In the last 20 years, the global footwear industry has undergone a major transformation. While consumers used to be reluctant to buy shoes online due to the difficulty of determining size and fit, that has changed as more businesses have launched eCommerce sites and started offering free shipping and returns. In Australia, online shoe sales are expected to reach $628 million in 2020/21, according to IBISWorld.
But that doesn’t mean online retailers can just sit back and watch their orders roll in. Stiff competition from local players as well as overseas providers have made it harder to acquire customers and put downward pressure on prices in an industry where profit margins are already slim. Over the next five years, the pace of growth is forecast to slow to an annual 4.4 per cent, which means footwear retailers will need to look for new ways to drive sales.
Of course, there are still opportunities to grow. The following footwear industry analysis will help you navigate them.
Why footwear industry growth is slowing
The main reason why online shoe sales are expected to grow more slowly over the next five years is that the market is becoming more saturated. Most consumers who are open to buying shoes online are already doing so, and likewise, most major bricks-and-mortar shoe retailers have already launched eCommerce offerings.
To continue growing your sales, you’ll need to focus on increasing your average order value rather than volume. This could require making changes to your website design and functionality, merchandising and marketing activities. For instance, you could try upselling customers with AI-driven product recommendations at the point of sale, or create a virtual try-on feature in a mobile app. Read more about the new AI and conversational commerce era here.
Beyond increasing your average order value, you could also adopt one or more of the strategies listed below.
Compete on customer experience
Nowadays it’s standard to offer free shipping and returns for online shoes and clothing purchases, since most customers will hesitate to click ‘buy’ if they can’t return unwanted items without incurring postage charges. So if you want to set out from the crowd, consider going a step further and letting customers order a backup size to try on at home for free. They can simply keep the pair that fits and send the other one back without having to wait for a refund.
Some retailers worry that offering free returns will be too costly, but you can keep costs in check by using a multi-carrier shipping platform like Shippit, which gives you access to discounted delivery rates. And while you might have to handle a lot of returns for first-time customers, once they know their shoe size, they might start to reward the trust you placed in them with repeat purchases.
Target a specific segment
The three biggest players in the online footwear market – Accent Group, which operates The Athlete’s Foot, Merrell, Skechers and Dr. Martens, The Iconic and Styletread – all offer a wide range of shoes, from fashion footwear to sneakers. You could set yourself apart by focusing on a specific segment, such as the sports footwear market.
Taking a closer look at footwear market segmentation, women’s shoes represent the largest share of industry revenue, since women tend to buy more shoes than men and they have more options to choose from, such as flats, sandals, heels, boots, wedges and thongs. However, the athletic shoe market has grown as a portion of revenue over the past five years. By becoming a specialist provider in this space, you could benefit from this growth.
Offer a point of difference like sustainability or customisation
Another way to compete in the crowded footwear market is by offering a point of difference around sustainability or customisation. These are both hot topics at the moment, since younger consumers are particularly interested in supporting environmentally friendly and ethical businesses and eager to put their own stamp on the products they buy.
If you want to learn more about how to run a sustainable eCommerce business, check out our eBook here.