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RUNNING INSIGHT

FUELING UP FOR GROWTH

FuelCell lineup characterizes New Balance’s ongoing push to become more modern. / By Daniel P. Smith

The FuelCell launch represents the continued transformation of New Balance’s effort to craft a more progressive product story.

his is not your grandfather’s New Balance. Over the last five years, the Boston-based brand, a running market mainstay for decades, has steadily gained market share in the run specialty channel, emerging as the number two footwear brand by various accounts. That movement hasn’t occurred by happenstance. A brand once characterized by its heritage

990 model, a sturdy, monochromatic workhorse first unveiled in 1978, New Balance has focused recent years on becoming a younger, faster, sleeker and more contemporary brand. New materials and midsoles. A more daring design aesthetic. A determined approach to performance. Intently seeking marketplace relevancy with sponsorships of elite athletes such as Jenny Simpson and Emma Coburn and savvy affiliations with events like the Brooklyn Half, 5th Avenue Mile and the

RUNNING INSIGHT ® is a registered trademark of Diversified Communications. © 2019 all rights reserved. Running Insight is published twice each month, is edited for owners and top executives at running specialty stores and available only via email.The opinions by authors and contributors to Running Insight are not necessarily those of the editors or publishers. Articles appearing in Running Insight may not be reproduced in whole or in part without the express permission of the publisher. Divesified Communications, 121 Free St, Portland, ME 04101; (207) 842-5500.

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New Balance Nationals scholastic track and field competitions. “We’ve actively looked for opportunities to tell stories around our brand that are more modern and relevant,” says Danny Orr, manager of performance running at New Balance’s Innovation Design Studio. Introducing FuelCell

FuelCell represents the continued transformation of New Balance’s product engine,

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New Balance Fuels Up (continued) athletes, in fact, will have a customized last to employ on their own pursuits. “The 5280 isn’t for everyone and we know that,” Fitzpatrick allows, “but without it, FuelCell doesn’t exist.” New Balance’s New Era

the latest step in the 113-year-old company’s unwavering push to shake the status quo and craft a more inventive, progressive story. A collection of four new models debuting throughout the summer and fall – the front-ofthe-pack FuelCell Rebel trainer, the speedy FuelCell Propel trainer, the sportstyle-attracting FuelCell Echo and the ultraambitious FuelCell 5280 racing flat – the new lineup blends streamlined modern aesthetics with high-performance materials, namely the proprietary FuelCell foam technology. While the FuelCell name has previously existed in the New Balance ecosystem, its current iteration is an entirely new innovation and the highest rebound material New Balance has ever created. “FuelCell is truly innovative and huge step forward for us,” GM for performance running and training Kevin Fitzpatrick says. The FuelCell journey began more than two-and-a-half years ago when New Balance running leadership, inspired by the company’s involvement with marquee events such as the 5th Ave Mile and the Westminster Mile in London, began considering an ultra-fast road shoe. 4

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“A way for us to do something unique in the industry and help our athletes,” Fitzpatrick says. The led to the 5280, the pinnacle model in the FuelCell collection and the most datadriven running shoe in New Balance’s long and illustrious history. Informed by an almost maniacal investigation of data, including the study of elite athlete gaits, New Balance’s interdisciplinary team made continuous, objective modifications to weight, traction, energy return and fit to create the most high-performance racing shoe possible. “We were relentless on the most minute details,” Fitzpatrick says. “Things no one would see or feel, we were obsessing over.” The result? A four-piece racing flat consisting of a lightweight and highly functional Hypoknit upper, a multidirectional carbon plate, a springy FuelCell midsole and a blended outsole aligned at a six-degree angle to improve traction at toe-off. “We took risks here,” Orr says, “and that lead to something new for our brand, but also for the running space as well.” Set to drop in September, the 5280 is unapologetically elite, unabashedly geared to the fast crowd. New Balance elite

The racing flat’s data-driven design and its benefits served as a launching pad for New Balance to bring the technology into models for a broader audience, especially as runners show increasing interest in different shoes for different experiences. “The traditional categories such as neutral, stability and motion control are becoming less important as consumers redefine the underfoot experience based on what they want to do on a given day,” Fitzpatrick says. “We’re no longer in the days of one shoe fits all.” With a forward-looking point of view on speed, the three new FuelCell training shoes – Rebel, Propel and Echo – all carry FuelCell’s soft, responsive foam, a counter to the market’s conventional thinking that fast shoes need to be firm. “People want to feel like energy is given back,” Fitzpatrick says. The most enterprising of the new FuelCell training models, the 7.3-ounce (men’s model) Rebel, features a FuelCell forefoot to create an energetic, propulsive feel as well as a sleek, modern silhouette courtesy of a jacquard forefoot, bootie construction and deconstructed collar on the upper. The Rebel will have a limited launch at select stores on Global Running Day, June 5, before its universal debut on July 1. The Propel and Echo – dropping in August and October,

