How These 3 Footwear Players Are Targeting E-Commerce Growth
It is projected that the global footwear market will grow at a compounded annual growth rate of 2% between 2011 and 2018. The market is expected to be worth more than $381.3 billion by 2018 on the back of a growing population, greater health awareness leading to more active lifestyles, innovative products, growing brand awareness, rising standards of living in the emerging markets, etc.
In the backdrop of this data, let's take a closer look at three footwear companies -- Nike , Under Armour , and Wolverine World Wide -- and see how they are positioned to capture this market through the e-commerce route.
According to a Nielsen report, "Apparel, [a]ccessories, [s]hoes, and [j]ewelry" will dominate this generation of e-commerce. Throw in the findings of YCharts -- U.S. e-commerce sales are only about 5% of all retail sales -- indicating that there is a lot of room for improvement going forward. The e-commerce channel should gain further momentum as retailers look to eliminate costs associated with operating retail outlets and also helps in capturing a wider market irrespective of physical store locations.
Nike is the world's largest athletic-shoe manufacturer, controlling about 50% of the market. It has had a brilliant run in the past and is still growing at an impressive rate. One of its growth drivers has been the pipeline of innovative products, as a result of which it earned the distinction of being the most innovative company of 2013, according to Fast Company.
Besides a robust pipeline of innovative products, Nike is also investing in e-commerce and digital products. The previous quarter witnessed a 33% jump in e-commerce sales as compared to last year. The direct-to-consumer, or DTC, channel, of which e-commerce is a part, accounts for just 15% of Nike's revenue. As a result, the company is expanding the footprint of Nike.com by launching sites in Japan, the world's third-largest e-commerce market, and in Brazil, which is a key growth market, according to management.
Nike has plans to nearly quadruple its e-commerce business in the next four years. The company is aiming to attain $2 billion in annual online sales, a massive jump from $540 million in e-commerce revenue posted in the previous fiscal year. To achieve this, Nike has been aggressively investing in its online strategy. According to Nike brand president Trevor Edwards, "Our integrated digital strategy will ensure that our consumers get a seamless experience when they connect with the Nike brand through whichever entryway that they actually come in."
The company already sells through the online channel in 24 countries, and as we saw above, it is looking to move into newer regions.
What's up with Under Armour?
Under Armour had a phenomenal run in 2013, gaining almost 72% as it continued to gain market share and register revenue growth of more than 20%. Under Armour has a very strong history of growth; even during the recession, it managed to grow revenue by 18%.
Given its sustained growth momentum, Under Armour seems to be on course to hit its revenue target of $10 billion by 2020. Currently, management hopes to double the revenue by 2016 to $4 billion by going truly global, as just 6% of its revenue comes from markets outside of North America presently.
Under Armour is aware that global e-commerce and global retail will be its growth drivers going forward. Thus, Jason LaRose (formerly of Express) has been appointed as senior vice president of global e-commerce and will oversee the company's online consumer experience and web-business strategy. The e-commerce strategy of the company is barely a year old with the e-commerce website being launched in December 2012, and it has a long way to go to catch up with Nike in this department.
But Under Armour is also working on a strategy to grow e-commerce sales. It expects to grow its e-commerce sales from 9% at present to around 25% in the future. To achieve this, Under Armour has undertaken an online campaign on its website about Armour39, which is a performance-measuring device. According to management, 95% of Under Armour's most popular clothing is available in the most popular sizes on its online channel, thereby giving it a greater chance to convert customers.
Wolverine is racing ahead
Wolverine World Wide's growth story defies the weakness that has plagued the retail sector in general. Wolverine's growth driver has been its 2012 acquisition of Collective Brands' PLG Brands, which added about four new brands to Wolverine's portfolio. For the third quarter, revenue was up 9% compared to the prior year's pro forma result, an all-time record for the company.
Wolverine World Wide has a diverse business model that spans 200 countries and multiple brands -- both owned and licensed -- across different categories. With such a footprint, e-commerce can definitely be a good growth driver as the brand is already well-known. The company has a network of 60 websites, 20 mobile sites, and according to job listings on its site, is still looking for a vice president of global e-commerce to strengthen operations.
In August 2013, it had promoted Jodi K. Watson from vice president of e-commerce to president, consumer direct. However, since the company hasn't reported e-commerce sales separately, it is apparent that it has a long way to go as compared to the others.
There's no doubting the fact that e-commerce is a growing channel, and each of these companies is trying its best to grow its business through it. Nike has the most aggressive plan as it intends to grow the e-commerce business fourfold. Under Armour is also looking promising, while Wolverine still hasn't outlined a clear-cut strategy. So, investors should keep a close eye on the e-commerce segments of both Nike and Under Armour as they can be huge growth drivers in the future.
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The article How These 3 Footwear Players Are Targeting E-Commerce Growth originally appeared on Fool.com.
Amal Singh has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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