Online Shoes Taking Big Steps
By Tom Ryan
Shoes were supposed to be one of those categories that wouldn’t sell on the web. The primarily hurdle was fit – the product had to be tried on and, in most cases, an experienced sales person was necessary to close the purchase. Plus, the shipping costs for returns for bad fits would be astronomical.
For a while the pundits were right as items like computers, books, music, toys and apparel drove e-commerce sales. But online shoe shopping now appears to be taking off.
In 2002, online footwear sales, at $954 million, were about one-fifth the
size of the $4.4 billion online apparel business, according to Forrester Research.
Last year, footwear surged to $2.9 billion, or about one-third the size of
the $9.6 billion sold in apparel. Looking ahead, online shoe sales are projected
to increase 22 percent in 2007 versus an 18 percent projected gain in apparel
and a 12 percent increase in overall online retail sales.
In a sign of how popular online shopping has become, two of the largest online shoes stores – Zappos.com and Shoebuy.com, both pioneers from the late 1990s – are attracting investor interest.
At the same time, plenty of brick-and-mortar retailers, including Nordstrom, Nine West and Brown Shoe’s Shoes.com, are crowding the field. And online shoes stores have recently been launched by the Gap (Piperlime.com) and Amazon.com (Endless.com).
Some feel footwear had its e-commerce breakout only after cyber shoppers grew accustomed to buying apparel over the web. Apparel was another category many had said would be a tough sell because women like browsing the malls and would have to try on or at least ‘touch and feel’ the product before buying.
“Apparel was the big behemoth,” Catherine Beaudoin, senior vice president and general manager of Piperlime, told the Chicago Tribune. “It’s falling like dominoes. Shoes are probably one of the last bastions because the feeling has been you have to try on shoes to feel comfortable.”
The online shoe shopping experience has been enhanced by improved navigation, multiple product views, and even enabling customer reviews. But just as any old shoe salesman would tell you, customer service is critical to the category – even online. Since fit is so key to shoe sales, online shoe stores have traditionally offered free shipping and free returns – an expensive but necessary cost of doing business.
Some are taking service a step further. The model appears to be Zappos.com, which believes an early decision to invest in customer service rather than advertising has been a key to its success. The largest internet-only footwear company, with sales of $597 million last year, employs an army of 250 customer service representatives to staff its call center in Nevada 24 hours a day, seven days a week. It also maintains an inventory of about 3 million pairs of shoes to avoid disappointing customers due to stock outs.
These efforts by Zappos and others are helping consumers overcome any apprehensions over online shoe buying by making it easy to try on different pairs and return the ones they didn’t like.
“Consumers are just more comfortable with it,” Marshal Cohen, an analyst at NPD Group, told Scripps News.
Discussion questions: How far will can online footwear sales go? What challenges does this present for traditional brick & mortar footwear retailers?
Yes, the dominoes are falling. But will online sales grow to the sky? No, they’ll plateau eventually. E-commerce sales will continue to grow at a double-digit pace for the rest of the decade, reaching 4.3% of total sales by 2010 (Global Insight). But the rate of year-over-year growth will likely decline from 24% last year (Jupiter Research), to 20% this year (Cowen & Co.), to below 10% by 2011.
The reason? The industry is maturing; most of the people who are going to spend money online are already logged on and shopping. There are no new fish coming into the pond (or, at least, rates of population and consumer growth are declining).
But the influence of the Web on retail sales will continue to grow this year, next year, and every year beyond. That is because use of the Internet for pre-shopping, comparison shopping, browsing and choosing a store destination is growing more important, not less, even (or especially) if the purchase is not completed online.
Therefore, even though online sales will eventually plateau, retailers need to integrate their in-store and online environments to drive traffic, provide consistent service and customer experience, get a unified view of markets and merchandise, and to increase sales, profits, market share and stock price.
Online retailing is here to stay in footwear, just as it is in most other product categories. Zappo’s, in particular, has done a great job of emphasizing service and they do a great job managing the experience. What I struggle with in shopping online–and in catalogs for that matter–is what to do when you are considering a new brand you have not worn before. Fit is what all footwear manufacturers struggle with more than anything else, and it is very inconsistent across brands. Despite the free shipping and easy returns, it still seems inconvenient to deal with the hassle. Not sure how the broad audience of shoppers feel about this, but I know fit is important, so that makes me lean toward this channel growing more slowly over time.
The shoe industry is yet one more example of a business where the meaning of service and convenience has been entirely redefined by the internet. Historically, service in the footwear industry meant good selection, friendly and efficient staff, the ability to walk in the shoes before purchase, enough speed that the kids don’t break anything in the store, and the chance to return the shoes as long as they weren’t worn outside. Zappo’s changed that game. Convenience online now means ordering 20 pairs of brown shoes without guilt, the chance to try them on with the desired outfits in the privacy of our own closets, knowing exactly what is in stock, shopping 24/7, and returning what doesn’t work without returns charges or that sneer from a sales person who’s trying to keep the sale.
Many other industries are seeing the same surprise redefinition of service. Who would have predicted that online pharmacy would be not only cheaper than bricks & mortar but easier, faster and driving greater patience compliance and elevated standards of care? Or that online cosmetics sales is creating a level of personalization previously only possible at the high end of the market? Then there is the make your own jeans phenomenon that terrifies many of us 40 somethings but is teaching a new generation of teenage shoppers that what matters is customization, flexibility, speed, creativity at a decent price, available on a reliable timetable.
What does this mean for retailers?
