Lady Foot LockerLady Foot Locker

Presentation by:Presentation by:Julie Perkins & Jody VailJulie Perkins & Jody Vail

March 21, 2006March 21, 2006

Situational AnalysisSituational Analysis Founded in 1982Founded in 1982 More than 600 stores More than 600 stores

nationwidenationwide Athletic footwear industry Athletic footwear industry

offers a wide array of offers a wide array of product segmentationproduct segmentation

LFL specializes in athletic LFL specializes in athletic footwear, apparel, and footwear, apparel, and accessoriesaccessories

There are very few retail There are very few retail chains that specialize in chains that specialize in athletic footwear for athletic footwear for women exclusivelywomen exclusively

Competition consists of Competition consists of department stores, and department stores, and apparel specialty shopsapparel specialty shops

Situational AnalysisSituational Analysis Strong relationships with key Strong relationships with key

suppliers is essential:suppliers is essential: Current products on Current products on

shelvesshelves Special make-up productsSpecial make-up products Highly competitive marketsHighly competitive markets Advertising & in-store Advertising & in-store

marketingmarketing Negotiate for: Negotiate for:

pricingpricing product exclusivityproduct exclusivity shoe design shoe design colorscolors materialmaterial matching apparelmatching apparel

Situational AnalysisSituational Analysis Technological advances:Technological advances:

Aided in developing further differentiation in the Aided in developing further differentiation in the industryindustry

Increases consumer demand and competitionIncreases consumer demand and competition Shortened product life cycleShortened product life cycle

Promotional activity consists of:Promotional activity consists of: Health magazine “Race for Women”Health magazine “Race for Women” Sponsored events such as fitness classes, and spa Sponsored events such as fitness classes, and spa

treatments w/ well known instructorstreatments w/ well known instructors Receive market funds from vendors for advertising, Receive market funds from vendors for advertising,

in store displays, and sales associate education for in store displays, and sales associate education for productsproducts

Athletic event sponsorshipsAthletic event sponsorships

Situational AnalysisSituational Analysis Trends within Trends within

industry:industry: Prior to LFL, women Prior to LFL, women

were purchasing were purchasing Keds & Canvas shoesKeds & Canvas shoes

It is now possible to It is now possible to find a sneaker for find a sneaker for every activity or sport every activity or sport and even casual wearand even casual wear

The athletic footwear The athletic footwear market has declined market has declined over the past couple over the past couple yearsyears

Situational AnalysisSituational Analysis Objectives & Constraints:Objectives & Constraints:

Staying current with new and updated productsStaying current with new and updated products Working to secure product exclusivity (very hard due to other Working to secure product exclusivity (very hard due to other

competitors within the industry)competitors within the industry) Financial Condition:Financial Condition:

Strong financial positionStrong financial position Pricing strategy allows them to reduce inventory quickly and still Pricing strategy allows them to reduce inventory quickly and still

maintain profitsmaintain profits LFL is currently #3 in the top ten retailers for total pairs soldLFL is currently #3 in the top ten retailers for total pairs sold

History of Problems:History of Problems: Suffered one huge product launch failure (Swoopes II)Suffered one huge product launch failure (Swoopes II) Initially product only sold 3%-4% per week and was forced to Initially product only sold 3%-4% per week and was forced to

markdown after only 10 weeksmarkdown after only 10 weeks Issue at Hand:Issue at Hand:

Whether or not to launch a new product (Rebecca Lobo Reebok Whether or not to launch a new product (Rebecca Lobo Reebok sneaker)sneaker)

Product exclusivityProduct exclusivity When to start advertising and launch productWhen to start advertising and launch product

Marketing StrategyMarketing Strategy Target Market:Target Market:

18 – 37 year old active females18 – 37 year old active females Likely to be active in sports, fitness, and family lifeLikely to be active in sports, fitness, and family life 12 – 17 year olds represented an important secondary market12 – 17 year olds represented an important secondary market Sales however occurred across a broad age segment, the LFL customer was Sales however occurred across a broad age segment, the LFL customer was

considered to be somewhat ageless marketconsidered to be somewhat ageless market

Total U.S. Athletic Footwear Market (% of total pairs sold by consumer Total U.S. Athletic Footwear Market (% of total pairs sold by consumer segment)segment)

Footwear Category 1995 1996 1997

Aerobic 5.0% 5.8% 5.4%

Cross Training 11.4 10.3 10.5

Basketball 2.8 9.7 9.2

Tennis/Court 4.1 5.1 4.5

Running 10.1 8.5 8.7

Casual Sneakers 25.5 33.4 34.5

Walking 26.1 24.9 25.2

Other 15.0 2.3 2.0

100.0% 100.0% 100.0%

Market AnalysisMarket AnalysisU.S. Athletic Footwear Market (% of total pairs sold by U.S. Athletic Footwear Market (% of total pairs sold by

footwear category)footwear category)

Segment 1995 1996

Men (17 + years) 33.0% 35.3%

Women (17 + years) 41.8 39.8

Boys 10.2 11.2

Girls 7.1 7.7

Infants 7.9 6.0

100.0% 100.0%

Marketing Mix VariablesMarketing Mix Variables Product:Product:

Due to growing consumer demand, consumer segmentation, and increased Due to growing consumer demand, consumer segmentation, and increased competition, manufacturers frequently introduce new products which competition, manufacturers frequently introduce new products which shortens product life cyclesshortens product life cycles

Pricing:Pricing: Based on 30% – 55% supplier gross margins on wholesale selling price and Based on 30% – 55% supplier gross margins on wholesale selling price and

