October 20, 2006
Cheap Sneakers Look to Run Past Pricier Competitors
Jump back. You don’t have to wear sneakers over $100 to perform on – or off – the court anymore. Today, retailers such as Payless ShoeSource, Steve & Barry’s University Sportswear and, of course, Wal-Mart are selling high-quality and inexpensive sneakers that have consumers taking notice and cash registers ringing.
Payless introduced its “The Amp” running shoe last month at $35. The retailer claims it is as good as shoes three times its cost and it is sturdy enough to stand up to a marathon run.
When Warren Greene, special-projects editor at Runner’s World magazine heard Payless’ claim about The Amp, he was skeptical.
“I remember thinking, gosh, this is a nice shoe. It flexes in the right places; it didn’t look like it would fall apart. I ran in it and it wasn’t awful,” he told The Wall Street Journal.
Of course, Mr. Greene wasn’t willing to give The Amp his full endorsement either. “It’s not clear if the shoe will merit a review (in Runner’s World),” he said.
Payless CEO Matthew Rubel said initial sales of The Amp have exceeded company expectations for the shoe. The sneaker is currently sold in 400 Payless stores and will be rolled out to an additional 1,200 locations by next year.
“The biggest hurdle is to get people to be believers,” said Mr. Rubel. “We’re going to be very patient. Ultimately, we believe the marketplace for authentic performance footwear at the $25 to $30 range is a multibillion marketplace.”
According to NPD Group, sales of shoes under $50 represent more than half of the U.S. sneaker market. Sneaker sales for items that cost $90 and up represent less than 10 percent of the market, although sales in the segment are growing at roughly three times (on a percentage basis) the $50 and under group.
Steve & Barry’s has gone even lower with its sneakers. The company recently launched New York Knicks’ Stephon Marbury’s line of athletic apparel and shoes. The Starbury 1 shoe is priced at under $15.
“There are kids that don’t have a choice,” Mr. Marbury said. “Now people can buy a line and say ‘OK, we’re buying the same exact quality for $14.98 or less.’”
Discussion Questions: Will the availability of high quality products in categories such as sneakers, clothing, home goods, furniture, etc. at discount
prices have an impact on the premium-priced and even the luxury goods market? Has the increased consumer acceptance of cheap chic lessened the value consumers place on premium
and super premium brands?
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What a great way to bring the fit, budget-oriented shopper into your store!!! Offer them unprecedented value with a nice product and at least 1/2 of the prevailing price.
But who is the customer that you are attracting? What else are they buying in your stores? How frequently will they return? Will they join your loyalty program?
To answer these questions, you need to take an insightful look into your customer relationships. By undercutting your customers, you run the risk of bringing in the bottom-feeders from your competition. Can you hear them cheering? On the other hand, they may be very profitable. Your business intelligence and testing infrastructure must rise to the task. Otherwise, you are just grabbing a little ink with no long term consequences.
You bet!
Watch the new high quality/low price sneaker niche scream and become a fashion statement for a few years. The buzz is already out on the web; expect to see these shoes in clubs nationwide soon.
Inexpensive athletic shoes have always been available. Recent publicity about the Starbury 1 is extremely skilled, since it isn’t easy to publicize something that fundamentally is as old as the hills. Here’s a question: if Steve and Barry’s gets a famous athlete photographed in a simple gray $10 sweatshirt, will that get headlines, too? Is that a trend? Or is that skillful publicity? The brightest retailers are the best media manipulators.
Will the availability of lower-priced items impact the premium market? No. Will it further impact the now-dynamic middle market? Most definitely…As Mervyn’s unveils its new store strategies, Kohl’s continues its up-market moves, J.C. Penney rocks on, Sears Holdings emerges from dormancy, and non-US retailers such as Uniqlo strengthen their positions, things will get even more interesting in the big-and-growing middle. Adding fuel to the fire, the middle market now includes Target and Wal-Mart in many categories. Luxury shoppers won’t be trading down; however, mid-market to mass shoppers will have lots of room to move around!
Carol hits this head on for the retailers’ positioning choices. If we drive down one level lower to the individual consumer and category, we will probably find a wide array of behavior — all driven by the relative utility of any given item to any given consumer. Teens to whom it is important will continue to wear $100+ Nike’s (and that may not necessarily be the kids in the 90210 zip code — it might be kids on the inner city basketball courts). For others, cheap chic may be all the rage. These lucky folks may be making an “I don’t need to wear that brand to be cool” statement. Others may be exercising what we used to refer to as the “housewife in the BMW at the self-serve pump” phenomenon. (Of course, no one knows what a full-service pump is anymore, another good analogy bites the dust!)
