Drapers speaks to UK and international footwear retailers about the most significant changes shaping the sector in 2023, from supply chain struggles to bestselling styles. [Sole survivors: how the footwear market is stepping up to new ... - Drapers]
The footwear industry has had quite a journey over the last three years: from lockdown restrictions and slumping sales in 2020/21, to the resurgence of formal shoes in 2022 amid the return of social events and occasions such as weddings. Covid lockdowns extended lead times for products manufactured in China or India, prompting UK and Europe-based brands to source closer to their main markets. Meanwhile, Brexit continues to dent international sales.
Despite this, footwear continues to be a lucrative opportunity for larger retailers with wider category offerings, including JD Sports and Marks & Spencer. Shoes accounted for 54% of JD Sports's £4.4bn revenue for the six months to 30 July 2022, while M&S managing director of clothing and home Richard Price has told Drapers footwear is a "key category" for the retailer.
Drapers speaks to UK and international footwear retailers and brands about the challenges they face, and the opportunities they will be leveraging for 2023.
Supply chain struggles
Supply chain woes continue to frustrate retailers, and the footwear industry has been hit especially hard because of the longer lead times than for clothing retailers, which extend to months, rather than weeks.
Uzair Ahmad founded Manchester-based unisex vegan footwear brand Koi Footwear in 2018. The label has more than 20 stockists across the UK, US, France and Spain, including Urban Outfitters and independents such as Quirky Bird Vintage & Retro Fashion in Ashburton, Devon. Koi Footwear also sells direct to consumer through its ecommerce site and its Manchester Trafford Centre store, which opened on 23 November 2022. Ahmad tells Drapers supply chain issues have been one of the business’s main challenges of the past year. Average lead times are between three and 12 months for its product, which is made in China with water-based polyurethane – a more environmentally friendly alternative to oil-based PU.
“Lead times were challenging in 2022, mainly because of sampling and manufacturing, and the increase in the cost of shipping. We are actively looking at new ways to forward plan and make this process more seamless.”
London-based women’s and men’s footwear brand Naked Wolfe, which is sold at Selfridges and Flannels, as well as its New Bond Street flagship, has maintained a mix of European and Chinese locations for the manufacturing of different elements of its shoes. This has enabled the brand to limit lead times to an average of 30 to 45 days for most products.
Meanwhile, one sneaker brand founder tells Drapers that, when evaluating manufacturing locations in late 2020, the lead times were significantly longer in Portuguese factories than for countries thousands of miles away, because of high demand for quality manufacturing coupled with factory worker shortages in the country, prompting him to choose a factory in Vietnam instead.
Despite this, another executive of a Danish footwear brand praised its Portuguese manufacturers for matching Vietnamese labour costs, while offering the quality and innovation of traditional Italian manufacturers in closer proximity to its European and African markets.
Some footwear brands are looking even closer to home. As of June 2022, the UK had 185 footwear manufacturing businesses, according to data from market research company IbisWorld, with the UK footwear manufacturing market being valued at £540m as of December 2022, market research data provider Statista estimates. With its shoe-making legacy dating back to the 15th century, Northamptonshire has remained a hub for the majority of UK footwear manufacturers. However, the sector had weathered a combination of challenges - including Brexit, the pandemic and record inflation. Both the British Footwear Association and leather trade association Leather UK name Brexit as the greatest challenge to the UK’s footwear manufacturing industry, resulting in worker shortages – caused by overseas workers returning home after the 2016 Brexit referendum and during the Covid-19 pandemic – and difficulties in finding EU customers.
"Workforce in the sector is ageing, recruitment is slow and Brexit is an extra twist of the knife,” said Leather UK director Kerry Senior. “Brexit is a big factor right now with immigration [due to the post-Brexit points-based immigration system introduced from 1 January 2021]. Italy is also struggling with manufacturing workforce shortages [according to 2022 data from Italy’s Ministry of Labour and National Agency for Active Employment Policies] but the difference between Italy and UK is that, as an EU country, Italy can bring in workers from [for example] Poland.”
Brexit has also made it more difficult for UK footwear manufacturers to export their products to Europe. BFA’s Reece-Raybould said: “My fear for comparatively small luxury sectors like bespoke British footwear is that there simply isn’t the manpower, resources or liquidity to navigate such a complex trading landscape.
