Trailblazers

▲ FOOTWEAR STATE OF THE INDUSTRY 2019

Trailblazers How footwear is forging a new path toward sustainability, charting a course for a more diversified supply chain and taking steps to meet consumers’ comfort mandate

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WRITING A NEW TABLE OF CONTENTS PLAYBOOK 3 PUBLISHER’S LETTER e’re living in a casual and reuse. Some footwear firms are focused on 5 FOOTWEAR TECHNOLOGY: moment. the circular economy, either by using post- 3-D PRINTING, FIT TOOLS & And the long-standing consumer waste as inputs or by ensuring the CUSTOMIZATION trend has shoppers products they make can be broken down and opting for athleisure reused for future kicks. Meanwhile, others are 10 MARKET TRENDS footwear at rates that swapping in comparable components for the are both disrupting shoe sales and influencing chemicals and plastics that typically come into 14 NEW BLOOD COULD W - design overall. The category is so bullish, in play. For these new materials, shoe companies SHAKE UP TOP HEAVY fact, that it’s blamed for sidelining performance are plumbing the depths of the ocean and the PERFORMANCE MARKET sneakers, which are seeing softer sales and far reaches of the fridge, coming up with new 17 CASUAL DOMINANCE fewer standouts. Even basketball, which uses for castoffs like algae, rice husks and even historically has been a slam dunk, started the milk. It’s a winning combination that’s allowing 20 MOVING TARGETS year on a losing streak with sales down 21 the industry to lessen its impact on the percent. (Read “New Blood Could Shake up Top- planet while preserving the technical aspects 24 SUPPLY CHAINS UNDER Heavy Performance Market” on page 14.) consumers demand from their shoes. PRESSURE And just as yogawear made stretch Even as the industry attempts to move mandatory in apparel, casual sneakers have forward with a slate of newness, a heavy cloud 28 FLOATING ON AIR made comfort the MVP in footwear. As a result, continues to loom. The on-again, off-again 31 MATERIAL INNOVATION the material innovation playbook centers trade war between the U.S. and China has been NEWS around providing a barely-there feel. (Read top of mind for footwear executives, who thus “Floating as Air” on page 28.) Gone are the far have been spared a direct hit with what days of heavy, bulky performance shoes and could be up to 25 percent in new tariffs on boots. Brands have put midsoles and outsoles a sector that already carries an inequitable on a diet in a quest for the lightest weight burden. The threat has started a possible mass components possible. New TPU and EVA migration, as companies seek other production compounds cater to everyone from rugged options. In “Supply Chains Under Pressure” outdoorsman to recreational runners. (page 24), supply chain leaders from companies Not only are the shoes themselves like Washington Shoe, All Black and Faryl Robin lightening up but so is the industry’s impact share their game plans for outmaneuvering on the planet. Scoring loyalty and sales now the trade war and positioning themselves to means exploring new ways to reduce, recycle compete in the years ahead.

—Caletha Crawford, publisher, Sourcing Journal SOURCINGSOURCING 20202020 REPORTREPORT TheThe Outlook, Outlook, Opportunities Opportunities and and Obstacles Obstacles for for the the ApparelApparel and and Footwear Footwear Industries in in the the Year Year Ahead Ahead

TheThe Sourcing Sourcing 2020 2020 ReportReport willwill serve serve as as thethe roadmap roadmap for for theC-suite. C-suite. TheThe report report will will featurefeature insights into: into how to: • how to achieve speed and efficiency • achieve speed and efficiency • improve sustainability and transparency • improve• navigate sustainability political roadblocks and transparency • navigate• capitalize political on technological roadblocks advancements • capitalize• and manage on technologicalcosts advancements • and manage costs

SPONSOR THE REPORT SPONSORContact Edward THE Hertzman: REPORT [email protected] Contact Edward Hertzman: [email protected]

19_sourcing2020_ad7_final.indd 1 7/22/19 5:23 PM FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

5 TWO HOURS AND COUNTING NIKE PINS MARATHON RECORD-BREAKING HOPES ON ZOOMX VAPORFLY NEXT%

Throughout history, athletes and competitors ahead of him to decrease wind resistance and have always sought a technical advantage that keep him steady. It failed. could allow them to train harder and longer, to In 2018, Kipchoge donned a pair of Vaporflys reach the pinnacle they seek. Along that path, to break the world marathon record in Boston. science and engineering has often played a He ran the 26.2 miles in just 2 hours, 1 minute role in finding whatever leg up exists. and 39 seconds, an improvement of 1 minute But, despite scientific advancements and 18 seconds over the previous record, the in footwear, racing surfaces and training most ever improved by in a single run. His time techniques, one victory still eludes even was close, but still not there. the most gifted athletes: the sub-two-hour Kipchoge kept running and Nike kept marathon. For decades, it seemed that dream engineering faster shoes. In the meantime, might never be reached. those who were not so single-minded started Then, Nike unveiled the Zoom Vaporfly 4% to wear the shoes to marathons around the Flyknit. The Vaporfly was the culmination of world. In just a few short months, Nike’s long hours of labor in a lab and looked like it. Vaporfly became the most popular footwear The sole was oblong and uncentered, its heel choice for marathon runners. According to the peaked with a sharp point. There was a springy brand, 46 percent of marathon runners that carbon fiber plate running through the full finished in the top three spots in 2017 wore length of the midsole. the Nike Vaporfly 4%. In 2018, 63.8 percent But, still, there was a method to the sported Nike’s marathon shoe, including 58.3 madness. Every element of the Vaporfly was percent of the World Major Marathon winners. designed, from the ground up, to break the Earlier this year, Nike announced to the two-hour barrier. world that it had a successor for the Vaporfly: Nike named the shoe after the fact that, the Nike ZoomX Vaporfly NEXT%. in order to bring the world record marathon Nike said it compiled what it learned from time under two hours, the record-breaking Kipchoge and other runners and applied that to the previous Vaporfly design. The result is a shoe that features 15 percent more Nike ZoomX foam OLYMPIAN ELIUD KIPCHOGE for improved energy return, while retaining the CAME CLOSE TO BREAKING THE exact weight of the original. It also incorporates 2-HOUR BARRIER IN VAPORFLYS a material technology Nike calls “Vaporweave.” AT 2 HOURS, 1 MINUTE AND 39 Similar to Flyknit, the new fabrication is lighter, SECONDS IN 2018 . more breathable and less apt to absorb liquid. The new Vaporfly takes its name from the runner would need to be made roughly 4 next percentage point to be chipped away from percent faster than was currently achievable. humanity’s athletic limitations. After months of engineering and testing, the But Nike knows its best review will come brand believed Vaporfly was ready to break the from the racetrack. On the day of the Nike record. All Nike needed was a runner. ZoomX Vaporfly NEXT%’s release, April 28, Enter Eliud Kipchoge, the Kenyan long- Kipchoge won the London Marathon in 2 distance runner who won the Olympic hours 2 minutes 37 seconds for the second- Marathon at the Rio Summer Games in 2016. fastest marathon time ever recorded—but, Kipchoge’s first attempt was an assisted unfortunately, still below the barrier. marathon, with Nike pacemakers in a phalanx —Christopher Hall FLEET FEET BRINGS ‘WOW FACTOR’ WITH FIT TECH

Volumental and Superfeet, two of the leading partnered with HP to create its Fitstation organizations in the field of 3-D footwear technology. Fitstation functions a bit differently scanning, have partnered to combine their two than Fit ID, with more of a focus on analyzing platforms to create a new retail experience for gait, pressure points, propulsion and knee footwear consumers. placement. The final purpose is slightly different, The partnership expands the footwear too, as Superfeet uses its technology to outfit its scanning solutions for footwear retailer own ME3D Custom Insoles and then ships the Fleet Feet, the first U.S. retailer to adopt the product directly to the consumer. technology. The new project marries those two ideas, Volumental’s Fit ID platform, which was bringing the scientific accuracy of Fitstation already present in the retail chain, doubles to the consumer-friendly footwear platform as both a convenient and quick footwear already available at Fleet Feet stores by way recommendation platform that generates of Volumental. Superfeet’s Fitstation had a 3-D scan of the user’s foot and creates a previously only been available at fewer than 30 profile that associates can then match with the your feet,” the company explained. “In one boutique footwear stores nationwide. perfect shoe. Brent Hollowell, vice president click and five seconds, our 3D scanner gathers In 2018, Superfeet opened the doors of a of marketing and vendor management at all the data needed for the AI-driven Fit mass customization factory it calls “Flowbuilt” Fleet Feet, called the technology “irresistibly Engine to offer you personalized footwear that promises industry-leading speed-to- attractive” to consumers and said it brings a recommendations.” market capabilities and collaborated with “wow” factor to the sales floor. Now, Volumental will be joining with Brooks Running Company for a capsule. “Volumental puts the power of AI right at Superfeet, an insole manufacturer that had —Christopher Hall

NIKE FIT DESIGNED TO CURB E-COM RETURNS

vision, data science, machine learning, turn out to be a smart investment. Returns, artificial intelligence and recommendation especially in footwear, can be brutal for algorithms” to provide a unique foot brands with a large e-commerce presence size—not shoe size—that will be able to like Nike. Just over the past holiday season, migrate across the app to provide sizing consumers were expected to return an recommendations for every available style estimated total of $1.39 billion in goods with it carries. poor fit being a common complaint. By measuring the user’s actual foot With Nike Fit, shoppers will be able to and not simply adhering to the somewhat purchase footwear with a much higher outmoded standard sizes, Nike claims its Fit degree of confidence and accuracy. The sizing program can help to both limit returns and recommendations provided by the app even improve the customer experience. change depending on the intended purpose “Using your smartphone’s camera, Nike Fit of an individual shoe. Nike records and saves will scan your feet, collecting 13 data points each user’s footwear data on the app in order According to Nike, three out of every five mapping your foot morphology for both feet to apply this information to each style. people are likely wearing the wrong shoe within a matter of seconds,” Nike wrote in a Because many consumers shop for people size, leaving over half a million people to statement. “This hyper-accurate scan of your outside of themselves, Nike designed the lament their footwear purchases in North unique foot dimension can then be stored app to handle sizing data from multiple America alone. in your NikePlus member profile and easily individuals. For example, a father can use his With the announcement of its new digital used for future shopping online and in-store.” Nike app to collect fit data for his son prior footwear sizing solution—Nike Fit—the brand In 2018, Nike acquired Invertex, a tech to purchasing a pair of sneakers. For in-store says it is aiming to fix that problem for good. startup that specializes in computer vision. sizing, Nike says visitors can step onto a Nike says its new sizing solution will Since then, it has seemed like only a matter “specially developed Nike Fit mat” and pass be accessible in-store and directly from of time before it put the tech firm’s new on their fit information to store employees. the Nike app and will use “computer capabilities to use. Nike’s acquisition may —Christopher Hall FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

