While the Covid-19 pandemic hit most retailers hard, it created uniquely intense challenges for Hotter Shoes. The vast majority of the footwear retailer’s sales were to older customers who patronized the company’s brick-and-mortar stores. These customers, who are not digital natives, were among the least likely to shift to buying online. Hotter needed to build up its e-commerce presence and appeal to a new group of shoppers at the same time.
While the company implemented First Insight’s “Voice of the Customer” predictive analytics to make more accurate design, buying and pricing decisions back in December 2019, the comfort footwear manufacturer and retailer has since gained a longer-term benefit of its deep digital transformation: attracting newer, younger shoppers.
Since the retailer had started broadening its consumer base in its digital shift, with online demographics skewing younger than brick-and-mortar shoppers, Hotter Shoes saw a chance to engage those outside its target audience. The success and focus of Hotter’s digital transformation showed an increase in digital sales, up 27 percent.
“[This digital transformation] enabled us to use the data around us to make sure we further personalize the offer that we give to our consumer base,” Ian Watson, CEO of Hotter Shoes, told Sourcing Journal in a recent fireside chat. “As part of this process, we’re actually lowering the average age of our consumer. Therefore, our requirement is to make the product differently and slightly more stylish than we have perhaps in the past.”
Now with more than 4 million customers globally, Hotter Shoes has expanded its consumer age base from its traditional 60+ shopper, to include more from the 35-55 age cohort.
Hotter Shoes leveraged First Insight’s Next-Gen Experience Management platform to future-proof their business and to further engage the younger demographic and gather product input and feedback. Within the predictive analytics platform, shoppers can choose whether they like one of multiple product designs and pick the price they estimate the market would pay for a product. They can also click to rate their feelings about the item and leave additional comments in a text box.
Overall, First Insight’s “Voice of the Customer” feedback has provided a 3.7 percent margin gain on the products tested.
Watson said that the feedback has ensured that when the brand develops new products, “we’re getting more of them right than we are getting wrong.”
According to Watson, Hotter Shoes wants to double its inventory turnover rate within the next 12 months, with predictive analytics expected to drive merchandising. He credits the feedback-driven predictive analytics capabilities with helping the retailer make more accurate seasonal orders and ultimately reducing unsold inventory.
“We’re currently measuring the stock that we have at the end of each season,” Watson said. “For the first time at the end of the spring/summer season, we’re targeting to be below 10 percent terminal stock (merchandise that is inappropriate for the forthcoming season).”
Petro described digital transformation as the “single most important strategy going forward” due to consumer shifts and engagement across generations.
Hotter Shoes was set for a digital pivot when Watson took the reins as CEO in March 2019, but the Covid-19 pandemic accelerated the decision and the company permanently shuttered 65 of its 82 stores. The remaining 17 stores now focus more on fitting technology and experience than product, enabling the retailer to carry less inventory.
Hotter Shoes re-platformed its e-commerce site in June 2020, and debuted a smartphone app integrating augmented reality (AR) so consumers could virtually “try on” products for fit, color and design without leaving their own home. Hotter Shoes also launched a 3D foot scanning software in the app and in store, Watson said.
But when it comes to successfully emerging from this digital transformation, Petro attributed Hotter Shoes’ achievement to a new line of retail thinking.
“Unlocking the single greatest asset of a retailer or brand manufacturer—their customer—it has become completely mainstream to embed this information into their decision making,” Petro said.