Shoes, Non-Athletic

INDUSTRIAL CODES

NAICS: 31-6213 Men's Footwear (except athletic) Manufacturing, 31-6214 Women's Footwear (except athletic) Footwear, 31-6211 Rubber and Plastic Footwear Manufacturing, 31-6219 Other Footwear Manufacturing

SIC: 3143 Men's Footwear Manufacturing, and 3144 Women's Footwear Manufacturing

NAICS-Based Product Codes: 31-62111 through 31-62114131, 31-62120 through 31-62120120, 31-621130 through 31-62130051, 31-62140 through 31-62140041, 31-62190 through 31-62190020

PRODUCT OVERVIEW

People have worn shoes for a long time, as evidenced by a cave painting from Spain dated from 12,000 to 15,000 BC showing a man and a woman wearing boots. Much later, we have a substantial record of the types of footwear that existed in the ancient civilizations in Egypt and China. Shoes are necessary as protective covering for the tender soles of the feet and for warmth in cold weather; but from the earliest times, shoes have also played a decorative role. In the United States in the middle of the first decade of the twenty-first century, annual shoe purchases came to 2.3 billion pairs, which translates to an average of 7.6 pairs of shoes per person. While shoes typically have a lifespan of two to four years, the huge number of shoes acquired by U.S. consumers indicates that footwear is bought for fashion and pleasure rather than sheer necessity.

Historically, shoes have been worn for aesthetics as well as for utility. Egyptian sandals from 1200 BC or earlier were artistically made, and footwear carried symbolic value, denoting the status of the wearer. A commoner would have one style of sandal, a priest another. In ancient Greece different styles of shoe similarly indicated whether the wearer was a citizen or a slave. Some medieval European court shoes were so much more decorative than functional that wearers could not actually walk in them, and extreme styles of shoes were sometimes so controversial they were banned by law.

Shoes are constructed from a wide range of materials. Egyptian sandals had soles of woven papyrus, and rushes, rawhide, fur, silk, and felt were common shoe materials throughout the ancient world. Medieval European footwear was sometimes made of wood, and a knight's armor included footwear made of jointed metal. However, the most pliable and durable shoe material is leather, and for most of the history of footwear, the shoemaking craft centered on the working of leather.

Shoemaking was a highly evolved art in virtually every civilization on earth, yet shoemaking technology remained almost unchanged from the fourteenth century BC to the middle of the nineteenth century. The shoemaker's hand tools consisted of curved and pointed awls for piercing leather, knives, chisels, scrapers and polishers. Leather shoes were formed around a shaping device called a last. Until the mid-nineteenth century, most shoes were made on straight lasts, in one of only two widths. There was no difference between a left and right shoe, and sizing was approximate.

By the early nineteenth century, the shoe industry in England and America was highly organized and efficient. Shoemaking was the prototypical cottage industry, with many individual makers centered in the same geographic area. Nevertheless, shoe production was carried out entirely by hand. Inventors in the United States began to mechanize shoe production beginning in 1845. That year saw the introduction of the first satisfactory mechanical rolling machine, which was used to soften sole leather. In 1846 Elias Howe invented the sewing machine. A dozen years later, in 1858, an Abington, Massachusetts man, Lyman R. Blake, invented a sewing machine specifically for sewing soles onto shoes. Another Abington resident, Gordon McKay, refined and developed Blake's device. McKay's and Blake's mechanized improvements seemed to threaten the livelihood of traditional shoemakers. In 1859 female shoe industry workers in Lynn, Massachusetts called a general strike in an effort to protect their jobs against the encroachment of the machines. Nevertheless, by 1864 sewing machines were used widely in the shoe industry in the United States and in England and shoe production grew enormously. A single machine operator could now turn out three dozen pairs of shoes per hour, an astronomical advance over the prior, by-hand production rate, which was one pair per day.