First, a huge need to really understand what matters to shoppers. What are their trip drivers and purchase motivators? What causes them to walk away or maybe worse buy once but not return? What are the hidden dissatisfiers behind the purchase?
Second, a mandate to get more creative and predict ways to anticipate trends and technology that can change the game. There is no one answer to predicting the future. All likely scenarios should be explored in a war-gaming fashion involving all functions and levels of the organization. Those 17 year old clerks who are working for the employee discount might just be the best source of ideas.
Lastly, know the weaknesses of the online operators and figure out how to exploit them. What can only be done in store and how can that become something you can do better than anyone else–in stores or via websites?
The success of online shoe retailing is one of the many delights of the quickly changing state of direct marketing. It says more about the failures of the conventional shoe retailers than anything else.
How many times have you selected a style at a local shoe store, only to find it out of stock in your size? The sales clerk dutifully comes out of the back room with three other boxes for you to try. But they are not what you want.
How many times have you go to replace your favorite pair of moccasins, loafers, or running shoes, only to find that that your model has been discontinued? Again, three suitable substitutes are presented. But they are not your favorites.
Shoe retailing has been stocking its stores with size run pre-packs for decades. The size runs are based on rates of sale, not considering all the folks that walked out of the store because they were out of stock. Over time, it is a recipe for business failure.
Into this big void steps Zappo’s and Nordstrom’s web sites and their imitators, serving the consumer that needs shoes in their size.
I admit to having used Zappo’s and also admit that on one pair of shoes, I “guessed” wrong on my size for the style that I ordered. But, what a painless experience it was to return and reorder and the entire experience just reinforced my desire to stay as a customer. I guess I could have gone to brick and mortar, waited for a sales person, or hunted for my size, which for some reason always seems hard to find, then waited on line at the checkout.
Zappo’s, for example, just made me feel that they were there to solve my problem and offer solutions for my shoe of choice; good businesses always seem to grow.
I see several lessons here:
1. No one can predict the future, not even industry analysts and experts. “Online shoe sales will never work.” “Apple Computer is dead.” “The PDA will be the next telephone.” Etc. But oh, how we love to try to predict the future! Maybe trying to makes us look like we can?
2. Many shoes are no longer made/sized with the specificity they once were. Some dress shoes still are true to “9 and a half B,” but casual shoes said to be a “9” are sometimes up to a full size off in either direction; also, they may be simply “wide,” which could be a C, D, or even E. Personally, I can fit in shoes with a number of different sizes, and with an insert here or there, get a great fit.
3. Even if we are industry experts, consumers in that industry may not feel the way we do. We may hate or love online shoe sales, or any other thing, but that doesn’t mean we speak for the average consumer in that industry. Data is the key, not personal feelings.
4. If you like a shoe and have worn it before, you can often get it so much cheaper and easier online. You know your size, and you have the choice of all the colors and styles.
Perhaps the biggest consumer “win” is the access to extended sizes. (One of the other commentators mentioned the traditional “size runs” used by many shoe manufacturers shipping to bricks-and-mortar retailers, which leave many customers disappointed.) There is a well-documented trend toward larger sizes in women’s shoes especially among the generation of shoppers most comfortable with online shopping. As long as the online shoe retailers master the challenges of no-hassle return–which should not be rocket science today–there is a lot of upside here.
With this unprecedented growth in shoe sales online, we should understand the brands’ products being sold by their manufacturers and the private sale of shoes through a number of other avenues. Given this, it is noted that such corporations like Nike have their own web sites as do their competitors. And we find the upscale shoes–Johnston-Murphy, Cole Haan and their competitors also have web sites.
Interestingly, in the past, web sites were used to see what is new and the product benefit(s) comparison vs. competition; followed by price.
So one then asks, do these shoe sales include sales from the department stores and other type outlets? One might speculate, these sales are more privately sold e.g.: eBay; and through factory outlets. Maybe even the less expensive shoes–like sneakers–through discounters!
Details of these shoe sales would be pertinent! Hmmmmmmmmmm
My points on this one are speculative as I have no answers to evidence but British people have been accustomed to catalogue shopping for a very long time and often don’t mind the need to occasionally return merchandise that isn’t quite right. What I don’t know, and would be interested in finding out, is whether the same people who have been shopping by catalogue are now shopping online. My hunch is that they are not, that we are talking about a different batch of people, economically and technologically. There will always be some people who will buy whatever they can online and not mind having to occasionally return but shoes are a category that I still do not envision having a huge market. Apart from anything else, the post office over here is closing outlets left, right and centre, making returns much more tedious and time consuming.
Zappos and other online shoe retailers can afford free freight, excellent customer service, and the high cost of acquiring new customers because their margins are decent. Shoe manufacturers don’t like to sell to deep discounters. They protect their full-line retailers. If shoe retail margins were as low as electronics or appliances or toys, none of the online shoe retailers could ever make any money.
I am still undecided about where I see the e-footwear industry going. On the one hand, consumers are getting used to trusting the online world for a good chunk of its products and services. On the other hand, I just don’t see myself buying shoes with “kicking the tires” a bit. Even with the promise of free returns, seems like more of a hassle than anything else.
Unless a consumer is absolutely, 100% sure of their foot size, I just don’t see the viability of the model as a whole.
Online shoes sales will grow as much as the traditional shoe retailer allows it to grow. Shoe buying, especially for females, is still viewed as a shopping experience that is enjoyed by women. The challenge is for the retailer to provide their customers with the shopping experience that is impossible to get online. Retail stores, as much as they try, will never be able to provide the consumer with availability of sizes the internet can, which means they have to make the shopping experience their point of difference.