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A new year, a new beginning

Published: 31st Oct 2017
Author: Phillip Nutt - Wenco

I am so happy to see the end of 2017; it most definitely was a year I sadly want to forget as it was one torn by serious health problems that basically evolved from taking too many pills for my old health problems that had been eradicated by a new heart valve.

It appears that  the medical fraternity failed to recognise my new heart was fighting my ingestion of the old 23 pills a day. Now I`m down to a baby aspirin and one heart pill and I`m slowly on the mend. The moral of this story is that new beginnings need fresh new approaches. And sometimes they are relatively simple to execute.
The reason I open with my own health problems is only valid because it serves to remind me that our industry is also really in need for a physical overhaul of its state of health.
When did the traditional shoe industry last have a check up or a stress test to see how it is handling life? I say this because I see and hear from a lot of stressed out shoe people questioning where our industry is heading.
Nearly 40 years ago the industry was hit with a 'Game Changing Fact' when the global powers that be decided that GLOBALIZATION was going to be so healthy for everyone, that this was the future direction for everyone to benefit from.
I`m not here to bash Globalization. We all know the results, we have seen the weak fall further into despair and a lot of upstarts make headlines on how successful they are in a world of fake news and planted stories.
We are seeing the eradication  of many of the activities  in business that 'old timers' use to hold in such high regard.
 
In discussing an end of year article with your editor, I was quite vocal in saying that 2017 left yours truly with much time on my hands from my health recuperation process and whilst it was tough to physically type, it sure was heaven to be able to read every article in major newspapers and magazines whilst also absorbing every repetitive CNN pundit's version of the decline of the Excited States under its Twittering Chief.
It's not just the USA that has its problems; there is such polarization in the two- or three-party systems that run the Western world that no matter what those in power say, another party will create a negativity of response that just is not good for our economies or the masses' psyche.
We live with a media that now headlines despair, not positive thoughts.
 
Our industry, as just a segment of these troubled times, is no different. Often I get comments as to why I make negative remarks in some articles but frankly I don`t see how this old part of the industry will change without shock tactics.
I`ve been blessed to have experienced over 50 years of relative success, starting first with a domestic  manufacturing business and then on to a global scale as the world markets opened up for sourcing.
I`ve seen a lot of change, the hurt that domestic production closure can feel to communities. What did these people do wrong to be obliterated from the scene?
The major lesson I learnt was that any business based solely on being competitively priced cannot survive. Companies built on being the cheapest have no control anymore as to where their competition will come from. 
I find it ironic and a strong message to those looking for direction, but the SURVIVORS of domestic production are in the main those who produce LUXURY goods or high quality WELLNESS product and didn`t aim for bigness but rather simply to be the best at what they do with good service and fair pricing for what they offer. 
As the new giants of E-Commerce strive to own every aspect of their business chain in order to control costs, it's interesting to see from my own observations how many start ups keep opening that are conceived by young entrepreneurs who seems to be fearless about borrowing money, employing people or even knowing where to distribute those goods. This fearless factor is worthy of professional study and in particular the impact that Crowdfunding has on their decisions to open businesses.
The shoe business use to be a generational 'thing', but the newcomers are not of that tradition. These are not 'LIFERS', they see 'a buck to be made' and their knowledge of the industry does not go any further back than the coming of Nike.
 
Whilst convalescing, a good shoe friend visited me. He`s still working at 70, rushing here and there globally just to survive. When I asked if he was enjoying himself, the one comment he made that impacted me was 'I`m now dealing with the third generation grandchildren of my original  shoe clients and they already “know it all” and sadly one has to let them find out the hard way it`s not a fun industry any longer!'
Yes , THE TIMES THEY ARE A-CHANGING but I`m not sure I can write with any relevance any longer. This new industry does not look to history for lessons to the traditional generational businesses. It bothers me to bring the new message to our industry because I know it hurts,  yet we MUST absorb the pain of change if we are to survive.
Let`s start with the OLD WAY we used to do business and ONLY YOU, dear reader, can decide upon which path you tread.
 

Bata was the first global shoe company, in an industry\r\ndominated around the world by domestic shoe brands.

