Demand is driven by fashion and demographics. The profitability of individual companies depends on their ability to design and market attractive shoe models. Big companies have economies of scale in distribution and marketing. Small companies can compete successfully through superior design or marketing.
Major product segments are athletic, women's, and men's shoes. Athletic shoes account for about 30 percent of the retail market, women's casual and dress shoes for 25 percent, men's casual and dress shoes for 15 percent, and miscellaneous for the remainder.
Domestic manufacture of shoes has been rapidly declining and is now worth less than $3 billion annually. The typical US shoe manufacturer is small, with annual revenue of $10 million and fewer than 100 employees. US-made products are mostly private-label men's shoes. Average revenue per employee is $100,000. Materials, mainly leather, amount to 50 percent of costs. Shoe manufacture has moved to low-cost countries like China because of the large labor content in the manufacturing process, especially for athletic shoes. Despite advances in automation, shoes are still largely assembled by hand, using cutting, glueing, and stitching machinery.
Retailers include regional and national shoe store chains, department and discount stores, and many independent local retailers. Chains typically locate stores in strip or enclosed malls, or as stand-alone operations. The retail shoe market is heavily segmented by type of consumer (sex, age, income level, urban/suburban, etc.) and price level. Better footwear prices range between $70 and $10; bridge footwear retails for between $100 and $200; designer footwear starts at about $200. Each brand includes numerous styles. With many choices of product, retailers develop "store model stocks" (the product mix) that will appeal to their target consumer audience.
The logistics of delivering product to retailers is extremely important for shoe companies, especially in view of the many brands, private labels, styles, colors, and sizes involved. Most shoe companies have several distribution centers, typically 500,000 to 1 million square feet, and sophisticated computer systems to track inventory, orders, and deliveries. Large retailers have similar distribution networks to service their retail outlets, usually with the aid of point-of-sale (POS) entry systems (scanners) at cash registers to track sales at individual outlets. Some shoe companies use electronic data interchange (EDI) or, more frequently, the Internet, to allow wholesale customers to place orders electronically. Problems with computer systems can have large financial consequences.