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The Nike Factor: Foot Locker Needs a Better Strategy

News broke and stock values crashed when Foot Locker recently announced they'd be selling a lot fewer Nike products in their stores. Nike's CEO tried to correct matters, emphasizing the company's continued partnership with the footwear headliner. But, it's no secret Nike's been cutting off merchandisers and making a play in its own right, and our prior analyses showed this has been a solid breadwinner for the brand.

While Foot Locker might still need to rethink its stock, Famous Footwear and Journeys both reported strong fourth quarter earnings for 2021 and big hopes for 2022.

In play for Journeys this year is continued experimentation with stand-alone retail locations versus mall placements, whereas Famous Footwear attributes their recent gains to shuttering under-performing locations, increased consumer interest in fitness, and the ability to ditch discounts due to supply chain effects. Overall, it seems Footwear is headed in a good direction.

It's worth noting Journeys and Famous Footwear touted success because of factors around site selection. Journeys is finding stand-alone locations perform well, while Famous Footwear needed to cut low performers quickly to focus resources.

How can Foot Locker ensure profits in 2022 with or without the Nike factor? 

Let's review some broad trends: 

Journeys was the holiday traffic winner in 2019 and 2020, but Famous Footwear took its place in 2021.

Footwear competition was tighter pre-pandemic, but Famous Footwear built a competitive edge starting in summer 2020 that didn't wane throughout 2021, with traffic nearly 40% higher during peak pandemic compared to Journeys and Foot Locker.

Journeys and Foot Locker are closely tied in second and third place, but right now, Foot Locker appears to have an advantage that might change in 2022 depending on their Nike stock.

We're asking: 

How did Famous Footwear build its first place position in a pandemic?

Why did Journeys lose its first place spot after 2020? 

Our answers: 

Examination of regional Famous Footwears show multiple locations across the U.S. with moderately increasing traffic, but we found a spot with three Famous Footwear sites that had nearly doubled traffic in 2021 compared to 2019.

Spokane, Washington stores hold the secret to Famous Footwear's success.

We dug a bit deeper. Two of the three stores are located within large regional shopping centers between 750,000 - 1,000,000 square feet. The third location sits in an outparcel adjacent to a smaller community shopping center around 350,000 square feet.

We checked traffic across the three locations with a hypothesis in mind...

...and the hypothesis played out.

The Famous Footwear location in the mall outparcel quadrupled traffic during the pandemic while neighboring sites within huge malls had reduced traffic.

Here are some site-related takeaway points related to outparcel and standalone retail locations: 

+ Easy in, easy out

+ Reduced indoor exposure (re: Covid risk)

+ Visible from the road and mall entrance

Our answer concerning Famous Footwear also extends to why Journeys lost its positioning during the pandemic. Analysis of Journeys traffic showed far more locations with over 50% traffic drops since Covid materialized. We focused on the handful of locations where Journeys traffic increased and found the following: 

Journeys locations with increasing pandemic traffic were all in smaller shopping centers with locations very close to the entrance. And their location in Murfreesboro, Tennessee with tripled traffic? You guessed it.

The Journeys location with sustained and tripled traffic during the pandemic belonged to a location in an open-air mall with its own entrance.

This is clear evidence that traffic increases according to the following factors: 

+ Outdoor access

+ Proximity to mall entrances

This is probably a Covid effect. Consumers are prioritizing quicker trips with less time spent indoors. Smaller malls are faster to navigate, and outdoor locations provide the most direct route to the exact store a customer desires. Our supply chain analysis found a similar trend. There was much higher retail foot traffic pre-pandemic but lower rates of spending, whereas consumers now spend more at retail locations but fewer visitors frequent stores overall. The higher traffic to spending ratio indicates pre-pandemic consumers engaged in much more browsing behavior. Now consumers visit stores with purchases in mind--and they don't want to linger.

The pandemic consumer needs fast, easy, and most importantly, safe locations to visit, and retailers should make this knowledge a priority when evaluating new locations. So, how can Foot Locker and Journeys ensure they keep up with Famous Footwear? 

Location, location, location.

+ Choose standalone sites or sites with outdoor access.

+ Indoor locations should be as close as possible to mall entrances.

+ Stick to smaller single-story malls where indoor dwell time is reduced.

We'll be keeping an eye on Nike moves and residual impact on all three brands. It seems Journeys has already pegged the right expansion strategy, and Foot Locker should take note. Location data can play a part in site selection and performance evaluation. It's also key to the competitive intelligence all three brands will need as the pandemic continues to throw businesses some curveballs and change the landscape of site ROI.

Want to hear more about our location data? Check out our blog, schedule a meeting or talktous@unacast.com.

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