 
1/ The collapse of the middleman margins
Pre globalization, national craft industries were sleeping giants. We did business as we always had done for generations, much with simple agreement handshakes, until the investor generations took over.
This generation thinks smarter, is greedier for rewards, and cares little for those paternalistic touches of old fashioned management.
These gurus of business school and the stock market are looking for cost savings to max out profits.
A quick study of the new giants of e-commerce will clearly show that they have an obsession with cutting margins to the bone for their services, knowing that they have a global market to cater to. 
The shoe industry over the past century was traditionally a domestic concentration. Basically only Bata had a global reach, with Clarks having a British Commonwealth consumer. America was just a huge market on its own, obsessed with advertising to let its product stand out from a scene of mediocre sameness.  It wasn't really until the late 1950s that Wolverine brought the first taste of global branding to the world in the form of Hush Puppies.
Traditionally manufacturers made goods and put on hefty profit margins, sales agents got their commissions for selling these products to retailers. Retailers then put on huge margins to cover all their costs of doing business and their profit.
These added costs were acceptable for decades as times were good, even as the grocery supermarkets and old style discounters consolidated and the lowest price became the common denominator .  The advent of globalization and container shipping began to split up who in the supply chain was to make the most profits.
Mass retailers decided to abandon domestic makers for cheaper offshore resources. Sears was one of the first to source offshore and, ironies of ironies, look at their corporate state today. 
Off shore prices enabled specialist discounters to emerge, who operated within less glamorous facilities, relied on little or no service staff and used  fast checkout services to process the purchases. The concept of customer relations went out of the window. People shopped there because it was cheaper for families, many of whom were struggling to find decent paying jobs.
It seems that since the birth of offshore sourcing, everyone has been trying to sell footwear in some form in almost every format of retail.
Even FOOD SUPERMARKETS began to sell basic everyday clothing and footwear  as a means to capture as much of the everyday consumer disposable income as possible.
They even offered credit cards with incentives based on purchases for cash paybacks or travel points.
 

Some categories of footwear have become commodities, sold through supermarkets. Source: https://www.tiendeo.co.za/offers/shoes

 
Move forward to the world of the Internet where people can pick and click  for all manner of goods and find easy apps for price comparison. 
Today one can order online and decide how delivery is to function. Do they send it by courier or do I pick it up are the only decisions to be made.
One negative of the Internet was that price comparisons became de rigueur for many shopaholics. People and media began to show the average consumer how much 'Value Content' was actually in the products they purchased. 
The mantra that 'quality is but a perception' was proven by the rise of branded athletic shoes  endorsed by superstars and then hyped beyond imagination by willing media.
Now the fight is on for the control of the margins. Consumers know what the actual costs of a shoe are.
 
Amazon et al are said to be looking at using their own brands rather than pay the middleman brand costs that also include that costly advertising and sales team expenses. They are also looking at ways to do their own courier deliveries with airborne warehouses and drones.
We have allowed footwear to become a commodity item, bought many times simply as a foot covering and the real disposable income being spent for 'fashionable' smart phones.
It is the role of these smart phones that has also helped in the demise of traditional ways of selling footwear. 
 
As classic retail faltered, look at how some of the smarter industry leaders acted.
The giant athletic brands found no loyalty with their traditional retail clients, so they opened their own LIFESTYLE STORES and now they appear to be moving away from mall-type environments for their own retail sites and the Internet business.
Fewer and fewer shoe chains can afford the 7-days-a-week retail mall operations.
Many of our malls now look like a disaster site as store fronts get boarded up with 'coming soon' signs as some of the great names of retailing of yesteryear go out of business because the are no longer relevant to the retailing environment. 
 
Consumers don`t worry anymore about the old school season sales. Today we are so overstocked with the sameness of merchandise that mall sales no longer have the same affect on consumers as they once did: e.g. Sears ran a month-long sales  liquidation of its stores in Canada, yet TV interviews showed that shoppers chose to wait until towards the end of the event because they didn`t see enough of a bargain value to warrant their shopping effort. These consumers, many of whom were new immigrants, had no loyalty to or nostalgia for Sears, they just wanted the best bargains.
Meanwhile Ali Baba in China does its Black Monday version of the USA-contrived Black Friday and sells over 40 billion dollars of merchandise in a day. 
NOW the big giants of retail are wanting Christmas day to be open for shopping along with all other major seasonal dates and they are supported by new generations of immigrants who are not Christians or have no empathy with the traditional cultural promotional timetables of Western culture. Yes, they want civic holidays, but they have no feeling for the Norman Rockwell feeling of yesteryear. One can now pick almost any day for your special sales.
 
2/ Where does old school retailing now fit in?
Now more than ever it is about knowing your customer very intimately.
It's very difficult to 'pen' consumers by age anymore. Now it's better to study LOCATION, DISPOSABLE INCOME and shopping habits.
The new social network giants are amassing huge profiles of each and every type of customer. We all feared George Orwell's 1984 Big Brother syndrome, but that day has arrived. Now when we buy anything online we expect a follow up series of 'we saw you bought this item so here are some others you might like'.
 
