The UK footwear market is showing signs of a slow-down, recently illustrated by shoe chains Dolcis and Stead & Simpson being forced into administration. Both have since been acquired by other retailers, suggesting that a more consolidated marketplace could be the way forward. Joe Ayling reports.

 

The wide availability of shoes in clothes shops, department stores and supermarkets, together with internet shopping, makes for strong competition at traditional high street shoe chains.

 

And with the UK's much-publicised weak consumer spending also factored in, specialist retailers are being backed into a corner.

 

According to a recent report by Verdict Research, cost inflation has compounded the problems facing the UK's footwear specialists.

 

Verdict says that despite rising costs, footwear retailers are unable to raise prices due to the high level of competition in the market - particularly from clothing retailers.

 

According to the research group, eight of the UK's top ten footwear specialists either saw profit margins fall or made a loss during 2006, and in 2007 this trend will have continued.

 

Massive competition
Verdict retail analyst and co-author of the report, Carol Ratcliffe, tells just-style: "In terms of sales there is massive competition from clothing retailers and general stores taking a big share of the market.

 

"Specialists need to offer something else to get people into the store but it has become more difficult."

 

She says that established stores like New Look are both fashionable and easy to buy in at the same time. Most competition is coming from low-mid market operators.

 

Ratcliffe tells just-style that in order to galvanise the sector, shoe chains will have to invest in their brands, stores and service.

 

One of the ways she suggests this can be done is through investments to renovate stores, an area where footwear chains have been lagging behind.

 

"There will need to be some investment in store environment because the competition is that much fiercer now," Ratcliffe says.

 

"Specialists need to promote the brand and make sure it is clear who the store is targeted at, and to be very targeted in terms of both age and fashionability."

 

Although clothing retailers and other non-specialists are also facing higher costs, as typically larger organisations they are in a better position to withstand these pressures, according to Verdict.

 

Cost inflation has arisen from EU anti-dumping tariffs introduced in 2006, higher rents, fuel costs and energy prices.

 

Verdict does not feel there is any shortfall in demand for shoes in the UK though.

 

"As a result, even the UK's largest footwear specialists continue to suffer despite shoppers' growing appetite for new footwear," the report, called UK Footwear Retailers 2008, notes.

 

Tough trading
However, when Dolcis went into administration on 21 January, the company blamed tough trading conditions on the UK high street.

 

The chain was forced to close about half of its 185 stores and concessions, with about 600 of the chain's 1,200 staff also lost their jobs.

 

However, insolvency specialist KPMG said there was no shortage of interest in the business, and that the joint administrators, Brian Green, Allan Graham and Howard Smith, had been contacted by "around 40" interested parties.

 

This was before Stylo Plc, whose brands include Barratts, PriceLess and Shellys, agreed to purchase the company today (14 February).

 

Michael Ziff, executive chairman of Stylo, says: "We remain in a very competitive environment and this acquisition is a great opportunity to strengthen our position in the retail footwear sector."

 

Fighting the squeeze

Therefore, it seems that while the combination of rising costs and weak spending pressures are squeezing some specialists to the side, others are relishing the opportunity to become major high street players.

 

In order for specialist shoe chains to truly compete in an ever-more volatile retail environment, consolidation of the marketplace is inevitable though.

As Ratcliffe tells just-style: "Specialists can benefit from having a large business, and this is one way they can fight back against rising costs."

 

The Shoe Zone is another group looking to upsize, having announced on 28 January the purchase of Stead & Simpson for an undisclosed sum.

 

Shoe Zone chief executive Anthony Smith is looking to return the Stead & Simpson business back to profitability within the coming months.

 

In turn, Stead & Simpson hopes to draw strengths and reduce costs from becoming part of a consolidated group.

 

For those opting to fight instead of flight, competition from high street fashion chains can be healthy.

 

"There is a future for the high street footwear specialist, but they are going to have to up their game to survive," Ratcliffe concludes.

 

Investors hope that consolidation by groups like The Shoe Zone and Stylo will help footwear retailers make the expensive transition into a stronger niche sector.


To read more about footwear retailing in the
UK, take a look at the UK Footwear Retailers 2008 report.