Shoe retailers learn to set the pace: Recession and fashion are making sports shoe makers help shops, writes Roger Trapp

IN THE 1980s sports shoes were the in thing. The growing concern for health and fitness, the leisure revolution, the new-found glamour of sports stars and greater spending power among teenagers combined to put a bounce in the industry's step.

Mark Blackburn, managing director of the independent retailer Cobra Sports, said: 'Some kids were buying 20 to 30 pairs of trainers a year, collecting them like I collected soccer star pictures.'

As each of these pairs of highly sophisticated shoes - whether Air Jordans, Reebok Pumps or whatever - costs more than pounds 50, this was a sector that at one time thought it could do no wrong.

Indeed, a modest investment of pounds 50,000 by the UK's Pentland Industries in the then fledgling Reebok in 1981 brought returns of pounds 390m over the next 10 years.

Now, though, the business that seemed to float through the air with the ease of Michael Jordan or 'Magic' Johnson has come down to earth with a bump. Just as the two giants of professional basketball have retired, so have the shoe manufacturers and retailers found that the world's sports grounds are not necessarily paved with gold.

The US-based market leaders Nike and Reebok - which respectively had dollars 3.93bn and dollars 3.02bn sales worldwide last year - have warned of profit falls, while the UK's Hi-Tec saw a pounds 9m pre-tax profit become an pounds 8.3m loss last year.

At the same time, retailers competing in a suddenly tough market are finding the going difficult. Sports shoes still account for about a quarter of the UK's total footwear market. But the recent pounds 2m deal that saw the privately owned Cobra nearly double in size to 70 stores and approximately pounds 30m turnover by taking on 31 of the Burton Group's 43 stand-alone Champion sports stores is not likely to be the last such consolidation.

The chief reason cited for this turnabout is the recession, particularly in Europe. But the fashion pundits are also claiming that the once-ubiquitous trainer is being eclipsed by the hiking boot, work boot and the like as sports gear gives space in teenage wardrobes to scruffier 'grunge' clothing.

Meanwhile, the high-tech shoe is seeing hot competition from the once-dominant Adidas - among 1970s-loving acid jazz fans - and Converse - whose popularity goes back to the 1950s and James Dean.

With a crowded market chasing the few customers still prepared to pay out big money for casual shoes - albeit ones worn almost constantly - things are looking tough on the high street.

But the outlook is not bleak. In fact, the market is still growing. It was up by more than 10 per cent in volume and value last year, said Nielsen Sportstrak, which monitors the industry. In the 12 months to August, UK sales rose from 8.4 million pairs worth pounds 293m to 9.6 million pairs costing pounds 339.3m.

Manufacturers and retailers alike insist that the market is cyclical. They accept that the vogue for more rugged apparel has lost them market share and forced them to introduce some products to counter the threat. But they are confident that the trainer will become de rigueur once again, although this might depend on whether the rising US basketball star Shaquille O'Neal or other contenders rise to fill Jordan's shoes in the minds of the young.

Meanwhile, the core customer base of active sports people - as opposed to fashion victims - is expected to remain the same. While much has been written lately about the leisure revolution 'that never was', statistics suggest that concern about health is continuing to keep sports participation rising, particularly among women.

That is not to say that the market of the next few years will not change. One thing the business is having to get used to, the industry commentator Tim Drake says, is the increasing preference for shorter races over the old marathons and half-marathons. This means that even serious sports people are using up fewer pairs of shoes. Against that, though, is the rising expenditure among women on shoes especially designed for aerobics.

Mr Drake, a former retailer who has recently set up the Sports Trade Think-Tank to bring together executives from both sides of the business for quarterly meetings, also sees brands maintaining their unusually prominent position.

He acknowledges that the likes of Nike and Reebok have been forced to drop prices as a result of the recession putting an extra premium on value, but said: 'Provided the brands keep developing, the private labels won't get in there.'

One of the ways in which the brands can move on is by telescoping their supply chains. Retailers are typically required to commit themselves to orders six to eight months ahead of delivery. In other words, while it takes less than half an hour to make a shoe, it takes seven months to order and deliver it.

When the going was good, the big names were able to get away with such a practice - which they say helps to smooth their production operations - when many other clothing retailers, such as The Gap and Marks and Spencer, were cutting delivery times to hours.

But buying for two seasons away not only puts great strain on the retailers' cash flow, it also makes it difficult to respond to market demand. And that has never been more important than at the present.

With conventional wisdom holding that it is impossible to get things more than half right when ordering more than three months ahead, it is not surprising that retailers often find themselves with too much stock of one product and too little of another.

This has become very serious lately, since the 'feast or famine' situation has often erred towards the feast.

The result - because of the fierce competition - has been sharp discounting, and the pressure on costs that has led Burton to pull almost entirely out of the market and several independents to close.

What is more likely to persuade the manufacturers to change their ways, though, is the growing market fragmentation that most retailers are seeing. It is not just that what is good for the US no longer also suits the rest of the world. There are what Cobra's Mr Blackburn calls 'little pockets of activity where things are happening' in the same way that the fashion industry is broken up into different styles.

It is generally agreed that there will have to be more effort to respond to changing demand. JD Sports, a comparative newcomer, is reckoned to have taken a lead by making its stores particularly attractive to the younger crowd, with big brands given their own areas within the outlets.

But others dispute Mr Drake's faith in the power of brands. Adrian Chamberlain is marketing director of Sears' sports and leisurewear division, which through the Olympus chain is comfortably ahead of Cobra, JJB and All Sports, with about 400 shops selling pounds 200m worth of equipment, and accounts for about 13 per cent of the market.

He said his group had already made great progress with private label goods and sees significant further opportunities in this area. 'Brands will always be important,' he said. 'But different groups are not so brand-fixated as teenagers.' In particular, he expects older, more value-conscious customers to follow the US example and be more receptive to cheaper, non-branded shoes and equipment.

But wherever the products are coming from, it appears that the boot may soon be on the other foot, with the retailers rather than the manufacturers calling the shots. As Mr Blackburn said: 'If you're close enough to what's going on, you can react' - and yell at the big companies to get them to respond.

(Photograph omitted)