Current nature and structure of the athletic footwear industry:
The athletic footwear industry is a highly competitive environment where the top four manufacturers hold over 70% of the market share. The barriers to entry into the industry are comparatively low, as anyone with new creative design ideas can produce and market their product, but the success of smaller companies is oftentimes shaky. Brand loyalty, ample capital, and broad based sourcing create an environment where the bigger companies such as Nike and Reebok have little trouble maintaining market share. Nike enjoys the largest share, with 42.3% of the nearly $8 billion market in the year 2000. Reebok was second with 11.9%, Adidas had 10.8%, and New Balance had 9.6% of the market. The remaining 25% must be divided among the numerous smaller companies fighting for a shot at survival.
One of the important characteristics of the footwear industry is the fact that the product is necessary to consumers, yet very much a discretionary purchase as well. The actual structure of athletic shoes does not change very much from season to season. The design and fashion aspects are what significantly differentiate one product from another. Due to these factors, athletic shoe purchases are largely dependant on economic conditions. When the economy is good and consumers are enjoying plenty of disposable income, they are more likely to make new purchases to update their shoe collections. When there is a shorter supply of income, consumers will put off purchases until they are absolutely necessary and the price of the shoes is low enough.
Currently, the athletic shoe industry is performing well. Overall footwear spending in the United States has decreased in recent years, but athletic shoe sales are increasing. In 2001...