Industry news

Running shoe market is healthy

 

Although the SA economy shrank by 1.8% in the fourth quarter of 2008, this will not necessarily have a major impact on our semi-durable markets (like clothing and shoes).

Consumer markets for running shoes seem to be performing moderately well against the backdrop of this economic climate.

GfK classifies Running Shoes into two main segments Technical and Non-technical. We then drill Technical further into Technical Road, Technical Racing and Technical Trail.

Purchases of Technical Running shoes during the 1st Quarter (Q1) of 2009 were down 6.5% on 2008. One should, however, keep in mind that the 91 000 odd pairs that were sold in Q1 2008 were 9.5% more than in Q1 2007, which was a solid performance. Volume differences between 2007 and 2009 are still positive (2.3%) — around two thousand pair’s country wide. Therefore, the medium term outlook still remains positive, even though markets have cooled.

Technical Running shoes with an average price between R800-R1 000 have enjoyed good growth as runners look for value for money options.

Sales of Non-technical Running shoes are also showing signs of robust consumer demand. In Q1 2007 we tracked 178 000 pairs while the numbers for 2008 and 2009 were 194 000 and 185 000 pairs respectively.

Pricing developments in the non-technical segment have been more aggressive where regular promotional activity had been done at the end of each first quarter to clear stock in order to make way for new season products.

On the revenue side of the industry, base value in the market is holding off any significant erosion in the face of inflation and Rand/$/€ exchange rates. The average VAT inclusive price for the top 20 Technical Running shoes for Q1 2007 was R746, this increased by 11.6% to R834 in Q1 2008. Q1 2009 shows further growth of 8.1% at an average price of R902.

While factoring the inflation rates into the comparison price, growth has stayed within an encouraging range. This is partly attributable to good product life cycle management, where new models are brought in to succeed older models, justifying higher selling prices.

Advancements in technologies related to running shoes and running as part of a lifestyle, have also driven prices upwards.

In conclusion, the running shoe market may slow this year compared to 2008 due to general market easing. But, volumes and revenue in the first quarter have shown that demand for this product will be healthy.

Competition in the market is likely to increase as we move into the year, so marketers need to focus on what provides value to their respective target markets. Product ranges need to be managed tightly, while variable costs are carefully controlled.

This will ensure margins are maintained and drive towards viability through this challenging 2009.