Airfreight: The new ‘sole’ of the footwear industry’s logistics operations?

A COVID-driven boom in e-commerce has increased the footwear industry’s reliance on airfreight, a trend that is likely to continue. Airfreight has always played a crucial role in the U.S. footwear industry, where 99% of shoes are imported and 93% come from countries like China and Vietnam, according to Matt Priest, CEO and president of the Footwear Distributors and Retailers of America (FDRA), a major trade organization for the industry. [caption id="attachment_95732" align="alignright" width="400"] © Can Stock Photo / Alexshyripa[/caption] Historically, airfreight has not been the predominant mode of import to the U.S., according to Priest, with an estimated 25% to 30% moving to the U.S. by air. “I think that’s going to be a number that grows because the consumer is changing,” Priest said. Traditionally, airfreight has been the mode of choice for special-case footwear shipments, including high fashion, high-value products, samples or shipments that need to move quickly, said Priest. However, airfreight has now become increasingly important for the footwear industry, which has struggled to maintain inventory since summer 2020, when shoe demand began to climb after an initial dive at the onset of the pandemic. According to Priest, footwear retailers responded to the dip in demand by getting rid of unwanted inventory, which left them undersupplied when demand suddenly returned with the warm weather. However, footwear isn’t the only commodity trying to move through the world’s backlogged ports, which has led to ocean freight costs nearing those for airfreight. “There's some parity between ocean and air that you might not have seen in quite some time,” said Priest. “So you're not taking this huge financial hit by pivoting over to airfreight and away from ocean, like you might have been four or five years ago.” “Airfreight now is being used for these small shipments coming direct from factories, and from China in particular,” Priest said, adding that this is in order to avoid the high duty rate footwear has to pay by keeping shipment sizes under the threshold for smaller shipments. The COVID-driven boost in e-commerce has been another major reason for the footwear industry’s increased reliance on airfreight. Wolverine World Wide, the manufacturer behind footwear brands like Saucony and Chaco, saw an 84% increase in their e-commerce revenue in the first quarter of this year, according to their March quarterly earnings report. Likewise, Nike saw its digital business grow by more than 70% year to date in mid-March from the prior year, according to Mike Friend, CFO at Nike, on the company’s fiscal third-quarter 2021 earnings call. A surge in e-commerce has engendered a rise in “direct-to-consumer,” or D2C, customer solutions, necessitating greater reliance on airfreight. Adidas, for example, saw 31% D2C growth year over year, according to CEO Kaspar Rorsted during the company’s recent earnings presentation. The company saw a 41% e-commerce sales increase on top of 35% growth in the prior-year quarter. “This means that e-com revenue has almost doubled over the two-year period,” said Rorsted. FDRA’s Priest sees the shift, as well. “I think there will be a resurgence to in-store [shopping],” he noted. Counterintuitively, many consumers consider in-store shoe shopping to be the more convenient option, according to Priest. For some customers, shopping in a store also doubles as a recreational activity, something e-commerce doesn’t replicate. Whether airfreight will continue to play an important role in the footwear industry is not in question. Rather, “the question comes down to, what’s going to be the ultimate balance?” said Priest. “Will we return to a model where about a third of our shopping for footwear is online, and not the 50% it’s been over the past year, or will that be the new normal?”

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