By Jawad Abbas, Staff Writer
The shoe industry is well regarded as one of the most lucrative markets worldwide. “In 2020, the global footwear market was estimated to be worth over 365 billion U.S. dollars.” One of the biggest retailers in the footwear market is Foot Locker, who suffered a fatal blow when CEO, Richard Johnson, announced in an earnings call that “Nike, one of Foot Locker’s suppliers, is moving to a direct digital selling strategy, limiting [Foot Locker] sales to 55%.” Undoubtedly, this news has scared off investors and saw the stock price fall by almost 30% on March 25, 2022.
Nike is the most valuable footwear company and has been slowly shifting towards a direct digital selling strategy over the past decade and has found tremendous success by doing so. The emergence of sneaker culture to the mainstream is what catapulted Nike’s success in the digital space. Sneaker fanatics have been buying up limited sneakers and reselling them at absurd prices. Companies such as StockX, eBay, and GOAT have been previously cited as the kingpins of the sneaker market, where sneaker fanatics can sell and purchase their favourite pair of trainers. Inevitably, the sneaker resell space was met with a ton of controversy. There were many consumers who would simply wish to purchase limited sneakers form retailers like Nike, and immediately flip them for a profit, instead of allowing sneakerheads to purchase the shoes at more affordable, retail prices.
It was not only regular consumers who became involved with the sneaker resell business. Nike’s Ex-VP Ann Hebert was pressured to resign from the company when news broke that her son started his own sneaker business, West Coast Streetwear, where he would upmark and resell Nike products, boasting a whopping $200,000 in monthly revenue. With Nike’s own employees (allegedly) preventing consumers from purchasing already limited sneakers, the company faced a great deal of backlash, and thus saw Ann Hebert resign from her position.
As for Foot Locker, losing the biggest footwear company in the world is terrible news for the sneaker retailer. Reports found that “Nike represented 70% of Foot Locker’s business in 2021 and 75% in 2020.” The situation may only worsen as Nike proceeds to come out with new alternatives for shopping for limited sneakers. In 2015, Nike launched its SNKRS
app in 2015 as a way to give consumers access to the latest and most sought-after sneaker drops. The app came equipped with a raffle, where buyers would be randomly selected to purchase limited sneakers if they were selected. Currently the app is only available in the United States, but Nike has previously stated its intention to introduce the app in Canada and select countries throughout Europe. Similar to Nike, Adidas launched its own CONFIRMED app in 2020, where consumers would enter a raffle to potentially have a chance to purchase limited sneakers. With Adidas fully intent on also enhancing its direct digital selling strategy, is it only a matter of time before Adidas, and potentially other sneaker giants, cut out Foot Locker as well?
Another potential danger for Foot Locker to look out for is how the sneaker giants plan to cater their businesses towards Web 3.0. Nike and Adidas have already come out with NFT projects and may even transition over to the Metaverse in the future as another alternative to go direct-to-consumer instead of selling through third party retailers such as Foot Locker.
Regardless of the recent downturn surrounding Foot Locker’s business going forward, the success of the footwear industry will not allow Foot Locker to simply fade away. However, this obstacle does present Foot Locker with a great deal of thinking as to what is next for the retailer going forward.
Photo by Lennart Uecker on Unsplash
FINANCIAL MARAUDER 