Why Foot Locker CEO Mary Dillon Says the DTC Craze Won’t Leave Retailers in the Dust

Foot Locker is still bullish on its role in the broader sneaker and footwear ecosystem, despite brands shifting their attention towards DTC ambitions and a weak first quarter.

“I’ve seen this movie before,” Foot Locker CEO Mary Dillon said at a session during the Bernstein 39th Annual Strategic Decisions Conference on Wednesday, referencing her experience at the helm of beauty retail chain Ulta. When beauty brands like Glossier and Kylie Cosmetics narrowed in on DTC models, people initially expressed concern about Ulta’s ability to compete as a retailer. Eventually, Dillon explained, these brands realized a wholesale retail presence was necessary as well if they wanted to capture consumers in different channels.

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“Now, [Glossier is] distributed at Sephora. And Kylie came to Ulta, because you reach a point where that’s not enough,” Dillon said. “And that’s just kind of the reality.”

This story, she said, is true for footwear as well. While some major brands like Nike and Adidas have focused on their direct channels and turned away from wholesale partnerships in recent years, many have recently come to realize that these channels and partners are key to a robust omnichannel strategy.

For example, Foot Locker last year said the amount of Nike product in its stores would be significantly less as the Swoosh accelerated its shift towards DTC sales. But the retailer reversed track in March and said Nike would remain its key brand moving forward.

Foot Locker chief merchandising officer Chris Santaella said at the time that the renewed Nike partnership would revolve around a strategy that is “complementary to the Nike direct-to-consumer strategy.”

So the idea that brands will completely shut out wholesale in favor of DTC channels is likely unrealistic, Dillon said.

“At the end of the day, the world doesn’t work that way. Consumers don’t work that way,” Dillon said. “They want to shop at times in an environment where they can browse and get service and have fun and try things, whether it’s makeup or shoes.”

Even if wholesale channels are here to stay, Foot Locker is still focused on positioning itself to be the retailer of choice for top brands. Dillon said Foot Locker currently has a 16 percent share in the broader wholesale market but is under-penetrated at just 8 percent in the space of up-and-coming brands like Hoka and On. And even as these brands simultaneously grow their DTC channels, Dillon does not feel threatened.

“There’s so much growth ahead for us on these brands that we’re only really in the early stages, both in physical distribution and online distribution,” Dillon said. “And as they grow DTC, I don’t see them as countervailing factors necessarily. It’s just different consumers shopping in different ways.”

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