This increased ease and rate of production led to big changes in the footwear market in the early twentieth century. For the first time, shoes needed designers as fashions changed more quickly. Shoes were also mass marketed to the middle and lower classes. A photo from an International Shoe and Leather Fair in the 1920s shows a woman dressed in a housemaid's uniform trying on several pairs of elaborate high-heeled shoes. Fashion, style and variety were available to consumers across a broad economic spectrum by this time. The shoe industry in the United States was quite robust through the first half of the twentieth century, peaking in 1968, when shoe production reached 642,400 pairs. Domestic production fell steeply after 1968, when a lowered tariff made imported shoes more economical. As of the early twenty-first century, nearly 100 percent of shoes bought in the United States are imported.

MARKET

The United States is the world's largest footwear market, where nearly 2.3 billion pairs of all types of shoes are bought annually in the middle of the first decade of the twenty-first century. The footwear market is usually looked at in terms of its consumer as well as in terms of shoe types. Men's footwear is considered one distinct market, women's another, and children's shoes a third. Total U.S. purchases of men's shoes equaled 237 million pairs in 2005, while women's shoe consumption stood at 884 million pairs. Total U.S. footwear sales, excluding athletic shoes, equaled 1.91 billion pairs in 2005.

While demand and purchases of shoes has been strong for the past quarter century, U.S. production has been on a very different trajectory. U.S. Census Bureau data provide evidence over the years of the industry's decline. In 1992 the U.S. shoe manufacturers had shipments of $4.8 billion and within a decade their shipments had fallen to less than half this total ($2.2 billion in 2002). The decline has continued unabated through the middle of the first decade of the twenty-first century with little reason to anticipate a reversal of the trend. Imports have made up the difference between rapidly increasing consumption and declining U.S. production.

Across all categories, the vast majority, 98.5 percent, of footwear purchased in the U.S. market is imported. Overall, 98.5 percent of U.S. footwear is brought in from abroad. Men's work shoes has the lowest import rate at just over 75 percent. This is the one segment of the shoe manufacturing industry in which a few domestic manufacturers were still holding on in the middle of the first decade of the twenty-first century.

China is the source of the largest share of shoe imports to the United States. Americans bought 1.9 billion pairs of shoes made in China in 2005, equivalent to just over 85 percent of all shoes purchased that year. The total value of Chinese footwear imports was $12.5 billion in 2005. Brazil was the second largest source of shoes imported to the United States.

Outside the United States, other nations marked as leading consumers of footwear are Japan, Germany, the United Kingdom, and France. In the early 2000s, the leading shoe producing countries were not major shoe consumers. China, India, Brazil, Vietnam and Indonesia are all major shoe manufacturing centers, yet these countries do not have a sizable and affluent middle class and consequently have a far lower demand for footwear. Both China and India are expected to be major footwear markets in the 2010s and beyond, as the level of disposable income and non-manual employment grows.

Fashion is a driving force behind the growth in shoe demand in the United States. The 40 percent increase (from 5.7 pairs per capita per year to 7.71) in pairs of shoes purchased per capita over the quarter century period 1980 to 2005 is explained by changing trends in footwear fashions. Footwear is very often a non-essential purchase for U.S. consumers, where the purchase of a luxury or popular brand of shoe is driven by want more than need. As such, the footwear market is heavily influenced by overall consumer confidence. Consumer confidence in the United States is often driven by non-economic factors that affect consumers' mental picture of the future. So the instability of the war in Iraq in the first decade of the twenty-first century, for example, is seen as a danger to consumer confidence. This and other political events have indirect consequences for the footwear industry.

KEY PRODUCERS/MANUFACTURERS

Almost all the key producers in the U.S. market have their actual manufacturing operations abroad. The U.S. footwear market is sharply divided among a few big producers and a host of very small companies, with little middle ground. Because the footwear industry is driven by fashion trends, sometimes very small producers or upstart companies can suddenly gain high visibility. For example, Skechers U.S.A., with 2006 revenue of $1.4 billion, did not begin selling footwear until 1992, yet in a little over ten years it had captured more than 36 percent of the U.S. fashion footwear market.

Collective Brands, Inc.

