In a post-recession landscape, the demand for designer shoes is tempered by a desire for value and versatility. But will it last?
In the past couple of years, consumers bearing the brunt of a struggling economy watched helplessly as their home values took a dive and retirement accounts cratered—while it seemed like the only folks making money were the Wall Street execs whose reckless leveraging helped trigger the financial mess. So it was no surprise that “luxe” became a four-letter word.
Conspicuous displays of wealth were considered crass—and even shoppers with cash to burn began rethinking their designer purchases. “Brown bag couture” became all the rage for luxury shoppers, who hid their Hermès and Prada in a nondescript sack. All of this added up to a miserable few years for luxury brands, whose goods were showing up for the first time in bargain bins.
“Luxury was the hardest hit sector in retail, with not only the aspirational consumer dropping off in the recession, but the luxury consumer dropping off, too,” confirms Marshal Cohen, chief analyst for NPD Group, a consumer market research firm that tracks the footwear industry.
The news was a bit brighter for 2010, as luxury shoppers returned to the stores, Cohen says. Luxury spending slid 7.8 percent last year to $10.1 billion, but it bounced back up for the first five months of 2010, according to Spending Pulse, a consumer-spending monitor from MasterCard. Now that the economy is slowly creeping towards recovery, luxury labels find themselves in an interesting position: Sales are up, but lowered prices haven’t budged, and consumers are savvier than ever when it comes to where they spend their dollars. So where does the new landscape leave luxury footwear?
“Fake luxury is out,” says Milton Pedrazza, CEO of the Luxury Institute, an independent research and consulting firm covering the luxury industry. “This severe recession has scared many people into living within their means, and I think we will see this discernment lasting for a long, long time. That means luxury companies will have to step up and deliver more quality for less price.” What does quality mean to the post-recession footwear shopper? It’s no small feat, notes Pedrazza: “The finest materials, craftsmanship, great design and great service—at a great price.” Designers can no longer bank on a name, he adds—even fabled fashion houses have stumbled, like Christian Lacroix, which abandoned its haute couture line in 2009. And even designers with enviable brand cachet—including Jimmy Choo, Hugo Boss and Donna Karan—have been forced to increase their accessibility by selling their products on their websites.
However, having a well-known moniker can be a big advantage, counters Theresa Ebagua, whose label Chelsea Paris launches in Spring ’11. Manufactured in Italy alongside Louboutin, Bally and Gucci shoes, her line has had to overcome today’s challenging consumer mindset, where shoppers seek a “safety net” in familiar labels, Ebagua reports. “Store buyers and consumers are sticking to established brands, which is proving to be a huge challenge for new designers breaking into the market,” she explains. So what can up-and-coming designers do to lure shoppers to their shoes? Go for versatility, Ebagua suggests. “It’s a huge segment of the luxury market still not being fulfilled. I am addressing this currently as I design my Fall ’11 collection, by introducing 2- and 3-inch heel heights, in addition to flats.”
Ebagua seems to be on to something. A huge crop of brands, from Christian Dior to Jimmy Choo to Chanel, have introduced mid-height heels for this spring, as more women are seeking a bigger bang for their designer buck in shoes that transition from day to night. “It’s not like three years ago when people would buy these crazy high heels and wear it for one season and never again,” confirms Chant Angelo, owner of Angelo Shoes, a designer shoe boutique in Pasadena, CA, that offers top-tier designers, including Fendi, Yves Saint Laurent and Valentino. Angelo notes that the consumer desire for versatility has driven high-end design in the last few years—and it isn’t limited to heel height. “For example, brands before [the recession] would carry shoes with studs or jewels, but now that’s totally changed to a simple black patent pump that can be dressed up or down.” The move to pared-down basics reflects the way his customers are shopping, he adds. “They shop less frequently, so instead of buying six pairs a year, they’ll buy three pairs. And they’ll buy a good-quality classic style, and carry it over into the next season.” Richard Erani, owner and creative director of Manhattan shoe boutique Chuckies, reports that his clients are also looking for more versatility in their purchases, eschewing a new pair to match every outfit. “Women no longer buy a shoe for one dress no matter how much they may need to,” he notes.
