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The Importance of America in the Sportswear Industry: Part 6 (Conclusion)

If you take two things away from my blog on America’s influence on the Sportswear industry I hope they are these. Americans buy 40% of all the Sportswear in the world, and there are more people in the USA working for sportswear manufacturers (not including the factory staff that are not technically employed by the manufacturers) than any other country in the world. Those are truly confounding numbers when you think about how big of an impact that has on the global market. Brands have realized America is the metaphorical golden ticket in the industry, so expect the competition to continue for every dollar of discretionary income that Americans are putting into their clothing. The “athleisure” market is booming, copycats and counterfeiters are getting exposed, and the top brands are moving key people into key places to ensure they can execute to American consumers preferences. It will be a long time before any other country is able to claim that it is the home of the sportswear industry

That said, China has gone from the world’s shoe maker to the second biggest shoe buyer seemingly overnight. Like the people at adidas have said for years “impossible is nothing”.

 

(Image courtesy of High Snobiety)

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The Importance of America in the Sportswear Industry: Part 5 (How Brands are Competing)

It almost goes without saying that the real winner in the USA is Nike. They always seem to focus on their homeland first and foremost and as a result see a huge amount of success. Their recently reported sales numbers (up 15% compared to last year, and up 16% this quarter in North America) are staggering examples of their success.

German giant adidas has recently put a bigger emphasis on growing the business stateside. By moving the brand’s Creative Director Paul Gaudio to the USA , and by poaching Mark Miner, Denis Dekovic, and Marc Dolce to start a new Brooklyn based design studio it is clear that the trefoil has decided to try to carve back some of the market share it has lost in the USA in recent years. It is also worth noting that new head of adidas America Mark King has put an emphasis on “American Sports”. He sees adidas as being a more successful brand stateside if they can appeal to the sports that the Americans view as their pastimes.  The brand will likely have to wait about another 13 or so months before any of these changes come into effect with how the cycles work in the industry (and likely longer before the three new designers are able to influence product), but the plan is in place.

Puma’s recent signing of Rihanna is sure to breathe some much need life into the brand, but it is hardly more than a quick-fix. They will need to really shake things up if they want to compete at a higher level. That said, the global Puma Labs they have in place at Foot Lockers around the world have definitely helped the brand return to prominence.

Skechers is the true underdog story that no one was really expecting. Their numbers (50% gain in brand share in April 2014, and best first quarter net sales ever) are shocking to say the least. They have seen incredible growth, and as they are able to afford more resources it will be interesting to see what they are able to do in the USA and around the world in 2015.

Under Armour is using a similar strategy to Mark King’s idea of trying to win in American sports. They have been growing in areas like basketball, and the recent battle they lost with Nike over Kevin Durant was their memo to the sports world that they aren’t just the new kid on the block anymore. Expect to see growth behind Steph Curry in basketball, and their sponsorship of university football teams in the USA. They are in need however of a veritable superstar(s) to back their campaigns if they are going to seriously challenge Nike in any of the “American sports”. They are on the right track however recently passing adidas to cruise into second for sales in the USA.

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The Importance of America in the Sportswear Industry: Part 4 (Brand Value and the Shifting Workforce)

  • The industry’s heavyweights have grown their workforces Stateside, and there are more employees in the USA than Europe.
  • The major sports brands (according to Forbes) are located in the USA
    • 24 Of the 40 most valuable sports brands are American. This group includes: events, teams, athletes, broadcasters, and sportswear companies
    • The Forbes report doles out 58 billion dollars in brand value throughout the list. The American brands represent about 78% of that value with 46 billion dollars in brand value
      • It’s worth noting that Nike’s brand value is the highest at an estimated 19 billion dollars or about 38 times the value of the Superbowl
    • The USA makes up about 40% of the world’s sportswear market according to renowned market research professional Matt Powell.

Below is a look at the data I used from the Forbes article here.

brand value

Pivot Table

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The Importance of America in the Sportswear Industry: Part 3 (Hip-Hop’s Influence)

A history lesson from the good people at Sole Collector and D.M.C.:

 “So, they put (Angelo Anastasio) up on it, so he went to adidas and said, “You know, listen, I know what’s going on. There’s this rap group Run-D.M.C. that made this, so adidas assigned him to leave L.A. to fly to New York to go to the show that Run-D.M.C. was doing in Madison Square Garden. He came … and he was hanging backstage. … But, when Run went out there during the show, “D, take it off your feet; hold it up. What’s those? Everybody in here, if you got adidas on, hold ‘em up.” So, 40,000 people in a sold-out Madison Square Garden held a sneaker up and Anastasio was like, “Oh my god, it’s true.””