“We’re not content with where we’re at,” Fitzpatrick says. “We see incredible opportunity ahead of us and are not taking our foot off the gas anytime soon.” KEVIN FITZPATRICK MANAGER OF PERFORMANCE RUNNING AT NEW BALANCE’S INNOVATION DESIGN STUDIO.

respectively – further bring New Balance’s fast and flirty story to the masses. “From an innovation perspective, we’re looking at where we can push, change and lead,” Orr says. “We feel we can lead in the speed realm where people are specifically looking for solutions that are new and energetic.” The combination of FuelCell and Fresh Foam, the successful cushioning platform that debuted five years ago, demonstrates New Balance’s spirited attempts to create more contemporary footwear in fit and function as well as style — efforts made to capture new consumers and revitalize a brand and products often considered strong though utilitarian and, at times, unimaginative. “We’ve had a purposeful plan and stuck to it,” Fitzpatrick says. “There have been some wins and losses along the way … but we’ve been focused on doing things differently around here.” That’s led to a more vibrant product pipeline, improved market share and an even deeper hunger to become a brand that resonates with a wider crosssection of runners. “We’re not content with where we’re at,” Fitzpatrick says. “We see incredible opportunity ahead of us and are not taking our foot off the gas anytime soon.” n © 2019 Diversified Communications

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RUNNING INSIGHT

SOLE FOCUS 3D scanning and printing tech raise the stakes in the insole customization race. / By Judy Leand Aetrex’s 3D Printed Custom Orthotics are designed to precisely match the individual’s foot.

he insole category, once quiet, steady and predictable, is now exploding with mass customization innovations in response to increasing consumer demand for personalized products. On the cutting edge are 3D foot scanning and insole printing technologies that are well on the way to becoming de rigueur in the running specialty channel. While custom insoles and orthotics aren’t new, until recently they have been extremely expensive – starting at about $350 and often costing hundreds more – and have required an exacting and time-consuming process of casting, molding, hand-shaping and fitting by 6

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experts. The latest 3D scanned and printed iterations average about $150 per pair, utilize a highly detailed foot scan that can be performed in-store, and the finished product is custom printed and delivered within a week or two. One of the largest players in the category and the market leader in running specialty is Superfeet, which offers ME3D 3D-Printed Custom Insoles using advanced FitStation by HP technology. Basically, FitStation works by taking a 3D scan of the foot and ankle and providing gait analysis to create a kinetic profile of the foot. This precise biometric profile can be used to design and produce a

custom insole. Or, if the consumer doesn’t want to go the custom route, the technology can provide personalized recommendations across footwear brands and retailers. The ME3D 3D-printed Custom Insoles have about the same longevity as premium OTC insoles – about 500 miles, similar to a pair of running shoes – and are retail priced at $149.95. “We now have about 30 FitStation systems in the U.S. market and we’ll add another 180 units by the end of this year,” says Matt Gooch, Superfeet’s director of product and innovation. “We’ll be expanding our distribution with one retailer in particular by Q4

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Sole Focus (continued)

Superfeet’s FitStation by HP technology creates a precise, personalized biometric profile that’s used to engineer ME3D custom printed insoles.

which will total 150 stores. In all, we’ll add close to 200 units — 150 with our new retail partner, plus 20 or so other new accounts.” Beyond the U.S., Superfeet wants to further expand FitStation in Europe and Canada. Eric Hayes, Superfeet’s CMO and head of product development, points out that the company has “an amazing exclusive distributor in Japan, a subsidiary in the U.K. and rest of Europe.” In addition to its partnership with 3D printing expert HP, Superfeet has joined forces with DESMA, a leader in direct-attach footwear manufacturing, and rs scan, which specializes in collecting pressure data and turning it into physical products such as 3D printed insoles (rs scan also makes the pressure plates used in FitStation). “Our approach is to bring together partners that allow us to scale the project in a way we 8

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couldn’t do alone internally. We can leverage the quality, expertise and best-in-class capabilities of our partners and that gives us the freedom to create insoles personalized to a level not available before,” explains Gooch. Powered by 3D Printing

