E-Retailing Plan for Made-to-Order Athletic Shoes

Overview and Strategic Foundation

The growth of mass customization as a strategy for more closely aligning product strategies with the specific needs of consumers has been shown to increase the potential for greater profits and to create higher levels of customer loyalty over time. The propensity of mass customization strategies to alleviate the inhibitors to consumer loyalty is accentuated and strengthened by e-retailing and online product customization selling strategies (Salvador, de Holan, & Piller, 2009). The connection between customer loyalty generated from well-executed mass customization strategies and the long-term relevance of e-retailing strategies is the basis of the analysis presented as the foundation of this e-retailing plan for a line of build-to-order athletic shoes.

For e-retailing strategies to succeed in mass customization market arenas, there must be support for multiple channels — often called multi-channel management — integration of e-retailing applications flexible enough for customers to personalize yet robust enough to scale globally, and tight integration of e-retailing systems with supply chains (Leonard & Cronan, 2003). On this last point, the critical need for e-retailing systems to be supported by catalogs containing the specific product attributes of those products being customized, and tight integration with pricing systems, has proven essential (Ba, Stallaert, & Zhang, 2007). What emerges from this plan for a line of build-to-order athletic shoes is a highly synchronized series of systems that include web-based front-end e-retailing systems, catalogs and product data management (PDM) systems that serve as the foundation of the product configurator, and integration with pricing systems to ensure profitability is achieved.

All of these systems working in conjunction with each other — and the real-time integration they require — represent one of the most difficult constraints for e-retailing strategies to overcome (Hofacker, 2008). Yet if this level of inter-process system, strategy, and role-based integration can be achieved, e-retailing strategies have been shown to generate significantly higher levels of trust and revenue over time (Jin, Park, & Kim, 2008). Creating a line of build-to-order athletic shoes that customers can order 24/7 over the Web is entirely dependent on how well an e-retailing strategy is executed and maintained over time.

Athletic shoes is an industry that continues to face significant consolidation, as industry leaders Nike and Adidas continually dominate the global market. The global recession and the resulting drop in discretionary income forced further consolidation and led to fragmentation among competitors globally. As shown in Figure 1 below, 74.5% of total sales come from manufacturers smaller than Timberland, which holds a 1.5% market share and generates approximately $1.3 billion in revenue (IBIS Research, 2009).

Figure 1: 2008 Global Market Share by Athletic Shoe Manufacturer

Brand, Product, and Service Offering

Nike, Incorporated: 12.0% | Adidas AG: 9.0% | Jones Apparel Group, Inc.: 3.0% | The Timberland Company: 1.5% | Other: 74.5%

Source: IBIS Research, 2009

As this industry is characterized by heavy price competition and intensely competitive distribution channel strategies, the use of e-retailing as a differentiated selling strategy is critical. Due to aggressive price cutting and a lack of innovation among the majority of manufacturers — with the notable exception of Nike — the industry has continually contracted. This contraction is leaving many strategically important areas wide open for innovation and growth. Paradoxically, the majority of manufacturers are not addressing mass customization through e-retailing, choosing instead to sell large-quantity, make-to-stock inventory (Leonard & Cronan, 2003). This commoditization of product features, with pricing used as the primary differentiator, leads to an increasingly fragmented market that uses e-retailing not to deliver an exceptional online shopping experience, but merely to push discounted end-of-life products. E-retailing has effectively become a strategy for clearing out aging inventory at low prices. This industry-wide approach leaves significant room for a line of athletic shoes sold entirely over the Internet and fully customizable.

This dichotomy between the full potential of e-retailing and its current use in the athletic shoe industry is the basis of Eleftria Athletic Shoes. Eleftria will capitalize on the disconnect between what a mass customization strategy combined with an effective, globally based e-retailing strategy can accomplish. By concentrating on this paradox, Eleftria can move beyond competing on price and availability alone, and instead create a unique online purchasing experience — one in which each customer can customize their shoes and receive them within seven working days. Mass customization thought leaders have observed that the e-retailing process as it applies to consumer durable products can be readily transitioned from a transaction to a purchasing experience (Pine & Gilmore, 2000). That is the essence of Eleftria's unique value proposition: to transform the online athletic shoe purchase through e-retailing into a shopping experience rather than merely a transaction.