In addition to versatility, today’s luxury shopper wants value, says Rena Krasnow, chief operating officer and style director for Aquatalia. “She wants a return on her investment. It’s got to have more utility to it,” Krasnow explains, noting that Aquatalia—which retails for $275 to $795—found success with its waterproof footwear. “For what she’s spending, there’s a component she can use to justify that amount of money. It’s not a fringe or splurge purchase,” Krasnow says. For designer Abbe Held, who expanded her handbag line Kooba to include shoes this year, added value means added comfort. “It’s very important that in addition to the look, a shoe must be comfortable and functional. For example, we have a sensational sky-high platform, but the secret to its success is that there is only a 2-inch pitch to the foot. It’s as comfortable as it is sexy, making it the perfect shoe for running around the city or making a statement out at night.” Pedrazza agrees that designers must consider value and comfort when designing for today’s marketplace, noting that the quality of product at budget-friendly fashion chains Uniqlo, H&M and Zara is “pretty good.” So shoppers have begun to ask more of luxury labels, he notes: “Why am I paying a price difference? What’s the function you’re delivering for me?”
For many industry insiders, the difference is craftsmanship. “Consumers are still looking for quality,” Pedrazza explains, noting that if shoppers are going to shell out top dollars for a designer name, then “the product has to be impeccable.” With a reputation that hinges on carrying only the best French and Italian brands, Angelo agrees: “The quality has to be something special and the finishing has to be perfect.” Which luxury designers meet the mark? Pedrazza names Hermès, Louis Vuitton, Gucci and Chanel. “There’s a reason these brands have lasted for so long,” he notes.
But the most challenging change for the post-recession luxury footwear purveyors is not that customers want versatility, value, comfort and craftsmanship—it’s that they want it all at a lower price. “I would say that the biggest change in the luxury footwear industry has been the pricing,” says designer Coye Nokes, whose namesake brand of women’s designer shoes retails from $280 to $650. “As customers become more price sensitive, the brands have been forced to respond. For many luxury brands this has meant a significant decrease in the entry price point enabled by new sourcing.” Pedrazza agrees, noting that the average benchmark for luxury footwear used to be $600, but has decreased to $400 in recent years. At Angelo Shoes, the average customer expenditure of $1,000 is down by 20 percent, Angelo reports.
Now that the economy is on the mend, do industry experts see the trends reversing back to the pre-recession norm in the luxury footwear market? The answer, for the time being, is no. “I think the change in price structure for luxury footwear will be permanent, even as the economy begins to recover,” Nokes says. “Many brands have begun new lower cost sourcing partnerships and are investing in development. Given their investment, they are likely to continue to deliver lower price product that appeals to a larger segment of the market.”
And even if prices do begin to creep back up, the consumer mindset is unlikely to change. “We’re smarter now,” Pedrazza notes. “We think through our expenditures. We still want our nice things, but without the waste.” Krasnow agrees that the consumer desire for value will linger, even among the luxury set. “I think there will always be a small sector of the market that will bounce back to excess, but I think it’s become more chic to be cautious about how we spend money and what we spend it on. If the pendulum swings, it won’t swing all the way back. I don’t think we will go back to those pre-recession levels where we were spending at the better end without thinking.”
Of course, there will always be women who can’t live without the latest Manolos. So how do retailers capitalize on this label-loving sector? “Pure luxury has not grown much in terms of new footwear brands, but what has grown is the level of the presentation by stores selling luxury footwear,” NPD’s Cohen notes. “Retailers have learned they truly must treat luxury footwear like fine jewelry and service the customer with displays and places to view the product, in a salon-style environment.”
It looks like Spring ’11 fashions may help retailers make such a sell more possible, as the runways revealed bolder, brighter designs. It appears that the fashion industry might finally be ready to branch out beyond the cautious, practical aesthetic of recent seasons and tempt shoppers with a bit more embellishment, color and just plain fun. Will the plan work? “Definitely,” Erani says. “It’s like kids boycotting candy. How long do you think it can last?” —Audrey Goodson