CASHING IN ON THE $6.5B 3-D FOOTWEAR OPPORTUNITY

With an eye on the future, footwear companies are anticipated to invest billions of dollars in 3-D printing technology and manufacturing over the next decade, with billions more in revenue up for grabs. According to a report from SmarTech Analysis on the future of 3-D printing in footwear manufacturing, the footwear industry’s interest in the technology will continue to grow, eventually accounting for $6.5 billion in yearly global revenue by 2029 at a compound growth rate of 19.5 percent. Otherwise known as additive manufacturing (AM), 3-D printing holds a great deal of promise for footwear producers—along with those that provide brands with the technology required to properly implement it into their supply chains. Revenue from 3-D printed footwear currently represents roughly 0.3 percent of total global footwear revenue, says SmarTech, but that number is set for growth. “This value—which is inclusive of AM of the forecast period and growing at a 24% will fall once the industry matures. Overall, hardware, AM software, prototyping and CAGR,” researchers said. SmarTech expects demand for AM materials to tooling as well as end-use products related The biggest obstacles to growth in 3-D reach 3.7 thousand metric tons by 2029. revenues—is expected to grow to about 1.5 printed footwear are its dependence on 3-D Regardless of the challenges involved in percent of overall global footwear revenues data capturing technologies and the fact implementing the technology and creating by 2029,” the firm said in a statement. that most AM production has already been a supply chain for its unique material needs, Revenues associated with additive the advantages of 3-D printing are perfectly manufacturing in the footwear industry are suited for the footwear industry, researchers THE 3-D PRINTED FOOTWEAR expected to rise predictably over the next contend. Already, brands consistently use 3-D SEGMENT IS EXPECTED TO 10 years. printing to create prototype footwear during BECOME THE LARGEST 3-D The growth will not be relegated to what’s PRINTED CONSUMER PRODUCT the design process, a trend SmarTech expects so far been typical of 3-D printed footwear, i.e. SEGMENT—ALONG WITH to grow over the decade. a Croc-like slip-on made from a single piece HOUSEWARES. “The 3-D printed footwear segment is of material that strongly resembles plastic expected to become the largest 3-D printed — SmartTech Analysis or rubber. SmarTech says the market for 3-D consumer product segment—along with printed footwear components will be the first housewares,” SmarTech said. “This is the to grow, including “additively manufactured outsourced to Asia along with the majority of only segment today where cases of mass insoles, midsoles and uppers.” footwear manufacturing. However, SmarTech production through AM processes have In fact, their analysts predict that individual says brands will be more likely to bring proven to be viable solutions and cost- 3-D printed footwear parts will generate $1 production in-house as demand grows. effective solutions. SmarTech expects that billion in revenue as early as 2023. Additionally, the availability of AM materials this trend will continue to increase as the “Midsoles 3-D printing is expected to be (typically a powder) is likely to contract as cost of materials decreases and the speed and the most significant revenue opportunity, interest in the technology increases, although productivity of AM technologies increases.” generating as much as $1.5 billion by the end the report anticipates that material prices —Christopher Hall NIKE RELAUNCHES ‘BY YOU’ CUSTOMIZATION

launched with a new and improved version of viewing them from every angle and zooming in Nike By You, the brand’s online customization to inspect each detail. tool that allows shoppers to create their own “With Nike by You’s 3D builder, customization custom sneakers directly from their browsers. goes from a fixed state to dynamic experience,” The service, launched in 2012 as NikeiD, has Nike said. “Zoom functionality also allows for been popular with online shoppers since its close-up views of the product details. When an inception—perhaps none more important than idea is completed, a unique, sharable snapshot Heron Preston, the designer behind Nike By of the finished shoe is quickly rendered.” You’s exclusive sneaker drop. Integrating a social component into its “NikeiD was a first-of-its-kind experience customization process is just another step from a brand that allowed consumers to take toward the complete digitization of its business their product and make it their own,” said that Nike has aspired to in recent years. Preston, who had previously worked for Nike Preston expects users of the new tool to simply until leaving to create his own label with Virgil enjoy the act of building a custom sneaker Nike brought its real-time, 3-D customization Abloh, in a statement on the news. “Early on, in their own image, challenging fans of the to its online storefront earlier this year with I was able to put my own spin on an iconic customization tech to create the most eye- the relaunch of its design personalization classic, the AF1. Today, the capabilities are catching and potentially wacky designs possible. program, Nike By You, complete with new being pushed so far.” “It is really exciting and for me to be at the features and its very own sneaker drop. Those capabilities were expanded when start of this magic toolbox of putting things The new Nike Air Max 720/95 Heron Preston Nike upgraded its tech earlier this year. Along together and taking things apart,” Preston said. By You released not as one of the sneaker with expanded customization options, the “People are tired of seeing things that are so industry’s famous limited drops, as one might tool’s interface was upgraded from a simple, perfect. It’s almost a competition—who can expect from a collaboration between Nike and customizable static picture to a fully 3-D deliver the most outrageous?” an up-and-coming designer. Instead, the sneaker model. Users can manipulate their creations, —Christopher Hall

ADIDAS, STELLA MCCARTNEY TAKE CRUELTY-FREE INTO THE FUTURE

Appealing to both sneakerheads and prior AlphaEdge 4D products in the Adidas animal lovers, Adidas teamed up with vegan line. The limited-edition women’s sneaker designer Stella McCartney to launch a new dropped in the spring, retailing for between iteration of the AlphaEdge 4D, a sock-knit $350-$450. sneaker with a 3-D printed midsole. McCartney, who debuted her eponymous Digital manufacturer Carbon, which label in 2001, has been a vocal pioneer in began its partnership with Adidas on its the movement to end animal cruelty in the is new for McCartney, though Adidas’ Futurecraft 4D midsole technology late fashion world. The brand is committed to collaborative efforts with Carbon to form last year, again lent its expertise to the only using vegan materials and textiles in its its Futurecraft 4D technology began in late Stella McCartney collaboration. True to line of ready-to-wear apparel and footwear. 2018 with the launch of its first AlphaEdge the British designer’s ethos, the Stella McCartney’s designs—often sleek, sporty 4D model. According to the brand’s website, McCartney x Adidas x AlphaEdge 4D model silhouettes—provide a complementary the 3-D printed midsole’s “single-component uses only cruelty-free materials. aesthetic to streetwear giant Adidas. The two design is precisely tuned for controlled The shoe features a black mesh upper brands have worked together for more than a energy return,” and the technology was with the Stella McCartney logo woven into decade on the Adidas x Stella McCartney line crafted “based on 17 years of athlete data.” the throat of the sock. McCartney chose a of activewear, and strive for sustainability by Analyzing the gait and strike pattern of muted off-white tone for the midsole to utilizing recycled polyester, ocean plastic and athletes in motion helped determine where complement the black upper, moving away cotton in the collection. wearers would need the most support. from the light green color that distinguished This foray into 3-D printing for footwear —Kate Nishimura

SPONSORED CONTENT ACHIEVING SPEED REQUIRES A QA OVERHAUL

In today’s demand-driven market, poor the hearts and minds of the artisans in How can companies design in quality rather quality is no longer acceptable at any price the factories. As a result, factories achieve than policing it at the end? point. Jose R. Suarez, founder and CEO of double-digit reductions in defects, lead- By implementing a Right from the Start™ Impactiva, shares the crucial role that quality time and costs as well as a significant system, you will ensure product expectations control plays in a brand’s long-term value. increase in flexibility. will trickle down from the designers to the artisans in the factory. First it is essential to Often brands have to pick between How can quality assurance play a significant provide feedback on quality from the very speed, quality and price. But today, role in advancing speed to market in beginning, at the product development stage. consumers demand all three. How can footwear specifically? Then it is necessary to set clear guidelines footwear brands deliver? Recently, at a class A factory we were with your factory by conducting pre-production As engineers we see huge resources able to increase the percentage of products meetings and trials to detect and remedy invested in our industry in data science and produced Right from the Start™ from 78 issues before production begins. Finally, it is artificial intelligence, but the most under- percent to 94 percent in only 15 weeks. important to perform professional in-process utilized and overlooked asset is human By eliminating issues when your production monitoring to raise accountability intelligence. As an industry we do not do a product moves from one manufacturing and discipline ensuring the higher quality of good job of training, developing, educating workstation to another, you can generate your products. or tapping into the human intelligence in huge improvements in your speed to market. our supply chains. It is essential to have reliable handoffs How can brands use better QA metrics to By implementing change management from artisans and supervisors who clearly mitigate the number of returns? techniques, we help factory leadership understand your quality expectations. To We are a metric driven organization and know execute new behaviors which translate into achieve this, you need to ensure your teams that you cannot fix what you do not measure. If sustainable habits that instill the values of understand how to identify a defect, perform we engage our artisans by gamifying their work accountability, discipline and transparency, self-inspection at each workstation and and providing them with real-time data on their ultimately creating a new leading-edge embrace a zero-defect quality mentality. performance, we can solve the quality issues we manufacturing culture. We must activate suffer as an industry.

CHINA FEELS IMPACT OF DIVERSIFICATION

China’s market share of U.S. footwear Campion, executive vice president and chief imports continues to slide, as the sector’s fate financial officer of Nike, said. amidst the trade war hangs in the balance. Footwear imports from No. 2 supplier For the first five months of the year, Vietnam rose 10.5 percent in value to $4.96 China’s share of U.S. footwear imports fell to billion, giving it a 26.7 percent market share, 48.2 percent in value terms to $4.96 billion compared to 25.6 percent last month. When year over year, down from 49.5 percent year looking at volume, Vietnam’s market share rose to date through April, according to new data to 21 percent, as the country shipped 207.29 from the Commerce Department’s Office of million pairs in the period, a 15.31 percent Textiles & Apparel (OTEXA). increase from the year-ago period. While China still holds a 65.28 percent However, at least one major importer isn’t Footwear imports from Indonesia were up market share in volume terms, the 645.28 shifting its strategy. 0.75 percent to $744.87 million for the year million pairs shipped to the U.S. for the year Nike Inc. said that it currently sources through May, Italy’s shipments rose 4.3 percent through May is still 14.5 percent less than the roughly 25 percent of its product from $621.19 million, India’s were up 6.5 percent to same period a year ago, according to OTEXA. Chinese producers and will continue to do $183.54 million and Cambodia’s increased 29.3 At the same time, the next five top suppliers so. The athletic gear retailer said it expects percent to $167.51 million. posted increases in the value of footwear any exposure to footwear tariffs would be Among second-tier suppliers, footwear shipments to the U.S., as sourcing patterns “relatively modest.” imports from Mexico and the Dominican have been impacted by the U.S.-China trade “The short of it is we’ve got a relatively agile Republic were down, while shipments from war and the continued threat of steeper tariffs approach to sourcing multiple nodes from a Spain and Brazil were up. still to come. production and distribution perspective,” Andy —Arthur Friedman FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

CASUAL TREND DRIVES MEN’S PURCHASES

Annual footwear sales now top $81 million in third of all spending in men’s footwear. has been the strength of Vans. The brand’s the United States, according to the latest data “Men’s footwear used to be oxfords and popularity has begun to leech business from from the FDRA. loafers and those categories are continuing Converse, which Goldstein said is struggling to For men, the styles that were important in to decline,” Goldstein said. “There are pockets provide newness to consumers, and could even 2017 remained important throughout 2018— within them, providing comfort and innovation, be over-distributed. and there is even evidence that the athleisure that have helped. But the new dress shoes for The average transaction value for footwear and comfort segments are still gaining steam. In men are sneakers.” is around $55, well within the bounds of particular, athletic-inspired styles grew double In 2018, a sizable portion of footwear sales mainstream brands’ price ranges. But, the most digits over the year, according to data from NPD. was driven by millennials, which NPD says significant change in the market occurred in “Athletic is still the biggest fashion trend made up more than 40 percent of all footwear the $150 to $200 range in 2018, driven by a out there, particularly for men,” Beth Goldstein, sales over the year. And more than millennials, combination of factors, including the rise in NPD executive director and industry analyst older Gen-Zs are gaining purchasing power, too, popularity of higher-end athletic silhouettes for accessories and footwear, said. “The men’s as they enter into full employment. and the ongoing rise of sneaker resale. sports leisure category was up about 19 The same impetus that made sneakers so —Christopher Hall percent last year.” popular with consumers has also given life Over the past year, athletic-inspired to the rise of comfort trends, according to silhouettes have continued to evolve, leading Goldstein, with a lot of that growth being to a wider adoption from luxury brands and found in the bridge and designer segments at the sneaker’s new role as a featured item in the upper end of the price range. Luxury brands sustainable collections. However, Goldstein like Gucci are now being driven by sneakers said athletic styles—especially sneakers—are and slides, even if they are considered luxury becoming more commonplace thanks to a styles rather than actual athleisure. wider acceptance of the style in more formal The biggest change over the year when it environments. Sneakers now make up one- comes to footwear spending, according to NPD, WHY GREATS’ ‘BUY BETTER’ MESSAGE IS GOOD FOR THE PLANET

