Figgins, Diana Ferrari, Mathers, Williams. Over the last two years, some of Australia’s most iconic footwear retailers have fallen victim to tough times. Is there hope on the horizon? Nadia Stennett and Assia Benmedjdoub investigate.
Much like the traditional stiletto heel rises and falls in favour, so too the conditions for retailers which stock them. While the footwear industries have been in a state of metamorphisis for the past decade - with trade liberalisation and advances in technology driving much of the change - it is the financial crisis which commenced in 2008 that is now defining its performance. According to business information firm IBISWorld, economic conditions, and the flow-on effect to household spending, drive the health of footwear retail revenue.
“As such, the financial crisis was a crisis for footwear retailers as well,” analyst Suzannah Rowley says. “In 2009/10, industry revenue reached a low not seen since 2001, totalling $2.4 billion for the year. Businesses retailing high value-added products were the first to feel the brunt of the economic downturn but as the poor economic situation continued, the reduced spending pattern filtered down through most price brackets of the industry.”
And so started the first major category collapse, with Melbourne-based footwear group Figgins Holdings buckling last year after closing 43 of its Shoobiz branded stores just 12 months earlier. Its subsidiaries Midas, Emporio, Mollini and Scooter were either folded or sold off. Colorado Group followed suit, entering voluntary administration this year and taking its Diana Ferrari, Mathers and Williams’ footwear offerings with it.
These are not independent footwear retailers competing with department stores such as Myer and David Jones. Textile Clothing and Footwear Industries Innovation Council chair Phillip Butler believes it’s a case of businesses struggling to break with formulaic approaches to retail.
“When things get tough, you’ve got to find ways to be more innovative and creative. There’s a global trend towards buying less and we need to adjust to that. If people are going to survive, they need to develop new ways of doing things.”
A key component of this is highlighted in the council’s Strategic Roadmap, which explores the impacts and opportunities of integrating online selling into traditional retail models. Australian businesses have been among the slowest in the Western world to move into the online realm, with currently only around 58 per cent of all Australian businesses online; opening the gates for tech-savvy overseas retailers to fill the void of growing customer demand to shop via the web.
A Digital Media Research report released by PriceWaterhouseCoopers this year forecast online spending by Australian consumers will surge from around $12 billion to $21.7 billion by 2015. Convenience, speed and cost-effectiveness were all cited as key reasons for increased consumer spending in the overseas e-tail market, with the meteoric rise of smartphone and tablet devices as major facilitators in the shift, which is being felt by many retailers.
National fast footwear chain Wanted is among those recording strong interest online. Marketing manager Lauren King says that in the current retail landscape, local brick-and-mortar retailers are not just competing on home soil, but with companies worldwide.
“We are already seeing Australia on the whole are spending more money overseas online,” she explains. “The younger generation wants it now and they want it fast – I think that’s why online shopping is really taking off. We’ve had huge success with our online store. Our shoppers are young people with disposable incomes who are really wised up about technology.”
A draft report released by the Productivity Commission this month stated a lack of understanding about the benefits of moving online as a fundamental reason for the general lack of enthusiasm among Australian retailers surrounding the e-tail market. Footwear Retailers Association president Peter Parkinson says going online just isn’t practical for everyone in the footwear industry.
“There are many problems associated with shopping online for shoes, other than replicating a product previously purchased. The precise fit, colour match and touch can not be manufactured through a computer screen.”
But new technologies are springing up to counter these challenges just as quickly as their opponents can find issue with them. Converse shoes offers its tech-savvy shoppers a shoe shop on the go, with “virtual shoe fitting rooms” via an iPhone application that allows customers to point their phone at their leg to view a real-time image of their foot, overlaid with an image of a shoe from the Converse catalogue, so the shopper can see what they would look like wearing the shoes.
Butler stresses it’s ‘outside the box’ strategies like this that separate the successful footwear retailers from their lagging competitors.
“There are some really interesting new business models coming forward – sites that take a radical new approach to the way people shop for shoes. One that comes to mind is Shoes of Prey. They’ve got a website where people can go to actually design their own shoes. This is an example of a really interesting new business approach that’s starting to come forward.”
Websites and shopping portals aren’t the only way businesses are realising the power of the internet to improve their reach. Footwear retailers are starting to make their mark through social networking sites to connect with a wider customer base. A joint research project by Shop.org, ComScore and Social Shopping Labs found that over 40 per cent of shoppers are looking to connect with stores online through social marketing tools including Facebook and Twitter.
Wittner Shoes director Debra Wittner says retailers that aren’t utilising these technologies are being left behind in the race to keep up with their overseas competitors.
“You can’t afford not to be in it,” she says. “The mobile application trend is growing dramatically and you have to be a part of that process. We’re on Facebook and Twitter, but the next big step is moving in the direction of brands who have a store within their actual Facebook area, so shoppers never have to leave Facebook, they can keep talking to their friends while they’re looking at our products, that’s where we’re headed.”
IBISWorld predicts that Australians’ love for shoes will prevail. Over the next five years, it expects industry revenue to rise by an average of 1.3 per cent per annum to reach $2.6 billion in 2015/16. A reduction in tariffs in January 2010, down from 10 per cent to five per cent, could also provide gross margin relief for retailers as well as the move towards greater consolidation of operations by the majors. Rowley notes that throughout 2005/06 and 2006/07 a number of retailers, including the embattled Williams and Mathers brands, exibited margin weakness due to poor stock selection, poor inventory management and lower inventory turnover.
“Many retailers have now upgraded their supply chain systems to also bypass traditional wholesalers and improve profit margins,” says Rowley. “Smaller independent footwear retailers will find it increasingly difficult to compete with franchise and chain stores, as they are unable to benefit from cost reductions associated with the economies of scale enjoyed by the larger retailers.”
But Parkinson believes there are opportunities for small and large retailers alike.
“Far too many footwear retailers are falling into the trap of ‘if it’s not broken, don’t fix it’. Stores that have a retail philosophy and offer a point of difference will continue to do well, businesses that don’t will continue to suffer. Just because you’re trading well, doesn’t mean you should sit on your laurels. The rhetoric of service and quality is easy. The difficulty is putting it into action.”