Collective Brands, Inc. is a $3.7 billion holding company for Payless ShoeSource, billed as the largest shoe retailer in the Western Hemisphere, and Stride Rite Corp., a maker of children's shoes. Payless operates approximately 4,600 stores, which primarily sell low-price brands in a unique self-service format. Payless has been in the shoe business since 1956, when two cousins opened their first store in Topeka, Kansas. Payless grew into a mammoth chain, with stores all across the United States, and in Canada, Central and South America, the Caribbean, Puerto Rico, and Japan. With revenue of $2.6 billion in the middle of the first decade of the twenty-first century, the company is one of the top forty importers in the United States.

In 2007 Payless acquired Stride Rite Corp. Stride Rite sells upscale shoe brands for children through 300 Stride Rite stores and through other retailers. The merger created a retail giant out of what were already significant players in the footwear market.

Brown Shoe Company

Another of the largest U.S. shoe retailers is the Brown Shoe Co., headquartered in St. Louis, Missouri. Brown operates the Famous Footwear retail chain, with approximately 1,000 stores. Its other retail operations include Naturalizer, with 258 stores, and two much smaller retailers, LaSalle and Via Spiga. In addition, Brown makes some well-known brands of casual footwear, including the Buster Brown line of children's shoes, and Naturalizer, Airstep, Connie, and LifeStride. Revenue in 2007 was over $2.4 billion.

Steven Madden, Ltd.

Steven Madden, Ltd. is the producer with the second largest share of the fashion footwear market, behind Sketchers. Steven Madden claims over 17 percent of the U.S. fashion footwear market with its Steven Madden, Stevie, David Aaron, and l.e.i. brands. The company operates 85 Steven Madden retail shoe stores, but does the bulk of its distribution through more than 6,500 department stores. Steven Madden, founded in 1990, represents the success, sometimes fleeting, of fashion lines. The company saw steadily rising sales in the first decade of the twenty-first century because of accurate selections of fashions that became trendy. Steven Madden also sells handbags and clothing. Revenue stood at $500 million in the middle of the first decade of the twenty-first century.

Allen-Edmonds, Inc.

Allen-Edmonds, of Port Washington, Wisconsin, is a relatively small player in the men's dress shoe market, but is significant in that it is one of the few remaining shoe companies that manufacture domestically. The company was founded in 1922, and made shoes for the military during World War II. After the war, Allen-Edmonds retained a following among men who had worn its shoes while in the service. Its dress shoes sell for more than $200, putting them squarely in the luxury range. Allen-Edmonds brings in an estimated $88 million annually in the first decade of the twenty-first century. Its continued survival stems largely from its stellar reputation as a maker of durable, comfortable shoes.

MATERIALS & SUPPLY CHAIN LOGISTICS

A variety of materials go into the manufacture of non-athletic shoes, with the bulk of the expense dedicated to finished leather. Leather may be calf, cowhide, pigskin, goat, or of other animal origin. Certain grades and types of leather are used for shoe uppers, while other types are used for shoe soles. Rubber, both natural and synthetic, is another key material in shoe manufacturing. Other materials used are textile fabrics, plastics and resins, and glues and adhesives. The adhesives are needed because most twenty-first century shoes are made by glueing the upper to the sole, where in the past, the process was achieved by sewing.

For the footwear industry as a whole in the middle of the first decade of the twenty-first century, one of the largest cost categories for manufacturers is labor. Though shoe manufacturing is almost entirely mechanized, the process is complicated, with over 100 steps needed to complete a typical shoe. So it is still a fairly labor-intensive industry. According to the 2002 Economic Census, compensation of employees made up over 25 percent of the cost of manufacturing for the footwear industry as a whole. The cost of leather is the second biggest expense, at roughly 15 percent. This is one of the primary reasons that the U.S. shoe manufacturing sector has moved to where labor costs are lowest. Labor costs in China and other parts of Asia may be as low as 5 percent of U.S. wages for comparable jobs.