“Due to unexpected charges and logistical headaches, many European retailers don’t want to import from the UK. To some extent, they have been asked to choose between carrying UK products and welcoming further bureaucracy and paperwork into their business models. It’s easy to see why the latter wins on some occasions. Anecdotally, we hear repeated stories from [BFA] members about costly returns processes from the EU to the UK. Many UK sellers are expected to pay upfront and reclaim import VAT on unwanted consumer purchases. Although this can be traced to incorrect paperwork, it’s indicative of the ongoing challenge of Brexit and its influence on EU-UK trade,” she added.
Despite workforce and export challenges, UK footwear manufacturers are benefitting from their reputation for producing expertly-crafted, bespoke shoes:
“The cost-of-living crisis has made consumers analyse their spending habits; they’re looking to buy less but higher quality,” said Reece-Raybould “This puts luxury footwear and British-made shoes in a position that some of our home-grown companies can capitalise on.”
One such brand is 142-year-old footwear business Loake, which manufactures in both its hometown of Kettering, Northamptonshire, and Chennai, India. The Kettering-manufactured shoes, which tend to have a higher retail price point of £399, perform especially well among east Asian and Scandinavian consumers. British consumers, on the other hand, tend to opt for the Chennai-made models, which retail for as little as £155. The different preferences mean that the UK-made shoes often need to be exported overseas, and the models made in India need to be imported into the UK, making Loake susceptible to supply chain disruption.
Sales and marketing director Richard Utting says: “There are always issues regarding supply chains, and 2023 will not be any different. [We have] so many different sources for our components, ranging from the calf skins that we use for the uppers, [to] sole leathers and rubber of varying degrees of wear and grip properties. Our team search for the best quality-to-price ratios both in the same countries as existing suppliers, as well as new countries. Europe remains the key source for the quality of upper leathers that we require.”
Dune CEO Nigel Darwin tells Drapers the footwear retailer’s ability to withstand supply chain challenges was attributable to “team effort” and good relations with suppliers and partners in China, India, Brazil and Portugal: “We are hugely appreciative of how all have pulled together, whether that has been flying stock in, or repeatedly reworking schedules to deal with the latest updates on timings of materials and deliveries.” Darwin is optimistic, as supply chain pressures are “easing” after a difficult few years.
Beyond the supply chain, trading continues to be affected by the UK leaving the EU more than two years ago.
Footwear brand executives identify Germany, France and Italy as some of the most difficult EU countries to trade with because of increased bureaucracy, complex customs procedures, VAT and tariffs that came into force on 1 January 2022 as part of then prime minister Boris Johnson's post-Brexit trade deal.
Coupled with the increasing logistics and raw materials costs amid global inflation of 8.8% in 2022, as reported by the International Monetary Fund, the additional expenditure and red tape has made trading with the EU difficult.
Koi Footwear’s Ahmad says: “Brexit has made navigating European sales more tricky and this has added more red tape to European transactions. For example, we are noticing that some European countries are not following the supposed rules [whereas] some are, [and] we are also seeing orders being taxed despite being below the tax threshold. Thousands of businesses are facing these obstacles, which in turn is making trading much more difficult. We'd like to see these issues ironed out and clarified to make it a fair playing field.”
Loake’s Utting says: “Brexit has already impacted on sales in western Europe, but we are targeting growth in Scandinavia [opening the first store in the region in Stockholm in 2017] and eastern Europe [including Poland, Romania, Greece and Hungary] to compensate for this.”
The British Footwear Association (BFA) chief executive Lucy Reece-Raybould describes Brexit as “still a major factor for footwear businesses”, with “no neat resolution in sight”.
“It is telling that some of the UK’s biggest department stores [including Selfridges and Harrods since 2021] have restricted or stopped shipping goods to the EU,” she says. “My fear for comparatively small luxury sectors like bespoke British footwear is that there simply isn’t the manpower, resources or liquidity to navigate such a complex trading landscape.
"BFA member businesses have responded admirably and with great resilience to UK-EU trading since Brexit, but, without a faster pace of change and improvements in administration which we continue to lobby government to provide, I fear we will struggle to recover pre-Brexit trading levels.”