All of the ME3D custom insoles are created at Superfeet’s Flowbuilt Manufacturing facility in Ferndale, WA. The plant is powered by 3D printing, multisection injection molding and 3D scanning, and is able to handle the mass customization of limited-run shoes for rapid prototyping, sampling and development. Turnaround time for the insoles is about a week and the goal is to reduce that time to four or five days. On May 9, Superfeet launched ME3D Aftersport Slides, customized sandals that utilize geometry matched to the size and

shape of each foot and are made with Syncro Recovery Foam that’s custom-blended based on the user’s weight and dynamic pressure pattern. The slides, retail priced at $99, are created using FitStation technology and are produced at Flowbuilt. Additionally, Superfeet has partnered with Brooks to create the Genesys beta research program, the first fully customized running shoe to utilize FitStation by HP technology. (The Brooks project is now up and running with shoes seeded to brand ambassadors and wear testers, but is not yet available to consumers.) Superfeet is also introducing Shaped by Superfeet, an ingredient program that will provide the Superfeet shape to other shoe brands, with the first products slated to roll out next year. Shaped by Superfeet will target the run, casual, work/industrial, outdoor, cycling and soccer markets and specific partnerships will be announced by late 2019/ early 2020. “In 2020 we’ll be customizing shape and midsole. By 2021, we’ll be able to customize an upper to conform to the shape of a foot,” says Hayes. “But personalization for all doesn’t stop at the shoe. Five years from now, advances in technology will enable brands to make customized products such as gloves, helmets and apparel.” Interestingly, Hayes observes that the development of this technology is, in a sense, a return to the way products used to be made before the industrial revolution: customized, one-off items made for the individual. The Aetrex Effort

Another key brand is Aetrex, which in February launched its 3D Printed Custom Orthotics

program for 2019. Utilizing data from its proprietary Albert foot scanner, Aetrex is able to translate complete data to produce an orthotic that precisely matches the individual’s foot, including customization of the right and left feet. The Albert scanning technology involves 5000 gold-plated barometric sensors, 960 LEDs and receptors and 18 cameras to capture foot data with AI and computer vision-informed software. The scan data is received using 256 degrees of varying pressure that is translated into a complex pressure map. From there, the data goes to the 3D printing production facility where the insoles are designed, and then the CAD files are sent to the 3D printer. The resulting custom orthotics, retail priced at $150, are sent to the consumer within days of the foot scan process. More than 400 stores currently offer Aetrex 3D Printed Orthotics using the Albert technology, and 800 to 1000 retailers are expected to join up by the end of this year. About 15 to 20 percent of the placements are international. Aetrex has also placed 5000 foot scanners globally, including 300 of the latest Albert design. The program was developed in conjunction with EOS, a global leader in industrial 3D printing. EOS has a production facility in Austin, TX, and next year will have international cells for production. “We’ve been in the scanning business since 2002,” notes Larry Schwartz, CEO of Aetrex Worldwide. “There’s enough momentum behind foot scanning and data capture that make the technology more attractive, and there’s growing awareness among retailers that this is something © 2019 Diversified Communications

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RUNNING INSIGHT

Sole Focus (continued)

Aetrex’s Albert technology and foot-scanning software offers data capture and marketing opportunities, and drives revenue and profits in a user-friendly way.

that they should consider for their business. The challenge is getting retailers to adapt to the new technology. Smaller retailers are interested in add-on sales of orthotics while larger retailers are drawn to the data for marketing.” Because the Aetrex scanning data stays in the cloud, each retailer owns the data on its consumers and is free to export it into their own systems to use as they see fit. In the case of Aetrex’s 3D Printed Orthotics, retailers also benefit from a product that requires no inventory, offers high margins and no markdowns and is seasonless. Moreover, these orthotics reduce waste because the material used is recyclable and gets incorporated back into the production process. Schwartz 10

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believes that in the long term, 3D custom printed insoles will comprise 20 to 25 percent of the total orthotics market. Sidas Bridges the Gap

Meanwhile, insole maker Sidas has taken an approach that bridges the gap between 3D custom scanned and printed product and OTC premium insoles. Although the brand doesn’t produce custom 3D printed insoles, it has partnered with digital foot scanning and run analysis provider Gait Up to help recommend both shoe and insole to consumers. The technology consists of a Dynamic Strike Sensor (DSS) for 4D gait analysis, a Feetbox scanning machine, and Corpus.e shoe database.

