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It’s 2002. You’re standing in line outside of a Foot Locker in a bustling mall, waiting for your turn to shuffle your baggy pants inside the store. There’s plenty of other teens waiting with you, hoping by the time they get in that their size will be available in the brand new Air Jordans.
It’s your turn. You pull your pants up and walk in.
The Jordans fit like they were made for your feet. You buy them, but you don’t wear them out of the store. They’re slipped into a referee-striped Foot Locker bag for you to drag around the mall for the next few hours as you terrorize the food court.
You hear the announcement that the mall is closed, followed by the clattering of doors from all stores closing at the same time. You call your mom to pick you up (from a pay phone).
You pull your new shoes out of the box while sitting on your bed, admire them. They’re beautiful; you can’t wait to show everyone at school tomorrow. You kick your little brother off the family desktop computer so you can chat on MSN Messenger with all of your friends. You set a status that says “got the new Jordans”. Nobody is cooler than you, you’ve won.
Kids these days… they have no idea how sneaker drops used to go. Stores like Foot Locker used to have so much power, control, and inventory. And now? Not so much.
On Foot Locker’s latest earnings call, the former formidable force in the footwear industry reported a loss in Q4 of 2023, which is typically the most profitable time of the year for retail or DTC businesses. Is this another sign for what’s to come? Did DTC kill the mall?
In this article, we’ll fondly look back at when malls were actually useful, how DTC has evolved to replace the need for malls, and what brick-and-mortar retailers can do to seamlessly operate their business both online and in-person. Because, at this point, if you’re only selling brick-and-mortar, you’re losing out on sales.
Omni means all, and all brick-and-mortar retail stores should be focusing on it. You can achieve an omnichannel ecommerce strategy by unifying various channels where your products are visible: desktop/mobile ecommerce sites, online marketplaces, social media, mobile apps, and brick-and-mortar stores. The goal is to create a unified customer experience and make it easy for customers to shop wherever they most prefer.
Some customers might still enjoy shopping in person. But those customers can also be exposed to the brand across multiple marketing platforms to deliver customers a smooth and seamless customer experience. While there are many pros and cons to offline retail, signs point to a marriage of the two being the best way forward.
Selling online as well as in-person is simple when you use Shopify. A member of our marketing team recently had a fun pop-up experience using Shopify POS with Kustom Ventures. Since they usually sell exclusively online, taking the Shopify point-of-sale app/card reader on the phone to the pop-up allowed them to keep online inventory accurate as sales were made in person. In-person sales are also a great way to get in front of potential customers, whether through a pop-up store or by operating a retail store. We’re not entirely ready to leave physical retail behind, so operating as the best of both worlds is the preferred option here in the year 2024.
The earliest form of modern retail was the local corner stores that popped up in the early 1900s. The idea was that you could walk to your local corner store to get any necessities like bread, milk, and later novelties like baseball cards and candy.
When everyone started driving cars (between 1920-1940), the ability to travel further from home meant people could go further and carry more. The local corner store turned into large department stores, where you could get many different things at once and pack them into your car to go home.
Between the 1950s and 1970s, indoor shopping malls became the new hot thing. They were usually built in suburbia, away from city centers, and became a new draw with their wide variety of retailers all under one roof. From 1970 to 1990, we saw Big Box specialty stores burst onto the scene, which drove a lot of smaller specialty merchants out of business (way to go, Best Buy).
When Amazon started in 1994, nobody thought that everyone would switch to purchasing online (well, maybe nobody besides Jeff Bezos). But if you’re reading this now, you know exactly how that went. Slowly but surely, the direct-to-consumer model pulled customers out of malls and onto their couches, waiting for the Amazon delivery driver to hand them a product directly on their doorstep.
While many consumers still enjoy the experience of shopping in physical stores, and physical stores even grew faster than ecommerce in 2021 (post-pandemic rebound), retailers need to understand how much more comfortable consumers are with online shopping. We can gather some lessons from the rise and fall of Foot Locker to extrapolate to any and all retail businesses looking to compete in the DTC and brick-and-mortar space.
