Why Does Footwear Retailing Grow Weak? Is It A Good Stop?

It was 90s of the last century. footwear industry The first line in the market Daphne Is facing unprecedented economic difficulties. Last year, under the measures such as closing stores, reducing staff and discounting, we still failed to let our performance get out of the haze of losses. Daphne group issued a profit warning to investors earlier this year, and continued to run losses in the first half of this year, reflecting a 11.7% decline in the same store sales growth rate in the mature stores. Public information shows that since 2015, the group has closed 1277 stores. Reporter survey found that, including BELLE Many famous footwear brands also suffered from the cold winter of retail industry.

　 Daphne warns investors to run losses

According to the rules of Listed Companies in the Hongkong stock market, Daphne group issued a profit warning to shareholders and potential investors in July 21st. The preliminary assessment of the existing information by the board showed that the Group recorded a loss in the first half of 2016, and the investment should be cautious.

Daphne International Holdings Ltd was founded in Hongkong in 1987, and has so far developed into a diversified fashion group based on footwear, apparel research and production, brand sales and management.

For the reasons for the loss, Daphne group analysis, first, sales fell, which is affected by a large net closed shop and the same store sales negative growth. According to the group's earnings report, a large area of closing shop began last year. Due to weak consumer demand, Daphne closed 827 shops in mainland China last year, and closed 450 stores in the first half of this year. The two is the increase in the number of days of merchandise inventory turnover, compared with 218 days in 2015 (194 days in 2014), and the increase in sales of off season products resulted in a significant decrease in gross margin.

However, the side effects of large scale shops and subsequent layoffs are the increase in operating costs in 2015. The share of operating costs, including rents and labor costs, continues to rise with inflation. To effectively control production costs, Daphne group integrated production equipment, including the relocation of production base from coastal areas to relatively low cost inland employees. However, the integration of production equipment and other integration measures mentioned above result in increased operating costs. Therefore, operating profit margins are further dragged down by the negative leverage effect.

　 Why footwear retail growth is weak?

In fact, not only Daphne, but also another shoe brand alligator - BELLE's business report card is not good. In the first half of the 2015 / 16 fiscal year, BELLE group reduced the number of footwear self retailing outlets in mainland China by 424, and the footwear business income was 98 million 357 thousand yuan, down 5% compared with the same period last year. The decline in marketing revenue has led to a decline in the status of footwear business in the group. The proportion of footwear business income to total business income has dropped from 55.9% last year to 50.8% now. Public information shows that BELLE's famous footwear brands include BELLE, Belle, Tata, Teenmix, Teenmix, Staccato and Staccato.

Fashion footwear retail industry generally encountered the winter market. The main reason is that the industry analysis is closely related to the change of channel environment and the change of consumer behavior. First of all, in traditional consumption scenarios, fashion shoes and clothing brands are usually gathered in places where consumers often hang out, mainly in department stores with better location and concentrated passenger flow.

But in recent years, with the establishment and application of a large number of shopping centers and commercial complex properties, the department store has been seriously diverted, affecting the sale of casual consumer goods. Secondly, in the huge impact of the electricity supplier, some department stores have adjusted or transformed their businesses. At the same time, the rapid popularity of e-commerce and mobile Internet tools makes consumer behavior more purposeful, reducing the wandering behavior of less purpose, which is conducive to the purpose of consumer goods, and is unfavorable for casual consumption.

The biggest convenience of online shopping is that consumers just need to move their fingers to browse all kinds of brands, styles and price shoes on the computer. Take Jingdong mall as an example, only women's sandals have about 1100000 items. After the order, the courier delivery, the price is cheaper than the real store, the wear is not suitable for free return, in contrast, shopping, choosing to choose to go is really individual life.

Another important reason is that the abnormal fluctuation of stock market in the second half of last year and the evaporation effect of huge wealth in the capital market further affect the already low consumption desire. Currency weakness in some Asian countries has prompted more mainland consumers to travel and shop abroad, affecting domestic consumption. In addition, operating costs, including rent and labor costs, continue to rise with inflation, which has further aggravated the pressure of retailers.

In the weaker market environment, shoe factory owners have adopted a self protective method of "broken tail", closing off shops with poor prospects and cutting off some employees. In 2015, the workforce of Daphne group in mainland China, Taiwan and Hongkong was approximately 18000 employees (2014: 26000 employees).

Is it a good stop?

Clothing marketing experts point out that the practice of closing stores can not fundamentally solve the problem of loss, but will narrow the company's entire sales channel. In fact, from Daphne and BELLE earnings reports, we can see that a large area of closed shop does not seem to reverse the decline in performance losses.

Insiders believe that the shoe factory owner should not overly reduce the number of physical stores. This is because, first of all, the vast majority of department stores, from the perspective of consumption habits, geographical location, retail efficiency and so on, still have certain advantages. For the time being, no more effective retail format can be found to replace it. Secondly, footwear, as a non standardized and experiential fashion product category, has its inherent needs and relevance, and will maintain its share in the mainstream entity channel. Moreover, footwear brands are still in a state of insufficient penetration in shopping mall channels. In the past few years, shopping centers built in the mainland in China are still in the incubation period and growth period.

It is understood that in the face of the bottleneck of survival, a number of shoe industry groups have taken measures to reintegrate, streamline and improve the efficiency of the entity shops and factories. At the same time, they will re-establish the opportunity to interact with the target customers, enhance their substantive links with customers, adopt information technology, carry out brand marketing with multiple platforms, strive to achieve one on one personalized recommendation and service on the basis of integrating customer data, and establish virtual micro stores relying on each entity store, so as to achieve seamless connection between online and offline services.