Retail Trend: Brands focusing on DTC with new brick-and-mortar stores

By: Brian Metzler

The latest running boom spurred by the pandemic means it’s a very good time to be in the running shoe business. But it’s also a tough time to be a specialty running retailer given all of the direct-to-consumer efforts being made by top running shoe brands.

Hoka One One and Allbirds are the latest running shoe brands to open their own brick-and-mortar retail locations in prime shopping districts, a trend that’s also been percolating in the outdoor industry.

Hoka announced this week it would open its first two retail locations to help capture the growing audience of the running boom that coincided with the start of the shutdown related to the Covid-19 pandemic in early 2020.

As gyms closed and people were forced to work from home for much of 2020 and 2021, many former gym-goers turned to running even though races were shut down in most states for nearly a year. Now, as running races have started to come back in many states — and with the Chicago, Boston, Los Angeles and New York City marathons on tap this fall — running shoe sales have been red hot.

The running shoe segment has greatly surpassed other types of athletic footwear since the start of the Covid-19 shutdown, according to NPD Group senior industry advisor Matt Powell. Nike, Brooks, New Balance and ASICS continue to be the top-performing brands, but Hoka, On and Altra are also reportedly on the rise. Plus, traditional second-tier running brands such as Puma, The North Face, Reebok and Under Armour are all putting more effort into running than they had in previous years.

"Up until the pandemic, running had not been very good for about eight years," Powell said in a report. "But there's no question more people are running. Whenever we've been in periods with a lot of people out of work, we always see running shoes, or running as an activity, revive."

According to company financial statements, Hoka's revenue in the three-month period ended June 30 surged 95 percent to $213.1 million from $109 million a year earlier. Deckers, the parent company of Hoka, saw sales rise 78 percent to $504.7 million during the same period. Hoka's sales also surpassed those of its sister brand Ugg earlier this year for the first time in company history.

Hoka will be opening stores in New York City and West Hollywood, California, in September. The NYC store is on 5th Avenue in the Flatiron neighborhood, while the Southern California store is located on Melrose Avenue. The Hoka shops will offer 3D foot-scanning services to help customers find an optimally fitting shoe.

"We want to learn more directly from the consumer ... about what they like, what they want and how their decision process works, in a one-on-one way," Hoka president Wendy Yang told CNBC this week. "The biggest thing is creating a conversation with consumers in-person and letting them experience the benefits (of Hoka) before purchasing."

New Balance, Nike, On Running and Allbirds have also opened more brand stores in the past six months to get closer to their customers. Allbirds opened its 30th company-owned brand store in Atlanta’s Ponce City Market in late August. The new space includes highlights of the brand’s focus on sustainability, with displays around the shop that call attention to the sugarcane, merino wool and other natural materials Allbirds uses in its footwear.

Nike has been pulling out of unsuccessful wholesale channels and specialty retailers for the past several years and spending more to rejuvenate its own stores and DTC sales from its website. On Running opened its first store in December in the SoHo neighborhood of New York City, increasing its Tri-State distribution beyond the collection of department stores and specialty running shops where its shoes are sold.

Earlier this summer, Black Diamond Equipment, Stio and Backcountry all opened stores on or adjacent to the Pearl Street pedestrian mall in Boulder, Colorado, in hopes of tapping into the city’s natural alignment with the outdoors and the summertime boost in outdoor tourism.

One of the best trends happening right now is that younger consumers are increasingly purchasing outdoor apparel and running shoes as casual wear, but not necessarily for running or hiking.

"Five or six years ago, the only people buying Hoka were the runners that were in the know," Yang said. "They were the early adopters that were trying this new, kind of crazy shoe. But that's not the case now."