Bronte Mance, who co-founded Naked Wolfe in 2017 with brothers Cody and Cooper Mance, managed to avoid the negative impact of post-Brexit trading by “reacting quickly” and opening a warehouse in Europe in 2019.
“We haven’t seen anything but growth,” she says.
The Brexit battles have prompted footwear brands to look further than Europe. Since 2018, Dune has focused on growing its franchise and wholesale business in the United Arab Emirates, Saudi Arabia, Oman, India, Pakistan, Nigeria and the US, leading to international sales representing 26% of total sales for the business, as of January 2023 - up from 5.8% in 2018, based on full year accounts published on Companies House.
CEO Darwin tells Drapers: “Our Middle East business [which counts 65 stores and an additional 10 in 2023] has been a big success story over recent years, and there remains significant opportunity to grow in the markets, both online and through stores. Our partners in India and Pakistan are seeing good potential with the brand, our recent opening in Nigeria [of a franchise store at Ikeja City Mall in Lagos in April 2022] has got off to a strong start, and we’ve seen encouraging consumer appetite in the US, where we launched with [department store chain] Nordstrom [in September 2022].”
As of 2023, Dune London is stocked online by two US retailers: Nordstrom and Arkansas-based department store chain Dillard's, where it launched in November 2022. Dune said that demand for Dune footwear in the US has "exceeded expectations" and the business plans to continue investing in the country.
Swedish footwear brand Vagabond, which in the UK is sold through footwear retailers Office, Urban Outfitters, End in 73 locations across the UK, is also looking to the US for opportunities in 2023.
The brand entered the North American market in 2018, when it began working with US-wide department store chain Nordstrom and New York-based multi-brand footwear retailer Shoe Market. As of 2023, Vagabond shoes are stocked in 78 stockist locations across the US. Consumers can also make orders directly through Vagabond's website, which also ships direct to consume to 33 countries in Europe and the US.
Vice-president and co-founder Marie Nilsson Peterzén says Vagabond is also "preparing to enter new markets in Asia", where it currently has no stockists or stores.
"For Asia, our main market focus is on Japan and South Korea during these upcoming seasons," she adds. Although Vagabond is focusing on online and wholesale "as a base", the brand didn't rule out opening a concept store or a shop-in-shop.
Meanwhile, in the UK, retailers are also investing in physical locations.
Koi Footwear and Naked Wolfe both opened their first physical retail locations in the run-up to Christmas 2022, the former in Manchester’s Trafford Centre in late November, and the latter in a unit formerly occupied by Church’s at 163 New Bond Street in central London in early December, both hoping to capitalise on heightened demand for physical retail among consumers experiencing ecommerce fatigue.
Naked Wolfe, which has offices in central London, Hong Kong and Beverly Hills, Los Angeles, ultimately aims to open a store in “every major city” in the world, says Mance. A second store – in the US – might be on the cards for 2023.
On 1 December 2022, Loake opened a store on Jermyn Street in London, opposite its existing smaller unit at the Prince's Arcade, which opened in 2011. Although the two stores have similar product offerings, the new 1,380 sq ft store provides a private shopping area for wedding parties and a shoe fitting service, as well as more space to display its products and host events for press and influencers.
Utting tells Drapers that Loake started planning its brick-and-mortar expansion in the depths of the pandemic, when investing in physical stores seemed counterintuitive. However, the record 14.5% vacancy rate in the third quarter of 2021, based on British Retail Consortium (BRC) and Local Data Company’s Vacancy Monitor, meant that Loake was able to secure six new sites at a cheaper rate – in Norwich, Salisbury, Brighton, York, Nottingham and Jermyn Street – taking the total number of Loake stores to 25.
“Loake took the decision in 2020/21 to take advantage of the deals that landlords are prepared to make on vacant retail properties,” says Utting. “[The new stores] are performing well, and increase our capability to trade and communicate directly with our consumer."
“Much time and focus has been given to researching our Loake consumer and responding to their requirements from our brand and ranges. This is now producing real results in terms of sales and profile. It’s early days yet but Loake are very pleased with the overall sales increase that we are achieving from Jermyn Street, especially when you consider the transport disruption [because of rail strikes in December 2022].”