That’s why Greats produces its sneakers in Italy at one of the world’s highest- rated factories for footwear in terms of environmental impact. In this way, sustainability has always been a part of Greats—long before it released a line of sneakers made with recycled ocean plastics. But sustainability doesn’t stop with product design. The entirety of a business, from top to bottom, must consider sustainability in order for a company to truly be committed to the cause. That’s why Babenzien said he no longer thinks simply being a participant in sustainability is enough; it’s a “requirement.” That’s why Greats has never used single-use plastics in any of its packaging, he added. In fact, the new upcycled Royale Knit is sold in packaging made from 100-percent recycled cardboard and featuring biodegradable ink. Greats plans to ship all of its products in this packaging going forward, Babenzien said. “We’re seeing a trend now, and I hope this trend continues, of people buying really high- quality products within a budget,” Babenzien Greats has been making its best-selling Royale trade comfort and style to get a better deal for said. “Consumers are starting to realize fast Knit sneaker to great acclaim for years and the environment. fashion was not a good thing. Buying trends this spring it unveiled the newest innovation “I don’t think you can make something constantly for things that didn’t last very long, for the silhouette: an upper knitted entirely of that is the ‘most sustainable’ that isn’t also in both physical and style form, is wasteful recycled ocean plastic. good-looking and comfortable,” Babenzien compared to buying better and buying less.” The upcycled silhouette will be available for continued. “Those factors still have to be —Christopher Hall both men and women and Greats says that this part of the equation. We think we’ve made first release will be responsible for removing something that people really like. It has a around 75,000 plastic bottles from the oceans fantastic elasticity in terms of how you can and dumps of the planet. While this is not a wear it, it’s super comfortable and it’s really completely new idea—Adidas famously has its well priced at $119.” own line of ocean plastic sneakers and Sperry The sneaker brand founder believes that also recently unveiled a collection—Greats the industry has moved toward thinking came to it with its own unique perspective. of sustainability only in terms of materials “We’re never going to be a zero-impact used—from recycled ocean plastics to company; we make things,” Greats CEO and coffee grounds and more—and that this founder Ryan Babenzien told Sourcing Journal. approach won’t necessarily solve footwear’s “But we can be more responsible and have a sustainability challenges. lower impact and that’s what we continue to do.” “If you make something that lasts long Babenzien said his sneaker company, which and is trend-resistant, there’s a sustainability he calls the world’s first digitally native to that,” he explained. “We’ve always used sneaker brand, focuses on sustainability by premium quality materials; we’ve always made making sure its products are built to last. In things that have a high value proposition in that way, he said, consumers do not have to terms of quality.” TENCEL™ is a trademark of Lenzing AG NEW BLOOD COULD SHAKE UP TOP-HEAVY PERFORMANCE MARKET CHRISTOPHER HALL

Performance footwear sales are in a downturn. shoe sales were down 21 percent in Q1. According to NPD’s VP and senior industry Powell told Sourcing Journal this was all advisor for sports Matt Powell, analysts part of a larger trend that has caused a major began to notice this trend in 2015—right blurring of footwear categories, lessening the at the beginning of athleisure’s rise, which importance of performance factors. is no coincidence. Since then, no single “Since the middle of 2015, we haven’t had performance footwear category has shown a single major performance category that is anything resembling marked improvement, trending positively. We are very much in an and brands have struggled to adapt. athleisure phase in footwear and apparel, According to the latest data available from and people want to wear athletically-inspired NPD, overall performance footwear sales shoes and clothes but they really don’t intend were down in the mid-single digits in the to use them for sports,” Powell said. “We asked first quarter of 2019. Although most footwear our consumer panel last year: ‘You bought categories suffered under industry headwinds a pair of sports shoes—now what do you in the quarter, including the later release of intend to do with them?’ Only 16 percent who tax refunds, performance footwear was hit responded said that they were going to use especially hard. Baseball shoes were the only it for sport. That’s down from 25 percent five category that didn’t experience a loss in the years ago.” first quarter, staying flat from a year ago. According to Powell, this likely has more to do with the influence of fashion in performance footwear rather than lower FOOTWEAR BRANDS HAVE activity rates. Looking at youth sports, ENJOYED STRONG BRAND participation has actually risen thanks to more EQUITY AND THE RIGHT girls participating in competitive activities. SNEAKER IS SOCIAL CURRENCY According to the most recent data available FOR MANY YOUTHS AROUND THE WORLD. from the National Federation of State High School Associations (NFHS), 15,009 more girls — Coresight Research enrolled in competitive athletics in 2017-2018 than those who did the previous year, and Running shoe sales were down 6 percent, competitive athletics participation for both 2018 and was almost as popular with females. year-over-year (possibly due to a long boys and girls increased. Yet, footwear sales for the category still fell by 2 winter), and golf shoes were down 5 percent However, the answer to performance percentage points in a year where more young under similar circumstances. However, it was footwear’s ills becomes more clear when athletes should have been buying soccer cleats. the fall of basketball shoes that proved to looking at participation in specific sports. be the most shocking outcome in the first Soccer, for instance, is fast becoming one of the Something Missing quarter. Despite iconic basketball events like nation’s most popular competitive sports. In There is something missing from these March Madness and the NBA regular season fact, it received the largest individual gain in sports, according to Powell, that led the both occurring during the quarter, basketball participation, year-over-year, among males in market in years past. FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

“For the first 50 years or so in the sport or so, it’s just cycled through all of those told Sourcing Journal its data shows the shoes business, we always had at least one categories.” performance footwear industry is excessively performance category that was in fashion,” However, NPD’s data now shows that those top-heavy, with the top 20 companies Powell explained. “In the early '70s, tennis was cycles have lost their power; the forces that accounting for 29.4 percent of global footwear the sexy sport. People wore tennis shoes and once drove the market are no longer in the sales. Nike and Adidas, alone, make up 15.3 tennis apparel on the street as sportswear. driver’s seat. Instead, performance footwear is percent. In comparison, the apparel industry’s Then jogging shoes came along and running stagnating, waiting for consumers to give the top-20 rake in a combined 15.3 percent. A top- became a thing. Then it was basketball shoes industry an answer. heavy industry can result in less innovation, and then training. Then, over the last 20 years Coresight, a market research firm, Coresight suggested, referencing data from a Feb. 2019 report—even without headwinds. Zappos, Alibaba and Tmall as well as other “When we look at the total footwear market, “Footwear, especially brands tied to sports online marketplaces. But customer data is the women’s portion of the marketplace is much activities and outdoor experiences, have fared king, and direct-to-consumer brands must also larger than the men’s piece,” Powell said. “Only better than apparel brands, but they too have have retail, fulfillment and return expertise when we look at athletic sales do men have a been vulnerable to the vicissitudes of retail on top of a desirable brand at an attractive larger portion of the spend. It really says to me channels with bankruptcies and store closures,” price. Industry margins have been impacted by that brands have not focused enough on their Coresight noted. “Footwear brands have growing consumer expectations and are likely women and women’s assortments. They tend enjoyed strong brand equity (Nike, Adidas, Vans) to remain under pressure for all but the most and the right sneaker is social currency for sought-after apparel and footwear brands for many youths around the world.” the next few years.” BRANDS HAVE NOT FOCUSED ENOUGH ON THEIR WOMEN However, the reality has been different AND WOMEN’S ASSORTMENTS. for smaller brands, with larger market issues Success Stories THEY TEND TO BE TAKEDOWNS, presenting challenges that few can overcome— NPD’s data does suggest there are some REINTERPRETATIONS OF and low margins won’t help. brands that have been able to make moves MEN’S SHOES. “Digital disruption is bifurcating the in this crowded market, with gains seen at — Matt Powell, NPD Group traditional wholesale apparel and footwear Brooks, Fila, Puma and Vans in Q1. Powell told market into those companies and brands with Sourcing Journal that, absent any positive adequate brand power to go direct to the trends, the industry can look to those brands to be takedowns, reinterpretations of men’s consumer and those that don’t have the brand (and others like Hoka and ON) for clues on shoes. They aren’t really developing women- relevancy to make it on their own,” Coresight how to move forward. specific product. That’s really the reason we see wrote. “The alternative for those brands which Most of all, he said, they need to be looking predominant women’s brands like Lululemon lack the power to go it alone can use Amazon, at a traditionally underserved demographic. and Athleta taking share.”

SPONSORED CONTENT STEPPING UP SUSTAINABLE EFFORTS IN FOOTWEAR

While the footwear industry may have been a voice, and it is a strong tool to share Brands have a big responsibility when it slower than other industries to advance opinions and influence. Ethical consumerism comes to sustainable offerings. They are on the sustainability front, it’s certainly is just at its beginning. responsible for the product philosophy, which making up for lost time. Birgit Schnetzlinger, includes design, responsible sourcing, control footwear manager for Lenzing AG, shared an What can manufacturers do to take a more of supply chain and the brand’s message. inside view of what’s driving brands to be holistic approach to sustainability? Retailers are often closer to the consumer more proactive about their efforts, A lot. The innovative power of manufacturers and have direct interaction—they play a very For Lenzing, that means leveraging the is crucial to adapt new materials. A important role when it comes to conveying versatility of its TencelTM fibers to be used traditional shoe consists of many different the message and educating the consumer. in nearly every part of a shoe. The more components, glued together. Reduction of components that are made with TencelTM, components, the design and techniques Price is always a consideration at the cash the better it is for the environment—and the to combine materials make a big impact. register. How can sustainable materials easier it is for brands to communicate the Automation is a great opportunity for local selection, specifically, add to the perceived benefits. sourcing and bringing back some production value of footwear? (or on-demand production) to the consuming Consumers often express their personal Beyond the eco-friendly theme of “being countries, what results in less shipping and attitude—such as eco-consciousness—by good by doing good,” what’s motivating less disposal of non-sold items. the brands they wear. Moreover, sustainable brands to develop footwear using There is also a lot going on in terms of materials do not always have to end up in responsibly sourced materials? digitalization. Millions of shoes are produced high costs. A sustainable approach is only There is definitely an ongoing shift in every year just for prototyping and end up in sustainable when it is available for the mass consumer demand—the new consumers think landfill before they have even seen a shelf. and not for an elite segment. Therefore, more critically. They want to know where our TencelTM fibers can be found in all price a product is coming from, and they ask for How can retailers support brands’ efforts to segments, from fast fashion to high end. transparency. Social media gives consumers become more sustainable? FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

