How should Mary Dillon reimagine Foot Locker?

Discussion
Photo: Foot Locker
Nov 22, 2022

In her first quarterly analyst call as Foot Locker’s CEO, Mary Dillon, who led Ulta Beauty for eight years, said she sees many parallels between sneakers and the beauty category when it comes to supporting growth, but also sees a bigger opportunity for Foot Locker to drive consumer demand.

“Much like beauty, [the] sneaker category is driven by passionate enthusiasts who are deeply engaged in the category, products that allow for individual expressions that are fun to shop for, and where newness and innovation matters,” said Ms. Dillon on the call. ”Also, sneakers are affordable luxury.”

Global casualization trends have been a major tailwind for the sneaker category.

Like beauty, sneaker buyers demand “choice and variety” and Foot Locker’s efforts to accelerate brand diversification will continue. In February, Foot Locker announced that Nike’s portion of Foot Locker’s sales would decline to about 55 percent by the fourth quarter of 2022 — down from approximately 65 percent in the 2021 fourth quarter and 75 percent overall for 2020 — due to Nike’s shift toward direct-to-consumer sales.

Ms. Dillon said Nike remains a “very important” partner and supports basketball, sneaker culture and kids categories. However, she noted that 80 percent of Foot Locker’s best customers already buy three or more brands. Amplified assortments of Adidas, Puma, Crocs, Converse, New Balance, Ugg, On and Hoka are also attracting new customers.

One hurdle will be overcoming the loss of traffic-driving signature launches as Nike is providing less “high heat” allocation and Adidas has ended its Yeezy collaboration with Kanye West. However, Foot Locker’s brand diversification efforts are designed to bring more innovation to selling floors and making the retailer less reliant on the launch calendar.

Opportunities Ms. Dillon sees include shifting its go-to-market approach “in many ways from being product-led to consumer-led.” Steps include adding more value-elevated engagement with its FLX loyalty program, tapping data analytics to amplify digital marketing efforts and better capitalizing on its omnichannel reach.

Ms. Dillon said the aim is to tap tools to “create a demand engine that’s bigger than just the products that we sell.”

DISCUSSION QUESTIONS: Do you see more benefits than drawbacks from Foot Locker adopting more of a “consumer-led” than “product-led” approach? What strengths should Mary Dillon look to build on as CEO of Foot Locker?

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"The question is how the consumers think about the product and if they need the expertise that Foot Locker can offer that trumps online purchasing."

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14 Comments on "How should Mary Dillon reimagine Foot Locker?"


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Mark Ryski
BrainTrust

Effective, proven leaders like Mary Dillon are exceptional at finding the direction. Shifting focus to being “consumer-led” may seem obvious, but to make it a strategic direction is a wise move. While it may have seemed at first that the choice of Mary Dillon at Foot Locker was a head-scratcher, it seems like a smart move now. Dillon’s focus on the customer is spot-on and her proven ability to deliver results will be well received by Foot Locker shareholders, customers and employees.

Lee Peterson
BrainTrust

Imagine Foot Locker a LOT hipper. I.e.: dump the referee shirts and start thinking Sneakerhead Capital of Earth: better music, different store design (the whole “athlete” thing is covered quite nicely by Dick’s), become more urban in every way, including using technology and social media in advertising as well as ship to home. The concept is tired. The product is not. Lead with the zeitgeist of the product and its main consumer and become an actual experience rather than slat walls of brands that you’re an obvious middle-man for. What a great opportunity to re-invent something that’s been exactly the same for as long as I can remember. Go for it, Mary. What’s the worst that can happen? You get sacked and get a better job.

Liza Amlani
BrainTrust

Absolutely Lee! Furthermore, the Foot Locker experience needs to be consistent and localized to the community they are serving. Removing archaic hierarchies of stores (think A/Flagships, B, C, and D doors) will drive better merchandising strategies across regions. Shifting from product-led to consumer-led is so much more than marketing. It’s driving the right product at the right time and in the right channel.

DeAnn Campbell
BrainTrust

Foot Locker was already on a strong consumer trajectory with their community centric “Power Store” format that brought in local artisans and product designers unique to each community. Mary Dillon’s biggest challenge will be to make this community format more scalable, since researching every community to find those local unpolished diamonds and teaching them how to produce and manage unique product lines is very time consuming. Ms. Dillon’s work on Ulta’s “Sparked” program highlighting new cosmetic lines will be very helpful in evolving Foot Locker’s presence, and the importance of viewing every customer as uniquely beautiful in their own way should align her thinking nicely with the individuality of Gen Z shoppers.