First, a customer profile is created and the feet are scanned. The user then mounts the DSS pod on the shoe and walks or runs, after which the pod is connected to Feetbox, which starts the analysis. The system then recommends shoe and insoles with virtual try-on. Sidas sells the system to retailers and also works with shoe brands — for example, Nike uses the technology to better design extended large shoe sizes. All of the data (currently about 1.5 million scans) goes to Sidas, which processes the information. “It’s all about knowing how your foot moves. This allows consumers to compare shoes and recommendations from scans,” says Sidas marketing manager Quentin Emeriau. “The scanner simplifies the process of selling shoes and insoles, especially when consumers have fit or pain issues. It’s as close to a custom experience as possible for $50, as opposed to custom insoles that sell for $150-plus.” Emeriau believes that scanners and technology add value that can’t be obtained online, and help the retailer become a knowledge source rather than just a shoe salesman. Just as importantly, the data informs retailers about what sells and what doesn’t, which allows for smarter buying and inventory management. Active Imprints, which began in 1988 as a custom insole/ orthotics maker, is launching its Customizable Insole System this month through 20 to 50 specialty running accounts. While the new line doesn’t require digital foot scans, retailers can use the imagery to help determine a consumer’s foot type, problem areas and pressure points. The brand’s insoles utilize a high-rebound,

low-compression proprietary foam and feature add-on parts that can be applied for foot balancing. The Medical Debate

But as with all emerging technologies, there are some points of contention. Sports medicine specialist, foot expert and accomplished runner Robert Conenello, D.P.M., FACFAS, FAAPSM, asserts that 80 percent of patients with heel and arch pain can do well with an OTC product. “Technology has been changing the market, even within podiatry. But not everyone needs a custom orthotic, just something to provide comfort and proprioception [ground feel],” he says. “Medical-grade orthotics change the movement pattern while OTC insoles accommodate the movement pattern, hence adding comfort. The bottom line is that there’s not a lot of difference between OTC and custom scanned and printed insoles. He adds, “The technology is cool and fun, but it’s not the ultimate answer— fitting is as much art as science and there’s more to it than just plug-and-play.” Lutz Klein, president and CEO of Currex, concurs that the best injury prevention in running is comfort and fit. “We focus on enhancing the shoe, not changing the characteristics and volume of the shoe. The shoe is the fundament of the business and of the runner. If you sell the wrong shoe, no insole will make it better,” he comments. K lei n b el ieves t hat 3D scanning has a very limited application because it is a static reproduction of the foot. “The forces of running are different than walking, so even with gait analysis mats, the results aren’t © 2019 Diversified Communications

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RUNNING INSIGHT

Sole Focus (continued) accurate in terms of running,” he says. He is also concerned that retailers, who in most cases pay their vendor partners for the technology, are giving away valuable information that may later be used by those vendors to create semi-custom products that will eventually be sold online, in direct competition with the stores. If knowledge and information is power, he wonders if the retailers should be the ones charging vendors for the data. Currex, which currently has 65 percent distribution in running specialty stores, has doubled its growth every year for the past five years and posted 70 percent growth from Q1 2018 to Q1 2019.

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In July/August, the brand will launch a new product for the walking community and distribution will include running specialty stores as well as independent shoe stores. “We found that 50 percent of customers in running stores were walkers, not runners, so these new insoles should be a good addition to the line,” says Klein. A Wait-and-See Strategy

O t her i nsole ma kers i n the market have a wait-andsee attitude regarding mass customization. “We haven’t found anyone who’s done a great job in scaling it in a very effective way. There’s a lot of 3D tech and

some consumers are willing to pay $100 to $200 for an insole, but we’re not necessarily seeing anything that’s better than what’s already on the market,” says Drew Davies, EVP and GM of specialty sales at Implus. “We’re having a lot of ongoing discussions about scanning and we’re now looking for the right partner and tech provider. “This could require a massive amount of training for store associates, which is a big reason we’ve held off for a bit,” Davies adds. “Ideally, we’d like to introduce a system in the next 12-18 months.” No matter how one judges the rapid advance of mass customization technology, it

The insole category, once quiet, steady and predictable, is now exploding with mass customization innovations in response to increasing consumer demand for personalized products. is demonstrably changing the interactions of consumers with retailers, and retailers with brands. Superfeet’s Gooch warns, “As the market continues to move toward personalized product, consumers are beginning to expect more options. Brands that don’t move in that direction will fall behind.” n

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Inside Insoles A look at what’s new for run specialty in the growing insole category in 2019.

