Can Customized Footwear Give A Competitive Edge To Under Armour?

by Trefis Team
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Under Armour (NYSE: UA) has been going through some relatively tough times of late, as the U.S. apparel market is slowing down and the company’s footwear segment has not been performing as well as it did in recent years. However, the company recently reported better than expected results for Q1 2017 and continues to look for long term growth opportunities. Recently, Under Armour unveiled its new platform which allows customers to customize their shoes by uploading desired images and colors. The company’s closest competitor, Nike, already has this option and by launching its own customization platform, Under Armour can ensure that it remains competitive in the footwear segment. Demand for premium customized footwear is on the rise, and with this platform the company can engage its customers better, creating a strong, loyal, customer base.

Customization Can Help Build A Loyal Customer Base

According to a report by Technavio, customization is a growing trend in the footwear space, and several manufacturers are looking to provide this option to attract and retain customers. Allowing customers to create their own design ties them closer to the brand and can act as a brand differentiator. However, with players such as Reebok and Nike already offering this option, Under Armour could have lost market share if it did not join the fray in providing a customization platform. This introduction puts it on par with its competitors, and is likely to increase consumer loyalty and engagement.  Technavio estimates that the demand for personalized footwear is likely to increase over the next few years. Nearly 25% of footwear which is purchased online is customized, and aggregates to around $2 billion.

According to our estimates, footwear accounts for nearly 30% of Under Armour’s valuation, and we expect the company’s retail footwear revenues to increase steadily and reach nearly $1 billion by the end of our forecast period.

Innovation in products, Under Armour’s focus on the retail channel, and opportunities in international markets are the factors likely to drive growth in these revenues. However, competition from Nike and others can impact these revenues negatively. Offering a customization platform can ensure that the company remains competitive and engages its customers better. We believe this platform should act as an enabler for Under Armour to pursue long term growth opportunities.

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