Richard Hernandez
BrainTrust

Consumer-led is the right direction to go but it is also morphing into something else. When I was younger, Foot Locker used to sell exclusively sneakers. Now it is a sneaker-and company — a shoe store. I hope the change in management can change the course of the retailer so it can survive into the future.

Jeff Sward
BrainTrust

And here I thought pretty much all of retail was consumer-led. Products solve wants and needs and problems. Even the most innovative new product is solving wants and needs the consumer didn’t know they had. (I’m pretty sure that’s from Steve Jobs.)

And I love the approach about developing tools to “create a demand engine that’s bigger than just the products that we sell.” Sounds like a great definition of experiential retail. Explore + Experiment + Execution = Experience³

Gene Detroyer
BrainTrust

Once upon a time, I went to Foot Locker. It had a vast selection and a staff that knew everything about sneakers. It was a “go-to” place. But that was before online shopping, and I haven’t been there since.

With about 75 percent of shoe purchases done online, Ms. Dillon doesn’t have a choice. Foot Locker must find a reason for being, and it can’t be because they sell brands easily found online. The challenge will be significant. The question is how the consumers think about the product and if they need the expertise that Foot Locker can offer that trumps online purchasing.

Liza Amlani
BrainTrust

Product assortments should be consumer-led. There is no question about it. Product-led assortments and merchandising strategies don’t leverage consumer insights to drive better decisions across product and marketing.

The challenge is that many retailers claim that they are consumer-centric but when you dig deep into process across merchandising, this is never the case. Eliminating silos across banners and low performing SKUs and categories should be a priority for Foot Locker. Seamless integration across banners will also significantly reduce many of the inefficiencies in the go-to-market process for the retailer — which will allow Foot Locker to truly be consumer-led. Leveraging data and analytics to be more focused on what the consumer truly wants, from product to experiences, will bring Foot Locker success. It’s the only way a retailer should operate today.

Lucille DeHart
BrainTrust

I support the product-led approach for footwear over consumer-led. So much of the hype is driven by the launches, limited availability (or perception of) and perceived status. While no retailer or brand can succeed without consumer consideration, the pivot here will be fundamental. The real opportunity is to re-engage the female consumer into this market. It has become male dominated and needs to create a path for other segments.

Michael La Kier
BrainTrust

Retail is more than just products; experience matters. The best retailers understand the importance of understanding their consumers. The best retailers dive deep to learn who their customers are, what’s important to them, and how they buy.

David Spear
BrainTrust

Ms. Dillon is on the right path with a “consumer-led” approach. Using all of the tools at her disposal, especially data and analytics, will serve her well, enabling the team at Foot Locker to uncover new insights they’ve never seen before and pull them back into the decision-making process. I’m speculating here, but I’m guessing her beauty background will spawn some pretty cool, new store design, new in-store experiences and new consumer loyalty programs. This will be essential to support her consumer-first approach.

Cathy Hotka
BrainTrust

What a delight to have Mary Dillon on board at Foot Locker. She’s right that sneakerheads have an enthusiasm for shoes that’s unlike other apparel items. She’s going to bring a new enthusiasm to the company and make big noise.

Craig Sundstrom
Guest

I think she did an excellent job of making a stomach punch — Nike’s sales hoarding — seem more like a glancing blow; I can almost believe it won’t hurt. Almost. But the mention of increasing reliance on Adidas — kind of an “out of the frying pan…” moment — makes the point that for all the “customer centric” talk, those customers still buy brands, not commodities. Foot Locker’s task is to make sure they sell enough brands to ensure diversity for customers, but also enough of each that they have leverage with manufacturers.

Anil Patel
BrainTrust

Is it possible to shift from a “product-led” to a “consumer-led” approach by:

1. Implementing a loyalty program

2. Tracking data analytics

3. Enhancing omnichannel initiatives

I’m quite confused. Isn’t Foot Locker already offering all these three initiatives? Would trying and tweaking them a bit be enough in bringing a major change?

I don’t believe so. With Nike going D2C, and Adidas ending its partnership with Yeezy, there has been a lot going on. Moreover, marketplaces are slowly losing their appeal as many brands are reframing their strategic framework and establishing a direct relationships with their customers. So, we will have to wait and watch what repercussions the situation will have for Foot Locker.

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"The question is how the consumers think about the product and if they need the expertise that Foot Locker can offer that trumps online purchasing."

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