ACTIVE IMPRINTS Active Imprints Customizable Insoles feature high-rebound, lowcompression proprietary foam that’s antimicrobial and recyclable. Add-on parts, with guidelines on the base of the dual-density insole, can be applied for foot balancing under the heel, arch and forefoot. MSRP $49.95

CADENCE Cadence Low Volume insoles offer durable, semi-rigid support with a comfort zone in the heel for shock absorption. It also has a wider forefoot shape to better accommodate a more natural footshape and toe box used by many shoe brands. MSRP $49.95.

AETREX Aetrex Compete Orthotics L400 Series provides Aetrex Arch Support to help biomechanically align the body and prevent common problems such as plantar fasciitis, arch pain and metatarsalgia. MSRP $59.95.

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RUNNING INSIGHT

Inside insoles (continued)

CURREX Currex RunPro insoles, available in medium- (pictured), high- and lowvolume profiles, allow for a customized fit and won’t add volume to the shoe. The de-coupled heel allows natural flexing, and a zero heel drop won’t change the shoe’s offset.

POWERSTEP The new Powerstep Pulse Sport Full Length, exclusive to brick-and-mortar run specialty stores, has an exposed, semi-rigid polypropylene arch shell for support and stability in a slimmer profile, and dual-layer foam provides cushioning. MSRP $41.95.

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MEDI-DYNE Tuli’s The X Brace, part of the Medi-Dyne family, targets pain associated with plantar fasciitis, Sever’s Disease, over-pronation and heel pain. The product mimics the low-dye taping technique to provide arch support in footwear that won’t work with traditional insoles. MSRP $30.

SPENCO The Spenco Ground Control insole, set to launch in the second half of this year, features a decoupled heel that allows the runner’s heel to remain stable while the arch and the rest of the foot move naturally.

RUNNING INSIGHT Inside insoles (continued)

SIDAS The Sidas Run 3Feet Protect insoles give stability and control by providing support to the arch. Other benefits include a forefoot pad for propulsion, a shock-absorbing gel pad in the heel and dual-density foam for comfort. MSRP $50.

SOLE The Sole Active Wide Collection is designed for wide and natural-splay footwear, has accommodative arch support and a deep heel cup made from density-mapped EVA. The insole also has a zero drop design and is wear/ heat moldable for customized support. MSRP $49.

SORBOTHANE The Sorbothane Ultra Plus insole has an Air-Infused Sorbothane Base for full-length cushioning, 150 percent more forefoot strike protection to help prevent turf toe, a lightweight integrated arch and a deep heel cup with impact protection. MSRP $59.95.

SUPERFEET The Superfeet Run Comfort Thin insole offers a thin, versatile fit. It boasts Aerospring Rebound Comfort Foam for comfort, an Evolyte carbon fiber stabilizer cap, a deep heel cup and a H.I.T (Heel Impact Technology) pod that disperses impact. MSRP $49.95.

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ÂŠ 2019 Diversified Communications

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RUNNING INSIGHT

Catching Up With OrthoLite Running Insight goes one-on-one with C.B. Tuite to explore what it has planned for 2019 and beyond.

rthoLite was founded in 1997 by Glenn Barrett, a lifelong footwear entrepreneur. Barrett believed the interior environment of the shoe had not been sufficiently addressed and while on a sourcing trip to Taiwan he was introduced to an innovative new open-cell PU foam that was the ideal technology to solve the problems occurring inside the shoe by creating insoles for top shoe brands. For an update on its business, Running Insight interviewed C.B. Tuite, OrthoLite chief sales officer.

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Running Insight: Most people in the running business know OrthoLite as the provider of insoles for top brands of running shoes. Where is your business today? Tuite: As a vertical manufacturing partner to more than 350 of the world’s top footwear brands, we’ve ramped up production capabilities across China, Vietnam, Indonesia and expanded into South America and Europe. Another priority has been technology innovation — we’ve committed resources and have worked closely with brand partners to introduce more branded OEM innovation in recent years than we have previously.

