Wednesday, January 10, 2007

Well... there goes the neighborhood - for shoes...

Welcome to the new year. Lots to catch up on... but I wanted to hit this first.

Yes... it was only a matter of time but the "new wal-mart" has come to the online shoe selling market. Amazon announced that they've opened an online only shoe marketplace called The store pretty much lays down the gauntlet for the online pure play Shoe Retailers like,,,, etc. With it's advanced (and usable!) search, 24/7 customer service, the free overnight shipping and the always popular Amazon personalization, they've pretty much blasted their way into the market. It was only a matter of time before Amazon did this. Their own footwear category has been going well since it's inception, and I'm sure Mr. Bezos and gang have been watching with great interest all the e-retailing media hype about zappos' success every quarter.

Here's why I think the free ride for the online pure-plays in the footwear segment is pretty much over. Think of these online shoe stores as... the local and regional stores that used to populate the rural landscape in the US. Remember... you'd drive through a small town and "dave's general store" or "Robinson's Family Clothing Store" used to be downtown on the square. Then, the bentonville gang started sprouting supercenters everywhere they could. Bringing "always low prices" to the masses, and right off the square where the land is cheap. What happened to the smaller stores? The ones that tried to compete head on... for the most part... went by the wayside. Only the savvy few were able to survive if they had a TRUE NICHE. Walmart won these battles with fair quality goods... at unbelievable prices... with razor-like precision when it came to logistics and operations.

The same thing can be said for Amazon. They have all of the logistics going for them. They set the standard in experience in the online sector, and now they've come to the shoe neighborhood to wipe out the "mom-n'-pop's" of the footwear world. And in the footwear world... Amazon has a "leg up" because unlike walmart... the amazon folks have literally an unlimited access to brands. So in a sense... they're even STRONGER than a walmart supercenter. I think that once Amazon gets going, you'll quickly see consolidation in the online pure play sector. The operating margins behind, and cannot sustain the free overnight shipping that Endless is offering. They eventually will have very little brand exclusivity, and at some point, when Amazon starts "crossing the streams" and using the rest of their apparel inventory to bring you a "full fashion experience" they will have all of the fashion footwear brands in their pocket. Brilliant plans by Amazon. (insert Guinness Guys here)

So... who's going to lose the most? Well... my guess is that you'll see either or start to decline quickly. There's just not enough room in the pure-play market, and now that Endless has raised the shipping barrier to "free overnight" they have the most to lose and the least wiggle room. Both of these online superstores have been under profit pressures since their inception and with Amazon now going after the business, long term survival of these will be tough. at least has Brown Shoe Company behind them. Zappos can only continue to go to the "venture capital" well so long. I think that getting purchased by IAC last year has enough resources behind it, that they can stick it out for a while based on the strength of the rest of their portfolio.

How do you win? Multi-channel footwear purveyors like Foot Locker, Finish Line, even Famous Footwear, have the key to surviving and the position to market against Amazon if they can move quickly to the "Shop online-pickup in store" model. That model resolves the one fear people have of online shoe shopping: What if it doesn't fit? If I were responsible for one of these chains... I'd be looking at how fast I can implement the instore pickup model. Otherwise... well... just ask Mr. Robinson what happens when walmart puts a supercenter in your neighborhood.

Worth just what you paid for them... those are my thoughts. Got any of your own? Feel free to comment or MEEBOME on the right.

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