This sparked the birth of the first partnership between rap and sportswear. Since then, it seems like every rapper has had some sort of influence on a major footwear producer. From Nike’s work with Drake and Macklemore, to Reebok collaborating with the likes of Jay-Z, Kendrick Lamar, and Rick Ross, and adidas’ Jon Wexler signing half of the rap industry with the three stripes it seems that rap has planted its flag of influence in the sneaker industry. There’s no debate that the influence of rap is worldwide, but its influence I believe is definitely strongest in the country it was born in.

The reasoning behind all these relationships is simple. Athletes sell shoes, but so do artists. The target market for a lot of silhouettes are identical with specific artist’s fans. The effect that an artist like Kanye West can have on the popularity of a piece is dumbfounding. For example, Kanye West attached his name to a plain white $120 T-shirt with French company A.P.C., and it “sold out instantly”. With millions of followers across the globe using mediums like Instagram’s Team Kanye Daily, WhereToGet, and a variety of blogs and magazines that showcase his outfit choices it’s no surprise that people want to dress like him. He isn’t the only artist with a cult-like following when it comes to fashion, so it is definitely worth mentioning that Puma’s move of bringing on Rihanna as Creative Director (much like Reebok did with Swiss Beatz in 2011) is a huge move for the women’s side of the brand. She is not a rapper, but it seems almost necessary to comment that Puma’s influence in the women’s market should see major growth thanks to her endorsement. 14.4 million Instagram followers will be subjected to her fashion choices, and Puma will likely see a nice bump in revenue thanks to her.

The adidas Run-D.M.C. partnership topped the list of the “best partnerships between rappers and sneaker companies”, and as the initial partnership it definitely has owned that spot. The now almost 30 year partnership has produced countless exclusive pairs and even has its own massive display pair at the adidas campus in Portland.

 

After adidas and the three Hollis-based artists teamed up there wasn’t very much collaboration between artists and shoe companies. The next big partnerships to form were Jay-Z and 50 Cent, who in 2003 partnered with Reebok. As 50 Cent said, he made “80 million (dollars) off the deal” and outsold Jay-Z’s more limited model by a 6:1 margin. The shoes may not have held their popularity as well as the Eminem Jordan 4 models that came out in 2004, but they are hard to compare since only 50 pairs were released by the Beaverton based behemoth. At this point, rappers were able to command incredible sums of money to co-sign a product based on their influence over customers. 2003-2005 was when rap planted its flag as a serious influencer in sportswear, and its reach has only grown since then.

Fast forward to a young multi-talented man from Chicago that in 2005 began his ascent to the top of the sportswear mountain. Kanye West’s work on a Nike model was his first foray into footwear, but his first pair that went past the sample stage was with the Japanese brand Bape. His work is well documented here, and there is no shortage of his influence. He even had his famous “dropout bear” on the heel of the Reebok S. Carter. In fact, the brands he’s worked with directly are Bape, Nike, and now adidas.

Since the Dassler feud brought on the battle to sponsor the best athletes in the world the sportswear industry hasn’t been afraid to push products using athletes as endorsers. As we saw beginning in the late 80’s this trend had begun to encompass more of popular culture. Just as athletes are seen as knowledgeable about what model might be best for their sport, celebrities became viewed as guides for how to look good. Rap has played a key influence in the sneaker industry based on a few things:

  • Culture of product placement – The prevalence of showcasing brands in songs, videos, etc. is growing by the day.
  • Prominence of brand shout outs and mentions in media – Social media, magazines, and blogs focus on who is wearing what, and what brands are showcased at various events. This has escalated with the explosion of the culture in the digital space.
  • Opportunities for collaborations – Based on the history between hip-hop and sneakers there is a long history of artist collaborators that have worked with brands.
  • Connection between basketball culture and rap – There is no debate that basketball and rap go together like Drake and the Raptors, but what is interesting is how sneakers all fit in here as well. There is clearly a happy marriage between these three cultural pillars, and the great brands leverage their influence in all three areas.

