Skechers brand is a global footwear and apparel company that opened its first door in Manhattan Beach, California. Its primary goal was to provide footwear that was fashionable to both males and females ranging from the age of five to forty years. The company has been on a growth path since its inception in 1992 and has managed to carve out a substantial market share in the apparel and footwear industry. However, Skechers brand is not among the powerhouses of the industry, since it is dominated by brands like Nike and Adidas. Nonetheless, the company’s brand through its mission statement “unseen, untold, unsold” has continued a profitability path through its ability to establish a brand that is well-recognized. The company’s products reach to the final consumers through various distribution channels, namely, factory outlets, retailers, and concept stores, both domestically and internationally. Nike, Adidas, Timberland, and Under Armour among others, are the company’s main competitors (Smith et al.).
The overall industry has witnessed growth in revenue over the last years, depicting the continued spending by consumers. The highly competitive industry has led to firms wrestling for market share in order to create their brand image. Moreover, the firms are trying to differentiate their products from those of competitors to create a brand identity that attracts consumer attention.
Skechers has continued in an upward growth curve in the competitive industry. The company has been able to outsmart most of its competitors to become the second in the US market segment. Skechers has concentrated on various strategies to survive in the industry as well as compete effectively (Smith et al.). The company has focused on efficiency in its production process, thereby lowering its costs. Moreover, the company has developed a brand image that is associated with quality and lifestyle. Differentiating its product is another aspect that Skechers has concentrated on by offering superior products in a variety of product lines.
Robert Greenberg established Skechers in Manhattan Beach, California, in 1992, with a mission of providing fashionable footwear that appealed to both men and women ranging from 5 to 40 years. The company is operating in about 2,300 outlets in more than 160 countries. Nike, Adidas, Timberland, and Under Armour among others, are Sketcher’s main competitors (Skechers 10-k). The company has historically increased its sales over time through its improved competition strategies, by embedding its objective, which is to; “Profitably grow our operations worldwide while leveraging our recognizable Skechers brand through our strong product lines, innovative advertising, and diversified distribution channels” (Skechers 10-k).
Through its mission statement “unseen, untold, unsold”, Skechers has been able to market its label aggressively, thereby concentrating on growing its products globally. It is through the marketing of its product under different lines that the company targets particular customers and their needs. The company has acquired a competitive edge by using professional sportsmen and celebrities to endorse its products to the dynamic market situation (Soni). Furthermore, the utilization of retail outlets as well as its own brand outlets and factory outlets has enabled Skechers to maintain a significant market share in the ever-competitive apparel and footwear industry. Skechers has different product lines with unique characteristics, which target a particular niche. The company has different niches that consist of kids’ wear, business dress, work savvy, and lifestyle (Skechers 10-k). There are particular practical features such as durability and slip-resistant soles in their line of footwear. Moreover, for the company to come up with a new product, they have to research both the domestic and international consumer needs through fashion shows and media trends and transform this into their revolutionary products (Skechers 10-k).
Skechers is a company that specializes in apparel and footwear. The company virtually operates over the globe. The company is strategically placed to continue with its international expansion. Skechers is the designer of its products, developer, and marketer of more than 2,300 lifestyles in addition to athletic footwear for men, women, and children. This market is significantly expanded, globally operating in more than 160 countries through its well-positioned infrastructure and distribution channels (Hite et al.). Furthermore, the company is able to market its products through its more than 2800 Skechers retail outlets as well as wholesale partners and its online skechers.com. Its international business represents about half of its total sales.
Industry and Markets
The apparel and footwear industry is continuously growing with increased sales. This demonstrates that the industry is on an upward trajectory. There is an increased confidence in consumers since footwear has become a necessity. With the strong international growth in the industry, there are various risks involved, such as weak economic growth and taxation. However, there is a rising demand for trendy and yet comfortable wear in all age groups. This proves to be the key driving factor of this industry. The segmentation of the industry is based on footwear and apparel type, end users, quality, and geographic areas. The rising health issue is another driver of growth as individuals are encouraged to perform physical activities, thus generating demand for athletic footwear and apparel. The stable growth in this industry is expected to continue at a steady pace in the coming years. The global market estimates are calculated through revenue generated through sales across different market segments. The market powerhouses in the industry are devising new strategies that focus on upgrading their designs to enhance expansion.
Every firm in the industry has to differentiate its products from competitors’ products. This way, they are able to gain market share given that they are able to design new ideas to stay ahead of competitors as they catch the eyes of consumers. Competitors in the industry offer different product lines to different market segments, though, they compete in the same segment. New product development is intense in this industry as well as an acquisition of smaller companies that have a distinctive market segment so as to gain rights to their brands. Brand image is the determining factor for a company to differentiate itself from its competitors. Companies create brand images that enhance consumers to identify with and which are appealing. The image that a company creates is its reputation of delivering quality products, which are reliable and uphold the expectations of consumer needs. Therefore, a brand image is an aspect that enhances the attractiveness of a product to consumers.