As the little anecdote from 2002 that opened this blog outlined, Foot Locker was once one of the hottest stores in suburban malls. People lined up for new sneaker releases, as Foot Locker was one of the only places to get them. Nike was founded in 1972, and Foot Locker in 1975. Many sneaker launches were exclusively offered through Foot Locker, and plenty of sales were rolling in thanks to that partnership. But, relationships change and businesses evolve…did Foot Locker rely on Nike too much?
In 1999, Nike launched a “new ecommerce area” on the Nike.com website, which was previously just an informational and marketing showpiece. Even I, an elder on the Triple Whale marketing team, barely remember information-only websites (besides Encyclopedia Britannica). At the time, even Nike stated the website was “an opportunity to recapture a level of intimacy with our consumer and simultaneously drive potential buyers to our retail partners”. And it probably did drive customers to retail partners - at the beginning.
Throughout the early 2000s and 2010s, consumers became increasingly comfortable with making online purchases. In 2005, Amazon created the monster of Amazon Prime, which offered free two-day shipping in the contiguous United States. Once we could shop so easily from the comfort of our own homes (or, later, a mobile device), there truly was no turning back.
In 2006, Shopify was invented as an all-in-one solution for brands looking to sell products directly to consumers. Before Shopify, you could have built a website on your own (which required a lot of coding knowledge), set up a payment gateway, create a way to manage your online inventory, and manage cash flow all in a new platform. Many existing brick-and-mortar retailers were scrambling to find a way to manage both online and in-person sales, and a lot of businesses failed to do it efficiently.
Nike built out their presence online to compete directly with brands like Adidas, with both brands creating apps to send out notifications for new sneaker releases: Nike on SNKRS, and Adidas on Adidas Confirmed. Consumers were steadily flocking directly to the source for their sneaker supply, and “sneakerhead” culture continued to evolve online.
“Malls are far from dead”, Foot Locker CEO Dick Johnson said. It’s one of those quotes you find and wonder when we lost optimism. Even though Dick didn’t believe it, malls (and Foot Locker) were honestly on life support. The days of lining up for store sneaker launches were long gone. Near the end of 2018, Foot Locker posted its record for annual sales ($7.9 billion), but with nearly 70% of product sales coming from Nike, it appears they put nearly all of their shoes in one gym bag. With Nike taking up more and more customers that were purchasing directly, the writing was on the wall for Foot Locker, unless they made some changes and diversified their offerings.
Choosing to invest in moving product more quickly and finding a way to drive the online customer into stores allowed Foot Locker to experience a slight resurgence in 2019. No bankruptcy like other mall brands - it’s finding a way to work strategically with DTC companies, in a similar playbook to Walmart and Target’s online marketplaces. They also invested in some consumer startups, including a $100 million investment in a sneaker resale platform called GOAT. It centered its investments on children’s brands like Rockets of Awesome ($12.5 million), SuperHeroic ($3 million), and Pensole Footwear Design Academy ($2 million).
Besides monetary investments, Foot Locker made a pivot with how it managed in-store experiences by adding a “Nike Pro Athlete” employee to its stores. This employee was trained specifically on Nike equipment, and was meant to push their most popular products. It started experimenting with “off mall” retail spaces as it closed stores in malls (165 stores closed just in 2019). Foot Locker tried to focus on “more than shoes”, and aimed to be a hub for local sneaker culture, as well as arts and sports. We applaud the effort.
The earnings call for 2023, besides showing a hard-to-believe Q4 revenue loss, also had some other surprising numbers. The most obvious sign that Foot Locker hasn’t adapted to the omnichannel sales model: only 25% of their sales came from digital. A survey from Power Reviews of over 11,000 people in 2022 found that 74% of all footwear spending occurs online, so Foot Locker has some catching up to do. The best way to do this is to focus on omnichannel ecommerce.
Still operating a brick-and-mortar store with no online presence? It’s time to get in the game (sorry, EA Sports). Here are 4 reasons why:
Gone are the days when we’d spend all day at the mall buying nothing except food, waiting for the next sneaker drop. As a former hot spot, Foot Locker endured both a meteoric rise and fall in public favor. Foot Locker and all retailers who formerly reigned supreme in the retail game need to step up their online presence and understand that omnichannel is the way to reach customers today and in the future. Don’t lose your syrup by hiding in a brick-and-mortar store; expand your reach by getting online, enhancing your exposure to new potential customers, and making omnichannel marketing your focus for DTC sales.
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