It’s doubtful cheaper sneakers will have much of an impact on Nike and the other higher priced shoes. Nike, Reebok and others spend millions branding themselves and it’s in situations like this where the branding effort will make the difference in being able to hold off low priced sneakers. If you’re over 40 years of age, you will remember “Billy Beer,” a cheap beer that at one time people thought would overtake the full-priced beers. Today “Billy Beer” is nowhere to be found and full and premium priced beers are doing just fine.
The low price/high quality strategy targets a different segment of the population. Cheap chic will continue to thrive as people refocus their expenditures but the core premium customers are in a class all by themselves! Premium and super premium brands have greater value due in part to the massive marketing investments the brand-owners have made. There will always be customers that like the cachet of a premium brand. To reduce the potential impact, premium and super premium brands will have to step up their non-price attributes like service and availability.
The actual value of the “new” low priced athletic footwear is directly tied to the profit margin. If the margins are not acceptable, the shoes will disappear like Billy Beer.
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What a great way to bring the fit, budget-oriented shopper into your store!!! Offer them unprecedented value with a nice product and at least 1/2 of the prevailing price.
But who is the customer that you are attracting? What else are they buying in your stores? How frequently will they return? Will they join your loyalty program?
To answer these questions, you need to take an insightful look into your customer relationships. By undercutting your customers, you run the risk of bringing in the bottom-feeders from your competition. Can you hear them cheering? On the other hand, they may be very profitable. Your business intelligence and testing infrastructure must rise to the task. Otherwise, you are just grabbing a little ink with no long term consequences.
You bet!
Watch the new high quality/low price sneaker niche scream and become a fashion statement for a few years. The buzz is already out on the web; expect to see these shoes in clubs nationwide soon.
Inexpensive athletic shoes have always been available. Recent publicity about the Starbury 1 is extremely skilled, since it isn’t easy to publicize something that fundamentally is as old as the hills. Here’s a question: if Steve and Barry’s gets a famous athlete photographed in a simple gray $10 sweatshirt, will that get headlines, too? Is that a trend? Or is that skillful publicity? The brightest retailers are the best media manipulators.
Will the availability of lower-priced items impact the premium market? No. Will it further impact the now-dynamic middle market? Most definitely…As Mervyn’s unveils its new store strategies, Kohl’s continues its up-market moves, J.C. Penney rocks on, Sears Holdings emerges from dormancy, and non-US retailers such as Uniqlo strengthen their positions, things will get even more interesting in the big-and-growing middle. Adding fuel to the fire, the middle market now includes Target and Wal-Mart in many categories. Luxury shoppers won’t be trading down; however, mid-market to mass shoppers will have lots of room to move around!
Carol hits this head on for the retailers’ positioning choices. If we drive down one level lower to the individual consumer and category, we will probably find a wide array of behavior — all driven by the relative utility of any given item to any given consumer. Teens to whom it is important will continue to wear $100+ Nike’s (and that may not necessarily be the kids in the 90210 zip code — it might be kids on the inner city basketball courts). For others, cheap chic may be all the rage. These lucky folks may be making an “I don’t need to wear that brand to be cool” statement. Others may be exercising what we used to refer to as the “housewife in the BMW at the self-serve pump” phenomenon. (Of course, no one knows what a full-service pump is anymore, another good analogy bites the dust!)
It’s doubtful cheaper sneakers will have much of an impact on Nike and the other higher priced shoes. Nike, Reebok and others spend millions branding themselves and it’s in situations like this where the branding effort will make the difference in being able to hold off low priced sneakers. If you’re over 40 years of age, you will remember “Billy Beer,” a cheap beer that at one time people thought would overtake the full-priced beers. Today “Billy Beer” is nowhere to be found and full and premium priced beers are doing just fine.
The low price/high quality strategy targets a different segment of the population. Cheap chic will continue to thrive as people refocus their expenditures but the core premium customers are in a class all by themselves! Premium and super premium brands have greater value due in part to the massive marketing investments the brand-owners have made. There will always be customers that like the cachet of a premium brand. To reduce the potential impact, premium and super premium brands will have to step up their non-price attributes like service and availability.
The actual value of the “new” low priced athletic footwear is directly tied to the profit margin. If the margins are not acceptable, the shoes will disappear like Billy Beer.