Firms in the footwear and apparel industry invest heavily in brand image as this is the key to enticing consumers to relate to the company’s products. Therefore, for a company to endeavor in this industry, product quality, variety, and customer service should be given the first priority in developing new products. This is because they enhance a firm to differentiate its products from those of rival firms. Given that the footwear and apparel industry revolves around satisfying consumer needs, firms have to provide new and appealing products to consumers. Furthermore, they have to create quality continually by accommodating consumers’ perceived needs, as this will attract them to purchase a company’s brand. It is thus paramount for firms to differentiate from their rival in order to be competitive in their respective industry.
The US market has matured, and the next frontier is the Asian market which is constantly growing. Skechers has to expand its presence in other markets to increase its sales volume. Developing countries in South America and the Eastern parts of Europe are the next frontiers that Skechers needs to pursue. The company needs to move away from third-party operations to wholly-owned subsidiaries as this will increase the visibility of its own brand. Moreover, owing to the high population and the high economic growth in Asia depicts the increase in income (Nazario). This implies that this market will become the next competitive market of the apparel and footwear industry. It is thus upon Skechers to devise strategies that will increase its presence in this market by following closely to the industry powerhouses. Through leveraging joint ventures in this market segment, Skechers will be able to enhance its presence particularly by consistently focusing on its core market. The company should avoid targeting hardcore athletes to reduce competition with the industry powerhouses’ products (Soni). The promising economic growth points out an increased buying power and consequently increased disposable income. Therefore, individuals will be able to purchase trendy outfits at a premium price.
Competition and Financial Plan
The competitiveness of the footwear industry has generated more than $48 billion in the US and is expected to continue with growth until 2020 (Hite et al.). Sketchers do offer two product line categories, namely, lifestyle and performance. Its domestic wholesale was 40% of the total, international wholesale accounted for 35 % while the retail segments represented 25% of sales.
There is increased competition in this industry: the company faces rivalry from Nike, and Adidas in the performance space, and Crocs and Steve Madden compete with Skechers in the lifestyle space (Jenks). However, Skechers has drastically surpassed one of its main competitors recently. This has made the company come out as a strong competitor among its rival companies, thereby experiencing tremendous growth.
Table 3 Skechers Competitive Analysis 2017
|Net Income Growth||7%||14%|
(Hite et al.)
Although the apparel and footwear industry has witnessed increased rivalry, Skecher’s competition is not directed to any company about its range of products. The company has designed products that are able to compete with the industry’s powerhouses’ branded products in addition to the private label products sold by retailers. The company is able to offer casual shoes and utility footwear that is able to compete with those offered by main rivals such as Nike and Adidas in the performance space and Crocs and Steve Madden in the lifestyle space.
The operations of Skechers have been altered by the rapid change in technology. Furthermore, the industry’s intense competition among rival firms coupled with consumer preferences in the different market segmentations has amounted to a significant risk factor (Sahoo). The reason for the risk factor is that the performance footwear together with the walking fitness category does compete with the footwear provided by these powerhouses in the industry in varying degrees. Therefore, with respect to the product category involved, Skechers is able to compete significantly with these companies based on style, quality, and comfort, although price offer does not play a significant role. However, the most significant factor that plays a key role in the competition is Skechers’ brand name prestige and its recognition among the different market segments.
Skechers faces steep competition in its domestic market, and this poses challenges to its market share because it faces difficulties in establishing significant outlets in the international arena such as Europe, Asia, and Latin America. Nonetheless, the availability of contract manufacturing capacity has enhanced companies to access new markets, given that Skecher’s major competitors have been in existence for a longer period of time. This has enhanced Nike and Adidas to grow rapidly at 6% and 14% respectively, because they have acquired greater recognition of their brand names, which has consequently enhanced them to capture a greater market share coupled with their greater financial power income growth of 12% and 36% respectively, and vigorous marketing. Thus, Skechers is not certain that it will be able to compete with such companies successfully, presently and in the future. However, its steady growth of 7% income and the intense competitive pressure will not deter the company’s competitiveness or otherwise deter its operations or financial condition.
The core competence of this company is its ability to differentiate itself from competitors by concentrating more on casual product style (Hite et al.). The company has been able to appeal to average people by offering trendiness and comfort to its products. The trendy element has enhanced its product’s popularity among its different market segments given that its main rivals are focused on athletes, marketing their products through expensive endorsements. In comparison with the company’s main competitors, Sketchers has employed a cheaper marketing strategy, thereby cutting costs of production.
