Shoes Rule When It Comes to Store Profits
Slinky evening gowns have long commanded designer runways. But operators of upscale department stores say that another fashion staple matters more when it comes to profitability: shoes. Pricey women’s footwear boasts gross profit margins as high as 50 percent, while women’s apparel has a maximum of 45 percent, according to retail consulting firm Kurt Salmon. Better yet, shoes are less prone to markdowns because footwear fashions often cross seasons—women now even wear boots in the summer—and demographics, with styles such as ballerina flats appealing to teens and grandmothers alike, says Deborah Rudinsky, a footwear-market analyst for trend forecaster Doneger Group.
That’s why retailers have been going shoe-mad this summer. Macy’s in August began rolling out a 63,000-square-foot women’s shoe department that it says is the world’s largest (with 300,000 pairs) at its New York flagship store. Barneys New York just opened a unisex designer shoe floor that is more than 40 percent bigger and features 350 more styles than its formerly separate offerings for men and women. And Saks has added 7,000 square feet of footwear selling space at its main store on New York’s Fifth Avenue and is expanding its luxe 10022-SHOE concept—with on-site shoe repair and iPads for browsers to use—to 15 stores from the current 11. Women’s shoes accounted for 12 percent of Saks’s sales last year, compared with a combined 8.5 percent for men’s and women’s footwear in 2006, a year before the retailer opened its first 10022-SHOE department.
High-end shoe mania took off in the late 1990s, when HBO’s Sex and the City transformed shoe designers Christian Louboutin, Manolo Blahnik, and Jimmy Choo into household names. Blahnik’s open-toed Sedaraby d’Orsay pumps and the red soles on Louboutin’s covered platform shoes turned into icons beyond the New York fashion world. “It became visually apparent from 50 feet that someone was wearing Louboutin,” says Robert Burke, founder of a namesake luxury-goods consulting firm in New York. “It was a detail recognizable not just to the fashionista but the husband of the fashionista.”
Walking through the rarefied world of shoe aficionados doesn’t come cheap: A simple Manolo Blahnik suede moccasin retails for $495 at Nordstrom, while a pair of Jimmy Choo genuine python Tosca boots goes for $2,895. A new generation of designers such as Tabitha Simmons, Alexandre Birman, and Nicholas Kirkwood continues to drive demand among high-end shoppers, says Saks President Ronald Frasch. But high-fashion looks from designers such as Jeffrey Campbell and Sam Edelman are also coming into ladies’ shoes at prices as low as $100, as the most extreme designs are being adapted for mass consumption by reducing heels to 2½ inches from 5 inches, says Rudinsky.
Sales of women’s fashion footwear grew 1.1 percent to $21.9 billion in the 12 months ended in June, according to market research firm NPD Group. While that lags behind the recent growth rates of 4.2 percent for apparel and 7 percent for handbags and luggage, shoes can outperform in terms of store productivity and profitability. “There is no question that shoes are the most productive in terms of sales per square foot,” says Muriel Gonzalez, a Macy’s executive vice president. (She declined to provide figures.) The Saks flagship’s shoe floor in New York is surpassed in productivity only by its heavily trafficked main floor, Frasch says. Jennifer Davis, an analyst with Lazard Capital Markets, estimates that the flagship’s main floor logs annual sales of $3,200 a square foot. Saks’s other stores average $390, she says.
To spur sales even further, Saks is adding a camera that will provide a stiletto’s-eye view of shoppers’ current shoes. Barneys has added more obscure designers who appeal to shoe fetishists willing to spend big on cutting-edge styles. And Macy’s, in addition to adding a Champagne and chocolate bar in its expanded Manhattan shoe department, is hiring runners to bring shoes to sales associates wielding handheld devices, reducing shopper wait times. “We see a high degree of passion among our customers for shoes,” says Macy’s Gonzalez. “We wanted an opportunity to pull it all together in one cohesive statement.”