Marshal Cohen

It should be no surprise to those of you in the footwear business that children’s footwear is selling very well. As trends go, when adult footwear is selling well (but not too well) children’s footwear prospers. That trend is no less apparent this year. For NPD’s most recent reporting period (August 2006 to July 2007), total adult footwear sales are up 4.1 percent in dollar volume. In children’s, the growth rate is running more than double that of adults. For that same time frame (the 12 month period ending July 2007), children’s dollar volume sales were up 10.9 percent.

In total, children’s footwear represents a $5.8 billion dollar business for U.S. retailers and currently there is no sign of that growth letting up. But to keep children’s sales in stride, there will have to be some changes in what is selling, where it’s selling and how it’s being sold.

Eleven

The total athletic footwear market, as of the 12 months ending July 2007, is an $11.3 billion dollar business…and it’s still growing. However, there are categories that are showing signs of vulnerability. The most vulnerable are those that are purely performance. The trend in children’s is much like what we have been seeing in the adult market. There has been a migration away from the styles built purely for performance to those shoes which are more fashionable and/or casual in their focus. This “low-performance” category for kids is up 34 percent for boys and 38 percent for girls.

This movement away from pure performance is a trend that likewise affects retailers. Those looking to capture the children’s footwear business should be aware of this trend and will do well to keep in mind that the children’s market is very brand-centric. Kids tend to be the most driven by a particular brand or brands. They can also be very fickle, and what is a hot brand one season may not be hot or as hot the next.

Stride Rite

To address where that footwear is being sold, first let’s take a look at the primary channels of distribution. There’s been a rumor that department stores are returning. Well, it looks like it is just that—a rumor. In children’s footwear alone, department stores are down 10 percent for boys and up only 1 percent for girls. So where is the hot spot for children’s footwear? It should be no surprise that it can be found in footwear specialty stores, namely independents and chains like Journeys. Those stores are currently running at a 23 percent growth rate over last year in the children’s shoe category alone.

Bical

The next favorite place to shop for children’s shoes (also popular with adults) is in the national shoe chain stores such as DSW, Famous Footwear and Payless. Those stores are up 10 percent overall, and their growth is largely being driven by the girl’s business. One other channel of distribution that gets a lot of attention is the online channel. But online selling for children’s has not seen the same growth we’ve been seeing in adults. This really shouldn’t come as a surprise since children’s physical growth is unpredictable and generally kids need to have their shoes fitted in-person each time they get new ones. Online sales have seen only a 7 percent growth in the children’s market compared to brick-and-mortar sales. Those retailers have seen an 11 percent growth for children’s footwear.

Tsukihoshi

How exactly are we seeing the selling happen? The “on sale” percentage for kid’s footwear has now reached the 50/50 mark. That means just as many shoes for kids are being purchased at reduced prices as those purchased at full price. Just a year ago it was 47 percent “on sale,” which tells me the consumer has been looking for bargains—and she’s been able to get them.

However, we’ve seen little sign of consumers either curtailing their purchasing or not purchasing at all. Despite all the noise about gas prices, housing sales and consumer confidence, the public is still out there purchasing footwear for themselves and buying the current styles for their kids. In fact, the only income level showing any signs of concern is in the $50,000 to $75,000 income range. That group’s purchases are only growing at 3 percent, whereas purchases for consumers at the next income level ($75,000 to $100,000) are growing at 14 percent. Consumers with incomes over $100,000 are the fastest growing at 21 percent. So when asked I’m asked if consumers are cutting back, my answer is, “No way—and they’re showing no signs of planning to do so.”

Pedoodles

For the children’s footwear market to continue to grow, manufacturers and retailers must make sure they continue to keep pace with the consumer, both adults and children. They should also try to offer the latest adult trends for kids, too. The generation gap, as we have come to know it, no longer exists. Kids and parents are sharing passions, styling preferences and consumption habits. And they are influencing each other’s purchasing. This in turn changes a lot of the current rules for marketing and merchandising for the footwear market. Footwear must keep stride for stride with consumers of all ages. Reaching kids today is a science, and reaching the adults that influence kids a whole other, equally important science. Keeping pace with the trends in and out of the footwear business is what’s needed to be successful today.

Marshal Cohen is chief industry analyst for The NPD Group. Cohen makes frequent appearances on NBC’s Today Show and is the author of a best-selling marketing book, Why Consumers Do What They Do. This article first appeared in the October 2007 issue of WSAToday magazine.

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