Tuesday, January 08, 2008

These shoes were made for walkin'

So there were a LOT of topics in the last half of 2007 that I didn't take time to write about... but as you know one of my interests is in the online footwear battles... having been in that area from pretty much the start of it.

I couldn't help but notice the end of pretty much the last of the experiments of the "separate online shoe" entity... when Brown Shoe announced they were closing their shoes.com offices in LA and moving all operations to their St. Louis headquarters... and rolling the brand up into their direct to consumer efforts. For those of you who don't know who Brown Shoe is... they are the parent company of footwear brand such as Naturalizer, ViaSpiga, Buster Brown and the Famous Footwear retail chain.

It made nothing but sense to do this... even though some very good people in LA now found themselves "seeking new opportunities." The cost structure of that operation not sharing fundamental core services like merchandising... really made it hard for that operation to make a profit. We'll never know publicly whether or not it did because BWS doesn't report the P&L for the unit individually. But... in light of the currrent struggle on both the retail and wholesale sides of footwear... cutting the overhead was a good move.

I wish them luck as a competitor in the online shoe races... but with Zappos so far ahead now... and talking about breaking the billion barrier in 2008... you have to wonder whether or not it might be time to let shoes.com fade into the background along with sites like Webvan and BOO. I think it makes a very interesting case proving once and for all that owning what seems to be "the best" domain name... does NOT guarantee success.


Anonymous said...

It makes no sense to me. I have done both traditional retail and on-line retail and there are no synergies between the two so the existing people will not have the capabilities to run the business. The St Louis office is primarily wholesale and has very limited experience in on-line retail so the end result is they’re going to have to hire the talent to replace the expertise in the LA office in order to run the business, which means there is no real gain. Everyone knows talent is needed to be successful and if you do not have the talent you will not be able to compete with on-line retailers that have the specialist, which understand the dynamics of doing business online. The way I see it it’s a lose/lose situation… they aren’t helping the bottom line and they’re moving from an area rich in this type of talent to one that has none. My guess is their business will suffer greatly.

onlineretailguy said...

Good comments Anonymous, but I think that the regionalization of talent issue is largely transparent at this point. Where it might have been an issue 5 years ago... it certainly isn't now. Development can be done from anywhere, as can most of the online marketing tasks. Many of the online marketing tasks are outsourced at the size of the Brown Shoe entities, because having that talent on staff really isn't cost/ROI or strategy-effective.

The specialized talent needed within the company is probably the product part, which in theory a shoe company should have at their corporate headquarters right?

Make no mistake though... I don't know if this move will make Shoes.com become more competitive... frankly I think that ship has passed and that consolidation/attrition in the segment will come quickly in 08. Zappos has won the "online only brand" battle for now in footwear. Only Amazon's infrastructure and tenacity can challenge them with endless.com.

It is a new etailing world... where the connectedness of your entities rules the roost. It is the way companies like Best Buy and others are weathering the retail storm caused by dwindling discretionary income. Retailers must become connected and integrated to achieve the synergies to survive. They also have to have the size/scale to compete against the now entrenched online only's like Zappos or Amazon. Also, with direct to consumer efforts from the manufacturers only on the increase, I don't think it bodes well for the pure play. The time for starting your own "online only shoe superstore" has come and gone.
It is a shame but, I don't think that BWS has the size/scale to support the online only effort. They would be wise to focus their time/talent/treasure on making the direct to consumer elements of their established retail entities such as Famous Footwear, best in class. We'll see how it plays out though.

E-commerce Expert said...

