Over the past two years, the climbing shoe market has been in turmoil with falling prices and an unprecedented number of brands setting up shop in North America. Last Year, The B.O.S.S. Report ran a three part series on the initial shake-up (see BOSS_0410-0412). Now that consumers have had a chance to react we have contacted many of the same sources we spoke with previously to see where the market is heading.
While there are several divergent theories as to why climbing shoe prices suddenly fell, most agree that the availability of high-quality, low-cost sourcing in China is now the main driver. Nearly every climbing shoe manufacturer in North America manufactures at least a few models in the Far East, whereas five years ago, Italy and North America were the primary locations.
The second factor that drove prices down was the European market and the emergence of international, on-line retail. Retailers in Europe generally view climbing shoes as a commodity, or even a loss-leader, so they take lower margins. Likewise, manufacturers of climbing shoes take lower margins in Europe. With nearly every small shop now running an on-line store, U.S. consumers were able to take advantage of the lower-priced European climbing shoes.
Some manufacturers were able to take advantage of both of these factors simultaneously. Mad Rock made a big splash in the North American climbing shoe world when they launched a new line with retail prices of $50-100.
Previously, it was difficult to find branded shoes for under $100.
“We looked at the global market and priced our shoes accordingly,” Joe Garland, VP of marketing at Mad Rock, told BOSS. “Now, we are the largest seller of rock shoes in the U.S. and making huge progress in Europe We sold between 75 and 80,000 pairs of shoes in the U.S. last year.”
The drop in prices seems to have set off a spike in climbing shoe sales, especially at chain stores where customers are more likely to base their decisions on price. According to the OIAs top-line retail report, for the period between February 1 and July 31 sales at chain stores increased 187% between 2003 and 2004 and units shot up 255%.
All of the executives contacted by BOSS agreed that these numbers are a bit extreme, but they all have seen a slight up-tick in sales at chain stores. They also agree that they are selling more pairs into the U.S. market. Again, according to the OIAs top line retail report, the number of shoes sold at retail increased by 24,600 pair, during the same six-month period.
It seems there are several factors driving these sales. First of all, with the lower prices many climbers are now replacing their shoes instead of having them resoled. Second, many intermediate climbers are now buying at least two pairs of shoes, one for the gym, and one for outdoor climbing. The final and possibly most important factor is that climbers are no longer purchasing their shoes from EU websites.
While the increased number of shoes and dollars sold appears to be good for both manufacturers and retailers, it is not without its problems.
John Connelly, Five-Tens International Sales Manager, told BOSS, “It's good for consumers, especially novice climbers, people who want to try the sport, and it's probably making it an easier decision for them to try climbing – which in turn should be good for the business overall. It presents challenges for manufacturers and retailers though – it's created new sourcing issues for manufacturers; making shoes/product in Asia equals longer lead times, higher minimums at factories, etc., and a gross profit issue for both manufacturers and retailers. You can't make as much money selling inexpensive shoes – you have to sell a lot more to make the same amount of money and it takes about the same effort to sell them.”
Mark Day, LaSportivas VP of marketing echoed parts of this statement. “In doing our preliminary visits with some of the majors, the retailers we need to target early in the cycle, I have heard a little backlash against the extreme low-end of the price structure. Even these big retailers cant make the margins they need at the $50 price point. This hasnt affected us at all; we dont play at the $50 to $60 price point because we dont feel we can build a LaSportiva product at that level.”
This is not to say that LaSportiva hasnt been affected by falling prices. The company proactively lowered their prices last year by 15-20%, bringing their pricing spread from $100-$160 down to $75-$130. At the same time they increased their retailers margins from 40% to 45%. At the higher price points Day said that LaSportiva “owns that market,” and the company reportedly sells more shoes over $100 than the rest of the market combined.
Five Ten is following much of the same strategy on the low end, but has not lowered prices on the high end. This year, the company launched a $75 made-in-china entry level rock shoe to address the low-price market. However the companys strategy still is focused on higher performance, with the launch of its new sticky rubber, dubbed “Onyx.”
The final factor contributing to the turmoil is the number of new brands in the U.S. Market. The number of climbing shoe companies showing at last years OR Summer Market was somewhat staggering. An industry which only had four major companies expanded to over a dozen within the course of half a year. While the market is far from settling down, at Winter Market, the number seemed to contract somewhat. Most people in the market feel that this number will continue to contract as smaller brands slowly fade away.
“I think the pie is a fixed radius, the number of climbers isnt really growing or shrinking significantly,” said Mark Day. “Realistically, the pie can be cut into three major pieces, with two or three smaller slices left over.”
It seems that this turmoil in the market has caught the attention of at least one major footwear manufacturer. BOSS heard rumors on the OR show floor about Merrell showing some interest in the climbing footwear market. BOSS contacted the company and they confirmed that there is “some product in development.”
Part of Merrells interest could be linked to a new interest in climbing footwear from the fashion world. BOSS spoke with Charles Cole at OR Winter Market, who said that recently he has started watching the fashion footwear market. In particular he has his eyes on Puma, who recently brought a climbing shoe inspired fashion line into the U.S. Market, called the Klim. Onitsuka Tiger also has a line of retro-climbing inspired fashion footwear in their line-up for fall 2005, called the Gantrai.
Taking advantage of this trend, while not alienating core customers could be tricky; if this sleeker euro-look takes off in the U.S. fashion market, we just might see some Five-Ten or LaSportiva inspired designs sitting next to Puma on the Nordstrom shoe wall.
As a whole, at least the eroding price points seem to be bottoming out in the climbing shoe market. Mad Rocks Joe Garland said that his company is comfortable with their margins, and none of the other major players seem to have any desire to go lower. On top of that retailers are showing resistance to prices that are too low. Looking ahead, we will probably see the same number of brands exhibiting at OR Summer Market, but more than likely we will see several players quietly drop out within the next 12 to 18 months. This all depends on how aggressive Merrell becomes in the market. A strong product coupled with Merrells marketing know-how could accelerate the timetable considerably.