CASUAL DOMINANCE FASHION AND COMFORT DRIVE SHOE SALES IN THE U.S. AND AROUND THE GLOBE VICKI M. YOUNG

here appears to be a long runway Lululemon Athletica, have elected to push While the Middle East, Africa and Latin America ahead for the footwear sector— further into footwear. Comfort sneakers that are expected to see the least advancement when particularly as more companies keep are also fashionable—think direct-to-consumer compared to other regions, the report concluded an eye on new technology and its role brand Allbirds—have also seen their fortunes that continued economic development will aid inT comfort—with the fashion and athleisure swell as consumers gravitate toward what’s their progress in the years to come. trends continuing to merge and evolve. new and innovative in the marketplace. That has Zion projecting that the global According to Joe Pelligrini, managing That shift in lifestyle has not only baby footwear market will reach $320.44 billion by director and investment banker at Baird, the boomers searching for comfortable footwear 2023, up from $246.07 billion in 2017, with a footwear category is at least $80 to $90 billion that no longer resemble old, clunky orthopedic compound annual growth rate of 4.5 percent in size in the Western world, and even larger options, but also outdoor enthusiasts on the between 2017 and 2023. when one adds in Asia and other emerging hunt for fashionable mountain boots that have With that kind of headway, it’s no wonder countries. “Anyone who carves out even a tiny some performance features, are sustainably Baird’s Pelligrini thinks there’s a greater chance slice, for example, one-half of 1 percent of sourced and feature a good balance of value almost $100 billion, is still a large company,” versus quality—even if they don’t plan to do the investment banker said. any actual hiking. “It used to be that it was a women’s closet According to Zion Market Research, North that was full of footwear. Guys now have many America currently dominates the market, with different pairs,” he said. “The casualization 34 percent of the revenue share of the global of the workplace makes it hard to wear very footwear market. Europe is expected to show formal footwear when dressing down. Guys significant growth due to changing fashion 4.5% have been expanding their closet, whereas trends and the rise in popularity of sports THE PROJECTED COMPOUND women had always been doing that with footwear. Asia Pacific, which had 29 percent ANNUAL GROWTH RATE FOR THE footwear as an accessory of choice.” of total market share in 2017, is also expected FOOTWEAR INDUSTRY BETWEEN And with casualization and the continued to see growth due to an escalation of sports 2017 AND 2023 interest in athleisure, many firms, such as activities and the adoption of Western culture. of footwear becoming a bigger component of GLOBAL FOOTWEAR OUTLOOK the mergers and acquisitions space as the sector enlargens. Multiples in M&A for the footwear space have a fairly wide range, but a company that’s strengthening and has demonstrated a $320.44 billion predictable growth rate might be able to garner The projected size of the global footwear market by 2023 a multiple of 10 times sales, the banker said. He noted that even with the increasing attention from consumers in what they put on their feet, ITALY, SPAIN AND the category itself is not an easy one. PORTUGAL “At the end of the day, everyone gets excited about the direct-to-consumer business models. Where two-thirds of There will be some that are very successful the total E.U. footwear production is concentrated because they are able to reduce the pain points for consumers,” Pelligrini said. “New, fresh marketing has helped Allbirds garner China attention, but Toms, which has been around, The second largest has struggled a bit,” footwear market, after the “Footwear is not easy to do,” he added. United States “It’s very difficult, and returns are steep. One EUROPE AND out of every four or five pairs are returned. ASIA PACIFIC Then you have to layer in the costs for return shipping, plus keeping your website cutting Growing markets due to changing edge, and the costs of social media to onboard fashion trends in Europe and consumers to your site.” escalating sports activities in Asia According to Pelligrini, what can help is Pacific being agnostic to where the product gets 13.1 billion purchased, whether on Amazon, specialty Pairs of shoes produced in China in retailers or the better department stores. 2017 That’s already happening with the digitally native brands, which are starting to open retail doors. The investment banker said becoming RECYCLED PLASTICS, “maniacal about product innovation” can also help footwear brands escalate. WOOL, PLANT MATERIALS Companies can’t rest on their laurels, he The top sought-after sustainable added, especially not those in the athletic fabrications in footwear footwear sector where consistent product innovation can help a brand develop a following. Small, specialized firms, such as those focused on running or other activities, tend to grow at “breakneck speed” because of their ability to connect emotionally with customers and the product innovations that provide a “better mousetrap for the consumer,” he said. 70% 30% SNEAKERS Innovation Ahead It appears that footwear firms are already The most sought-after style in The ratio of footwear sold in men’s, women’s and children’s trying to figure out how to innovate on the stores versus online footwear athleisure front to give it some fashion credibility, and still be mindful of technological advances at the same time. Zion Market Research, Statista, European Commission and The NPD Group and The NPD Group/Consumer Tracking Service B. Riley FBR equity analyst Susan Anderson said the Fashion Footwear Association of New York’s June Market Week conference saw FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

streetwear and retro as the prevailing trends, So how does that compare with non-athletic which also matched up with the broader fashion footwear? According to Beth Goldstein, fashion cycle in apparel. “Steve Madden and NPD executive director and industry analyst Skechers are leaning into this trend, increasing for accessories and footwear, “Casual sneakers their sneaker penetration and re-releasing remain the hottest category, taking share from retro styles from their back catalog,” she said. all others. However, we have started to see a While the retro sneaker offerings turnaround in true fashion styles as brands emphasized chunky, vintage, rhinestone and 34% incorporate the elements that consumers love fluorescent styles, the analyst said that many NORTH AMERICA’S REVENUE in their athleisure–comfort and athletic styling. companies were also re-releasing past shoe SHARE OF THE GLOBAL Consumers want to be just as comfortable when styles with new innovations, such as lighter FOOTWEAR MARKET they aren’t wearing sneakers as when they are.” weight materials. Anderson also noted that That said, even as brands incorporate athletic footwear inventories were much success with their Blondo acquisition, doubling comfort elements in their footwear, Goldstein healthier in the first quarter, helped by “cleaner sales since buying the business in 2015.” noted that dress footwear options for both offerings from Nike and Under Armour.” Blondo is best known for its waterproof men and women have become a much smaller A strategic growth initiative at Wolverine footwear offerings. business than it had been in the past. She’s World Wide, which owns brands such as And if comfort is key for many consumers, also seen growth in the use of sustainable Merrell, Chaco and Saucony, is about becoming don’t expect interest in athleisure to go away materials, such as recycled plastics, wool and “faster and more innovative” in its product anytime soon. Matt Powell, VP and senior plant materials. creation engine, said Anderson, while Skechers industry advisor for sports at The NPD Group, As for what shoe brands are doing to set is re-emphasizing the walk category that it described athleisure as being in full force. themselves apart from competitors, Goldstein created and is now doubling down in that “Consumers are wearing athletically inspired said they are using comfort as a selling point and segment, particularly in its women’s offerings. shoes that are not intended for sport,” he said, differentiator, but she cautioned, “That will start At Steve Madden, meanwhile, Anderson noting that smaller brands are growing much to become a commodity, so brands will need to noted that the company is “seeing continued faster than their larger counterparts. figure out what relevant innovations are next.”

SPONSORED CONTENT INNOVATION DRIVES SALES & SUSTAINABILITY

Beyond exclusive drops and greener greatly to the value, so designers are always We're seeing "end-to-end" sustainability plans manufacturing, it’s new technology that’s looking for a new material or technology to from many of today's manufacturers. They generating excitement. Hisham Muhareb, can help a shoe be perceived as "rare." are sourcing non-depletable materials and founder of American Events, which produces optimizing the way resources are used. One The Materials Show, cited Nike’s futuristic- What new advancements in materials and example is Nike's Flyleather, which looks looking self-lacing shoes as just one technology are promoting sustainability? to have a low carbon footprint and uses example of a product with the technological Companies like Material Exchange allow significantly less water than Nike’s premium bite to drive consumer demand. designers and manufacturers to virtualize leathers, with the same fit and feel. Closed- the prototyping process—keeping waste loop systems are becoming more common— What role does materials selection play in down before the product even makes it to cutting waste is being kept in-house, perceived value? the factory. Sustainability is also being built manipulated or reformed, then repurposed New materials and new technology add into raw materials. Used plastic bottles into other products at the factory. to the perceived value for the consumer are transformed into textural fibers that when compared to traditional styles and can go into any product or form. e.dye has Why are you partnering with Première Vision production methods. What's new and what's created a textile coloring process that puts and what does it say about the market? next will always drive up the perceived the color directly into the yarn, requiring 75 Première Vision Sport will bring new fabric value, even when it's not a driving factor in percent less water, fewer harmful chemicals, mills, trims, print and pattern studios, and increasing manufacturing costs. less energy and lower CO2 emissions than high-performance textiles to The Materials Another aspect affecting perceived value is traditional piece dyeing. Show. Cross pollination between apparel and scarcity. Even major footwear brands are able footwear materials sourcing offers a vibrant to emulate a boutique feel by doing limited How are manufacturers taking a more and valuable exchange of ideas, materials releases. The "uniqueness" of a shoe adds holistic approach to sustainability? and trends. MOVING TARG FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

THE TRADE WAR BETWEEN THE U.S. AND CHINA HAS THE FOOTWEAR INDUSTRY CANVASSING THE GLOBE FOR WAYS TO MITIGATE THE IMPACT. CHRISTOPHER HALL