Today our portfolio of comfort performance solutions has grown dramatically due to our “Innovation through Collaboration” model. Our product roadmap is focused on delivering eco, value and performance innovations across all categories and price points, which has enabled expansion both within the running category, and outside of it with comfort, dress, casual, fashion and outdoor partners. How are you positioned in the market? We’re positioned to help our brand partners deliver superior comfort and

RUNNING INSIGHT

Catching Up With OrthoLite (continued)

OrthoLite’s technology gives customers the opportunity to customize their story.

performance in footwear, a winwin on both sides. For us, it’s about helping sell that second pair of shoes and creating brand evangelists for those investing in OrthoLite. We give partners the unique ability to custom ize thei r OrthoLite technology story by color, density, hardness, rebound and more, and because of that we have over 75 percent share of our category. From a premium running perspective, we estimate

our technology is utilized in more than 50 percent of the category. What are the major trends you are seeing in your business, especially as it relates to running? There’s a continued focus on how eco is now part of a performance story versus solely a sustainable one. OrthoLite is able to deliver our new eco Hybrid solution across all formulations, allowing brands to elevate their overall eco-content

while remaining cost-neutral. Customization is huge. Our brand partners love the ability to customize their comfort and performance attributes to meet specific performance metrics with a combination of insole and midsole technology. We’re also seeing the running category in particular continue to lean in on lightweight footwear. We’ve introduced our new UltraLite technology, which has all the key performance attributes that OrthoLite is known for in a lighter formulation. What impact do you see the custom and 3D printing business having on OrthoLite? OrthoLite has and will always embrace innovation and new trends. We are further exploring this new technology, but from a mass production standpoint, and as a provider of OEM branded insole solutions it’s not yet where we need it to be when it comes to capacity and speed. It’s an exciting innovation, but the key

OrthoLite has invested signifcantly in overseas production, such as this facility in Vietnam.

will be the ability to scale it for mass production. Can you talk about your sustainability initiatives? Twenty years ago we pioneered sustainable insole technology with our first formulation that utilized recycled rubber and now OrthoLite humbly boasts the largest suite of eco-technology. We take the insole/outsole postproduction waste and grind it into our proprietary formulations. It’s part of our secret sauce. Today, our focus is on closing the loop and achieving zero waste across our global production regions. We’re sustainable in both production and product and have opened our own recycling facility to fully repurpose and reuse all post-production waste. We’re now commercializing this 100 percent recycled technology in parallel to our new eco Hybrid technology – patent pending – where we take post-production waste foam and mix it into all of our technologies during the actual formulation process. We have created a unique way to reuse the waste while retaining performance, truly a game change in insole technology. So what’s next for OrthoLite? Another interesting trend is what we refer to as investment engineering versus cost engineering. Over the last few years some brands made the fatal error of trying to down spec their products to save cost and increase margins versus making the right investments to improve product performance. Consumers can tell the difference and those brands that continued to invest in the best materials and innovation are the ones winning and taking market share. n

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RUNNING INSIGHT

Tweets, Tariffs and Tit for Tat The footwear business responds to the latest round of tariffs. / By Mark Sullivan

he trade impasse between the United States and China is finally impacting the running market. Here is a summary of the latest back and forth developments on the subject. Keep in mind that the situation is very fluid and is changing hourly. • The two countries with the largest economies in the world have been negotiating over what U.S. companies see as flagrant intellectual property theft by Chinese companies and regulations that force U.S. companies to transfer technology to Chinese firms. • While those are the two key issues, the battle is being fought over tariffs imposed by President Donald Trump on goods imported from China. To date most of the tariffs have been imposed on industrial products such as steel, but the most recent set of tariffs announced last week are striking closer to home in the sporting goods industry, hitting categories such as hats, gloves and components for fitness gear. • And if the next round of tariffs that President Trump has threatened in e-mails,

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set at 25 percent, take effect, prices on athletic footwear made in China are sure to rise. Meanwhile, in response to that, China has said it will increase tariffs on $60 billion worth of goods made in America and shipped to China. Important tariffs are paid by American companies at the border on goods they import from China. If a company faces increased tariffs, they can pay and impact their bottom line, or raise prices to retailers and ultimately consumers to defray the costs of increased tariffs. “While we welcome the administration’s tough position on intellectual property protection and transfer of technology, the tariffs present a problem for our industry,” says Tom Cove, president and CEO of the Sports & Fitness Industry Association. Cove and others in the know say that the tariffs will inevitably result in higher prices for American consumers. Meanwhile, on the supply chain front American brands are scrambling to move production out of China to other countries (see chart on page

“While we welcome the administration’s tough position on intellectual property protection and transfer of technology, the tariffs present a problem for our industry.” TOM COVE, SFIA

22 and sidebar on Brooks Running). “Companies have been diversifying out of China for the past 10 years,” says Steve Lamar, EVP of the American Apparel & Footwear Association. “Nike led the way and others have followed.” The Vietnam Story

Lamar says that Vietnam has been “the story” for the past couple of years as companies diversify out of China, so much in fact that factories in that country are near capacity, which could limit future growth. Indonesia and Cambodia are the two countries most likely to take on production from athletic footwear companies that leave China.