America is not only the birthplace of rap (and hip-hop), but it is very clearly the home of the genre. The relationship between rap and sneakers is possibly the largest relationship between music and a commodity outside of musical instruments and the music they create. As rap continues to flourish and develop subgenres the opportunities for collaboration between the two interlinked sub-cultures is massive. As long as hip-hop celebrities continue to be regarded for their fashion choices it’s a “no brainer” that their involvement will evolve from the successful product seeding initiatives and further we will see more artists listed as collaborators on projects.

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The Importance of America in the Sportswear Industry: Part 2 (TV Viewership and Marketability)

TV Viewership and Marketability

Before I get started, I think it is important to recognize the FIFA World Cup, The Cricket World Cup, and the Summer Olympics are the world’s most watched sporting events. It isn’t a surprise that the FIFA World Cup tops out the list for viewership and although the total numbers globally are incredibly difficult to estimate, (a great example is that almost 35 million Germans (AKA 86% of the population) watched Germany win in 2014. When India and Pakistan faced off for the Cricket World cup there were an estimated 1 billion people that tuned in). The Olympics viewership can vary greatly depending on season, time zones, and location. These three events are clearly the most watched events in the world, however because their location changes every time the event takes place, and they only occur every 4 years the ratings can be a bit skewed based on those factors. When looking at major watchable sports I excluded the above three for the following reasons:

  • Infrequency of the event
  • Large geographical changes at each occurrence
  • Large time zone changes at each occurrence

There is definitely an argument for the Champion’s League final which is considered the world’s most watched annual sporting event (165 million viewers in 2014). It spans all over the globe (albeit concentrated in Europe) and is bit of a headache for marketers since you have to be a huge global brand to get your money’s worth. As far as global eyeballs in front of TV’s it wins that award annually. That said, viewership by country is tied to whether that country is represented in the final, and generally doesn’t come close to the Superbowl. The best argument for the Champions League Final is that it represents the taste of European viewers rather than specific countries with the teams that compete to play in the final.

In the USA, there is a lot of money involved in televised sports. The home to the big 4 major leagues frequently sees huge deals for television rights for sporting events. The NBA and NFL both have contracts for around 25 billion while the MLB and NHL have smaller deals at 12 and 2 billion in the USA respectively. The comparable stats though come down to TV viewership. Below is a breakdown of the big 4 leagues viewership in the USA for their championship game in 2014.

TV

With all of that in mind, why do I conclude that the USA is the “home of major watchable sports”? I base my opinion on a few factors.

  • Frequency of major events
  • Total viewership among all major leagues
  • Viewership over one country

When it comes to watching sports there is no country that does it better than the Americans. They are consistently able to draw huge numbers of viewers for annual events. These viewers are then subjected to large scale targeted advertising by a variety of brands including major sportswear companies. The ability for these brands to reach the American market through televised sport is perfected in America and is exemplified by the $133,333 a second it costs to advertise at the Superbowl. People in the USA are watching a lot of sports, and if you guessed there are a lot of people buying sportswear as a result of that marketing then the numbers infallibly support you.

It’s also worth noting that these leagues are also not finished expanding their influence globally. The NFL, NHL, and NBA all have extended their audience globally with games abroad. The Toronto Maple Leafs (the NHL’s most valuable team) are actually able to reach more viewers in China than in Canada according to Vice.

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*Sources for Total USA Viewers:

NFL, MLB, NBA, and NHL

(Image courtesy of High Snobiety)

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The Importance of America in the Sportswear Industry: Part 1 (Introduction)

When adidas was founded in 1924 as “Gebrüder Dassler Schuhfabrik” they weren’t concerned with what was going on across the Atlantic. In fact, it wasn’t until the late sixties when Nike was still known as Blue Ribbon Sports that adidas took the then 200 million people inhabiting the USA a bit more seriously. adidas was far more focused on Europe which had a population of around 650 million people in 1970. Europe was adidas’ backyard, and they were competing with Puma for dominance. The battle had and would almost bankrupt both companies as they tried to build their respective brands. They would however have to start worrying about a new battleground in the 70’s. The battle between the top brands for market share was about to finally go global, and it was then that the race to capture the USA began.

