The latest old school retailer to potentially be in trouble.
You may have heard that times are tough right now for some of the best-known mall brands in America, like J.Crew, Sears, True Religion, and Payless, among many others. Last week, Foot Locker—the massive sneaker store chain that currently has 3,363 stores around the world—joined the list of ailing traditional retailers when it reported lacking earnings figures, and a 6% fall in sales at stores that have been open at least a year. At the core of their struggles, QZ reports, is that Foot Locker is far too reliant on Nike products—and not the right ones, either.
Some have blamed the increasing e-commerce market for the decline of these more traditional retailers—with particular ire reserved for Amazon, which seems hell bent on automating the shopping experience. But e-comm still only accounts for 8.9% of overall sales in retail (according a recent report by the U.S. Department of Commerce). Additionally, with fast-fashion stores like Zara, H&M, and Uniqlo all currently flourishing, it’s hard to point the finger squarely at the “Buy Now” button.
Rather, consumer tastes seem to be the main culprit for the decline—and Foot Locker hasn’t changed enough to keep pace. In Foot Locker CEO Richard Johnson’s view, “the limited availability of innovative new products”—or the kind of extra-limited sneakers we all love—is also behind the company’s underwhelming sales figures. In other words, the fact that everyone is clamoring buy sneakers that are only available in small quantities is directly at odds with Foot Locker’s need to sell sneakers to the masses.
Additionally, Foot Locker seems dangerously reliant on Nike products for its success. Per QZ, a staggering 68% of products Foot Locker put in its stores in 2016 were Nike products—all at a time when Nike is having its own woes selling the kinds of basketball and running sneakers people usually buy at Foot Locker. According to NPD analyst Matt Powell, Nike’s overall sales of sporting goods merchandise (which also includes apparel) were down a massive 25% in the second quarter of 2017. Additionally, over the past 12 months, Nike’s stock price has dropped from $60.22 to $53.61.
While Foot Locker is living and dying by the Swoosh, Adidas has been red hot. Its market share of athletic footwear—aka sneakers—is now up to 11.3% in the United States (up from around 6% in May 2016), a trend that’s largely attributed to shoes like the Adidas Superstar, which was the best selling sneaker of 2016), and its NMD collection, which has helped Adidas gain footing in the market with younger customers.
It’s not quite this simple, but if Foot Locker wants to stop the bleeding, they might want to consider phasing out Nike basketball sneakers and swapping in more of the casual Adidas kicks people are loving right now—provided, of course, the kids stay hyped on the Three Stripes.
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