Are we on the verge of hitting peak shoe?
The meaning of peak is that production has met its maximum rate and at that point production will gradually decline. I don’t think that is the case. What I actually think is happening is that we are on the verge of peaking out the consumer, meaning that they can’t keep up with the current rate of production.
Right now there is multiple releases every week. For the month of February, and we are only two weeks in; we have seen the release of three Jordan 1’s, the Reebok Kamikaze II release in five colors, the Nike Basketball Black History Month Pack that contains seven shoes, the Air Jordan 3 ’88 retro, the year of the snake Kobe 8, the KD V in ice blue, the Adidas Rose 3.5 in multiple colorways, the Air Jordan 13 squadron blue, the Air Jordan Year Of The Snake pack containing two shoes, the Nike Air Foamposite One “Fighter Jet”, the Jordan Brand Black History Month pack containing three shoes, the Lebron X home edition, the birch KD V, the Nike Basketball All-Star pack containing eight shoes, the Jordan Brand All-Star pack containing five shoes and then the release of the Jordan XX8. That’s 43 shoes in fifteen days and I know I am missing pairs. I am generalizing here, but that is 43 shoes that are all relevant to the exact same consumer. 43! FORTY-THREE!
The lowest price in the shoes I listed is the $100 Reebok Kamikaze II and I believe the highest is the Kobe 8 in the Nike Basketball All-Star pack at a staggering $280.
I am all for profit and all for corporate greed. If you can make a dollar and the consumer is allowing you to then go for it but you better have a plan for when that consumer is not there. At some point this market is going to kick back. Not in a revolt in prices or in product but in a way that says the product isn’t relevant anymore. By many standards the footwear industry didn’t lose a step during the Great Recession of the past five years. While other commodity based companies faltered and filed for bankruptcy or just simply went out of business the shoe industry kept pushing. I believe that is because in itself a high priced shoe is an obtainable luxury. Something that you can afford occasionally but not always and gives the consumer a way to treat themselves and up their self esteem for a limited time.
In my eyes athletic shoes and in particular basketball shoes; are oozing the form of excess that once plagued many companies, most notably the American auto industry. For decades the auto industry was seeing their sales decline but their profits increase. Car sales were terrible but SUV and Truck sales were thriving. Then the cost of oil skyrocketed and the consumer stopped buying them and when it was time for small cars the American auto industry didn’t have any to offer. In an industry that isn’t built on being nimble that left them scrambling while their consumers went looking for other brands. There is no secret as to what the outcome would become for the American auto industry and it is just now starting to rebound for taking profits over lower unit sales.
The average car price in America in 2012 was $30,000 and the average shoe price for the whole industry, not just basketball and the “sneakerhead” market, was $59. The average basketball shoe price was $88. I will admit that it is hard to compare these two commodities as they have such a vast difference in their cost for the consumer. But to me there is a similarity. While the auto industry relied on SUV & Truck sales to make their profits the sneaker industry is now relying on limited edition retro product and special packs to continually raise their profits. Take for instance four of the top ten best sellers last year were the Nike Air Force 1 Low, the Air Jordan 11 Black/Red retro, Air Jordan 4 Black/Red retro and the Air Force 1 mid. All shoes that are retro and in particular, the Jordan 11 and Jordan 4, are highly touted releases that cause more than just demand.
I am a sneakerhead and I love the current state of the industry in the amount of options that it presents. I do think it is highly over saturated and could use some seriously streamlining. What I think the main issue is that all of these packs; the China Year Of The (insert name) pack, the Christmas Day pack, the Black History Month pack, the All-Star Game Pack, the Valentines Day pack, the Easter pack and the Elite pack, all while being sprinkled in with the other general releases leads to some product being irrelevant. It is inevitable, when you have a shoe like a KD V or Lebron X that has ten plus colorways, it is a great challenge for them all to stand out in the market place. It is also clear these packs are a part of the line planning now for the companies. It is no longer a unique play on a high visibility event that could add some extra revenue based off of the excitement. It is now a part of expected revenue.
The reality is all things come to an end. It may not be this year, it may not be next year and it may not be in the next decade but at some point the consumer will stop buying every release. Whether it is from the buyer simply running out of money or it is from the trend dying, it will end. What I am concerned with is, what happens next? Parts of the automotive industry are calling themselves “enablers of mobility”; essentially saying they are working on creative ways to keep you moving. It may not be a car but they will be a part of your transportation. To an extent athletic companies have moved on, in particular Nike with their + line. It’s fitting that they were named, “The No. 1 Most Innovative Company Of 2013” by Fast Company. And it’s not because of all the themed packs of shoes they are releasing.
One last thing I would like to point out that in 2012, the athletic footwear industry actually sold less units then it did in the previous year but it profited more. Sounds similar to selling less vehicles in a year but having record profits. Just a thought.
Let me know your thoughts in the comments below!