RUNNING INSIGHT

Tariffs Tit for Tat (continued) Athletic Footwear Imports By Country (Data is in pairs)

SOURCE: AAFA, from OTEXA (Commerce Department).

“It’s like bumper cars,” Lamar says. “Production is being bumped from one factory and one country to another. This is the biggest sourcing disruption we’ve seen in a generation.” Lamar says the next round of proposed tariffs, which would

increase rates on athletic footwear from China by 25 percent, would take effect in approximately 80 days. “There is a process,” he says. “It needs to be posted, there will be hearings and lobbying. If it happens, the tariffs would go into effect by

the end of July.” W h i le m a ny fe a r p r ic e increases and sourcing disruptions, other are hoping that cooler heads will ultimately prevail. Said one executive experienced in athletic footwear sourcing in China: “Right now, there is a

lot of posturing on both sides. Trump is trying to convey to the Chinese that they cannot expect business as usual where they agree to terms and then do whatever they want. This situation will not be resolved easily or quickly.” n

Brooks Pulling Production from China THE LEADING RUNNING SHOE brand has had it with the uncertainty over production in China. Brooks CEO Jim Weber told Running Insight last week that the brand plans to remove all production from China by the end of the year, moving most of it to Vietnam. In fact, Weber says its longtime partners in China have already begun construction on new factories in Vietnam to accommodate the shift in production. “It’s been an escalating journey with our production,” Weber said. “We’ve always engaged in alternatives planning and now it’s time to put those plans in place.”

Weber said that last year 45 percent of the brand’s shoes were made in China, with Vietnamese factories accounting for most of the rest. Brooks has sourced in Vietnam for about five years, Weber said. In 2018, Brooks paid $19 million in duties on shoes imported from China based on a duty rate of 20 percent, the company said. If the tariff goes up 25 percent as President Trump has threatened, Brooks will pay 45 percent on Run footwear out of China, which would result in additional tariffs of $23 million in 2019 or $42 million total on the same import volume as 2018.

Brooks said it would pay $47 million assuming there’s a 10 percent volume increase in 2019. Weber said the factories Brooks uses in China and Vietnam employ about 18,000 people and Brooks itself employs about 50 in Asia, including a leadership team to manage production flow and quality control. Weber said Brooks has long-term relationships in Asia and does not “make the same shoe in three different factories like some brands.” “We’ve had relationships going back 10-15 years and like to make decisions that are based on five-year plans.” n

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RUNNING INSIGHT

running shorts Brooks Running Announces Partnerships, Opens New Distribution Center and Marine Corps Historic Half, which will take place in Fredericksburg, VA. The sponsorship also includes support of other Marine Corps Marathon events, including the 17.75K, Run Amuck, Belleau Wood 8K, Recon Ruck, Quantico Tri, Quantico 12K, Turkey Trot and Medal of Honor 8K. Brooks Opens Distribution Center

Brooks Partners With International Front Runners

Brooks Running and International Front Runners, the global network of lesbian, gay, bisexual, transgender, queer (LGBTQ+) running clubs, have entered into a two-year partnership to promote inclusion in running. Together, the two organizations will support the growth of Front Runners clubs in cities beginning in the U.S. and Canada, inviting more runners to join the community and experience the power of the run. International Front Runners, which began in San Francisco in the 1970s, is one of the oldest and largest LGBTQ+ athletic organizations in the world. It is comprised of more than 110 running clubs in 20 countries, including the U.S., South Africa, Germany and China. As part of the partnership, Brooks and International Front Runners will work collaboratively to find and fund opportunities with local clubs to enable more runners to experience the run and take part in the Front Runners community; examples include hosting membership drives and community fun runs and organizing local events. Brooks will provide donations this year and next, beginning with support for its hometown club, 26

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Seattle Front Runners. Donations will be announced on a rolling basis through 2020. In celebration of the partnership with Front Runners, Brooks will debut a limitededition Run Proud Collection of apparel and accessories featuring designs that honor LGBTQ+ runners and champion the inclusivity of running. The collection, which launches this week, gives runners a way to express themselves and the value of inclusion throughout the year. Marine Corps Marathon Extends Deal

Building on their more than 20-year history, Brooks Running and Marine Corps Marathon Organization (MCMO) have extended their relationship for another five years. Over the past 20 years, Brooks and MCMO have cheered on more than 370,000 runners who have crossed the finish line at the historic marathon, including 33 runners who have completed every Marine Corps Marathon since 1999, the year this partnership commenced. Under the agreement, which extends the partnership until 2024, Brooks will be the footwear and apparel sponsor of the Marine Corps Marathon, held annually in October in Arlington, VA, and the nation’s capital,

Brooks Running has opened a distribution center in Whitestown, IN, that will serve as the company’s North American distribution center and will employ more than 130 people by 2023. The new distribution center spans more than 400,000-square feet with expansion capability to facilitate future growth. It features state-of-the-art systems and automation to improve order accuracy and more efficiently flow inventory in and out of the center.

