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Licensed footwear steps it up

After nearly a decade of price-point decline in tandem with a production shift to low-cost factories in Asia-Pacific and a bigger retail demand for discount shoes at mass, the US$6.5-billion children's footwear category in the US is about to switch gears. Shoe manufacturers across the board are lifting their prices from anywhere between 5% and 15%, and lurking behind the hike is an all-too-familiar litany of factors. Higher fuel and material costs, a weak US dollar and rising labor costs in China are at the root of it, but it doesn't help that footwear manufacturing has traditionally been one of the lowest-paid labor opportunities in the region, meaning worker retention is lower to begin with.
August 1, 2008

After nearly a decade of price-point decline in tandem with a production shift to low-cost factories in Asia-Pacific and a bigger retail demand for discount shoes at mass, the US$6.5-billion children’s footwear category in the US is about to switch gears. Shoe manufacturers across the board are lifting their prices from anywhere between 5% and 15%, and lurking behind the hike is an all-too-familiar litany of factors. Higher fuel and material costs, a weak US dollar and rising labor costs in China are at the root of it, but it doesn’t help that footwear manufacturing has traditionally been one of the lowest-paid labor opportunities in the region, meaning worker retention is lower to begin with.

With retailers already grappling with a downturn in consumer spending, manufacturers specializing in adult shoes are naturally nervous that price increases will further discourage spending on footwear, leading to profit-shrinking price reductions to move merchandise off of shelves. But kids shoe-makers – and especially those with licensing portfolios – may be able to weather the storm better.

Marshal Cohen, chief retail analyst for the NPD Group, asserts that this subset of the wider footwear category is less likely to be dramatically affected by the spending slowdown because kids cycle through shoe sizes so frequently. ‘The younger market outgrows footwear faster than they can ever outwear it, so it’s always going to be an area where you need new product,’ he says. Cohen adds that licensed footwear has the unique ability to stand out on a crowded shelf and make an instant connection with the kid consumer.

But if prices are going up, parents forking out more cash for new shoes every four to six months are going to be looking for product value to keep pace. So most kids footwear licensees are pushing their R&D teams harder to come up with innovations that make their lines an attractive proposition at any price. And creative licensing applications are crucially important in the current climate.

Disney Consumer Products footwear director Rob Michaelis singles out Crocs for having done a particularly good job of embodying Disney/Pixar feature WALL-E on its shoe line featuring an outsole tread pattern that matches the star robot’s actual belt tread.

Buster Brown has also put a lot more effort into product innovation lately, and the result is its EVA line of Croc-like molded shoes made of expanded rubber. Todd Murray, Brown Shoe Company’s director of children’s brands and licenses, calls them ‘toys for the feet,’ and says he’s continually looking for hot licenses to showcase their play value. One design in the range, for example, is a shoe that looks like a car. And with its Mattel license, Buster Brown has delivered a SKU that’s shaped like Barbie’s pink convertible, with the doll icon appearing in the window as if she’s driving the vehicle.

The New York-based company has also patented its Toe Zone technology that allows moms to quickly figure out the right shoe size for their child and monitor foot growth. Three color bars are printed on the outsole of the shoe, and when a child’s foot is lined up against the outsole, it will fall somewhere between Too Big, Too Small and Toe Zone, which indicates a perfect fit. Just last month, Fisher-Price licensed the technology for a line of ‘Fit Zone’ branded kids footwear due out in spring 2009. The boys and girls collection for pre-walkers and toddlers will include SKUs that span athletics, casuals, boots, slippers, sandals and beachwear.

With Disney’s Hannah Montana and High School Musical leading the way, tween properties seem to be generating the most licensing heat in the kids footwear category in the US and Europe right now. Boca Raton, Florida-based BBC International is having its best sales year ever, thanks to owning the rights to these mega-hits and targeting each retail channel with a unique packaging and pricing proposition. But footwear manufacturers have to be on their toes to keep up with this fast-moving, fashion-savvy demographic, so BBC and DCP are gearing up to roll out a light-up shoelace program that will complement the high energy of High School Musical and support low-profile athletic and skate shoes when it rolls out at Wal-Mart this fall.

DCP’s Michaelis has one more key initiative in the offing that he says hasn’t been tried before with an entertainment license in the footwear category. Come early 2009, DCP and direct-to-retail partner Payless will start incorporating the benefits and features of branded athletic shoes (i.e. thicker sock liners, gel pads in the heels) into a new line of Mickey Mouse Clubhouse, My Friends Tigger & Pooh and Little Einsteins kicks. The range will have higher SRPs than other Disney shoe lines, but should still market for less than branded footwear like Nike and New Balance. And Michaelis says the products’ higher value should put them on the same playing field as these dominant athletic brands, which may open up new distribution channels.

For licensors like DCP, footwear business is actually handled by an apparel and accessories team because shoes are considered part of an outfit. Echoing this MO, when Belgium-based licensed kids footwear player Leomil created a Leomil Fashion brand of its own a few years ago, it presented shoes and apparel together to retailers and licensors. This strategy, says CEO Albert Milhado, resulted in retailers making dual purchases and merchandising the SKUs as sets. Consumers followed their lead, and sales increased by 10%.

Milhado sees the licensed kids footwear category growing steadily every year in Europe, with the UK and France posting the highest sales, followed by German-speaking countries. Licensees and licensors have also helped improve the in-store profile of kids shoes lately with branded boutiques at shoe retailers featuring display materials to draw kid consumers in.

If a child is attracted to a box, Milhado says he’s already halfway to buying it, so Leomil has also jazzed up its packaging with collectible cut-outs and games. With Bob the Builder shoeboxes, for example, kids can cut out Bob’s tools to play with.

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