In 1971, Blue Ribbon Sports ditched the Onitsuka Tiger (AKA Asics) in favour of their own swoosh and incorporated as Nike Inc. That was when things started to heat up in the USA, and the development of the sportswear industry’s new home in the USA really began. Just as the Dassler brothers had created athlete marketing, Phil Knight and W+K were about to pioneer aspirational marketing.

I would note that Reebok entered the USA later when entrepreneur Joe Foster obtained the rights to the British athletic company in 1979. They became the major competition for Nike in the United States, and would play a vital role as the industry developed.

The retail sporting goods industry is predicted to reach 266 billion dollars by 2017, and as of right now the American marketplace makes up 40% of that market. That 40% makes the USA the highest spending nation in the global sportswear marketplace. There are a few reasons outside of money spent why in the last 40 years the “land of the free” has cemented itself as the home of the sportswear industry. The next 4 parts that will be discussed are below:

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Why Online Sneaker Stores Are Making Your Retail Experience Better

The way we buy shoes is changing.  Shoe retailers are committed to putting consumers in an environment where they feel comfortable. As well, the big two shoe manufacturers (Nike and adidas) have pulled the ability of some small Mom & Pop accounts around the world to sell their shoes.  This decision is spurred on by the high cost and low return associated with some of those small retail relationships, and the lack of control the companies have in their product’s presentation in these stores. The big sportswear companies are finding it increasingly easier to focus all of their efforts on their own stores (where they make the most money and have the most control); similarly, they can institute changes with the major retail chains as they can institute immediate marketing or merchandising changes across all stores with the flip of a switch. With retail changing and buyers consuming across different platforms, the times are changing, and the companies that act rather than react will see their bottom lines grow.

Why Online Sales Are Ruining Everything for Retailers

Before we get started looking into the retail landscape, I think it’s important to break down where your money goes when you buy a shoe. Typically the (very simple) breakdown on a $100 pair of shoes looks like this:

  • $25-$30 in costs associated with getting the shoe made and delivered.
  • $25-$30 in costs associated with sales, marketing, R&D, endorsements, and other costs not associated with making a shoe.
  • $40-$50 in profit for the retailer.

As you can see, a huge chunk of money (40-50%) of every sale goes to the retailer which in a lot of cases is not the company that made the shoe. Now if Nike, adidas, or a retailer can convince a consumer to buy a pair of shoes from their company website or its own bricks and mortar location then it yields more sales and profits for that specific company. This is why you can easily find a 15-20% off coupon for one of the big 2’s own stores. The thought process here being even if the shoe only yields a company $80 in revenue it is still $30 more than they would have got before. Combine that with effective new methods of shipping and benefits to the consumer like next day shipping, and not paying state or provincial sales tax and you have created a reason for consumer to buy online. For the consumer you are now paying $20 less on a pair of shoes by doing very little work, and even enjoying delivery to your house. For Nike or adidas you are making $30 more by not sharing profit with a retailer. It’s essentially a win-win for everyone except for those retailers who are left with trying to compete for consumer with significantly less stock and a lot less pricing power. This means the retailers have to come up with creative and smart ways to get customers to buy from them. E-Commerce is growing at an alarming rate for Nike and adidas with growth rates of 42% and 58% in the last year respectively. Both companies have lofty goals in the online marketplace, and, with the online marketplace accelerating in growth countries like China, it makes sense that there is a focus on this spectrum. Consumers are comfortable buying from online retailers, and this makes it easier for shoe manufacturers to justify closing under-performing and less than premium accounts. Expect online sales to grow and grow as retailers grow their e-commerce teams, offerings, and experiences.

Nike and adidas Getting into Bed with the Big Dogs

When adidas launched the Pure Boost it seemed like everyone was desperate to get a pair. In Europe the release only hit Foot Locker locations. Along with five exclusive colourways for the ZX Flux, it seemed/seems like adidas was/is focused on getting the world’s second largest footwear buyer (behind France-based Decathlon Group) to push its products. Although the reach of Foot Locker and the fact that its 604 European locations stretch well beyond the reach of Europe’s top boutiques there wasn’t a way to be able support local boutiques. The move in the end was great for getting shoes on to people’s feet, and appealing the silhouettes to a different clientele that might not see them if they were at a street wear or sneaker boutique.

