28 Oct 2020
Posted in Retail
Lack of demand and unfavourable business rates drives Shoe Zone to reduce portfolio by c.20%, says GlobalData
Following today’s release of Shoe Zone FY figures for 2019/20,
Pippa Stephens, Retail Analyst at GlobalData, a leading data and analytics company, comments:
‘‘Shoe Zone’s footwear specialism has significantly hindered its performance during the pandemic, with its revenue during H2 FY2019/20 falling by c.40%, causing its share price to tumble by c.20% in early morning trading. Shoe Zone has announced that it now plans to shutter up to 90 of its 460 stores over the next two years, and while it has blamed the government’s delayed revaluation of business rates, a lack of footwear demand during COVID-19 will have accelerated its response. Having already carried out 30 net store closures throughout FY19/20, this slump in store numbers will be a massive blow to the business, but will enable it to adapt more successfully to consumers’ rapidly changing shopping habits, with online penetration across the clothing & footwear sector continuing to rise significantly. Moreover, a smaller high street presence will allow the retailer to focus on its Big Box locations, which will remain more desirable among shoppers, as their positioning within retail parks allows for easier accessibility and plentiful parking, while their larger floorspaces enable simpler social distancing.
While the retailer’s decline was mainly driven by its physical locations, which were forced to close across the UK during lockdown, it has also been severely hindered by the fact that its shoppers were not previously accustomed to shopping through its website, with online only accounting for 6.5% of its sales in FY2018/19. Though digital revenue was up c.100% versus last year throughout the pandemic, this was not significant enough to outweigh the lost revenue from stores, and retailers with more established online platforms have had greater top of mind appeal due their superior fulfilment capabilities and more engaging websites. Shoe Zone must encourage more frequent purchases among its current customers by offering more perks via its loyalty scheme, reducing the cost of its delivery saver option to £9.99 (currently priced at £12.99) and introducing free postal returns. Providing free delivery over a minimum spend threshold would also help to increase basket sizes, while more inspiring social media pages would boost impulse purchases.
Shoe Zone’s value proposition will have helped it retain some appeal during COVID-19, as increasing unemployment rates have caused some shoppers to trade down from competitors like Office and Dune. However, some of its branded ranges extend into midmarket price points, so it should reduce these options and prioritise those which offer better value while economic uncertainty remains rife. Its strong presence of children’s footwear will have been beneficial throughout the crisis, as this subsector has proven more resilient due to shorter replacement cycles. However, to maximise potential within its adult ranges, Shoe Zone must decrease its mix of formal styles and focus more on sports footwear, which has been one of the strongest categories during the pandemic. It should try to onboard more desirable sports brands, like Fila and Puma, to boost relevance, and should ensure trainers have a key presence across its social media posts and website homepage to raise awareness of its offer.”