Mizuno Americas Returns to Profitability

Mizuno Corp. recently reported that its America region returned to profitability for the first time in four years, although sales fell for the third straight year. The Americas region’s operating income in the year ended March 31 reached ¥160 million against a loss of ¥210 million the prior year. Revenues slumped 10 percent to ¥18.0 billion from ¥20.0 billion. In its statement, Mizuno said sales in the Americas decreased due to a sales strategy emphasizing profitability. Profitability was also helped by a focus on the optimization of its corporate structure. The statement noted that Mizuno Americas will be looking to expand sales by developing new products while also focusing on a reduction in fixed costs. Companywide, Mizuno’s revenues in the year were down 3.9 percent and operating profit was down 5.2 percent. Net income was up 23.1 percent. n

RUNNING INSIGHT

running shorts Toth Named VP at Saucony

SAUCONY HAS NAMED JOE TOTH VP–U.S. sales. In his new role, Toth, formerly GM of Saucony Canada, will oversee all facets of U.S. footwear and apparel sales, including long-range planning, go-to-market strategies and building successful partner relationships within the U.S. region. Toth

will report directly to Saucony president Anne Cavassa. Toth has more than 20 years of experience in sales, marketing, management and operations. He joined Saucony in 2013 and was most recently GM of Saucony Canada, where he oversaw the strategy and execution for all aspects of the brand’s Canadian business. Prior to that, he was key accounts sales manager for the Canadian region. ASICS Reports First Quarter Growth

ASICS recently reported growth in the first quarter of 2019 within ASICS North America (ANA), which includes the United States, Canada and Mexico. This growth was driven by strong sales

of performance running and tennis footwear, along with product launches within the performance running and Sports Style categories. ASICS saw an increase in sales of Legend products, especially the latest model in the GT-2000 series, along with successful product launches, including the Metaride and Gel-DS Trainer 24 models. ASICS says it continues to see growth across key retail channels, citing 3.3 percent growth year-over-year. This increase is attributed to successful product launches during the quarter, which drove consumers to our retail partners and into ASICS stores. n

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RUNNING INSIGHT

running shorts Fleet Feet Converts Two Stores in Tennessee and Mississippi PERFORMANCE RUNNING OF WEST Tennessee in Jackson, TN, and Trails and Treads in Tupelo, MS, have both converted to become Fleet Feet Sports stores. In both cases, current ownership will remain. Co-owner Danny Crossett will remain owner of the Performance Running of West Tennessee, which he opened with co-owner Harris Magruder in 2015. And Magruder, founder and owner of Trails and Treads, will remain owner of that location, which he first opened 1997. “Danny has a career built on service,” says Robyn Goby, VP–development for Fleet Feet. “That innate passion for helping others is a quality we see in all our successful Fleet Feet owners.” A native of Tennessee, Crossett, after

graduating high school, joined the Air Force,. After four years of working on nuclear missiles in Wyoming he returned home to begin a three-decade career in the Postal Service. After he retired in 2011 he became a personal trainer, eventually crossing paths with Phil Horner, the owner of the Fleet Feet in Kingsport, TN. The store becomes the twelfth Fleet Feet location in Tennessee. Regarding Magruder, Goby says: “Harris has a passion for running and his community and for over 20 years has provided great service, products and programs to the Tupelo running community.” Magruder started his career as a salesman, working for a steel coil manufacturer in the 1990s. He took a side sales job opportunity,

selling fleece to pop-up shops and Christmas villages during the holidays. The success of this led him to open up his own outdoor store, Ascent Outdoor, in 1997. Over time, Magruder evolved the store’s primary focus from outdoor to running, and officially changed the name in 2004 to Trails and Treads. “There’s been a lot of changes to retail and running since I first opened in 1997 and partnering with Fleet Feet ensures I’m able stay ahead of those changes,” says Magruder. “Fleet Feet’s approach to outfitting the runner from head-to-toe with the right products and information, as well as its focus on building strong running communities, aligns with my approach.” n

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