45% retailer markups on the retail selling price45% retailer markups on the retail selling price Typically offered at full suggested retail price for 1Typically offered at full suggested retail price for 1stst two weeks two weeks Shoes were not marked down until they fell below a 10% weekly pushShoes were not marked down until they fell below a 10% weekly push

Retail Channels:Retail Channels: Competition was based upon several factors: 1) target consumer segment, 2) Competition was based upon several factors: 1) target consumer segment, 2)

price, price,

3) merchandise assortment, 4) store reputation, 5) store location, 6) 3) merchandise assortment, 4) store reputation, 5) store location, 6) advertising, and advertising, and

7) customer service7) customer service Promotion:Promotion:

Celebrity endorsementsCelebrity endorsements National brand and image campaignsNational brand and image campaigns

Marketing ExpendituresMarketing ExpendituresTotal Advertising Expenditures for the Top 10 Athletic Total Advertising Expenditures for the Top 10 Athletic

Footwear BrandsFootwear Brands

Rank Brand 1997 (in millions) 1996 (in millions)

1 Nike $159.0 149.0

2 Reebok 55.0 84.0

3 Adidas 21.0 14.0

4 Fila 15.0 13.0

5 Converse 8.0 5.0

6 New Balance 4.0 3.0

7 Keds 3.0 3.0

8 Airwalk 2.0 9.0

9 Asics 2.0 2.0

10 Foot-Joy 2.0 2.0

Lobo Launch or No Lobo Lobo Launch or No Lobo Launch?Launch?

Facts surrounding the decision:Facts surrounding the decision: The Lobo shoe would incorporate The Lobo shoe would incorporate

Reebok’s Hexalite technologyReebok’s Hexalite technology Lobo’s contract with Reebok enabled Lobo’s contract with Reebok enabled

them to involve her in product them to involve her in product endorsements and ads, store endorsements and ads, store appearances, and speaking engagementsappearances, and speaking engagements

12-17 year olds would be critical to reach 12-17 year olds would be critical to reach due to their buying power, in the past this due to their buying power, in the past this segment bought shoes based on fashion, segment bought shoes based on fashion, styling, and brand appeal rather than styling, and brand appeal rather than performanceperformance

When to launch the product:When to launch the product: June at the start of the inaugural WNBA June at the start of the inaugural WNBA

season or October when school basketball season or October when school basketball season begins?season begins?

Retail Exclusivity:Retail Exclusivity: LFL desired exclusivity to help LFL desired exclusivity to help

differentiatedifferentiate Marketing Support:Marketing Support:

Reebok would provide the launch plans Reebok would provide the launch plans and marketing funds (television, print, and marketing funds (television, print, and in-store merchandise displays)and in-store merchandise displays)

Can a female athleteCan a female athlete drive product sales or drive product sales or at least create demand?at least create demand?

SWOT AnalysisSWOT Analysis Strengths:Strengths:

33rdrd highest % of total pairs sold within a given year highest % of total pairs sold within a given year Great reputation for supply of women’s athletic shoesGreat reputation for supply of women’s athletic shoes Few other chains specialize in women’s footwearFew other chains specialize in women’s footwear Largest portion of sales during back to school seasonLargest portion of sales during back to school season Prides itself on servicePrides itself on service 600+ store chains strengthens relationship with vendors600+ store chains strengthens relationship with vendors Power to solely own the Rebecca Lobo launchPower to solely own the Rebecca Lobo launch

Weaknesses:Weaknesses: Sales below that of Footlocker and Kids Foot LockerSales below that of Footlocker and Kids Foot Locker Swoopes II launch failure Swoopes II launch failure 12 – 17 year olds do not purchase shoes for performance12 – 17 year olds do not purchase shoes for performance Web page is not kept up to dateWeb page is not kept up to date Lack of creative advertisingLack of creative advertising

SWOT AnalysisSWOT Analysis Opportunities:Opportunities:

More product segmentationMore product segmentation Technologies designed to enhance performanceTechnologies designed to enhance performance Increase in women’s sports participationIncrease in women’s sports participation Lobo contract enabled product endorsements, ads, Lobo contract enabled product endorsements, ads,

store appearances, and speaking engagementsstore appearances, and speaking engagements 12 – 17 year olds critical is proceeding with Lobo 12 – 17 year olds critical is proceeding with Lobo

launch also offer athletic wear and accessories to matchlaunch also offer athletic wear and accessories to match Threats:Threats:

More product segmentationMore product segmentation Sales within industry starting to fallSales within industry starting to fall Increasing demand for men’s and children’s shoesIncreasing demand for men’s and children’s shoes Discount storesDiscount stores

The DecisionThe Decision Launch Lobo shoe with ReebokLaunch Lobo shoe with Reebok Take minimum amount of pairs for exclusivity (15,000)Take minimum amount of pairs for exclusivity (15,000) Price product at $80.00Price product at $80.00 Advertising and promotional support to commence in JuneAdvertising and promotional support to commence in June October delivery date for purchaseOctober delivery date for purchase

Rebecca Lobo is well known among teens and with solid Rebecca Lobo is well known among teens and with solid marketing efforts the market can be reached effectivelymarketing efforts the market can be reached effectively

The Hexalite technology can be marketed as an The Hexalite technology can be marketed as an attractive lightweight active wear shoe providing a attractive lightweight active wear shoe providing a great deal of comfortgreat deal of comfort

First 5,000 pairs sold will receive one of the followingFirst 5,000 pairs sold will receive one of the following free tickets to a Lobo gamefree tickets to a Lobo game photograph with Rebecca Lobophotograph with Rebecca Lobo autographed accessories or apparelautographed accessories or apparel team shirtteam shirt