he ongoing trade war between the U.S. them vulnerable in the short term. and China has had consumer goods “We will continue to reduce our dependence companies in disarray for more than on China as a sourcing country, but the effect a year; with each new tariff tranche, of further migration will not impact our cost Tmore products produced in China have fallen structure until early 2020. [Our] brands will victim to additional duties. Although apparel raise prices in the short term to offset higher and footwear have been largely spared, that landed cost pricing due to increased duties,” doesn’t mean the categories haven’t felt Mike Jeppesen, president of global operations at effects. Clothing and shoe brands are on high Wolverine Worldwide Inc., told Sourcing Journal. alert, drawing and redrawing contingency “The higher duties will, in effect, result in higher plans, accelerating supply chain changes and product prices being passed on to the consumer.” calculating the potential hit to the bottom line. In the meantime, the company, which The uncertainty alone has been costly. produces the Sperry, Saucony, Keds and Merrell “The threat of potential tariffs essentially brands among others, is attempting to mitigate has the same impact as activated tariffs,” Matt the fallout. Priest, president of the Footwear Distributors “We have proactively expedited the shipping and Retailers of America (FDRA), told Sourcing from China of available product,” Jeppesen Journal, quoting a member of his organization. said, adding that the logistics of moving out And now with these goods included in the of China will also have an effect on lead times fourth tariff list, the worst-case scenario looms and shipping costs. “We’re prepared to customs and the industry is bracing for what could be clear and pay duties on product in our free additional tariffs to the tune of 25 percent. For footwear, in particular, additional tariffs I DON'T THINK MANY FULLY could be devastating. According to the FDRA, APPRECIATE THE PAIN AND shoe companies already pay an onerous SUFFERING THAT WE ARE amount of duties that outweighs the burden GOING TO SEE AT RETAIL FROM other products face. For much of the last 25 ALL THIS. years, footwear duties have averaged around — Gary Raines, FDRA 11 percent under current tariff law, with some reaching well over 50 percent depending on trade zone DCs prior to a duty increase.” the classification. While reducing exposure to China is a logical Considering that many of these products reaction, the industry is finding that it may not offer very low margins, the FDRA believes that be a realistic one—at least not for everyone. an additional 25 percent tariff could end up Places like Vietnam and Bangladesh could limiting and, in some cases, eliminating the be attractive from some aspects, but the added production of some low-cost footwear entirely. cost of doing business away from China is difficult to recoup. Exiting China “The average landed cost of footwear from To protect their companies, footwear the world as a whole last year was about executives have been looking for ways to $10.79 a pair. In China, that was $8.26,” said insulate themselves from a direct hit. While FDRA chief economist Gary Raines. “Looking the most logical first thought may be to at Vietnam, even though they were 18 to 19 exit China, moving a supply chain is easier percent of the pie, the average cost was $13.40. said than done, even under the best of So if you are thinking you are just going to circumstances. Some are finding that making move production from China to save that 25 TARGETS a hasty retreat is nearly impossible, leaving percent—not at all. You’re going to see your costs increase substantially just moving from The consumer isn’t going to pay for that at a Looking Closer to Home China to Vietnam.” Target or a Walmart. You might just kill that Beyond the most talked about production Even for those that stay in China, the production.” options, Hady Jawhar, apparel project manager NRF said costs will rise. In June, the trade Raines agrees, saying the result would be for Sealand Maersk, a container shipping group released a report prepared by Trade a classic example of deliberate destruction company that serves North and South America, Partnership Worldwide that outlined the of demand. Central America and the Caribbean, said impact of the tariffs, including how the brands have been looking to countries in the increased costs out of China would impact Western Hemisphere. THE THREAT OF POTENTIAL sourcing around the globe. Ultimately it found TARIFFS ESSENTIALLY “We’ve been exposed recently to a lot of that retail prices would rise by 8 percent no HAS THE SAME EFFECT AS suppliers, brands and companies that deal matter the origin of the goods and by 21 ACTIVATED TARIFFS. with this cargo. What we’ve been hearing percent for footwear imported from China. are rising concerns from increased tariffs in —Matt Priest, FDRA But Laura Baughman, president of Trade China,” Jawhar said. “Then, it’s the outlook Partnership Worldwide, said the model shows a for the next five years on sourcing and the general average overall. Every retailer will have “I don’t think many fully appreciate the preparation and capacity for Central America a different strategy for dealing with the tariff. pain and suffering that we are going to see to take such a load.” “It depends on the product and whether at retail from this,” Raines concurred. “It’s Jawhar said that countries like Honduras the retailer is a direct import or an indirect picking on the mass-merchant shoppers that and Guatemala are likely destinations for import,” she said, providing an example of are accustomed to spending five bucks for a production that could potentially move how a store could opt to insulate certain children’s shoe. You’re going to see a lot of westward. Although labor is more expensive, products. “So if you go into a store today consumers that can’t or won’t fork out the Sealand Maesrk believes there are several built- and see a sweater from China for $10, it additional money.” in advantages to this kind of diversification. won’t necessarily be $12.50. It might be $11 because they have spread that extra $2.50 to other products that are less price TARIFF MATH sensitive that the consumer will buy if that The trade war has the industry sharpening its pencils—and price goes up.” looking for someone to absorb a potential cost increase. Additionally, stores could opt to delay markdowns as a way to recoup some of the The apparel and footwear Jan Rogers Kniffen crunched at $3.56. That’s what I paid increased costs. industries are bracing for a the numbers to determine the tariff on. That $3.56 at According to the FDRA, China currently direct hit in the trade war. just how a worst-case 25 25 percent would be 91 accounts for 57.5 percent of the world’s total Retail executives percent tariff on footwear cents. If added onto $9.99 at footwear production. Combined the rest of everywhere have been from China would impact its full selling price, it would the world makes up less than 75 percent of running the numbers ever retail prices. As the current be a 9 percent increase. China’s total capacity, pouring cold water on since President Trump CEO of J.Rogers Kniffen That all depends on your the idea of replacing Chinese production in started placing tariffs on WWE retail investor cost of goods sold. My cost any one area. goods coming out of China. consultancy, he explained of goods sold was lower as Further, for brands that offer low price Until now, those calculations what consumers have to a percentage of the business shoes, the issue is even bigger. have been theoretical for worry about and how other than others, but almost “The challenge is for mass retail,” Priest the apparel and footwear industries stand to gain. everybody’s is 50 percent. said. “For those types of shoes, it’s almost 100 industry. Soon they could So let’s say you buy it for 50 percent China with price points that scream be a reality. What everyone Sourcing Journal: With a 25 cents and sell it for $1: You a need to be in China because the American wants to know is how bad percent tariff, what would be pay the tariff on 50 cents, consumer demands it from a price perspective.” could it get_ and who’s going the potential impact at retail? and 25 percent of that is “To some degree, a shoe may not be worth to absorb these higher costs? Jan Rogers Kniffen: I was 12.5 cents. 12.5 cents on a moving,” he said. “If it moves from a 67.5 Former senior executive selling my average shoe at dollar would be a 12 percent percent duty to a 93 percent duty and it’s at May Department Stores $9.99. It landed in California increase, not a 25 percent a $3 shoe at the border, there’s really no incentive. You’re going to double the price. FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

“Proximity is very obvious,” Jawhar continued. customs broker and freight forwarder, contended background is the possibility that they could “[For products coming from China] transit that until recently, some apparel and footwear simply be struck from the record, much like the time is not less than 30 to 35 days—versus brands had been “on autopilot” when it came to potential tariffs that the Trump administration a 3-to-4-day service from Central America. customs issues. Today, they’re hungry to learn as threatened Mexico with in order to make a With that transit time on the water, there’s not much as they can. deal on immigration. much exposure to currency fluctuation, market “We want to be very careful; we don’t have a However, it doesn’t seem like the China fluctuation, jobs, etc.” magic wand. We can’t make the tariffs go away,” situation will be resolved as quickly, which However, there is simply no comparing said Iacopella. “One thing that we’ve done from means the strategizing over how to handle Central America’s capacity with China, and very early on [is] we’ve leveraged tariff trackers the potential threat continues. According Jawhar admitted that the discrepancy is such from regional trade groups. We’ve created to Iacopella, many brands have no way of that a 1 percent impact in Chinese production is tools where importers can put their HTS maneuvering in the short term, leaving holiday equal to 10 percent impact in Central America. numbers in and get the status of that number sales at the end of the year vulnerable to “A factory in China has 3,000 workers whereas, in China. We’ve educated our customers about tariffs without much recourse. In the opinion here, it’s 150 to 200 people,” he continued. “I retaliatory tariffs, and we’ve tried to centralize of Priest and the FDRA, this period of transition don’t think Guatemala and Honduras can take a that data into one place. In the absence of is more likely to lead to a new world order for sudden shift in sourcing away from China. But being able to lower costs, at least we can be trade, rather than a return to form. they can definitely lean more on those countries, very accurate with that information.” “If someone makes a deal at dinner over the and we are seeing that.” As talks continue regarding the new tranche next couple of weeks and then all this goes With all of the what-if scenarios, information of tariffs, brands will likely have to adapt even away, we’ll all be super-duper relieved,” Priest might be the most valuable commodity. further to trading conditions that have at concluded. “But [the situation] isn’t without Vincent Iacopella, the executive vice president times been described as both “unprecedented” its consequences, and I think it has forever of growth _and strategy for Alba Wheels Up, a and “inevitable.” Looming always in the changed the relationship.” increase. Nobody’s going JRK: In truth, 100 percent something for $3, you what’s happened. The CPI Pushing [the tariff to see a 25 percent of what you buy it for can strip out 30 cents, [consumer price index] increase] through to the increase because nobody isn’t tariff-able because which doesn’t change the is going nowhere. Why? consumer, other than except Costco buys it for you can exclude shipping numbers by much … but Because when you have very temporarily,+ is not the price they sell it for. and all kinds of other it’s worth doing, especially a worldwide oversupply going to happen because things. So it might be if you’re buying a lot. of goods, someone will the minute you do, your SJ: Since the volley began less than 9 percent. It sell it cheaper than you volume is just going to between China and the could be 8 percent. SJ: But no matter what, are if you raise your price. drop. And the products U.S., apparel and footwear First sale is the concept the cost of doing business And there are plenty of that they’re about to put executives have been of how you can get the will rise. Who will pay for people selling goods the tariff onto, it’s apparel, taking a lot closer look price down as low as this, the consumer? now that have 0 cost of shoes and accessories. You at some aspects of their you can to pay the tariff. JRK: No way are [retailers] capital. Amazon would don’t need it—you want it. business to try to find ways We used to do this when passing anything onto be a good example and You don’t have to buy it. If to mitigate the impact. I was at May, and we the consumer. We’ve had so would every other they raise the prices, you’ll In some cases, they’re stripped out anything a worldwide oversupply online-only guy who has buy something different. realizing they have been that was legitimately of goods for several been inundated with It’ll push more dollars unnecessarily paying too not tariff-able. It usually years now. That’s the investment money and into restaurants, trips and much in tariffs all along. amounts to 10 percent, reason there’s been doesn’t make a profit. They experiences. How is this the case? so if you were= buying 0 inflation no matter have a 0 cost of capital —Caletha Crawford SUPPLY CHAINS UNDER PRESSURE BRAND EXECUTIVES SHARE INSIGHTS INTO THE FORCES SHAPING FOOTWEAR’S FUTURE, HOW THEY FIND THEIR FOOTING DURING TIMES OF INSTABILITY AND WHAT KEEPS THEM UP AT NIGHT.

KATE NISHIMURA

s modern trends shift at a dominated by automation, technological Z shoppers want to know where products are breakneck pace, brands are innovations only offer a partial solution, coming from, what they’re made of, and how their stretching to meet the demands of brands said. Instead, they still struggle with the purchases will impact the world around them. young consumers who age-old issue of coordinating efforts between The confluence of competing demands has craveA novelty. product teams, suppliers and factories, all of left footwear insiders with mixed emotions. But behind the scenes, manufacturing costs whom are now working to gain unprecedented Change is imminent, they all agreed, but the are rising, and uncertainty over trade issues agility to pump out more SKUs than ever. waters are yet uncharted. with China has forced brands to re-examine And not just any product will do. Brands are Here, senior footwear executives discuss the way their businesses are run, along with now also expected to be beacons of ecological the state of the footwear supply chain in the where their operations are based. and social change, by developing responsible face of evolving technology, environmental Even in a world that seems increasingly materials and processes. Millennial and Gen concerns and tariff threats. FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

