- Foot Locker and other sneaker retailers have learned their lesson about depending too much on Nike.
- Foot Locker has allocated more wall space to emerging performance running brands like On and Hoka.
Despite a renewed partnership with Nike, Foot Locker will continue to diversify the brands it sells under new CEO Mary Dillon.
Foot Locker and other sneaker retailers have learned their lesson from Nike's shifting strategy. Although Nike still sells at some retailers like Foot Locker, Nike is committed to putting its own direct-to-consumer sales first. In response, retailers have allocated more wall space to up-and-coming performance running brands.
The results have been promising. Foot Locker acquired 10 million new customers in the US last year through rising brands like On and Hoka. On and Hoka drove twice the number of customer acquisitions for Foot Locker compared to other brands in 2022, Dillon said at Foot Locker's investor day last week.
Foot Locker, a brand turning 50-years-old next year, is also helping On and Hoka reach a younger audience, the same audience that industry giants Nike, Adidas, and Puma have long benefited from.
"Brand partnerships like these are helping us to bring in new customers into our franchise as well as helping them expand to a younger and more diverse customer set than they may have today," Dillon said.
Both Hoka and On are favored by millennials and Gen Z, who often wear running shoes as casual wear. Deckers CEO Dave Powers told analysts last month that Hoka's new Solimar cross trainer launched without much brand marketing but is still in the top five styles purchased by women aged 18-34.
The number of On shoes sold at Foot Locker increased by 50% over the last three months of 2022, compared to the third quarter. Martin Hoffman, On's co-CEO and CFO, credited the growth partly to the "continued demand among younger consumers for products such as the Cloudnova," one of On's most popular silhouettes.
Small, growing brands also typically spend hefty amounts to acquire each new customer with marketing and other efforts. Wholesalers can help bring that cost down.
"Acquiring a 21-year-old in New Jersey is more expensive for us to do than Foot Locker because Foot Locker has kept that relationship with that consumer," On co-CEO Marc Maurer told Insider in an interview.
In 2022, On increased the number of stores selling its sneakers by 15% and grew wholesale revenue 73%. And the company believes it has more room for growth. Its sneakers are available in less than 400 locations of the three major sneaker chains Foot Locker, JD Sports, and Dicks Sporting Goods. The retailers combined have over 1,800 brick-and-mortar locations in the US alone, not including other portfolio brands like Champs and Finish Line.
As for Hoka, wholesale revenue for the brand increased by 83% in its most recent quarter. The company has historically considered running specialty stores as its bread and butter but has recently expanded into Dicks Sporting Goods, REI, and Foot Locker.
"The door count and assortment of Hoka and On Running, are two great examples of newer brand partners thriving in the Foot Locker retail environment," Franklin Bracken, Foot Locker's chief commercial officer, said during investor day.