Australia / Analyst Insights
Niche markets expected to allow expansion for footwear retailers

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by Julia Saladino
Jan 27 2016

Australian footwear retailers have battled through difficult operating conditions over the past five years. Subdued consumer sentiment and restrained discretionary spending have limited growth among retailers. As a result, IBISWorld expects the footwear retailing industry to contract by 1.2% annualised over the five years through 2015-16. Despite difficult trading conditions, some retailers have implemented successful growth strategies such as appealing to younger, trend-conscious consumers who are less conservative with discretionary spending, and offering consumers a point of difference to other retailers to defy the overall industry trend.

RCG Corporation Limited, an investment holding company that operates a number of footwear retailers such as The Athlete’s Foot, has been particularly successful implementing this strategy. RCG has grown over the past five years and now controls the largest share of the footwear retail market, at 15.0% of industry revenue. The Athlete’s Foot has successfully positioned itself as Australia’s largest athletic footwear retailer, differentiating itself from rivals by focusing on form and fit as a key selling point. This initiative has seen revenue for The Athlete’s Foot grow by 16.3% for 2014-15. In 2015, RCG acquired Accent Group Limited, an importer, wholesaler and retailer of international footwear brands. This acquisition – which was expected to increase RCG’s exposure to younger consumers –  gave the retailer exclusive distribution rights to a range of brands such as Vans and Dr. Martens, as well as the retail operation of Platypus, a casual footwear retailer. Differentiation, coupled with inorganic growth through acquisition, has helped RCG’s annual revenue grow by 67.5% for 2014-15.

Hype DC Pty Limited (established in 1998) is a footwear retailer specialising in casual footwear, which stocks both well-known international brands such as Nike, Adidas and Converse, in addition to niche brands such as TOMS, a socially conscious footwear label. Hype’s long-term strategy has been to provide consumers with limited edition and exclusive sneaker ranges, as well as premium footwear that appeals to the young, brand-aware consumer. Hype’s emphasis on distinctive shop fit-outs and stimulating visual merchandising has helped to establish the company’s presence as a unique and brand-conscious retailer. Hype’s annual revenue has consistently trended upwards over the past five years, allowing it to expand its store network rapidly – store numbers grew from 42 in 2013 to 55 in 2015. Organic growth through store expansion and its unique position amongst retailers has contributed to Hype’s annual revenue growth of 38.4% for 2014-15.

While subdued retail conditions have hampered growth among footwear retailers, IBISWorld expects some improvement in consumer sentiment to help slow the contraction of industry revenue over the next five years. RCG Corporation and Hype DC have demonstrated that there are still opportunities for footwear retailers to grow, by targeting consumers less sensitive to economic conditions and creating a point of difference for customers, which has worked well for both companies. IBISWorld expects both retailers to continue to pursue their current strategies and further expand their market presence. As a result, their success will most likely see competitors try to emulate their strategies in the future.


Relevant companies:

RCG Corporation Limited

Hype DC Pty Limited