20961632-footwear-sector-analysis

8/7/2019 20961632-Footwear-Sector-Analysis

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A Report

On

Footwear Sector Analysis

Guided by: - Prof. Venkatraman Submitted by:-

Akhilesh tripathi (8103)

Ankit Sruvastava (8105)

Brijendra Pal Singh

(8116)

Dipti Pathak (8121)

Gaurav Agarwal (8124)

Priyanka Mahajan (8146)

Sarvesh Jaiswal (8161)


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Footwear Industry

Market definition:

The footwear market consists of the total revenues generated through the sale of all type of

mens, womens and childrens shoes. The global figure includes the Americas, Asia Pacificand Europe. Americas consist of Brazil, Canada, Mexico and US, while Asia pacific consist

of Australia, China, India and Japan. Europe comprises of Czech Republic, France,

Denmark, and Germany etc.

ATHLETIC FOOTWEAR INDUSTRY


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Global Scenario:

Footwear is huge and increasingly diversified business driven by a host of demographic lifestyle,

and fashion trends. It would not be exaggerating to say that globally the footwear industry ishaving expanding market rather it is axiomatic. As the world population increases so the living

standards of people rise thus increasing the demand of footwear.

According to SATRA (Shoe and allied trade research association, UK) the global trend of

footwear industry are as follows.

Consumption

(Millions of pairs)

1998 2000 2002 2004 2008

Asia (all) 4744 5222 5474 5840 6528

Americas 3011 3274 3279 3433 3611

Europe (all) 2239 2396 2544 2717 2886

Rest of the world 1086 1187 1172 1317 1399

Total 11080 12079 12469 13307 14424

According to the report published by SATRA, Asia including India Subcontinent is the largest

market for FOOTWEAR in terms of consumption. Next to Asia is Americas and then followed

by Europe and rest of the world.

In monetary terms the market shows a different picture as Asia lies behind Europe and North

America but irony to the situation is that Asia is the leader in terms of footwear consumption and

market. It is merely because of the population density in the Asia.

China is the largest producer and exporter of shoes and it is also the biggest consumer of

footwear by virtue of the size of its population.

Overall the footwear production is highly concentrated in Asian market and the consumption in

the US and European market.


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Table: showing the breakdown of major consuming countries and their areas.

Country Consumption

Millions/ pairs

Population

Millions

Per Capita

Paris/ Person/year

USA 1939.7 290.3 6.68

Japan 584.4 127.2 4.60

EU 1666.5 380.2 4.38

Canada 122.4 32.2 3.8

Taiwan 82.7 22.6 3.66

Australia 72 19.7 3.65

Korea 165.4 48.3 3.42

Brazil 483 182 2.68

Thailand 144.4 64.3 2.25

Mexico 180.4 104.9 1.72

China 2768.7 1286.9 1.71

India 1687 1049.7 1.61

Indonesia 350 234.9 1.49


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Indian Scenario:

The Footwear Industry is a significant chunk of the Leather industry in India. India ranks second

among the footwear producing countries next to China. The industry is labor intensive and is

concentrated in the small and cottage industry sectors. While leather shoes and uppers are

concentrated in large-scale units, the sandals and chappals are produced in the household and

cottage sector. India produces more of gents footwear while the worlds major production is in

ladies footwear. In the case of chappals and sandals, use of non-leather material is used to

manufacture these in the domestic market.

Reputed global brands like Florsheim, Nunn Bush, Stacy Adams, Gabor, Clarks, Nike, Reebok,

Ecco, Deichmann, Elefanten, St Michaels, Hasley, Salamander and Colehaan are manufactured

under license in India. Besides, many global retail chains seeking quality products at competitive

prices are actively sourcing footwear from India.

The industry is on the edge of adopting the modern and state-of-the-art technology to suit the

exacting international requirements and standards. The Indian Footwear Industry is all set for

leveraging its strengths towards maximizing benefits. Strength of India in the footwear sector

originates from its command on reliable supply of resources in the form of raw hides and skins,

quality finished leather, large installed capacities for production of finished leather & footwear,

large human capital with expertise and technology base, skilled manpower and relatively low

cost labor, proven strength to produce footwear for global brand leaders and acquired technology

competence, particularly for mid and high priced footwear segments. India has the competitive

advantage over other countries in the form of materials and skilled manpower.


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The Indian footwear retail market is expected to grow at a CAGR of over 20% for the periodspanning from 2008 to2011. Footwear is expected to comprise about 60% of the total leatherexports by 2011 from over 38% in 2006-07. Presently, the Indian footwear market is dominatedby Men's footwear market that accounts for nearly 58% of the total Indian footwear retailmarket.By products, the Indian footwear market is dominated by casual footwear market. As footwearretailing in India remains focused on men's shoes, there exists a plethora of opportunities in theexclusive ladies' and kids' footwear segment. The Indian footwear market scores over otherfootwear markets as it gives benefits like low cost of production, abundant raw material, and hashuge consumption market.