Businesses need stability to plan and thrive. apart from the competition and keep our KARL MOEHRING Thus, the trade war is depressing investments by loyal customers coming back? Our team is CEO Washington Shoe Company companies. If this continues, the economy will constantly sharing and brainstorming; many slow and hit consumers’ pocketbooks. nights I wake up and write down an idea to On automation and the future: share with our design team. KM: The nature of footwear manufacturing as MARTY ROSE it stands today is very labor intensive. Footwear Agent and Distributor JIM BIOLOS All Black manufacturing is ripe for some automation—in President Faryl Robin the near term, possibly helping with packaging. As the technology matures, it will make its way On automation and the future: into other parts of the manufacturing process. MR: Automation is for the massive brands. On automation and the future: The design culture of All Black is a focus on JB: Because we don’t own our factories, we On the impact of the political upheaval: handmade and especially hand-finishing. have to work with them to build in lean KM: Prior to the tariff threat we had started We use automation when it fits into our and agile manufacturing techniques. Before expanding our manufacturing base to the culture, such as laser-cutting machines and those factories can take advantage of the Dominican Republic. The added benefit to the 3-D printers. When we find automation that many technologies and automation available, D.R. is the environmental savings of being closer complements our handmade process, we will they need to first create better processes to to the production base in terms of shipping. jump on it. automate. We are spending a lot of time with our factories to improve their processes—to On his company’s sustainability strategy: On the impact of the political upheaval: reduce waste, improve their flexibility and KM: I believe any responsible business has to MR: All Black is made by the Taiwan-based overall product quality. Then we will work with be looking at sustainability. We are looking ACL Footwear Company. ACL is looking into them to automate where appropriate. at production processes to reduce waste, and options to move more aspects of production utilizing more sustainable raw materials. A from China to Taiwan. The challenge is to On his company’s sustainability strategy: find affordable and talented labor in Taiwan JB: We think about sustainability as a business vs. China. model that ensures that our customers, the WE ARE SPENDING A LOT OF TIME company, our suppliers and the environment WITH OUR FACTORIES TO REDUCE On his company’s sustainability strategy: are all better off because of the work we do. WASTE, IMPROVE FLEXIBILITY AND OVERALL PRODUCT QUALITY. MR: ACL addresses sustainability by adjusting Inputs are actually not our primary focus our design and manufacturing process. We today. Treating our workers—and those in the — Jim Biolos, Faryl Robin started this change two years ago. The new factories who make our shoes—so that they process is called minimalist styling. We use are happy, healthy and productive will have the lot of our production starts with sustainable fewer cuts and a reduced number of seams. most sustainable impact on our business. Our rubber. Our packaging is something we look This process reduces waste, reduces labor time child care facility at a few factories in China at every season on how to reduce and recycle. and results in improved comfort, better fit and is a good concrete example of our efforts. We moved to shippable shoe boxes to reduce a sleek style element. Minimizing environmental impacts is also of the need for a shipping box for single-pair high importance to us. shipments to our customers, and we use On how tech and culture affect speed to market: recyclable paper tape. MR: Our hurdles related to speed to On how tech and culture affect speed to market: market trace back to our handmade and JB: Speed to market, in our view, is more a On how tech and culture affect speed to market: hand-finishing culture. This strength is mindset than a tech initiative. Of course, there KM: Technology is helping clear those hurdles, also a weakness when it comes to time are some key technologies that are radically be it communication tools that help improve management. We are proud of this weakness improving our ability to get our retailer translation or the ability to have video calls and use it as a point of difference. Our clients (and their consumers) the footwear every day with the supply chain. Personally, customers refer to All Black as a well-made they want, when they want it. But it is the I find that I couldn’t operate without the brand that looks higher priced then our actual consumer-focused, agile mindset—and an messaging apps we have today. retail price. The reason for the brand’s success integrated approach with our retail clients— is the careful attention to detail, as well as that we think determines speed to market. Not On what keeps him up at night: cutting-edge design. We cannot rush this simply a fancy app. KM: This year, it is the threat of tariffs. My process and achieve the same results. customers are worried, my suppliers are On what keeps him up at night: worried— in every conversation, it’s mentioned. I On what keeps him up at night: JB: The “short-termism” of so many players see a silver lining of the tariff threat in the fact MR: Being innovative. What is the next in the supply chain keeps me up at night. that we are diversifying our manufacturing base. big idea that will continue to set All Black Consumers—and the retailers that serve 3 years on our core products due to increased will push for manufacturing improvements OUR MOST INVALUABLE RESOURCE material and labor costs, as well as increased to lowers costs and provide some stability. MAY BE OUR B2C E-STORES, WHERE inbound ocean freight expenses. Automation certainly has a place in the future WE TEST, GATHER AND ANALYZE Therefore, we have been forced to look at of footwear manufacturing, but I also see a DATA AND APPLY TO OUR LINE. other areas of the company to trim costs so more attainable opportunity in pushing lower — Frank Cammarata, Camtrade that we can offer our retailers outstanding tech productivity improvements in the fashion product and value while maintaining their footwear world. Athletic companies have been margin requirements and keeping ours in a all over this for years, but fashion footwear them—have higher standards than so many reasonable range. manufacturers have lagged. suppliers assume. Many supply chain partners want to continue to do business the way On how tech and culture affect speed to market: On the impact of the political upheaval: they have over the past 20 years, which now FC: Our business has matured enough over NC: Aldo has been looking for opportunities results in a product that is of higher cost, lower the last 2 to 3 years that we are now able to to diversify for years now. Our first option is perceived value, that takes too long to deliver. consistently obtain direct information from our to look at Southeast Asia with our existing Rather than working with companies like ours key retailers on what styles, materials, colors and manufacturing partners—providing some to reinvent their processes for this new industry price points are performing at their consumer measure of stability while seeking cost context, too many prefer not to change and level. We internally analyze that information opportunities. We are also looking at expanding extract whatever short-term value they can out of very carefully after the season and come to a in regions that have been more niche for us. the system. We think this is a losing proposition, consensus on what direction to follow for the Finally, we have partnered with strong suppliers and it has caused us to re-evaluate our supply next season, while adding touches of newness on improved planning, material positioning chain and the companies we partner with. and freshness to our collections. and manufacturing processes to manage costs Naturally, we also shop European retail regardless of country of origin. That said, we have FRANK CAMMARATA markets one season in advance to observe not and will not compromise product quality. CEO and obtain all of the latest fashion trends Camtrade to implement. We also did a focus-group On his company’s sustainability strategy: initiative this year that we are still evaluating NC: The Aldo Group is the first fashion footwear On automation and the future: the benefits of. In the end, our most invaluable and accessories company in the world to be FC: We are already realizing the benefits of these resource may be our own B2C e-stores, where climate neutral—our sustainability platform is efficiencies and added-volume capabilities. Over we can test a range of products in 52 states, strong and growing. We recently announced the last 10 years, our factory base has ramped then gather and analyze the data which we that our Call It Spring brand is fully vegan. up and implemented a much more significant apply to our line-building process for the Our materials and sustainability teams are infrastructure mechanism for automation—from following year. This has proven to be a very collaborating on sustainable materials, and machinery and equipment technology impacting useful initiative for inputs. exciting announcements on that front will be cutting, lasting, stitching and finishing, to fit- made later this year. From a transportation testing [and] quality control, as well as more On what keeps him up at night: point of view, we have packaging optimization sophisticated factory worker training. FC: I would say the condensing and in place to maximize carton volumes—reducing Design and development capabilities, as displacement of traditional brick-and-mortar shipping costs while lowering carbon emissions. well as speed to market, have been greatly retail stores into e-commerce venues. Footwear improved. Also, the people at our facilities tends to be a quite personal and fit-related On how tech and culture affect speed to market: are still the most invaluable component, as shopping experience, and it will be interesting NC: It’s culture for most companies. Technology they implement and oversee this very critical to see how that plays out in years to come. One is always pushing the envelope, but people process function for our business. door closes and another one opens, I suppose are used to working in a certain way and must is the right view of this. So, we see it as an adapt to make the best use of technology. On the impact of the political upheaval: opportunity. We will have to navigate it carefully FC: We are running our business today as if while maintaining a nice blend of both. On what keeps him up at night: these tariff increases will go through, although NC: Uncertainty. Variability. We are living in they very well may not. It looks like we will NATHAN CRAY times of change—from customer preferences know quite soon, one way or the other. About a SVP, Supply Chain & Operations to the retail marketplace, balancing strong Aldo year ago, when this news was first announced, planning to manage costs while everything we had to explore some other alternatives, around you is shifting. Sourcing and the supply which we are ready with should this happen. On automation and the future: chain’s role have not changed. Deliver the best Overall, our production costs have risen by NC: Trade uncertainties, rising global labor product at the best cost as fast as possible. It’s approximately 6 to 8 percent over the last 2 to costs and increasingly complex supply chains just gotten more complex. COMFORT

BEYOND EXPECTATIONS Today, consumers are responsible eco-citizens of the world, and they demand the same from the brands they purchase. OrthoLite® Recycled™ lets you increase the total eco-content in your insoles to 98% with our recycled postproduction waste material to achieve the highest eco-standards and sustainability goals. The recycled solution oﬀ ers support, stability and under-foot comfort in single-density and dual-layer options, and is also ideal for Strobel and upper applications. OrthoLite® means your brand can deliver the comfort and performance your OrthoLite® Recycled consumers expect—with the eco-friendly features they demand. COMFORT & PERFORMANCE — AT THE CORE OF EVERY INSOLE.

ortholite.com FLOATING OUTDOOR FOOTWEAR BRANDS LOOK TO SHED WEIGHT WITH LIGHT-AS-AIR FOAMS.

KATE NISHIMURA

he popularization of outdoor “[As] a technical trail brand, our focus is more responsive and lightweight, Power Run is used activities like hiking, trail running in the rugged area. But these would be great- in Saucony’s standard road and trail products. and urban exploring has led to an looking shoes with jeans, though they’re super In addition to new innovations in midsole explosion at retail, resulting in new functional from a performance standpoint.” foam, brands are reducing the weight of their Topportunities for the outdoor market. The wearability of these forthcoming styles products by rethinking the configuration of a But this wave of fresh air enthusiasts comes doesn’t just come from their streamlined shoe’s outsole lugs. with a new set of expectations. designs and eye-catching color palettes, Saucony’s Power Track compound—a “very Consumers are increasingly looking for though. A focus on lightweight foam midsoles sticky, very grippy” rubber compound provides footwear that serves all of their needs—and has gripped the category, in a large departure traction “in a variety of conditions,” and the not just the technical ones. from the clunky-yet-durable hikers of company has a number of styles where EVA “Door to trail is definitely a thing,” Katie yesteryear. shows through open areas of the sole. Pyle, product line manager at Saucony, told Saucony’s Power Run Plus is a TPU “Lessening the amount of rubber used Sourcing Journal. allows for a more lightweight effect,” said Pyle. The focus of the brand’s SS20 collection will Foam aficionados at Hoka One One are also WHAT WE’RE SEEING AS AN be applying new outdoor-ready features to its ASK FROM THE MARKETPLACE playing with lug configuration as a means to heritage line, “so that you can wear it casually, IS VERSATILITY. THE MORE reduce weight, said Jared Smith, the brand’s you can wear it on the trail, or you could wear APPLICATIONS FOR USE, THE product line manager. it on the road.” MORE PEOPLE GET INTO THE “We’ve zoned the rubber strategically to Modern consumers are getting out in new FOOTWEAR. minimize weight but maximize durability on and different ways, she explained, “whether it’s — Jared Smith, Hoka One One areas where you’re going to see wear and tear hiking, running, fast packing or just a day trip on the shoe,” he explained. through your local park.” The foam that shows through those exposed Pyle is seeing more consumers than ever compound that will make up the midsoles areas is the brand’s proprietary blend of hitting the dirt and the pavement, and she of some of the SS20 season’s trail running rubberized EVA, Smith said, which provides noted that women ages 18 to 24 are a growing offerings. The beaded material is 25 percent “durability, resilience and rebound.” demographic for the brand. “We’re seeing more lighter than the brand’s current high-end “You have something with a little more people getting out as a way to disconnect.” cushioning system, and Pyle said it offers an structure where the shoe is interacting with The new mindset is manifesting in more ultra-plush, cushioned feel underfoot. the trail,” he said of the rubber-infused foam. wearable silhouettes, Pyle said, pointing The brand’s original Power Run compound is What gives Hoka’s sneakers their iconic, to some of the company’s newest lines of also still a favorite for mid-range performance boosted silhouette is the stacking of active sneakers. styles throughout the line. An EVA blend that’s compounds to make up the midsole. Leveled FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

29 ING ON AIR

on top of the rubberized EVA is a layer of marketplace is versatility. The more applications also deals in foam midsoles, and has seen “comfortable, plush, supportive cushioning” for use, the more people get into the footwear,” skyrocketing demand from brands looking to made from another blended EVA compound, Smith elaborated. “Whether it’s out on the trail lighten things up. Smith said. for a light hike, on a pretty gnarly technical run, “I think what’s driving the whole mindset The effect is an extremely lightweight yet or just out and about in the city, our products of the consumer today is, ‘make my life less substantial silhouette that helps runners are going to fit those uses.” heavy,’” Ells said. “Emotionally and physically, maintain momentum and reduces impact on we just want to shed what’s weighing us down.” the joints. Components Ells referenced the evolution of another The brand’s standout style for the next The consumer’s growing propensity to spend outdoor staple, the puffer jacket, as a way of spring season is the Challenger ATR 5, said time outdoors is not just affecting brands, but explaining the trend. Smith. “It’s a really versatile shoe in terms of also the component companies bringing them Once bulky and heavy, the modern iteration crossover from road application to trail,” he their performance technology. can be folded or rolled to a fraction of explained, and “weight saving” through the use “These compounds are evolving as quickly its size, and stuffed into a pack without of lighter compounds helps promote use in as the demand from the consumer,” commented adding much weight or volume. For hikers varied terrains and situations. Bill Ells, VP of sales for Vibram. The world- and campers, a few grams can add up to a “What we’re seeing as an ask from the renowned Italian rubber outsole company mountain of inconvenience.