The intent of this section is to use analytical models to evaluate the potential for Eleftria Athletic Shoes to gain market share in a declining market using a highly differentiated value proposition. The most comparable program today is Nike's NikeID, designed specifically to circumvent Walmart's insistence that its highest-end shoes be cost-reduced for sale across its more than 500 U.S. stores and over 60 global locations. Nike pioneered the mass customization of athletic shoes with NikeID, and today supports seven language variations of the website: English, Spanish, French, German, Italian, Chinese, and Korean. This is the most formidable competitor to Eleftria Athletic Shoes. Nike has successfully used NikeID to transition away from competing purely on price and transactions toward creating a unique purchasing experience, which has driven the site's ongoing success. By allowing customers a fully collaborative experience online, Nike creates even greater loyalty than brand strength alone would provide. This aspect of e-retailing, which invites a high degree of customer interaction and collaboration, also signals a fundamental shift in the balance of power between consumers and manufacturers (Moynagh & Worsley, 2002).

Adidas, Converse, K-Swiss, Timberland, and California-based regional manufacturer Vans also have e-retailing strategies in place, yet NikeID remains the most comprehensive and the most fully integrated with Nike's pricing, catalog management, manufacturing, and fulfillment systems globally. Eleftria Athletic Shoes intends to focus on men's and women's casual and athletic footwear, capitalizing on the crossover between shoes designed for casual use and those designed for athletic use.

Situational Analysis and Market Models

As Eleftria is a start-up, there is no existing plan. The industry-wide data presented throughout this report comes from the literature review conducted prior to its development.

The BCG Growth/Share Matrix assesses the profitability of product markets by growth potential, making it a useful tool for planning the development of Eleftria's product line. Critically important to this product strategy is the development of crossover products in the near term and plans for sustaining these strategies in the future. Concentrating purely on athletic shoes would significantly limit the addressable market, as the BCG analysis illustrates.

From this analysis it is clear that for Eleftria to gain market share quickly — even in a declining and consolidating market — it needs to develop the e-retailing strategies it will use to sell build-to-order shoes so that it can serve men, women, and children seeking pure-play athletic footwear first. Second, the greatest growth opportunities lie in tailoring, through the build-to-order e-retailing strategy, footwear for women's fitness and fitness dance. Using the BCG Matrix, these categories are among the highest-growth areas of the industry today. There is also significant growth potential in build-to-order tennis shoes featuring the more advanced specifications that serious recreational, semi-professional, and professional tennis players seek. Finally, the highest-growth area is in highly personalized shoes. This is a smaller but very profitable market that has been largely ignored as price wars have broken out throughout the casual apparel, soccer, and golf segments.

The e-retailing objectives for Eleftria Athletic Shoes are as follows. The first objective is to create an e-retailing strategy that capitalizes on multi-channel management, meaning the site will be accessible over the Web, through specialized interfaces on BlackBerry devices and PDAs, and also via telephone ordering. The second objective is to create a fully integrated e-retailing system connecting to pricing engines, catalogs of shoe components, suppliers (to validate that the shoe being designed can actually be built), and cost data (to confirm that each configuration can be produced at a profit). This back-end integration must be real-time to ensure maximum responsiveness to the customer. The third objective is to create a comprehensive dashboard of metrics to measure the performance of the e-retailing plan over time.

Strategies for promoting and sustaining the e-retailing plan include Google AdWords advertising, Yahoo Overture, and additional search-based advertising. In addition, blogs will be created specifically to promote Eleftria Athletic Shoes, along with Facebook and MySpace pages and Twitter accounts to promote the shoes and their customization features.

Metrics used to evaluate these strategies will include click-through rates and cost-per-click as defined through Google AdWords, the ratio of repeat to new visitors on the e-retailing site, the percentage of visitors who complete and save a shoe configuration, and the percentage of visitors who complete an online purchase. These metrics will align directly with the sales funnel for these products.

Using the BCG Matrix, it is clear that despite the consolidating nature of the footwear market, meaningful opportunities for growth remain. Defining unique and highly differentiated e-retailing strategies in the higher-growth market areas will yield more positive results than competing on price or availability alone. There is also a need for Eleftria to create strategies aligned with each phase of the sales funnel and to measure progress through the online sales process accordingly. All of these efforts must also be evaluated by the degree to which they deliver positive experiences for customers (Pine, 2004).