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Tariffs, Tech, Trade, Coronavirus: What’s Keeping Footwear Execs Up at Night

Amid concerns about tariffs, changing consumer attitudes and even the coronavirus, footwear executives at the Footwear Sourcing show in Las Vegas Thursday debated how the industry can forge ahead in 2020 and beyond.

Edward Hertzman, founder and president of Sourcing Journal, moderated the conversation on trade, supply chain and sustainability between leaders from Bendy Shoes, Faryl Robin and Washington Shoe Co., each with varying views about the future of the industry.

On sustainability

“I was talking to someone from Sustainable Apparel Coalition, and only a third of companies have a sustainability plan,” said Caroline de Baere, co-founder of San Francisco-based Bendy Shoes.

That number simply won’t cut it, she said. De Baere founded her American-made comfort brand with environmental stewardship at its core, and she believes that a sustainable outlook can actually help brands’ bottom lines.

Bendy Shoes sources leathers from Italian tanneries gold certified by the Leather Working Group, de Baere said, but houses materials in downtown Los Angeles, where the company’s factories operate.

This proximity, which eliminates the need to ship finished goods to the U.S. from overseas, cuts down on the brand’s carbon footprint, gets product to market more quickly, and allows for efficient inventory replenishment.

The company received its initial funding through a Kickstarter campaign which promised a simple, easy-to-wear shoe with just seven components.

The average sneaker has between 20-30 components, de Baere said, while casuals boast between 10-14. Fewer parts make the shoes easier to manufacture and provide greater supply chain transparency.

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The company is also transitioning to AllBirds’ sugarcane-based Sweetfoam outsole this year.

On trade

“We try to have a long view,” Faryl Robin president Jim Biolos said when asked about the company’s sourcing outlook in the wake of ongoing tariff uncertainty.

“Forty years ago, few shoes were made in China. We can expect that in 40 more years the mix of production will be totally different than it is today,” he said. While the company could flip a switch and begin moving out of China today, Biolos said it’s staying put for the time being.

Coronavirus and tariffs has introduced risk that we haven’t had in the past 20 years,” he said. The company is looking into a strategy that would involve diversifying its sourcing away from China gradually. “We can’t move in one season or one year,” he said.

“The coronavirus keeps us up at night,” Washington Shoe Company CEO Karl Moehring added.

The company’s offices in China won’t open until Feb. 10, he said, and even after that, there will be a lack of visibility into shipping times. Factories are scheduled to be quarantined for an additional 10-14 days.

The virus is hitting after a particularly painful season for Washington Shoe Co. and others in the industry, brought on by the List 4A tariffs that were enacted in September.

To mitigate the increased duties on footwear, the company had a surplus of product shipped into the U.S. ahead of schedule. “One of the side effects of the tariffs was bringing in a lot of inventory in 2019,” Moehring said.

The decision overwhelmed Washington Shoe Co.’s distribution center, he said, and they haven’t yet sold through the product. This year, the company has invested in a new ERP system to aid in inventory planning.

From left to right: Sourcing Journal founder and president Edward Hertzman, Bendy Shoes co-founder Caroline de Baere, Faryl Robin president Jim Biolos, Washington Shoe Company CEO Karl Moehring at Footwear Sourcing at MAGIC in Las Vegas.
From left to right: Sourcing Journal founder and president Edward Hertzman, Bendy Shoes co-founder Caroline de Baere, Faryl Robin president Jim Biolos, Washington Shoe Company CEO Karl Moehring at Footwear Sourcing at MAGIC in Las Vegas. Kate Nishimura

On new technology

Faryl Robin is also testing new technologies related to forecasting and demand planning, Biolos said, with the help of its retail partners. The tools are allowing for “more accurate production based on demand.”

On the factory floor, the company is also looking to become “more lean and agile” in its processes.

“It’s challenging,” Biolos said. “We’re not anywhere close to where we want to be yet, but we think that by getting that mindset and flexibility into the manufacturing process, we’ll reduce waste in the system.”

Faryl Robin has been working with Inspectorio’s quality control technology, as well as its shop floor assessment tools to improve supply chain operations, Biolos noted.

While he believes it will take time, Biolos is optimistic about the prospect of truly on-demand footwear production, if the industry can band together to “radically change the system.”

Increasingly used tech tools that offer greater understanding of consumer segments and demand can help brands and retailers target optimal production numbers and regional assortments, eliminating product overruns and the need for deep discounts.

“We’re in a world where there are smaller segments of consumers,” Biolos said. “Even big-box retailers who think they have a mass market really don’t—they have multiple segments that come to their stores.”

On the state of retail

Aside from the threat posed by the coronavirus, the biggest thing keeping Moehring up at night is the challenge of competing with Amazon.

“We can be undercut, and it’s tough to compete on price on Amazon, or even elsewhere online,” he said.

While the online platform is “an important partner and a channel for distribution,” Washington Shoe Co. has had to make some changes in order to succeed in the marketplace.

Amazon’s massive collection of private labels is constantly working to subvert other brands and retailers through copycat products, and Moehring’s brands have had to evolve. “We try to set our product apart by creating brand pages and marketing to tell our story,” he said.

Washington Shoe Co. is also hitting back with price-conscious, unbranded styles of its own to compete with the products being sold by Amazon.

Store-owned brands are also impacting the company’s experience at mass retail. “Retailers are doing more private label, which squeezes out other small brands,” he said. Washington Shoe Co.’s brands are increasingly competing for limited shelf space as retailers build up their own offerings.

Biolos believes that shoe brands are being faced with a paradox.

“Retailers have the conflicting need for low prices, as well as product that differentiates them from others,” he said. Appealing to the consumer based on price alone isn’t a recipe for success, and doesn’t encourage brands to experiment with innovative new product.

“There are forces driving toward sameness in retail,” Biolos said. With brands focused on developing “the next big thing”—a unicorn style that will rake in profits at mass retail—they’re actually missing the nuanced differences between distinct, valuable segments of the market.

“The long-term key to success is in serving consumers’ needs through different types of product,” he said.