FROM LEFT: HOKA ONE ONE WOMEN’S SPEEDGOAT MID 2 GTX; MEN’S STINSON MID GORE -TEX; CHALLENGER ATR 5 MEN’S; AND WOMEN’S CHALLENGER LOW GORE -TEX But when it comes to footwear, Ells said, there was a reason that compounds and constructions became weighty, for a time. Durability and performance were top-of-mind for footwear companies and their suppliers. “Once you start to blend EVAs with other materials—other polymers, maybe some rubbers or some urethanes, maybe some other plastics—then you can get into some much more functional properties, like better rebound, FROM LEFT: BIRKENSTOCK ARIZONA AND SAUCONY MAD RIVER TR better shock absorption. But as you start to do that, things get a little heavy,” he explained. have to shed preconceptions about performance. asking for sandals they could wear to the “While we have been an industry that has “We can get light as a feather, but beach, pool or spa. been trained and educated in EVAs, we’re now what’s the industry looking for in terms Unlike the brand’s regular offerings, the EVA seeing urethanes, which have greater longevity of expectations?” he asked. “A runner, for versions can be hosed off if they get sandy or and often other better physical characteristics example, might be looking to get 300 miles muddy during outdoor excursions. that can meet the same density ranges of EVAs. out of a shoe. The outdoor enthusiast might “There’s 100 percent a lightweight play to So you’re now able to take a combat boot and be looking for two years.” be made here, too,” Shiblaq said emphatically. make it feel like an athletic shoe.” Outdoor products, like footwear, are “If you’re a hiker or a backpacker and you need When asked how suppliers like Vibram are expected to last. And until now, they were built something to strap on that you can wear lake- attaining the light-as-air feel, the answer is, quite almost entirely to service that objective. side or river-side and not add much weight to literally, air. But now that priorities have changed, your pack, this is the perfect style.” “There are products made where gas is consumers can no longer expect their footwear Birkenstock which currently carries the infused. In a typical EVA, you have what’s called to weather the elements, along with the wear- Arizona and Madrid styles in colorful EVAs, a blowing agent—think of it as yeast in a cake,” and-tear incurred by pounding the pavement will release the Barbados and Honolulu (both Ells explained. “Some of the materials use gas or the trail, indefinitely. sporty slides) next spring. infusion, which changes the cell structure, the As for the material inspiration, Shiblaq said rebound technology, the shock absorption.” Casual that the new styles—which all retail for below Trail runners and hiking boots aren’t the only $50—are constructed from the same EVA that outdoor shoes getting a foam makeover. makes up the outsoles of the brand’s standard HOW LIGHT CAN YOU GET A favorite of earth lovers for generations, sandals. WITHOUT AFFECTING LONGEVITY? WE CAN GET LIGHT Birkenstock has revamped some of its most Though the formulation’s density was AS A FEATHER, BUT WHAT’S iconic styles with a material twist. tweaked (there’s not as much gas infused into THE INDUSTRY LOOKING FOR Using injection-molded EVA, the brand has the full-EVA styles), it’s a material the brand IN TERMS OF EXPECTATIONS? created shockingly light, full-foam versions of has long been using to support its contoured its core line, which is usually made from cork footbeds. — Bill Ells, Vibram and leather. When asked whether the shoes’ lower price “All traditional Birkenstocks are made point and bright colors speak to a different Though he’s excited about the fact that from cork and, naturally, cork is not meant consumer than the brand’s core demographic, lightweight foams are giving people the freedom to be sunk in water,” said Dania Shiblaq, the Shiblaq said the brand has definitely enjoyed to enjoy their surroundings, Ells believes there’s a company’s senior PR manager. She added some newfound attention from Gen Z shoppers. trade-off to the new iterations on the technology. the brand’s standard sandals can’t get wet “There’s a lot that speaks to that consumer. “How light can you get without affecting without degrading the adhesives that hold the They’re fun, bright colors that we’re playing longevity? That’s where the diminishing shoe together. with,” she said. returns come.” “We wanted to create a style for our Shiblaq also thinks that the full-foam styles’ With the whole industry wanting to shed customers that was water-friendly,” she said, versatility speaks to the active, outdoor-loving weight, Ells cautioned that consumers might also explaining that consumers were increasingly set more clearly than ever before. FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

SPONSORED CONTENT ORTHOLITE’S GREEN INVESTMENTS PAYING OFF

Higher quality product—and goods that meet How is OrthoLite “greening” its practices? Yes, brands need to hit target costs in consumers’ sustainability demands—are Presently, OrthoLite uses solar power in our this price sensitive market, but working what’s leading the market. facilities, has created our own wastewater collaboratively with best-in-class component Even in this price sensitive landscape, treatment facility, and has built our own suppliers to drive both innovation as well as investment in innovation has an ROI that proprietary recycling facilities to reuse cost efficiencies will benefit in the long run. goes beyond dollars and cents, according post-product waste in patent-pending insole to CB Tuite, Chief Sales Officer of Ortholite. technologies. From a packaging standpoint, When it comes to comfort, what do Here’s how the company is meeting the we deliver insoles in reusable boxes instead consumers value the most? green mandate and exceeding consumer of corrugate and use biodegradable bags Consumers absolutely value long-term expectations, wear after wear. instead of poly bags. We’ve worked hard to comfort. Yes, step-in comfort drives product ensure we’re being eco-conscious every step off the shelves, but consumers will keep What’s the catalyst toward more sustainable of production process. coming back for that second pair when their footwear components? footwear meets and exceeds expectations. A unified commitment from brands, What other trends are important, and how That is why the investment benefit trend is suppliers and factories driven by consumer are they shaping footwear design? important to brands. demand. There is more awareness around Brands focusing on higher quality footwear OrthoLite is the least expensive way for the benefits of delivering sustainable are winning, while those that are more brands to upgrade the overall quality and solutions to the end user—this consumer is focused on cost cutting have clearly lost comfort of their shoes. The insole is the first letting their wallet speak, and it has created market share. This investment benefit trend thing your foot touches and brands recognize a halo effect throughout the supply chain. is gaining tremendous momentum. An the importance of this. Today, OrthoLite is If suppliers and brands are not focused on investment into product is an investment found in over 500 million pairs of shoes delivering product that performs and has into both brand equity and the consumer, and annually, and the focus on insole comfort by eco-benefits, they will be left behind. the return has been extremely positive. brands is not going anywhere.

DR. SCHOLL’S OFFERS COMFORT WITH A CONSCIENCE

The longtime leader in comfort footwear threw to incorporating environmentally-friendly its hat in the sustainability ring with a sneaker elements into all of its forthcoming collections. capsule for men and women. The brand will also be reworking its packaging, Dr. Scholl’s new line of sneakers feature a and plans on creating boxes made from proprietary rice husk-infused outsole, which the recyclable materials and soy-based inks. brand said cuts down on the use of petroleum- Dr. Scholl’s said the recent efforts have based rubber. The styles are “crafted from heel already yielded measurable results. The to toe with eco-conscious, sustainably sourced shoe is our beacon of light.” company has invested in planting more than materials,” the brand said in a statement. Earlier this year, Dr. Scholl’s collaborated 6,000 trees, recycled over 8,000 landfill-bound In addition to the husk outsoles, the shoes with St. Louis-based rapper Mvstermind on a plastic bottles, used more than 100,000 yards feature algae-based EVA foam midsoles, uppers limited-edition men’s sneaker that tested the of sustainable materials and saved more than 1 made from 80 percent recycled plastic bottles, recycled bottle knit upper and algae-based million square feet of plastic. chrome-free leathers and non-synthetic, all- midsole. Burton said the process diverts algae “We understand that sustainability is a cotton linings. The complementary styles, called from ecosystems in China and the U.S. that journey, not an end destination,” said Jay the Howe and the Herzog, each retail for $100. are being negatively impacted by overgrowth, Schmidt, division president of Caleres Brand “We were given the opportunity to saving fish and other wildlife. Portfolio, adding that Dr. Scholl’s has “continued explore every possible option to create more While the brand admitted that it’s at goals for the future” when it comes to sustainable shoes,” said Andee Burton, the the beginning of its foray into sustainable redefining both materials and processes. brand’s product development manager. “This materials, Dr. Scholl’s said it’s committed —Kate Nishimura VIVOBAREFOOT HARNESSES PLANT POWER

Vivobarefoot, makers of minimalist footwear, Along with being environmentally-friendly, consumers have already reported switching believes there is power in plant-based Vivobarefoot said the material is both brands for sustainability reasons. sustainability—so much so that they’ve lightweight and durable, reducing the overall “The less you put between your feet and created a new sneaker, 30 percent of which is weight of the shoe by about 10 percent. the environment, the better. Just like our other manufactured using renewable plant materials. “The launch of the Primus Lite Bio styles, Primus Lite II Bio was designed to let Vivobarefoot has made a name for itself in represents an exciting step away from the people’s feet do their natural thing, while the footwear industry as a disruptor, thanks industry’s reliance on single-use petroleum- providing maximum sensory feedback from to its atypical and often innovative approach based materials and towards a promising your body to your brain,” Clark said, adding that to footwear design. In 2017, for example, future of plant-based alternatives,” Asher Vivobarefoot released a minimalist smart Clark, design director at Vivobarefoot, WE WANT TO CHALLENGE THE shoe powered by artificial intelligence, and it said. “We want to challenge the world’s WORLD'S RELATIONSHIP WITH later partnered with algae-based performance relationship with shoes, the materials they SHOES, THE MATERIALS THEY materials company, Bloom, to create EVA foam. are made from and the impact they are ARE MADE FROM AND THE Vivobarefoot’s new sneaker, The Primus Lite having on us and our environment. Our IMPACT THEY ARE HAVING. II Bio, is one of the first to be made with a ultimate goal is complete circularity.” — Asher Clark, Vivobarefoot thermoplastic polyurethane (TPU) created by The company has already collected some Bloom’s algae, yellow dent field corn and natural compelling evidence that using plant-based rubber—instead of a petroleum product. materials in a product can attract consumer while there’s still “significant” amount of non- According to Vivobarefoot, Bloom harvests interest. In April, Vivobarefoot commissioned plant based materials in the shoe, the company the algae from freshwater sources at high an independent consumer study and found that believes it’s better to make incremental steps risk of algal bloom, a natural event that can 67.5 percent of people think the use of plant- than none at all. have devastating effects on an ecosystem. As based materials in a product is a “key factor” in The brand said it is “on a mission” to phase a result, the brand says that Bloom actually determining whether or not it is sustainable. out petrochemicals from its entire production “cleans and restores the environment” during This means using plant-based materials could line over the next two years. the collection process. become a key differentiator, as one-third of all —Christopher Hall FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