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(Photo courtesy of www.sneaker.794mhz.jp)

For big retailer chains like Foot Locker, Finish Line, and Champs the target is the mass market, and they look to sneakerheads as a small slice of their sales base. The boutiques are serving the 5% of the sneaker market that consider themselves devotees to athletic footwear while the big retailers serve the rest of the world. Obviously, all retailers are fans of consumers that will camp overnight to pay for their products so as much as Foot Locker could likely survive without getting any Jordan release or exclusive adidas’ they would never want to. They have the beauty of being the second largest buyer of athletic footwear in the world, and as a result they can call the shots for a lot of the relationship. It makes it easy for them to demand exclusives and access to any model and colourway they want with all that bargaining power. Obviously, it is in the best interest for the suppliers of footwear to not anger their biggest account, and as such you can expect to see more and more sneakerhead targeted silhouettes across all brands on the shelves of a Foot Locker and it’s competitors since they result in huge sales numbers. But then again, maybe not.  Foot Locker has built up its House of Hoops concept which is a premium chain store that has a similar feel to a boutique, and is geared towards sneakerheads and elite athletes. Foot Locker is seeing value in enhancing its retail presence, and Ken Hicks has made splashes with other ideas like the Flight 23 NYC store in collaboration with Foot Locker owned Foot Action. In cities that can support these premium stores they become the epicenter for sneakers, and the shops are moving to push the sneakerheads there by limiting releases to those locations. The big dogs are seeing a trend moving towards premium locations and buying experiences, and the sneaker world and sneakerheads are happy to follow along.

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(Photo courtesy of http://www.lightworks.co.uk)

Making Company-Owned Stores More Premium

Whether it’s adding the “boyfriend bench”, free drinks, a live DJ, or Wi-Fi, companies and retailers are figuring out that they need to not only have wares people want to buy, but they need to create an experience that consumers enjoy. The theory is simple: keep people in your store, and they will spend more money. This theory is confirmed by Seth Fiegerman in his article on MSN Money here. As I previously mentioned, stores are attempting to make the shopping experience comfortable, premium, and enjoyable. They are also attempting to engage as many senses as possible as this can equal more sales. (*Side note* shout out to all the local shops that don’t engage with my sense of smell. Just walking by a Hollister is enough to make me gag). RTEmagicC_niketown-nyc-5thfloor-sportswear-1.jpg

(Image courtesy of High Snobiety)

Wi-Fi

Shops figured out years ago that engaging with appropriate music and letting people touch and feel shoes results in more and more sales. The same shops are looking now at bringing in free Wi-Fi to go along with the already comfortable experience. There are two main reasons why stores like adidas are bringing in Wi-Fi to their shops:

  1.  It really isn’t for the buyer, but it is more for the girlfriend, the friend, the brother, the sister, or whoever they are with. As soon as the other person is able to check a couple Snapchats then the buyer doesn’t feel bad looking at that second colourway.
  2. It lets the buyer research more and remove any pre-purchase dissonance (aka the voice in your head that says “you already have 6 pairs of Jordan 5’s, do you really need another?). By getting the opportunity to look again at prices online, reviews, and pictures of the shoes then the buyer becomes more comfortable with spending their hard earned cash.

Either way the addition of Wi-Fi in retail outlets has led to an increase of sales according to the people at Deloitte. You can expect to see iPads, and ways to access the online included in this as well so that you can order your size if it isn’t in stock or browse a larger range of products that you can pick up in store. Omnichannel offerings are no longer the future, but they are the present.

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(Image courtesy of http://www.philly.com)

In-Store Displays and Videos

Both adidas and Nike have been working hard to engage consumers with their content when they are susceptible to a sale. One great example is the Canadian boutique Livestock that in early 2014 had Nike come in and transform the adidas Consortium, and Reebok Certified account into a purely Nike store for a couple of weeks. The takeover let sneakerheads come in and take a serious look at things they might not look at like the Nike Tech pack. The display was incredibly well-executed and was the talk of the sneaker world on outlets like Sole Collector. This pop-up shop featured iPads that let consumers zoom in on the material of the Nike Tech pack which again engages the sense of sight even further. Couple all this with some re-releases of some seriously sought after pairs of shoes and you have the recipe for success. Check out a video that the nice people at Livestock put together below.