Another challenge for the footwear industry are rising costs of materials and shipping, which many brands have taken steps to absorb themselves and freeze prices for at least a selection of products.
Koi Footwear's Ahmad says: “We have worked extremely hard to remain high quality and affordable, and have therefore not changed our RRP [recommended retail prices], despite increasing costs for us.”
Naked Wolfe has frozen the prices of its bestselling staples, including its Spice and Jane boots, which retail at £300.
Loake has raised retail prices of its products by an estimated 14% since 2020, but aims to keep the increases “to an absolute minimum and balanced by any positive currency fluctuations”, says Utting. The heritage brand promotes the circularity of its products by marketing them as investment products. For instance, at its Jermyn Street store opening in December, Loake offered shoe waxing and shining to attendees.
“We will continue to communicate the benefits of our products and brand, regardless of the economic scenario. More and more, the consumer is looking for value for money, and the repairability of our products is a strong solution to this desire,” says Utting.
Amid a challenging trading environment, there are qualities which help some footwear brands perform better than others.
BFA’s Reece Raybould says there are currently five footwear business categories “setting the pace” in the sector: sneaker brands, occasionwear brands, ecommerce-savvy brands, businesses with a clear sustainability message and children’s footwear brands.
“Casual, daily-wear sneakers are still a top-performing category, dominating the market for new shoes,” she says.
This is supported by research by footwear retailer Schuh, which identified casualwear sneakers from Converse – including the All-Star Hi model, followed by the Lift Hi model – as its two top-selling products of 2022. In its footwear trends report published on 14 December 2022, Schuh also found that sales of sneakers from sportswear brand New Balance increased 135% on 2021, led by strong demand for the NB327 and NB550 models.
Strong casual footwear sales are likely to continue into 2023. Despite being known for formal footwear, Russell & Bromley and Loake both cite casual styles among their bestsellers. Jeans brand Lee is also entering the footwear market and is launching a range of women’s, men’s and children’s trainers and casual shoes for autumn/winter 2023.
Footwear sales at Richmond-based independent boutique Schuberts Footwear confirmed that customers are prioritising comfort and functionality over formalwear. Schuberts Footwear owner Gary Moore told Drapers that "comfortable, utilitarian" shoes with waterproof and windproof qualities had been performing particularly well for the independent retailer, which stocks more than 30 footwear brands, including Birkenstock, Geox and Hogl. Chunky Chelsea boots from Swedish brand Philip Hog sold out completely, while customers also opted for lightweight walking boots – often Gore-Tex-lined for water and temperature insulation – from Austrian brand Legero, German brand Ara and Australian brand Blundstone.
“We’ve always prioritised comfort – that’s our reason to be,” said Moore. “We do still stock formal shoes. We have a lot of professional customers [who require formal shoes for the office].”
Consumer demand for comfort has also been experienced by larger retailers, with John Lewis sales of Ugg and Birkenstock sheepskin slippers doubling year on year. However, formal footwear sales remained strong, increasing by 78% year on year in the winter 2022/23 season.
John Lewis footwear buyer Louise Sole said: "Many [are] looking for shoes to match their occasionwear outfits. [Brand] highlights include John Lewis, Charles & Keith, LK Bennett and Premium Sarah Jessica Parker."
Loake introduced trainers in 2020, when consumers were opting for casual footwear for socially distanced strolls in the park instead of its staple brogues and loafers. However, the heritage brand has noticed a resurgence in more traditional silhouettes in early 2022. Nevertheless, formal footwear is still prone to consumers tightening their purse strings.
BFA’s Reece-Raybould says: “In 2022, we saw an uplift in occasion footwear sales, largely due to the return of events in the wake of the pandemic. However, this is likely to taper as consumers restrict their socialising during the current cost of living crisis.”
Although record inflation shows no signs of easing its grip on consumers, retailers and manufacturers alike, the footwear industry has successfully walked all over any difficulty that presented itself in 2022. From supply chain disruption to picky customers, businesses continue to show resilience and adaptability that will keep the sector booted up and ready for the challenges of 2023.
