How Birkenstock’s Inventory Control Delivers Direction
On several occasions I’ve walked into various retail locations and found Birks marked down. It’s a trend that struck me as disturbing. I initially thought of it as a flawed wholesale strategy rooted in buying into a brand’s own hype. The more I dug into Birks and their strategy for delivering footwear in the US, the more I began to realize the company was testing the waters of mainstream sneaker retail.
Stores like DTLR, Hibbett Sports and Foot Locker began carrying Birkenstock during the quarantine when casual and comfort footwear spiked and became a part of the daily wear for the work-from-home teams. Birkenstock even went so far as to create EVA versions of their classics to cater to those markets. They were cheaper and appeared to be direct competitors to Crocs.
It made sense for Birkenstock to land in mainstream sneaker retail. Today, that foray offers insight into how Birkenstock will deal with wholesale partners and growing distribution. In a recent post on the IPO, I made this statement about how the brand could justify their IPO and rebound from a rough initial offering:
- Introduce a Two-Tiered City Expansion for Birkenstock Doors
- Develop a much larger plan for Sports and Recovery
- Implement a Birkenstock apparel strategy
- Avoid goofy marketing strategies, seeding and partnerships
- Develop broader demographics through design and better closed toe options
Expansion Into Sneaker Retail
Birkenstock in the correct retail partner locations sells through at SRP. Lately, even on their own website, there are clearance pages. No company is immune to a sale, but as I stated initially I was concerned when I began seeing heavily discounted Birks in sneaker stores. A visit to Hibbett Sports, who celebrated the addition of Birks in this post: Hibbett | City Gear Welcomes Birkenstock to Growing Brand Family, shows how the consumer base who shops at their stores have slowly begun to shift back to Crocs and Nike socks. How has Birkenstock adjusted their relationship with Hibbett Sports? They’ve reduced the number of SKUs. Only 12 options show up online and only 3 of the 12 are discounted. Birks has showed the ability to adjust.
Foot Locker has a combined 134 listings (unlike Hibbett online visual merchandising, Foot Locker does a poor job of compartmentalizing each style). Markdowns only exist on underperforming models and EVA options. Of the 134 listings 14% are discounted most of them in kid’s sizing and in seasonal colors. Why is this important? Sneaker retail offered opportunity during and post quarantine. That channel must be monitored and moderated now. Many brands leave their relationships with wholesale accounts unattended.
Birkenstock is an active retail partner. With the company now public it’s easy to grow at all costs and attempt to keep accounts with mainstream sneaker retail. Instead of doing this Birkenstock recognized the inherent danger of remaining aligned without control. During a DTLR dive by a recent arch brand partner, this was the result:
There is not a DTLR in my region, so I lean heavily on a brand partner with DTLR stores in their area to perform retail dives. This partner operates an online 3rd party shop. When reaching out to ask if purchasing Birkenstock was something they should do, I gave them an emphatic “hell yes”. While I know the grey market can be problematic for a brand, I understood the value of the model. This one SKU in 2023 on one 3rd party platform has generated a $70.45 Avg sold price, with 989 Total sold and $69,675.05 Total item sales. Where some analysts will see this and state there are issues with Birk, I see this, and I immediately gauge how Birkenstock is managing this relationship. I visited the DTLR website. Birkenstock is no longer a brand listed there.
Birkenstock is now a public beach, but this doesn’t mean the brand has decided to leave the waterfront unattended. The company has shown a willingness to act and function with restraint at an odd time in footwear. Sales are not strong and pushing product into mainstream retail could look great for the brand in upcoming quarters, but the long-term result of throwing everything out there to see what lands would diminish them. It’s clear brand equity is at the forefront of the future of the cork footbed.