On the adidas side of things, the opening of the Bluewater HomeCourt shop showcased the adidas Shoebase. These two massive touchscreens help customers choose the right product for them and engage their senses again. The launch was coupled with a radio DJ and a nice discount to encourage consumers to come see the new store and really experience it. At the heart of what adidas was trying to accomplish is creating a unique and amazing retail experience. Like adidas HomeCourt Bluewater General Manager Robert Goodman said “The concept is quite unique and will make a significant contribution to the experience for guests“. The look and feel of the store is to make consumers feel like an elite athlete at any level. The entrance is through a tunnel like one that athletes go through seconds before they step on the pitch or the court. This is the second HomeCourt shop by adidas, and I wouldn’t be surprised to see more pop up in areas around the world. Whatever way that stores are trying to become premium it is clear that it is incredibly important to be seen as premium. The boutiques are (hopefully) always going to be around as they are the epicenter of sneaker culture in any given city. While the big brands own shops will be a lot more cookie cutter thanks to global and national regulations it is clear that the focus is on delivering a premium and consumer focused experience.  As adidas Global Head of Retail Environments Ted Mager said “Shopping for this generation is very social. They need to have a place to hang out. The longer the consumer stays in the store, the more likely they are to buy”. Create a fun, popping, and premium place then watch the profits roll in.

Also, shout out to Solebox and their Solebot. They just opened their new shop out in Berlin, and have brought forward the age of the robot with their stock searching robot arm. Check out the video below from the people at Reebok Classics, Solebox, and Patrick Mohr to get another idea of what premium shopping looks like.

Closing Stores that Aren’t Deemed “Premium” or Underperform

With a focus on creating premium stores and experiences that engage consumers senses the standard for what is considered acceptable under the standards of the big 2 is rising. In January, stores across the UK announced that they were having their ability to order product from the sportswear companies pulled out from under them. It was clear in this article by the Standard that the focus was to focus of Nike and adidas’ in this initiative was clearly on the shops that perform and push product at a commercial level. It’s unfortunate that there are stores with relationships spanning decades with the big 2 that are now forced to prove their mettle, but in a world where brand power sells shoes it is important to focus on what is moving product. To put it frankly, sales representatives only have a finite amount of time in the day, so if a store can’t meet the minimum quantity to justify the cost of time for that representative then it makes sense to focus their efforts in a place where they see more value. This also has occurred online. Until just a few days ago adidas restricted its online sellers to not include Amazon and EBay. They had disallowed sellers to use these channels with the worry of the brand not being presented in the right light. They recently reversed this call for sellers as long as they “adhere[d] to strict guidelines”. This is likely thanks to the massive growth in the online spectrum, and attributed that there products are showing up on the retailers either way.

Where the Retail Landscape is Going

A few predictions on where I expect the international retail landscape to go include:

  • Expect more Mom & Pop shops to shut down as they lose their Nike or adidas accounts.
  • Expect e-commerce to continue to grow as the next big part of the omni-channel ecosystem.
  • Expect mobile purchasing to continue to get easier and play a bigger part of how consumers buy.
  • Combining the online and retail experience. Whether it’s ordering product from iPads in stores, adding in-store pickup, or implementing creation centres for NIKEiD and miadidas
  • Look to the big retail and sportswear brands to continue to develop concept stores in retail locations around the world (focusing on the big cities like Paris, NYC, Berlin, Shanghai, Hong Kong, Tokyo, and Los Angeles).
  • More exclusive items for the big chain retailers as they flex their buying muscle.
  • More focus placed on making the consumer stay a while by engaging them. This is the area I expect the truly innovative companies and retailers to shine!

The retail landscape is changing. Consumers have the luxury of multiple choices of how and where they buy the latest sneakers. While I don’t think that Nike or adidas is going to lose the race anytime soon I do believe that the two horse race is going to be across more channels and will only intensify from here. Nike and adidas make each other better by competing with each other, because in the world of footwear competition breeds creation. This creation extends across a variety of fronts past just the actual shoes, and into the retail spectrum. This high level of competition has blown up with the growth in online retail, and is only poised to create more and more creative ways to buy creative shoes.