The challenges of footwear retail

Some of the key issues faced by today’s mainstream retail businesses.

by Oliver Chandler

Footwear retailing is always fast-paced, and the speed at which it is changing is escalating. The advent of new technology is not only significantly affecting the way we shop but also, as a consequence, the way footwear is supplied. High street competition has always been intense, and retailers are used to having to accommodate for rapidly evolving styles and the emergence of new suppliers. However, in today’s retail world, the traditional store is only one of an increasing number of ways that consumers can obtain footwear products. Traditional suppliers have in many cases embraced the digital world, and offer their products online as well as through their shops. In addition, multinational online retailers continue to refine and grow their businesses. Not only does new technology make it easier to view and order products via computers, tablets and smart phone apps, we can also compare notes with other customers and criticise poor service through blogs and social media sites.

Consumers are increasingly expecting a better service, instant product availability and fast delivery – whether this is in-store or online. While the sequence of the product lifecycle has changed very little, this has affected the speed of product development and manufacturing. The way the product is brought to market can significantly affect flexibility, cost and availability. Brand owners and retailers are now much more integrated into the supply chain, and so effective supply chain management is critical.

Improving the supply chain

Globalisation and bulk sourcing of products and materials usually has a cost advantage, particularly where manufacturing is in low-labour-cost countries. However, the supply chain can be cumbersome and slow, leading to long lead times and an inability to make rapid changes. This is not such a problem where retailers work on the traditional spring/summer and autumn/winter product collection model. Accurate forecasting is essential, and the consequences of getting it wrong could result in either having too much stock due to insufficient demand, or stock running out with little prospect of immediate replacement.
Predicting fashions can be notoriously difficult, and for this reason there is an increasing trend to move towards a more flexible approach. Instead, a number of large retailers (both with traditional stores and online) have introduced almost continuous introduction of new products on a rolling basis throughout the year, in order to keep pace (or ahead) of fashions and trends. Many of these are small in quantity, and enable designers to gauge reaction and make changes as necessary.

The demand for smaller minimum order quantities (MOQs) is seeing some footwear manufacturing leave its established sources and move back to more local suppliers. Although this can increase flexibility, smaller orders often result in a higher price per unit, as a better price can usually be negotiated for large quantities. This can be critical to profitability, as some retailers often work on tight margins.

An upside of local sourcing should be lower freight costs. In addition, the retailer or his agent may have more opportunities to visit the production sites to check quality and generally be able to deal with any issues more rapidly.

Meeting the demand

According to many retailers, an increase in pace of changes and collection variation has significantly shortened the time available for quality control. This quick turnaround time has seen some retailers engineer their collections to incorporate the same components or processes across a number of styles in a season. In some cases, they also maintain a unified approach by using components from previous collections. By doing this, buyers and technical teams are able to cross reference test data across styles in an effort to ensure consistent performance and fit.

Some retailers have design teams which utilise both creativity and shoemaking knowledge to develop their collections. Where designers are in short supply, retailers will look to external sourcing companies or design houses that offer on-trend collections that have been sourced with traceability, sustainability, corporate social responsibility and technical specifications in mind.

A product’s performance rests in the hands of technical team members who must structure the footwear to meet the relevant technical specification. Often contained in these specifications is information on the company’s ethical and corporate social responsibility policies, as well as the footwear’s performance and labelling requirements. A supplier often formally agrees to abide by a company’s specification and sourcing policies prior to commencing production. In many cases, it is down to suppliers to source compliant materials and components to ensure the finished product conforms.

Once a design is approved, initial samples are requested from the selected suppliers. The samples are subjected to various inspections and fit assessments prior to being signed off. If happy with the overall appearance and testing evidence, the supplier is given the go-ahead to commence production. Retailers invest heavily to establish relationships with key suppliers, and in some cases utilise sourcing offices within the region to maintain close relations with these companies.

Reaching the customer

With the vast majority of products sourced from Asia, sea freight is still the industry’s preferred method of transporting goods. Once received, products are often inspected upon arrival at the warehouse. Stock can remain in a warehouse for some time, and steps may need to be taken to ensure that the storage environment does not promote mould growth. Mould growth can occur during shipping when goods are packaged incorrectly and can be a significant problem. Leather goods sourced from tropical countries are particularly vulnerable to mould growth, due to the environmental moisture and warmth. A number of companies supply products intended to prevent this.

A more recent initiative is the transcontinental train link from Chengdu to Poland, which provides a speedier delivery service between China and Europe. Travelling almost 10,000km, the journey cuts transit time significantly compared to ocean freight.

Back at the retail stores, merchandisers have the challenge of planning and controlling the flow of incoming styles and replenishment of stock. The merchandisers work closely with the buyers to ensure that sales data is fed back to the buying team, so that timely and accurate re-orders for popular styles can be placed.

If things go wrong

The retailer’s customer service team will typically manage the communication networks to ensure that all consumer complaints are handled correctly, and that significant failures are reported back to the technical team. If a common fault begins to occur, it is the technical team’s responsibility to identify the root cause and the severity of the problem before deciding the required course of action. In extreme cases – where safety is an issue – the retailer may take action to remove the product from the marketplace. However, product recall is a costly step to take both financially and because of potential brand damage, so this needs to be managed carefully.

To avoid such a situation, it is common practice for products to undergo a risk assessment process prior to commercialisation – particularly those intended for use by children. It is the role of the technical team to supply evidence that risks and hazards have been sufficiently assessed prior to a style being commissioned. The risk assessment has become a useful tool in the face of rising consumer complaints and legal disputes with market surveillance organisations. Classified as a form of due diligence, the risk assessment procedure demonstrates that a retailer has considered risk during the design stages which, in turn, will have enabled the retailer to define the testing required to prove that the style is fit for purpose.
In many countries, due diligence risk assessment and associated testing to ensure products are ‘safe’ is a legal requirement.

An inherent problem with online retail is that the returns levels can be consistently high due to consumers over-ordering products. Fitting can vary greatly between styles and brands, and consumers tend to order a variety of sizes to ensure that they find a pair that fits. While the garment sector has many online tools for assisting with purchasing the correct sized garment (such as ‘virtual fitting rooms’), footwear is still an issue for online retail. Current measures in place include various forms of printable fitting guides, the dimensions of which can be heavily influenced by the settings of a consumer’s printer. Besides causing internal stock issues, this problem obviously has a financial impact on the retailer, which will often shape their returns policies. Many still refrain from charging consumers for returns postage, fearing that this will deter sales.

To conclude, globalisation and the Internet have completely changed the retailing scene. Asian volume production has meant significantly lower costs and today’s retailers have access to high-quality footwear and garments (often with considerable production complexity) for a lower price than 20 years ago. Broadband capability has fuelled the rise of the online retailer, providing consumers with access to an infinitely greater variety of products than would have been dreamt of in the high street of the 1990s.

As mentioned at the opening of this article, however, the retail scene is forever changing. The rising cost of labour in developing countries and volatility in raw materials prices, coupled with the growing power of the consumer in countries such as China and India where domestic demand (and therefore prices) are increasing, means that brand owners and retailers are constantly evaluating their supply base.

Publishing Data

This article was originally published on page 10 of the May 2015 issue of SATRA Bulletin.

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