The supply disruptions caused by the Covid-19 pandemic are pushing up footwear prices in the U.S. as consumer spending picks up with the reopening of the economy.
Large brands are also coming out of the pandemic stronger than their smaller rivals and are ready to engage into acquisitions, which will result in a consolidation of the footwear industry. Meanwhile, there is growing consumer pressure for sustainable products which could result in changes in the supply chain, according to the panelists of a conference organized by the Italian trade fair Expo Riva Schuh, which focused on exploring the main trends in the sector.
The industry is expected to enjoy a sharp rebound in the U.S. and in Europe thanks to an anticipated economic recovery driven by stimulus measures introduced to lift demand after consumer spending declined due to Covid-related lockdowns.
The American footwear sector has already registered record spending in April after a strong surge in March. “We’ve pretty much recouped what we lost last year from a spending perspective,” said Matt Priest, president and CEO at Footwear Distributors and Retailers of America (FDRA). The upward trend is likely to continue in 2022, he added.
The ongoing recovery is however creating an imbalance between supply and demand, which is putting pressure on inventories. “Through the first five months of the year we’re not rebounding fast enough on the imports side, or supply side, to recoup the damage done last year. The demand side will remain higher than supply, and tight inventories will likely persist in footwear,” said Gary Raines, chief economist of FDRA.
This is bound to drive footwear prices higher later this year, he added. “We can expect a really aggressive shopping season. This combination of factors with too much demand and too little supply is likely to keep footwear prices elevated for the foreseeable future.” The latest numbers from 2021 showed the fastest year-on-year increase in footwear prices in 33 years in the U.S., Raines said.
Another challenge with respect to the American market is posed by rising duties weighing on footwear imports. “For a number of years recently, U.S. trade policy has changed dramatically, adding import duties to footwear,” Priest said.
Despite an enhanced focus on domestic manufacturing, “at least for the time being, to meet the needs of our 330 million citizens in the U.S., the production hubs” will continue to be in South East Asia and in the Far East, Priest said. “Nearshoring is not necessarily something that is top of mind for us. Top of mind for us is sustainability, that may or may not include nearshoring,” he added.
Further issues impacting the sector are higher material costs and a rise in shipping costs. “Transpacific container rates climbed again to near-term highs. These prices are likely to continue higher deep into 2021,” Raines said.
With respect to materials prices, leather prices “are now starting to take radical increases” after having been stable for a long time, said Robert Hiley, head of production partnerships at Ecco Shoes.
Consolidation and acquisitions are also among the main trends in the sector. “Bigger brands are gaining more strength. We are going to see more and more consolidation of big companies and acquisitions. I see that as a trend going forward. The big companies have more and more power to grow and they’re looking at acquisitions,” Hiley said.
Also, companies will need to focus on a sourcing strategy that is innovative and sustainable, said Ellen Schmidt-Devlin, member of the Expo Riva Schuh Scientific Committee. “The consumer is the one who decides for us, he’s the one we respond to - for instance regarding at which speed the product should be made available, or they could tell us they want a transparent supply chain.”