A rise comes before a fall
After a promising 2022 the shoe industry had some expectations that 2023 would not be as buoyant.
This is proving to be true. Global predictions had to take into account that inflation was a wide-ranging problem, the Ukraine-Russia war saw little possibility of a quick solution, energy supplies were consequently affected and so on. What was not predicted was the situation with Gaza and Israel causing further uncertainty towards the end of the year. Companies that had struggled through the pandemic had to make the most of the 2022 rebound. Not all could, however, with supply problems and consumer purchasing power restricted by cost-of-living increases. Clarks in the UK was one company in particular that was bedevilled by supply problems.
The two main axes for the shoe industry remain the USA, as the most important consumer market, and China, as the most important producer. China, for so long showing strong growth each year, suddenly started to see lower levels of growth which would also have ‘knock-on’ effects for other countries. In 2022 it barely amounted to 3%. The predictions for 2023 were around 5.1%. In the ‘good old days’ it would have been around 9%.
Loss of volume
The US domestic market is also a pivotal factor in the global shoe sector. Prospects (at the time of writing) were not auspicious. In the period January to September (nine months) footwear imports into the US market were down 40.5% which equates to a loss of 576.1 million pairs. This loss in volume terms can be clearly seen in the results of the two leading volume shoe exporters to the USA: China and Vietnam. China delivered 831.4 million pairs which, when set against the corresponding period in 2022, was a loss of 305.3 million pairs or 26.8%. Vietnam also had poor results, seeing its exports to the USA down by 29% or 146.1 million pairs.
These two together saw their exports down by 451.4 million out of the total US fall of 576.1 million pairs (over 78% of the total loss). Of course, both supplier countries have experienced problems in the last two years with covid closures.
This, added to reduced US domestic demand for footwear, has set the agenda for the global situation. This rather gloomy picture can also be seen reflected in the performance of some of the leading players such as Nike, adidas and Pou Chen.
Problems for brands
Nike’s interim results in 2023/2024 were causing some concerns, particularly with profits falling and reduced demand on the retail site Stock X with a premium of less than $10 (over $100 at one time) and the latest Air Jordans possibly losing steam. Nike is often viewed as a ‘bellwether’ for the US economy and there was some concern that US consumers were cutting back. Adidas also had a rocky road to circumnavigate in 2023 due to a parting of the ways with Yeezee (Ye), the rap singer formerly known as Kanye West. Ties were cut in October 2022 after his antisemitic remarks and other issues. Stock to the value of $1.3 billion of unsold Yeezy’s sneakers presented a bottom line problem but the company donated stocks to groups fighting the issue. An operating loss of $494 million was quoted.
Advancing technologies
Talking of adidas and Nike also leads to the question of ‘shaving seconds or even minutes off race events’ with ever advancing technological developments in the sport shoe industry. The official World Athletics wording ‘Shoes must not be constituted so as to give athletes any unfair assistance or advantage’ is now under pressure similar to VAR in soccer. Marathon races (excluding the later-in-the-year New York Marathon) were dominated by Nike, in particular, followed by adidas with other shoes by On, Xtep, Asics and Anta, having to take more of a back seat by and large, although still contributing to Marathon results.
The Nike Alphafly, Vaporfly and the adidas Adios Pro 3 and Adizero have revolutionised running performances. Perhaps a more apt comparison is with Formula One car technology. How far should performance be reliant on technology (if at all)? As far as the footwear industry is concerned, comparisons with space flight may be permitted, in that advances in technology (especially by Nasa) assist with raising, for example, the performance of all footwear in terms of comfort, lightness, durability, fit, safety, resistance to slip and other factors.
Self sufficiecy
Other emerging trends in 2023 may include a settling down after covid, a rethink about self-sufficiency of nations following concerns about deliveries of energy, food and shoes, supply chain integration, take-overs, climate change, sustainability and a move to slow down the seemingly relentless slide to online from bricks and mortar retailing. Covid (albeit it may still be with us) in fact brought in some new factors. These included working at home which may well have affected the use of footwear. Slippers or indoor footwear up – outdoor use of footwear down. Although running parallel (pun intended) was the rise in outdoor sport activities to keep fit. Whilst there are no meaningful statistics to quantify this, there is, undoubtedly, more working at home overall.
Self sufficiency for nations has not really affected the shoe industry in general. Attempts to bring back some production has not worked in the UK. Clarks and Airwear attempted some relatively small-scale local production but results have been modest or negative. Similarly, with adidas and its attempts at automated factory production in Germany and the US. Supply chain integration and takeovers have seen fairly isolated instances although the buying up of brand names without the physical assets has seemingly been more widespread. The company Next in the UK is one example of this.
The question of online or ‘bricks and mortar’ retailing has been more interesting. Covid saw sharp rises in on-line purchases. Moves to digitalise transactions and cut out the human element have, however, met with some resistance. This may be temporary as the present older generation was not brought up with IT and is probably the last generation where that will apply. However, at present, moves to reduce or remove completely human assistants in supermarkets or at railway stations have met stiff resistance. Some retailers have even spoken about opening more stores, as for example White Stuff in the UK and Germany.
Military conflicts
The World Shoe Review by the author has attempted to indicate the levels of online shoe sales (as well as other channels) for each country and it will be interesting to see how those levels progress in the next few years. Another factor in 2023, of course, has been the war situations in the Ukraine and, more recently, Israel/Gaza. What have been the effects of these scenes of conflict for the shoe industry?
Firstly, the shoe production in the Ukraine will have been affected. Sales of footwear and materials/components to Russia (and vice versa) will have fallen. Military and safety footwear (locally but more so from allies) will have increased. Fashion footwear demand will have fallen and sanctions on Russia will have reduced exports to it and reduced consumer demand. As far as Israel and the area in general are concerned, both have footwear industries. Again, destruction of factories is likely but information is scarce at the time of writing.
So, 2023 has been a year of retraction, becoming more so as the year progressed. The saving grace for footwear has been the ubiquitous sneaker/athleisure trend but that appears to be showing a slight slowdown as is streetwear. What might replace them?
China’s exports to the USA fell dramatically in 2022.
CREDIT: SHUTTERSTOCK/ALEXANDER GAFARRO
