Clothing specialists and grocers have already made a major assault on the UK footwear market. New research suggests there is likely to be further encroachment in 2005 from non-specialists attracted by the sector's superior growth.
Competing with the convenience, fashionability and newness of the footwear ranges from clothing specialists has proved a major challenge to traditional footwear retailers whose market share growth is slowing to a near standstill in 2005.

Excluding Marks & Spencer, Verdict Research estimates this collective group will have increased their footwear sales by 60.6 per cent between 2000 and 2005.

Including M&S they will account for just under a third of the market, or £1.6 billion of sales, in 2005. In comparison footwear specialists grew their turnover by only 24.5 per cent over the same period (to £3.3 billion) according to Verdict's latest report on 'Footwear Retailers 2005.'

Figure 1: Winners and losers in footwear market share 2005e on 2004
click table to enlarge

Note: Market shares for Brantano, Dolcis, Kurt Geiger, Matalan, Stead & Simpson and the Shoe Studio Group remained stagnant in 2005
Source: Verdict Analysis

Shopping at clothing competitors
Verdict says the biggest single challenge facing the specialist footwear retailer is how to overcome its customers' need to shop at potential competitors' stores to purchase clothing.

Every male and female footwear shopper will purchase clothing elsewhere, and identifying the potential of this captive audience has been a key factor in the emergence of the clothing specialists' footwear offer.

But non-specialists have been far from spoon-fed. Clothing specialists in particular have been highly adept at identifying the potential of footwear range development, with the likes of River Island now generating approximately 20 per cent of turnover from footwear sales.

More than just an obvious source of new revenue while non-specialists' core clothing markets are slowing, footwear ranges carry higher average selling prices, build extensive cross-selling opportunities, raise average transaction values, and generate significantly higher sales density levels.

Figure 2: Estimated footwear sales densities (nearest financial year ending in) 2005

click table to enlarge

Note: Brantano, George, River Island, Russell & Bromley, Shoefayre and Stead & Simpson densities are 2004
Source: Verdict Analysis

Aggressive targeting
As a result, non-specialist retailers have been aggressively targeting the footwear market as they continually seek new ways to develop their lifestyle proposition and guarantee continued business growth.

Increased space allocation and continual range development have been the order of the day as they have seamlessly stepped into the role of market innovators. Identifying fashion trends and running with new concepts, they have become catalysts in the market, driving developments - such as TopShop's standalone footwear concept and New Look's leather ranges - rather than reacting to the specialists' range innovations.

Unintentionally specialists have therefore adopted a position of being market-led rather than market leaders.

Slow to instigate store refurbishment, introducing only minimal range development and failure to generate excitement among their customer base: these factors have resulted in the group largely failing to gain share over the last year, says Verdict.

Share growth
Verdict estimates that only four of the 13 major footwear specialists achieved market share growth in 2005.

With the exception of Shoe Zone, Faith, Schuh and Jones each major specialist either lost or simply maintained market share in 2005. Smaller specialists such as Office, Qube and Dune have performed far better, benefiting from their highly targeted, high fashion, niche propositions.

But it has not all been doom and gloom for the specialists. Despite a lacklustre market share performance, specialist footwear retailers have built on foundations laid in 2004, with most reporting a continued upturn in profitability. Attention must now be paid to driving top line growth to fight off the inevitable continued progress of non-specialists.

Verdict estimates that the footwear market will outperform clothing market growth in 2005, supported by a reduced level of deflation (-0.7 per cent) and strong volume sales growth (+4.0 per cent).

As a result there will be further encroachment on the market from non-specialists attracted by superior growth. Clothing retailers dedicating greater sales area to footwear, particularly as they move to larger stores, will be made all the more appealing by higher sales density levels and continued strength in the footwear market.

Therefore footwear specialists must fight back and innovate to grow. Many have laid the foundations for growth by investing in store portfolios, building fashionability of offer and quickening lead times and stock-turn.

However, other problems must be tackled. A differentiated service proposition will be a key factor in building loyalty and supremacy of offer over non-specialists.

This remit goes far beyond basic customer service, says Verdict. Due to the complexities of sizing and stock availability, specialists must target missed sales opportunities, maximising rate of sale through the development of effective customer ordering systems.

Space productivity will be enhanced further by such a measure which will improve customer retention and once again justify their specialism.