Are We Better Off?

As the election approaches, industry leaders debate how we’re faring today compared with four years ago. By Maria Bouselli

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As the election approaches, industry leaders debate how we’re faring today compared with four years ago. By Maria Bouselli

It’s a question that hearkens back to the debates of the 1980 election between then president Jimmy Carter and Republican candidate Ronald Reagan. “Are you better off than you were four years ago?” the former California governor asked the American public. The answer back then was a resounding no and The Gipper went on to become the 40th president of the United States. The question has since become a standard bearer in presidential politics as well as a viable reference tool for anyone taking stock of their situation. As we gear up for the November presidential election, Americans are once again wondering this same thing, and with an 8.2 percent unemployment rate in July, many remain unsure. In a national poll conducted by Bloomberg News in June, 45 percent stated that they are better off today than they were in the beginning of 2009, with 36 percent saying the opposite.

Despite this having been one of the worst recessions in 100 years, the footwear industry has fared pretty well with many arguing it is well ahead of the current sluggish recovery. An informal poll of industry colleagues as to whether we are better off than four years ago, however, is largely mixed. “I don’t know that we’re better off,” says Gary Weiner, president of Saxon Shoes in Richmond, VA. “I think we’re [just] more used to dealing with things in retail and wholesale, and with consumers.” This is a sentiment echoed by other retailers, brands and industry experts alike. “I wouldn’t say the industry is better off but what I would say is the industry in general is a lot smarter collectively,” notes President of ENK Footwear Group David Kahan. “And both wholesalers and retailers are better prepared and able to anticipate issues that may arise and be proactive to handle [them].”

Four years ago when the financial crisis was beginning, businesses had to make a choice—to change with the times or to keep moving as they were. “The better get better [in these times], and the weaker go away—that’s the way the market works,” says Bill Combs, owner of Burch’s Shoes in Eugene, OR, and CEO of Bogs Footwear. Those retailers and brands that wanted to succeed had to re-evaluate their strategies and decide what was a priority, and what branches of their businesses had to be cut back. “First off, inventory management on both the wholesale as well as the retail side became paramount to profitability,” says Kahan. “Everyone realized if the top line is going to be challenged, we need to focus on ways to drive the bottom line.” Mary Brown, director of marketing at Eastland, echoed his statement. “We definitely had to become more flexible, especially in working with the shift of inventory with retailers—no one wanted to be caught with inventory they couldn’t sell,” she notes. David Sharp, president of Rocky Brands, observed that his company brought its inventory down from $75 million to $50 million in the last four years. “In 2008 and 2009 we hunkered down,” he says “We were actually playing defense, doing the fundamental things to run the business—preserving cash, reducing debt—those kind of things—and it paid off for us.”

For some brands, the difficult economy actually did pay off in a big way. As Rocky Brands was already on the defensive course, it killed the unprofitable parts of its business and, as a result, reduced its debt from approximately $60 million in 2008 to $20 million this year, with improved earnings the past three years. Bearpaw also saw an opportunity to increase brand awareness. “Four years ago was really a deciding moment,” says Randy McKinley, director of marketing at Bearpaw. He notes that the company made a key decision to widely market its collections and expand the product offerings to become a “true brand,” which opened up additional distribution. McKinley credits this improvement, and the 100 percent gains in the last three years, on the quality of product that Bearpaw customers receive for a price of under $100. Many independent retailers, however, struggled through the recession. Gary Hauss, owner of the J. Stephens chain based in West Hills, CA, credits helpful business associates, even some of his landlords, in helping him weather the tough economic downturn. “In 29 years in the footwear business there have only been two years that we didn’t make money—2008 and 2009,” says Hauss. “We’ve always had great partnerships with our vendors, and that’s what got us through those times. And we got tighter and leaner,” he adds, referring to the stores he was forced to close during that period.

Paying even closer attention to customers’ needs and wants was another point both retailers and brands focused on. “We always felt like we gave good customer service, but we broke that down and tried to improve it by doing things even better,” Combs says, adding that he made sure Burch’s had various sizes and widths in stock so it never missed a sales opportunity. Joe Gradia, co-owner and vice president of Hawley Lane Shoes in Norwalk, CT, notes that with so many people out of work, customer service became more important than ever. “It’s back to less people walking in so you have to take those opportunities and provide them with the ultimate service so they want to come back,” he says. “It’s the ‘wow’ factor.”

And both wholesalers and retailers learned quickly they weren’t the only ones changing—customers were altering their buying methods and adjusting to tough economic times too, opting to purchase one pair of shoes rather than multiples at a time and searching harder than ever to find a good value. “I think they’re more cautious and more value-oriented,” says Sharp. “I don’t mean that they’re looking for the cheapest—they’re looking for the right value equation. They’re willing to pay high prices, but want to make sure features and benefits are related to the price.” At Burch’s Shoes, Combs set up seminars with brands to better educate his salespeople as he noticed that customers were more informed than ever. “A lot of times they know more about the products than your most experienced people on the sales floor,” he notes.

David Aznavorian, director of marketing at Earth Inc., calls this new, savvier customer “evolutionary rather than revolutionary,” and cites technology as a way their buying habits have changed. ENK’s Kahan agrees: “There is far less impulse buying and far more educated price shopping. I’m sure we’ve all seen customers in a store with a handheld device scrolling online to check prices on what they are trying on.” Despite many stores and brands not performing as well, one fact still rang true—people always need shoes, and a just-purchased pair is a cheaper way to satisfy the need for something that’s shiny and new. “Let’s face it, people buy in order to make themselves feel good, and a pair of shoes that excite them is a far more reasonable purchase than a new car,” Kahan notes.

As consumers are increasingly starting to purchase several pairs of shoes at a time, McKinley notes this as an indicator that business is starting to look up. “From what our retailers are telling me, they’re starting to see a comeback,” he says. Many brands cite the economy’s recovery, if they believe there is one, as slow and fragile. “It’s difficult to put my finger on ‘Are we in recovery or still in crisis?’” Aznavorian says. Kahan waxes more philosophically: “I’d like to believe we are in a recovery but when you still see high unemployment numbers and weak consumer confidence, it leads you to believe that rather than a ‘robust recovery’ we are in a bit of a stagnated state marked by hopeful expectations, tempered by reality.” While Eastland’s Brown says that the economy is definitely improving “slowly but surely,” “year over year,” J. Stephensons’ Hauss is more optimistic (Aren’t most retailers?) stating that it’s “night and day” comparing where the footwear industry stood four years ago with today.

Overall, brands and retailers agree with Hauss’ positive outlook for the future but would like to speed things up. “In general we’re optimistic about the economy, although we’d like to see the pace of recovery much faster,” Sharp confirms.

Bob Mullaney, president of U.S. operations at Rockport, says while he looks forward to the future, it’s important to look back at what the last four years have taught him and his colleagues. “I think we’ve all been humbled,” he says. “We’re all performing our jobs better than we did previous to the economic challenges we’ve had. Maybe some things came a little bit too easy before and now we’re really rolling up our sleeves and looking at matters with a little bit more diligence and thought.”

Or, putting it more bluntly, Saxon Shoes’ Weiner says: “We’re happy to still be here and put the lights on everyday.”

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