Foot Locker Explores New Store Concept and E-Com Platform as Sales Slip

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Foot Locker Explores New Store Concept and E-Com Platform as Sales Slip

By Tim Denman - 05/30/2018

To reinvigorate its customer base, Foot Locker is designing new, highly interactive stores outside of its traditional mall locations. In addition, an ongoing e-commerce platform refresh adds functionality and improves the digital experience.

The footwear and athletic apparel retailer has been struggling to keep pace in the omnichannel era, watching both market share and sales slip in the highly competitive digital age. In Q1 2018, net income dropped from $180 million last year to $165 million in 2018 ― a reversal that the executive team finds encouraging, since it marks a less drastic drop compared to the recent past.

“While we faced many of the challenges we anticipated, a 2.8% comparable sales decline in the first quarter was an improvement over the second half of 2017,” said Foot Locker’s CFO and EVP Lauren Peters on a recent earnings call with analysts. “And there are encouraging signs as we move through 2018.

A clear bright spot in the quarter was apparel, which continues to benefit from a shift to more premium assortments. This is seven quarters in a row that we’ve had comp positive gains in apparel. – Dick Johnson, CEO, Foot Locker

While there are plenty of negative metrics the leadership team could focus on ― declining store sales, flat direct to customer numbers, slowing store traffic ― there are a couple of bright spots to build upon: high-single digit comparable sales increase at Kids Foot Locker and double-digit sales gains in apparel.

New Store Concept

For 2018, Foot Locker is on pace to spend $230 million on capital improvements on the business. A large portion of that capital expenditure is earmarked for improving its physical stores and enhancing the in-store experience.

In March, the Champs Sports banner opened its newest flagship store in New York’s Times Square, upping the brand’s cool factor and exposure among the millions of tourists that visit the destination each year.

“This multi-level space celebrates sneaker culture and brings an immersive retail experience, combining prominent digital elements that showcase the best brand stories from our leading vendor partners,” CEO Dick Johnson said.

In addition to the new showcase store, Foot Locker is developing its Power Store concept across multiple geographies. The new store concept is designed to inspire shoppers, build community, and provide a seamless, tech-filled shopping experience for consumers with a focus on presenting premium products and experiences in exciting and unique ways.

“Power stores will provide us an opportunity in some cases to pivot off mall,” said Johnson. “We want to provide great excitement in the store and we haven’t been able to necessarily get the right flexibility in the malls. It could be strip mall, it could be a power mall, it could be off the pad. But it will allow us the opportunity to do more on the street if you will.”

The concept is not entirely new to the brand. In Western Europe, half of the retailers store fleet is outside of the traditional shopping mall. While exploring locations outside of the mall is not novel to Foot Locker, the Power Store concept with its emphasis on higher end SKUs is a new approach. The first of these concept stores will open in London and Liverpool in Q2, and will expand into US markets later in the year. In addition, five Power Stores are planned to open in Asia before year-end.

Digital Experience

In concert with its in-store investment and experimentation, Foot Locker is building out its digital capabilities to further connect with its millennial customer base. A key portion of that digital evolution is fixated on the retailer’s new e-commerce platform. The platform, which is slowing being rolled out across Foot Locker’s various brands, will allow for increased features and functionality, beyond the legacy system’s current capabilities. In addition to the customer facing benefits, the new solution will enable a more seamless back-end experience for the retailer’s e-commerce and IT staff.

“We’re moving all of our digital sites to a common platform,” Johnson said. “We have been very pragmatic about moving the sites over to the new platform and making sure that it functions and does everything that we expect it to. So that will continue throughout this year. We will then have everybody on the common platform that will allow us to make subsequent changes more effectively and efficiently.”

In addition to the e-commerce platform reboot, the retailer will be launching new and/or improved mobile apps for all of its banners over the next few months. The retailer is also currently designing a new loyalty program, which it anticipates to launch by the end of the year.