The tariff applied to imported shoes was cut in half in 1968. Almost a quarter century later the World Trade Organization agreement began the process of gradually eliminated apparel and textile import quotas altogether over the period 1995 through the middle of the first decade of the twenty-first century. These measures to ease restrictions on shoe imports have meant that domestic shoe companies have had ever declining incentive to make the effort to keep their manufacturing facilities in the United States where costs are much higher. Because U.S. shoe companies almost universally manufacture abroad, these companies have a global supply chain spanning oceans and continents.

The industry is vulnerable to rising costs of petroleum, as shoe companies must pay to ship materials, components, and finished goods long distances. The length of the supply chain also means that state-of-the-art information technology is extremely important to shoe manufacturers. Shoe sales cycle quickly, with some seasonal shoes only on store shelves for ten weeks or less. Shoe sales are also very vulnerable to the whims of fashion, leaving shoe makers constantly on alert to changing trends and able to respond quickly to new styles and models. This means that communication technology and materials handling and logistics technology must be extremely efficient. The large retailers such as Payless also depend on sophisticated information technology to track inventory.

DISTRIBUTION CHANNEL

Distribution is usually considered in terms of three tiers: manufacturers, wholesalers, and retailers. However, in the footwear industry, these lines are somewhat blurred or overlapping. The leading shoe companies in the United States do their manufacturing abroad, and they may not actually own any plants or equipment. Thus shoe giants like Brown Shoe may be more accurately considered shoe designers and wholesalers, rather than shoe manufacturers. Leading shoe wholesalers are also, in many cases, also leading retailers. Brown, for example, operates one of the leading shoe retail chains, Famous Footwear. On the sales end things are similarly blurred. Many other leading companies in this field may be considered both wholesalers and retailers, as they sell both to their own chains of shoe stores and to other retailers.

Overall in the U.S. footwear industry there are approximately 100 manufacturers, 1,500 wholesalers, and 30,000 retail outlets. Retailers include independent (non-chain) shoe stores, department store shoe departments, mass-market merchants such as Target and Wal-Mart, and national chain shoe stores such as Payless. The largest fifty shoe store chains control approximately 80 percent of the market. The market is extremely competitive at all levels.

An evolving distribution channel in the middle of the first decade of the twenty-first century was the direct, online sales channel. In 2006 online shoe sales accounted for close to ten percent of overall shoe retail sales in the United States, and industry analysts expect that figure to rise to closer to 20 percent by the end of the decade. Major online retailers are Zappos, Shoebuy.com, Onlineshoes.com and Shoes.com. These organization's sites specialize in footwear. Other e-commerce businesses that sell a variety of goods, such as e-Bay and Amazon.com, are also emerging as an important outlet for shoe sales.

KEY USERS

Everybody needs shoes, although people who cannot afford shoes certainly do with fewer than the U.S. average of 7.71 pairs per year. In the United States, women buy more shoes than men, with women's total purchases at 8.84 million pairs and men's at 2.37 million pairs, according to figures compiled by the American Apparel and Footwear Association for 2005.

Shoe purchasing is tied to income and employment, and the leading shoe buying countries are areas with highly developed economies and high levels of non-manual employment for both men and women.

ADJACENT MARKETS

The primary adjacent market for footwear is apparel. The apparel market is driven by demands of fashion, and changes in apparel styles may influence shoe design and vice versa. Some shoe companies also have apparel lines, and apparel designers may also sell shoes, so there is quite a bit of fluidity between the two markets. Both apparel and shoe marketing depend heavily on brand recognition or brand loyalty, and when a brand is successful, it may spread across categories. Kenneth Cole, for example, a leading brand of men's shoes, also successfully launched a men's apparel line in 2004.

Leather handbags and accessories is another market considered adjacent to footwear. This market is also heavily influenced by fashion trends and by brand recognition. Footwear companies are large consumers of leather, and they have the ability to procure and design other leather products. Handbags and other leather accessories such as belts are also part of a total fashion picture that encompasses apparel and shoes. Sophisticated consumers want apparel, shoes, and accessories that coordinate, and designers have to be alert to trends in all three markets in order to successfully forecast demand.