URBAN MATURE CONSUMERS (The fact that they still own their urban homes now worth 100s of 1000s of dollars) or have sold out for a luxury condo means that they are looking for upscale entertainment and dining within close proximity to where they live. Travel, health, fitness all play a role and they can be both frugal and quality driven in their shopping habits. The social network companies know this.
 
EDUCATED MILLENNIALS are very similar to URBAN MATURE CONSUMERS but have their own twists. Forced into mouse-sized condo apartments because of high costs of accommodation and not willing to spend hours in commuting congestion, they have created whole new approaches to consumerism that not even IKEA was ready for and is now adjusting to.
These small condo dwellers see their apartments like hotel rooms for sleeping only. They rely on external services for their needs be they for food, fitness or entertainment. This is a generation that for many may never own a car, preferring to rent a 2GO mini rental  for specific needs  or being the first to adapt to the likes of UBER (which now has a bike courier pizza delivery service for fighting downtown gridlock). Even the coming driverless car service opens up so many opportunities for people who were previously shut in.
 
I cannot stress enough how much retailing can change, will change and will reposition its whole raison d'être of purpose. Retailing via the Internet and social media is open 24 hours a day. Bricks and  mortar stores are open 7 days a week, but do they have to be when stats are there to tell you when people shop and where they shop?
 

Local brands which survive the global onslaught mostly concentrate on luxury or wellness, like Birkenstock and a host of other German brands. Source: http://resources.footwearetc.com/_resources/www/ footwear/images/homepage/new-subhero/birkenstock-bw.jpg

 
3/ Shoe retailing has to be come exciting again
There are some excellent new start up companies now on the Internet and many are not coming from Europe or North America where we have become victims of excessive replication of each others' best sellers rather than seeking our own identities.
Faraway continents like Australasia that brought us the SHEEPSKIN boot phenomena are now doing wondrous things with woven wool uppers that suit both wellness markets and fashion markets. I have seen some colourful woven slipper  booties from exotic places like Nepal and Mongolia.
 
Consolidation of retailing is no longer about just being bigger than anyone else.
The challenge in branding for the future is a battle again of who will own the profit margins and now strategic partnerships are more important than ever.
It's now better to share success than failure because of these changing times. 
 
Important retail space will now become even more expensive and as a result old school retailers are looking at leasing out some of their space for new concept applications that hopefully will have some value in  refurbishing their rather tired and worn out retail images.
Even independents with good locations are being approached to lease AIRBNB type  merchandise departments under short term contracts for new brands as another application of the successful POP UP store concepts.
Excitement has to come in many ways for survival.
 
Mediocrity of service is the kiss of death. IF someone is willing to get off their duffs (instead of their key boards) and come visit your store there has to be an exciting reason for those consumers to do it.
I see great hope for the independent who knows how to create excitement with their regular clients. The impact of the Internet is not all that bad for good independents.
Apps and Algorithms exist aplenty that can blanket your client contacts with offers of excitement and encouragement to make a trip to the store for a happy experience such as early collection showings. special loyal client pricing and even membership of product exclusivity.
I see no reason why independents with a solid reputation cannot think localised pick 'n click ordering by some of its regular clients who cannot get out, particularly elderly patrons in winter. As an example I submit how LOBLAWS here in major urban areas is now starting an online fast grocery home delivery as does our LCBO liquor stores. They and many others are seeing that bricks and mortar can compete with the giants of the Internet when it's not just price but quality of offering that is also valued.
 
I appreciate any input  for keeping this subject of CHANGE going in our articles, as it's not going to be an easy time until we start to see how big the E-Commerce factor will become at the expense of the old ways of doing business. 
It is a fact that Globalization did bring a manufacturing revolution where outsourcing forced tremendous downsizing and hardships on local communities in the West. Now we see the next phase which is the retailing revolution taking place and  thousands of part time staff being put out of jobs that in the main had become the base for new immigrants to acclimatize to their new country.
The challenge will be how our politicians deal with the pysche of soclal stress as a result of this technical progress. Its going to be tough to deal with both short term problems and long term strategies and stay in power through democratic means.
 
 

Phillip Nutt is the president of Wenco International Footwear Consultants, based in Canada. His intimate knowledge of South Africa comes from a stint with Bata SA in Pinetown. An outline of his services is available on his website, www.wenco.ca.

©2017 S&V Publications
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