Retail is a totally new landscape in 2020. Store shutdowns have forced most commerce online, and consumer spending has been tempered by economic concerns.
At Footwear News’ Virtual Summit on Wednesday, Matt Priest, president and CEO of the Footwear Distributors and Retailers of America, dissected the implications of the changing landscape with Steve Madden, Ltd. chairman and CEO Edward Rosenfeld, who expects to see “some steps forward, and some steps back” on the course to recovery.
Shopping in shoe stores is down 99 percent year over year, according to Priest. And while many brands hoped that the slowdown’s spike occurred in April, infection rates have continued to climb.
“Brands must be flexible and be willing to change course,” Rosenfeld said. And until a viable vaccine is available, he believes it’s likely that consumers will continue to stay home en masse.
Outside of the health risks, shoppers are also anxious about their financial security. “The economy,” he said, “has contracted with unprecedented speed and scope.”
The number of Americans out of work has shrunk slightly, but they’re still in the double digits, he added, hovering at 11 percent last month. “We certainly hope there’s an expansion of unemployment benefits in some form, and a stimulus payment would be great.”
Rosenfeld noted that the first round of stimulus checks, which were issued in April to the tune of $1,200 per person, had a direct impact on the Steve Madden brand’s online sales at the time. The company’s web sales have accelerated since the beginning of April, Rosenfeld said, and the last earnings report revealed a 75 percent increase in e-commerce. Dolce Vita, another footwear brand in the company’s portfolio, has also seen growth.
FDRA data showed online footwear sales up 165 percent over 2019 during the spring’s retail lockdown, said Priest, but the dramatic shift wasn’t enough to make up for the losses from brick-and-mortar.
The pandemic could represent an inflection point for certain consumers, like Baby Boomers, who weren’t previously accustomed to shopping online. “We have socialized e-commerce for a new generation of buyers,” he said.
The coronavirus crisis has forced revelations that will undoubtedly have an impact on the company’s future, Rosenfeld noted, and Steve Madden will continue to prioritize the growth of e-commerce even after the pandemic subsides. “We need to sharpen our focus on the consumer,” he said, “and really listen to what kinds of products they want and how they want to shop for them.”
The Steve Madden brand is known for its “test and react” tactic, bringing in a selection of new products to select markets in order to gauge consumer appetites, Priest said, before buying into large purchase orders from suppliers. Rosenfeld said the strategy has been integral to the brand’s success at gauging the stickiness of trends.
In recent years, though, instead of simply bringing those tests to physical retail, the brand has sought to conduct them online as well. “One of the nice things about that is that we can put things up for pre-order before we go to production, and start to get a read,” he said. Since COVID-19 hit, the brand has leaned into this process with even more vigor, not wanting to produce product that won’t resonate with shoppers.
Speaking to one of the issues that burdened the industry well before the pandemic took hold, Rosenfeld said tariffs on Chinese goods have contributed to retail’s discomfort during 2020. “We didn’t like them before COVID-19, and we really don’t like them now.”
The increase in duties has forced the brand to raise prices, he admitted. That’s a choice that causes executives worry during any economic climate, because it could impact consumer demand. Now, though, shoppers are feeling the heat of a recession and high unemployment, causing them to tighten their purse strings even more.
Steve Madden is continuing to diversify sourcing to countries outside of China to mitigate the tariff impact, but “there are also very good reasons to be in China,” he said.
“It’s not just price, but materials, speed, and the whole infrastructure,” he added. “It’s the material suppliers and everything else that makes it a good place to produce footwear, at a great value.”
Given the heightened tensions with the country, however, Rosenfeld said the company is accelerating its efforts to explore other options.