EVERLANE TO ‘TREAD’ LIGHTER ON THE PLANET

Everlane’s Tread by Everlane is a new unisex Melville said. “To add to that, sneaker growth has in every element that we could, from the sneaker brand the company is touting as the grown tremendously over the last few years and lining to the laces,” Melville explained. “From world’s lowest-impact sneaker. it’s largely a hype-driven style, only adding to there, we looked to alternative materials and The sneaker market’s impact on the the consumption and production of plastic. This components, and the right factory partners.” environment results in billions of pairs ending is where we saw the need for a sustainable style The choice of alternate raw materials up in landfills annually. Athletic footwear also in design and engineering.” results in 18,000 pounds of rubber kept out has one of the largest carbon footprints, as it’s It took two years for the brand to create of the landfill each year, and 54 percent fewer made largely from virgin plastic. the Tread by Everlane low-impact trainer. The greenhouse gas emissions, Everlane noted. Last year, Everlane set out to eliminate virgin brand enlisted two third-party firms to measure Tread by Everlane uses leather because of plastic from its supply chain by 2021 with the the trainer’s carbon footprint and offset 100 its aesthetic, comfort and durability, but the introduction of ReNew, an outerwear collection percent of those emissions. company needed a responsible supplier, which made using recycled polyester derived from The biggest challenge with sneakers, it found in Saigon TanTec. —Arthur Friedman roughly 300 million plastic bottles. Melville said, is the number of components in “With Tread by Everlane, we’re taking the their construction. Plastic is lightweight and next step forward in sustainability to better the durable, “which is maybe great for sneakers, sneaker industry and our environment with the but not so great for the environment,” she said, mission to create a zero-impact sneaker,” Alison adding that the company was challenged with Melville, Everlane general manager of footwear finding a material that could deliver on those and accessories, told Sourcing Journal. traits with a lesser impact. “Sneakers are filled with plastic, plastic that is “Our solution was to develop a sole made impossible to break down and causes hundreds by blending natural and post-industrial of millions of pairs to end up in landfills,” recycled rubber, and use recycled plastic

REFORMATION STEPS UP ITS SHOE GAME

Reformation’s launch of a dedicated shoe The inaugural 11-piece collection, which collection was a first in the Southern offers a “nod to the ‘90s,” serves up feminine California brand’s history. yet minimalist silhouettes in a bevy of The Ref shoes range features metallics and playful pops of color. Prices sustainably crafted espadrilles, flats start at $128. and sandals for hot summer days “when “Our mission at Reformation has always you’re wearing less and sweating more,” been to show that fashion and sustainability according to the It Girl favorite. can co-exist,” Yael Aflalo, founder and CEO at The shoes were a long time coming. Reformation, told Sourcing Journal. “With that Though Reformation collaborated with the in mind, we’re excited to launch our first Ref likes of Bulgarian footwear maker By Far shoes collection and bring our sexy, vintage- in the past, those co-branded kicks were inspired designs to your feet.” available for only a limited time. And shoes, In addition to schooling shoppers about the company discovered, are its customers’ fashion’s impact through content on its site, No. 1 requested item. the fashion brand has also partnered with In keeping with Reformation’s ethos, Ref Arcadia Power, a clean energy company that shoes boast eco-friendly elements such as optimizes home energy usage. To entice chrome-free leather and jute. Compared shoppers to switch to wind energy, the brand with most shoes sold in the United States, is offering $100 gift cards for each sign up, they save an average of 52 percent carbon a tactic it openly refers to as “a bribe.” More emissions, 70 percent water and 65 percent than 586 Reformation fans have enrolled, waste, the brand notes. They also include according to the company, equating to taking strategic cutouts to “show some skin and 680 cars off the road for a year. make you look a little extra hot.” —Jasmin Malik Chua ADIDAS FINDS ITS (RE)PURPOSE WITH FUTURECRAFT.LOOP

Adidas is pushing the limits of upcycling with thermoplastic urethane or TPU, and Adidas said and instead constructed the Futurecraft.Loop its new 100 percent recyclable sneaker, the it can be broken down entirely for repurposing to be, essentially, a knitted upper molded Futurecraft.Loop—a high-performance running into the next generation Loop products. and clean-fused directly to a Speedfactory- shoe designed to be worn, returned and remade. “Taking plastic waste out of the system is the produced Boost midsole. Adidas said it will Drawing from the experience gained from first step, but we can’t stop there,” Eric Liedtke, compel wearers of the Futurecraft.Loop to its partnership with Parley for the Oceans, executive board member responsible for global Adidas will attempt to close the loop as tightly brands at Adidas, said in a statement. “What TAKING PLASTIC OUT OF as has been seen in footwear. The Futurecraft. happens to your shoes after you’ve worn them THE SYSTEM IS THE FIRST Loop will be composed of a single material, out? You throw them away—except there is no STEP. OUR DREAM IS THAT away. There are only landfills and incinerators YOU CAN KEEP WEARING and ultimately an atmosphere choked with THE SAME SHOES OVER AND OVER AGAIN. excess carbon or oceans filled with plastic waste. The next step is to end the concept of — Eric Liedtke, Adidas ‘waste’ entirely. Our dream is that you can keep wearing the same shoes over and over again.” return the shoes to Adidas to be deconstructed According to the brand, the biggest hurdle and have its TPU repurposed. Each shoe will be in the design process was getting around washed, ground into pellets and melted down the traditional pitfalls that normally prevent to return the material to its base state. footwear from being recyclable—namely Adidas said it will use input gained from the fact that most shoes are made by gluing its global beta program to inform a second multiple components together, resulting in a generation of Futurecraft.Loops, which should product that can only be downcycled. be accessible by the general public around To get around that, Adidas ditched the glue Spring/Summer 2021. —Christopher Hall FOOTWEAR STATE OF THE INDUSTRY REPORT 2019

SPERRY’S HOLISTIC APPROACH TO NATIVE BOWS SUSTAINABILITY CONSUMER

Sperry is doing its part to help the world’s Sperry’s Bionic collection differ from its more ocean pollution problem. traditional styles and are, instead, inspired by COMPOSTABLE The brand has had a strong connection with “multi-colored sailboat sails with patchwork the ocean ever since its first model, the Top- pieces and stitching details.” FOOTWEAR Sider, was designed by founder, Paul A. Sperry, to Taking a truly holistic approach to prevent accidents on slippery boat decks—now sustainability with the collection, Sperry Native Shoes’ latest project blends sneakers the footwear brand is looking to help protect packages its ocean plastic footwear in shoe and science. the seas with a new collection composed of boxes made from 100 percent recycled paper Athletic footwear are among the most toxic plastic recovered from oceans around the world. material. The brand has also pledged to use contributors to footwear waste. These styles The collection’s release coincided with only vegetable ink and water-based glue in its and their myriad components can linger in the announcement of Sperry’s new, ongoing packaging. landfills indefinitely, refusing to break apart sustainability platform, “Look Good. Do Sperry and the Waterkeeper Alliance or decompose. Good.” and was the first major initiative have also partnered on a “voice-controlled With the release of its new Plant Shoe, for the program. The line was produced in experience” found on Amazon Alexa-capable a casual lace-up made entirely from plant- partnership with the Waterkeeper Alliance, devices. Consumers can ask for the experience derived components, Native promises to be the an ocean sustainability NGO that will recover by requesting that Alexa activate the “Sperry first waste-free sneaker. the plastic through its Ocean Plastic Recovery Waterkeeper” skill, which offers hints to keep According to the brand’s creative director, Initiative, and Bionic, a materials company plastic use down. Mike Belgue, the new design was spurred by that will make the yarn. Sperry says its support of the Waterkeeper the company’s commitment to becoming “100 Featuring popular styles like the Authentic Alliance and Bionic will help clean up beaches percent life-cycle managed” by 2023. The Original, the Captain’s CVO and the women’s and marine environments around the world, Plant Shoe is made from totally biodegradable, Crest Vibe Sneaker, the collection is wide- hopefully helping to curb the 8 million tons of animal-free materials—and its consumer- ranging and offers options for men, women plastic that find their way into oceans every year. compostable, he said. and children. However, the designs for —Christopher Hall “The next step beyond our current recycling initiative was to create something that wouldn’t need to be reused or recycled, but instead, generate zero waste. Something that was born from the earth and could go back into it,” Belgue explained. After two years of research and material testing, the sneaker materials list reads like a grocery list. The shoe’s upper is woven from carded pineapple husk and organic cotton, while an organic linen sock liner covers its kenaf and corn felt insole. The outsole is made from natural lactae hevea or “rubber milk,” with a cork and sisal-based midsole. The shoe’s components are held together by olive oil- soaked jute thread and natural latex glue. The Plant Shoe follows Native’s Remix Project, which also addresses post-consumer footwear waste. Consumers can drop off their worn Native shoes at select locations or send them in through the Zappos for Good platform. Through a proprietary process, the shoes are reground into material for playground flooring, insulation and more. —Kate Nishimura NAT-2 UPCYCLES SOUR MILK

Got milk? Nat-2 certainly does. The Munich-based shoemaker recently partnered with German microbiologist Anke Domaske (of Qmilk fame) to engineer a “100 percent natural” sneaker upper derived from soured milk no longer fit for human consumption. Two million tons of milk are disposed of in Germany alone, according to Domaske, who extracts the milk protein casein and spins it into yarn using a water-efficient process that requires no toxic chemicals and leaves behind zero waste. The resulting fabric is silk-like in hand and appearance, with properties that reportedly include moisture and temperature management, PUMA’S NEW LINE MAKES bacterial resistance and reduced skin irritation. Nat-2’s Milk line marks the first time milk PLASTIC (WASTE) FANTASTIC fabric has been applied to shoes. To increase the material’s durability, the company blended Puma is joining the fight against plastic retailers like Inditex, Target and Walmart have 30 percent casein fibers with 70 percent wool pollution. also pledged to reduce the amount of plastic in to create a first-of-its-kind “milk felt” that is The brand announced a new collaboration their packaging and products. compostable at the end of its life. with First Mile, a producer of recycled polyester First Mile, Puma’s partner in this new “The milk material is 100 percent [natural] sourced from plastic refuse collected in venture, collects the raw materials for their and shows improved skills towards regular felt,” low-income communities, to create a new recycled polyester yarn from plastic bottles it wrote on its website. “Due to the mix of wool sportswear capsule for Spring/Summer 2020. picked up from the “streets, canals and landfills” and real milk fibers the touch is soft and silky, With the addition of the new capsule, Puma of towns in Haiti, Honduras and Taiwan. It’s is entering the ranks of brands that have begun collection network, which the organization says to fight back against the inundation of plastic is about 4,000 people strong, helps to keep THE NEW NAT-2 LINE SETS OUT in our environment by reconstructing it into those areas free of unwanted plastic while also TO SOLVE AN ENVIRONMENTAL usable apparel. providing a unique sourcing opportunity for PROBLEM: TWO MILLION TONS OF MILK ARE DISPOSED OF IN “Plastic pollution is one of the most pressing brands like Puma. GERMANY ALONE. environmental problems the world faces today,” Puma said the capsule will be another Adam Petrick, global director of brand and aspect of its 10for20 sustainability campaign, marketing for Puma, said. “That is why we are which began in 2016 and is based on the while peeling is eliminated, dirt does not get a very excited to join First Mile and be a part United Nation’s Sustainable Development hold and the strength is improved.” of the solution while supporting low- income Goals. Aside from the Puma x First Mile The shoes, which start at 299 euros ($338), communities and transparency in supply chains.” collection, Puma has made a number of come in unisex high-top and low-top styles Turning plastic into raw materials for sustainability-minded improvements to its and colors such as off-white, greige and navy. footwear has caught on in recent years and company—including the implementation of Handmade in Italy, each one comprises a cork companies are ramping up their intake of the sustainable cotton into its supply chain two insole, a rubber outsole and a vegetable- new input. years ahead of its initial schedule. tanned leather lining. Adidas recently announced plans to double The new capsule will include footwear and Nat-2 is a veteran at dabbling with the production of footwear it produces apparel with a focus on outdoor elements and unusual materials. In the past, the brand has with recycled plastic and Sperry launched practical features like utility pockets. Puma experimented with mushroom “leather,” coffee a collection of recycled polyester footwear says it will be released in either Q1 or Q2 of grounds and even grass. earlier in March. In the past couple of months, 2020. —Christopher Hall —Jasmin Malik Chua

The Footwear State of the Industry Report 2019 is a Sourcing Journal Media publication, which features a compendium of the most noteworthy stories published by the media company focused on the forces shaping footwear sourcing, design and production as well as original reporting on related topics, exclusively for our partners:

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