The markets for socks and foot care products are also adjacent to the shoe market, but tend to have a far less direct impact on shoe sales than fashion issues and other accessories.

RESEARCH & DEVELOPMENT

Looking forward, the shoe industry's success depends more and more on the ability to react quickly to changes in consumer demand. New developments in the industry focus on technology and communication that give manufacturers the nimbleness to adapt to trends and new conditions. While the manufacturing and design functions have already integrated computer technology, future improvements are likely to be in the areas of planning, logistics, supply chain management, and inventory control.

New developments in these areas might be primarily technological, for example in the form of more complex and efficient computer databases. Information technology that allows more insight into consumer buying patterns is a key to planning and production. Other emerging research and development focuses on mastering the long supply chain typical in the footwear industry, especially in the areas of quality control and customs and inspection. Developments here may be in management patterns—finding more efficient human organization, rather than more efficient machines.

CURRENT TRENDS

The footwear industry always follows the unpredictability of fashion trends. Some of these are so fleeting that they only last a season, while others have a more long-term impact on the footwear market. For example, in the United States in the early 2000s, a trend toward more casual dressing helped manufacturers of casual (but non-athletic) shoes. This trend filtered from the apparel market into footwear as part of a larger cultural shift toward the more casual workplace. This is a fashion trend that may have more longevity than a seasonal preference for a certain color or heel height.

Another large trend that affects the footwear market is globalization. As the industry itself is completely international, with shoes designed in one place, supplied in another, and manufactured in a third before being shipped back to the domestic market, the shoe industry is already a multinational enterprise. Because the U.S. market is mostly mature and extremely competitive, shoe companies will move more and more into economies that are producing an affluent population that can purchase shoes for pleasure and status. China and India are expected to be the next big markets for footwear.

Climate change is another factor that may provide an impetuous to changes within the market for shoes. Warmer weather demands different footwear than cooler weather. Lightweight shoes such as sandals typically retail for less than winter footwear, so though volume of sales in terms of number of pairs purchased may not decline, the value of those sales overall may dip. This is an environmental trend that the footwear industry must grapple with.

TARGET MARKETS & SEGMENTATION

The footwear market is segmented very finely, with shoes for men, women and children; a wide array of price points within each category; shoes for spring, summer, fall and winter; casual shoes; dress shoes; and special-use shoes such as house slippers and protective footwear. Brand image is extremely important in shoe marketing, and brands try to evoke associations such as comfort, quality, and high fashion, each of which appeals to some groups of consumers more than others. Shoe sales are highly dependent on emotion and consumer confidence. Therefore a brand has to quickly sum up a desirable set of characteristics for a consumer, so the consumer can make a purchasing decision.

The footwear market in the United States is fairly mature, so marketers have to find new ways of drawing the same pool of consumers to their shoes rather than a competitor's. One way the footwear industry is targeting new consumers is by bringing high-fashion names within the reach of a mass market. In 2006 Payless ShoeSource, known for its low-end shoes sold through self-service stores, debuted a line of designer shoes, made by Laura Poretzky of the sportwear line Abaete. The shoes sold for $20 to $40, well below the cost of other designer shoes, but more than the average price for Payless, which is $14 or less. This follows a trend in the apparel industry as well, where hot young designers have been tapped for limited lines at Target, for example.

The Baby Boom generation (those born between 1945 and the early 1960s) is another key target market for the footwear industry. As this large demographic group moves toward retirement, the call for comfortable yet fashionable shoes drives sales. Baby Boomers are a relatively affluent group. Women within the demographic are typically willing to pay moderately high prices, from $80 to $150 retail, for the right shoes. Marketers appeal to this group with an appropriate variety of sizes and widths for aging feet, and with promises of comfort and flexibility.

RELATED ASSOCIATIONS & ORGANIZATIONS

American Apparel and Footwear Association, http://www.apparelandfootwear.org

Footwear Distributors and Retailers of America, http://www.fdra.org

National Shoe Retailers Association, http://www.nsra.org

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see also Athletic Shoes