While I agree with some of the points you made I have to respectfully disagree with a large number of them. While I agree back-end development can be done remotely, if and only if dedicated exclusively to your on-line business, you still run the risk of a misinterpreting the directive or even more seriously a breakdown unless you have real time communication. With your entire revenue stream coming from a single location when a site goes down or has technical problems the difference between having dedicated IT resources in house versus shared resources at a remote location can be significant. On the other hand I have to disagree with you that front-end development and on-line marketing efforts can be done remotely… let me explain why. From a marketing perspective… in the on-line world costumers visit your site with greater frequency so site freshness is imperative, therefore tiles and banners require updates be done at the very least biweekly with a message consistent between on-line marketing and the vision of the merchants. The coordination between design, merchants and marketing is extremely crucial to this effort and requires extensive communication and involves numerous refinements to make sure each is working in concert making it extremely difficult to accomplish if all parties are not under the same roof. Misdirected links or messages not consistent with product and emails can have a devastating effect on sales and conversion and the overall user experience… so there is very little room for error. Secondly, most of the talent in the on-line marketing field is made up from Generation Y’rs, who are not just interested only in their jobs… they want to be a part of the overall decision making process building skills they can take to their next company. They use the workplace for social and professional networking and prefer this type of setting which allows them to interact with all departments and staff… so this is were you find most high-level talent.

As far as consolidation and attrition I see no indication this is taking place… in fact quite the contrary. While Zappos does have a formidable lead in this category upstarts like Shoebuy, Onlineshoes, Shoemall, and Piperlime each experienced considerable growth this past year. Add to this Zappos has made no secret of their intentions to become a site similar to Amazon covering numerous categories… these niches players will easily be able to out maneuver them with pinpoint marketing and site look and feel specific to the footwear category. If you look study the Internet 500 published by Internet Retailer you will notice the smaller niche site grew at a rate far greater than that of the bigger sites and multi category site, which only serves to validate this fact. Not only do I think you will see more sites come on-line in 2008, I think you will find the growth in this category is a good 3 to 5 years from reaching a level of maturity and you will continue to see new entrants well beyond this year.

As for direct to consumer efforts from the manufactures and those of multi channel retailers having an advantage over pure plays… this flies in the face of research by the like of Jakob Nielson and Forrester Research. Nearly all research done with respect to on-line retail you will find consistently in the top three the primary reason people shop on line is product selection. Manufactures and multi-channel sites cannot compete with the pure plays by putting their off-line assortments on-line, and none has shown the willingness to deviate from this strategy. This would seem to have been validated by research that shows pure plays garner nearly 60% more traffic than along with year over year increase in sales far greater than any multi-channel web sites in the same categories.

onlineretailguy said...

Thanks for taking the time to leave such an extensive comment eCommerce Expert. Interesting perspective. I guess we'll have to see how this plays out. Certainly never a dull moment.

E-commerce Expert said...

Your blog sucks by the way. I couldn't figure out how to used my blogger name (e-commerce expert) and sign in.

One of my favorite things to say is "I told you so". It appears I was right on this one. During the 4th quarter of last year Shoes.com broke even, and had it not been for the extra week sustained a loss. The 1st quarter numbers for this year have been released and net sales were off 6.8% and a larger operating loss than a year ago. Can you say "dumb move".

onlineretailguy said...

You'll have to take up the login issues with the folks at google as they're responsible for blogger I'm afraid.

To your comments about the BWS earnings release today... yep... looks like Shoes.com lost $$$ in the first QTR, but so did the rest of the shoe industry for the most part. How much would they have been in the tank without cost savings from multiple operations?

End of the day, the click-brick strategy has significant advantages when times get tougher... because the synergies of the two can save costs. The key is a good online marketing platform that delivers ROI across the business... not just eyeballs to a website. Combining that with the right merchandise at the right price at the right time and the click/brick combo still will win out in the end. The only exceptions to this rule are the true established pioneers in the pure play: Amazon... uh... yeah that's probably about it for now. We'll see how the rest of the online pureplays are able to cope with the next year's events... including the loss of the "sales tax advantage" they currently enjoy.
Fun times!
onlineretail guy

Anonymous said...

e-commerce expert says. The only savings they experienced was the rent of the office which I'm sure was minimal in the scheme of things. By the way congress agreed to a 7 year moratorium on taxing internet sales so your argument is baseless. I can understand synergies between; say Foot Locker and Footlocker.com, but what synergies are there between Shoes.com and any other BWS brick and mortar outlet? I have done both and the dynamics of the online and offline are so radically different a single decision makeing process with never satisfy both. To use a your closing to a prior post... "We'll see how it plays out though". I have a feeling I'll be back though :)