Marketing Plan for the Company’s Product Line
Companies that operate in the footwear industry source their products directly from Asia. However, their fast-moving products consisting of sports shoes costs are similar and the company’s brand determines the selling price. To manufacture a pair of sneakers in Asia and ship it to the US would cost Skechers Company about $28.50 (Kish). This cost is inclusive of $25 for labor and factory cost and $1 for shipping. The company also spends about $15 on overhead costs and $2 as tax, thus making the company net $4.50, a 9% in net profit on each pair of shoes, which is sold to wholesalers for about $50. With respect to different ratios, it is visible that the company has been profitable as well as increasing growth. The return on investment and return on equity ratios demonstrate a steady rise up to 2015. This is also demonstrated by the steady rise of both the profitability margin and the operating margin (Hite et al.). However, the minor decrease in the profitability metric was occasioned by a declined operating margin. The income statement demonstrates that the decrease in profits was a result of an increase in operating expenses in 2016. The increase was experienced toward the last quarter when the operating expense increased to $273.4 from $221.2 million the previous year (Hite et al.). This increase came along because of Skechers increased long-term growth plan globally whereby the company was able to increase 53 domestic and international outlets. Additionally, the company added headcount in the domestic market to support its brand worldwide (Hite et al.). Notwithstanding the small decrease in both return to equity and return to assets, the profit margin and operation margin ratios are way high above the industry average (Hite et al.). The result can lead to the conclusion that Skechers has strong profitability as well as a sound operation on an upward trend. This profitability advantage is expected to continue into Skecher’s future.
The liquidity and credit ratios are also demonstrating the competitiveness of a company. Skechers’ liquidity and credit ratios are lower than the industry-level average. The current ratio of the company has remained stable in the last 10 years and its debit-to-asset ratio has been decreasing over the last 5 years. The low liquidity and credit ratio are a demonstration that the company is able to service its debts and operate effectively.
The US has been the largest market segment for the apparel and footwear industry. Skechers has made considerable strides in this market by overtaking its main rival Adidas to rank second in the US market of footwear and apparel (Sahoo). This portrays that Skechers has the potential to compete in the market with the industry powerhouses. However, the US market is nearing its climax and, thus, the companies in the footwear and apparel industry should focus on intensifying their operations in Latin America and Asia. Latin America has many developing countries which imply the buying power of populations in these countries is increasing. Consequently, the increased buying power grants consumers the ability to purchase products that are superior. Since Skechers offers superior products, intensifying its marketing plan will be an efficient strategy for accelerating growth and, hence acquiring a competitive edge.
Central Eastern Europe is another market segment that Skechers needs to concentrate on by moving away from third-party operations. By owning subsidiaries in this market, the company will improve its operations as well as increase its brand visibility. The Asian market is the fastest, growing globally. Therefore, Skechers needs to enhance its presence through leveraging joint ventures (Hite et al.). Furthermore, the company needs to concentrate on the market behavior without necessarily focusing on the costly marketing strategy of endorsement. The Asian market is vast and Skechers should consider opening stores as well as joint ventures in all areas perceived to be potential markets. The increased economic growth is a pointer to an increased middle-level income population which Skechers should target to increase its market as well as acquire a significant market share.
Strategic Position and Risks
Skechers revenue growth has continued to extend at a steady pace over the years. This is attributed to Skecher’s ability to cut its operating cost as well as offer superior quality in its different market segments. The company has outsmarted one of its largest competitors, Adidas, in the US market. If the company concentrates on cost-cutting in the international markets and offering quality, it will experience accelerated growth. Skechers does not operate or own any facility to manufacture its products. All of its products are sourced from manufacturing companies, enhancing the company greater flexibility and production capacity by lowering its capital cost of production. The company also has to diversify its manufacturers to ensure an efficient flow of products in a timely manner.
The international market provides a variety of opportunities for Skechers to pursue in its expansion plan. Given that its large competitors focus on performance and space while Skechers focus is on style, it implies that its products will have a longer lifecycle than those of its main rivals. Therefore, Skechers has a window for increased growth and thus the need to increase its brand presence in the diverse international market. The company must develop strategies that will match the emerging market to capitalize on the uptake of its products.
The steady growth in revenue by Skechers will continue into the future. The sales growth is predicted to continue with a steady rise in the percentage increase. The sales are expected to grow above 13% to about 16% due to the planned future expansion of its operations in the global market. Although the growth will be gradual during the expansion process, the sale growth will eventually accelerate to a higher percentage in the next year, if effective strategies are employed to create attention to potential consumers in new markets. If Skechers continues to focus on efficiencies and innovation coupled with relevancy in designing their products, the company will continue to lead in the casual footwear brands and second in athletic footwear. Increased presence will witness accelerated sales, and hence expand its presence in various market segments.
SELECTED FINANCIAL DATA
|Statement of earnings data as of December 31|
|Net sales||$ 3,563,311||$ 3,147,323||$ 2,377,561||$ 1,846,361||$ 1,560,321|
|Earnings from operations||370,518||350,824||209,071||93,609||22,319|
|Earnings before income taxes||359,484||333,497||191,380||82,215||10,473|
|Net earnings attributable to Skechers U.S.A., Inc.||243,493||231,912||138,811||54,788||9,512|
|Net earnings per share:(1)|
|Weighted average shares:(1)|
Table 2 Earnings Before Income Tax
|Peoples Republic of China||72,584||49,027||15,201|
|Earnings before income taxes||359,484||333,497||191,380|
Skechers Competitive Analysis 2017
|Skechers||Nike||Adidas||Steve Madden||Under Armour||Crocs||Industry Avg.
|Net Income Growth||7%||12%||36%||7%||-2.6%||-44%