brands such as Hoka and On had standout industry success stories in the pandemic. Both of these brands, rooted in performance, benefited from a national running and exercise boom in 2020.

Despite an overall drop in performance footwear sales, these key brands are still making gains. Hoka net sales jumped 90.8% in the third quarter to $352.1 million, another quarterly record for the brand. On in November reported its strongest quarter yet as it aims to become a $1 billion brand.

Two years ago, people bought Hoka and On sneakers to help them achieve athletic goals. Now, more people are buying the brands because they are popular, say experts.

“It’s less about athletic and it’s more about just cool shoes,” said Matt Powell, an advisor at Spurwink River consultancy, naming On and Hoka as two major inheritors of this trend. “Even though those shoes are built for performance, I think a tremendous amount of those shoes are being worn because they’re new and cool and different.”

HOKA ONE ONE Clifton 8
The Hoka Clifton 8 walking shoe.
CREDIT: Courtesy of Hoka One One

People are still buying performance sneakers, especially compared to three years ago. Performance footwear sales were up 8% in 2022, compared to 2019. But in some cases, customer motivations for purchasing have evolved.

“We’re selling a lot more sneakers that are more relative to what’s going on and ‘what she’s wearing,’” said Brian Burnett, VP and GMM at Rack Room Shoes.

The family channel retailer, which experienced the athletic sneaker boom during the pandemic, first made a concerted push into athletic in 2016, with the launch of The Athletic Shop, its sneaker-focused shop-in-shop. Now, Burnett said people are looking for offerings from labels like On or Hoka because they are on trend (though neither are sold at Rack Room).

“On is definitely more of a lifestyle brand today,” Burnett said. “It’s a performance brand but more driven off lifestyle.” The same is true for Hoka, he added.

TikTok and the influencer landscape is at least partly responsible for the rapid spread of these trends, Burnett said. Last year, the Adidas Samba exploded on the internet from various TikTok videos and celebrity appearances.  Versace platform shoes had a similarly viral moment, selling out across retail after the look went wild on TikTok last year.

“It takes one influencer to put something on online, and the comments and the followers and all that just creates a groundswell,” Burnett said.

Keep it casual

In a post-pandemic and inflation-ridden world, coolness isn’t the only reason people are buying shoes. After two years of mostly staying at home, people don’t want to sacrifice the comfort they’ve grown used to for trendiness. As such, hybrid silhouettes that blend dress with performance are finding favor with consumers as they head back to offices and events.

“I think a little cleaner-looking product — not garish but still a sneaker — is an important story,” said Powell. “We continue to see the blurring between what’s dress casual and what’s athletic.”

For example, Cole Haan, a brand typically associated with dress shoes, launched its third performance footwear collection in January. The line was meant to cater to the 2023 sneaker buyer, or someone looking for an office shoe that can also support a quick “lunch run” break during the day.

Cole Haan running shoes
The Cole Haan 5.Zerøgrand Monk Strap (L) and 5.Zerøgrand running shoes on foot.
CREDIT: Courtesy of Cole Haan

“I think the consumer is telling you that they’re looking for function and fashion — things that go with more things, things that can last longer,” Burnett said. “You’re seeing some trends, whether it’s white, or neutrals across all categories, that they can wear with multiple occasions.

The demand for “all black” and “all white” sneakers is also a part of this trend, where monochrome performance shoes are being seen as fashionable in a non-sporting context.

At online footwear retailer Zappos, the hybrid styles that blend dress and comfort are also standing out. “That’s what we see people are voting for, that casual comfort that you can dress up or dress down depending on what you’re wearing,” said Zappos chief merchandising officer Joe Cano. He called out another Cole Haan silhouette that looks like an oxford style loafer with a sneaker sole, which embodies this dressy and sporty trend.

“Even within our fashion categories, if there are too many bells and whistles to the heel, our customer isn’t voting for it,” he said. “They want something that is comfortable, but still looks good.”

Having a versatile pair of shoes for multiple occasions is also helpful for an American consumer dealing with higher than usual prices, especially in shoes. Footwear retail prices in January were up 0.4% compared to the same month last year. In 2022, full-year footwear prices rose 4.6% at the fastest rate in four decades.

“There’s less money, disposable money that they want to spend, so they’d rather have something that lasts longer. And goes with more things,” said Burnett.

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