India is now a major supplier of leather footwear to world markets and has the potential to rivalChina in the future (60% of Chinese exports are synthetic shoes).

India is often referred to as the sleeping giant in footwear terms. It has an installed capacity of1,800 million pairs, second only to China. The bulk of production is in mens leather shoes andleather uppers for both men and ladies. It has over 100 fully mechanized, modern shoe makingplants, as good as anywhere in the world (including Europe). It makes for some up market

brands including Florsheim (US), Lloyd (Germany), Clarks (UK), Marks and Spencer (UK).

The Export targets from 2007-08 to 2010-11 (In Million US$)

Product 2006-07 2007-08 2008-09 2009-10 2010-11

Leather 688.05 726.85 785 847.8 915.63

Footwear 1212.25 1967.88 2597.6 3428.83 4526.05

Garments 308.98 358.53 372.87 287.78 403.3

Leather

Goods

690.66 733.34 798.69 870.06 948.04

Saddlery &

Harness

81.85 105.66 127.85 154.7 187.19

Total 2981.79 3892.26 4682.01 5689.17 6980.21

Approximately 4000 units are involved in manufacturing footwear in India. The major chunk ofthe industry is contributed by small scale units with the total production of 55%. The totalturnover of the footwear industry including leather and non-leather footwear is estimated atRs.8500-9500 crores including Rs.1200-1400 crore in the household segment. India's share inglobal leather footwear imports is around 1.4% Major Competitors in the export market forleather footwear are China (14%), Spain (6%) and Italy (21%).


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The footwear industry exists both in the traditional as well as modern sector. While thetraditional sector is spread throughout the country with clusters of concentration catering largelyto the domestic market, the modern sector is largely confined to selected centers like Chennai,Ambur, Ranipet, Agra, Kanpur and Delhi with most of their production for export.Assembly line production is organized, and about 90% of the workforces in the mechanizedsector in South India consist of women. In fact, this sector has opened up plenty of employmentopportunities for women who have no previous experience.

STATISTICAL INFORMATION:


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Indias Exports of Footwear Country-wise Share in Total Exports (2007-08)


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Major Markets for Indian Footwear:

The European Union and the USA are the major markets for Indian Footwear accounting for79.95% and 9.22% share respectively in Indias total footwear export. The major markets forIndian Footwear are Germany 16.66%, UK 16.31%, Italy 15.32%, USA 9.22%, France 7.81%,Spain 5.10%, Netherlands 4.91%, Portugal 2.50%, UAE 2.48% and Denmark 1.18%. These 10countries together accounts for nearly 81.49% of Indias total leather products export.

Footwear Industry PEST AnalysisPolitical

Recent merger between Adidas and Reebok

home market lobbying/pressure groups

Very few sporting events apart from cricket fixtures to attract customers

Economic

Marginal share of 2.44 percent in global trade worth US$ 97.606 billion

Estimated target of 12 bn $ (7bn $ export + 5 bn $ domestic) trade by the year 2012 overseas

economies and trends

The Indian footwear retail market is expected to grow at a CAGR of over 20% for the period

spanning from 2008 to 2011. Footwear is expected to comprise about 60% of the total leather

exports by 2011 from over 38% in 2006-07

Growing middle class and growing buyer power leading customers to look for branded shoes.

seasonality issues sports is more of a rage in summers

Lack of targeting of market segments for kids and women

Social

lifestyle trends upward shift


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demographics

consumer attitudes and opinions changing favourably towards branded shoes

media views

consumer buying patterns

fashion and role models

buying access and trends advertising and publicity

Technological

Competing technology development

India offers benefits like low cost of production, abundant raw material, and a huge

consumption market

research funding in design and requirements

manufacturing maturity and capacity

information and communications consumer buying mechanisms/technology

innovation potential

technology access, licensing, patents

SWOT ANALYSIS OF INDIAN FOOTWEAR INDUSTRY

MAJOR PLAYERS IN FOOTWEAR MARKET

PUMA

NIKE


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WOODLAND

ADIDAS

BATA

RELAXO

LIBERTY

ACTION


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Companies Profile:

ADIDAS: Adidas ltd is a German sports apparel manufacturer and part of the Adidas group,

which consist of Reebok sportswear company, Taylor Made-Adidas golf company, and

Rockport. Adidas is the largest sportswear manufacturer in Europe and the second largest

sportswear manufacturer in the world. Companys revenue for 2006 was listed at about US $

13.625 billion and the 2007 figure was listed about $ 15.6 billion. It has more than 170

subsidiaries guarantee marketplace presence for Adidas products around the world.

Liberty: Liberty shoes ltd. is a leading leather shoes brand and is engaged in the manufacturing,

supplying and exporting of the footwears. It is the only Indian leather shoe brand that occupies

fifth ranking among the top shoes manufacturing companies in the world.

Reebok: Reebok specializes in the design, marketing and distribution of sports and fitness

products including footwear, apparel and accessories, as well as footwear and apparel for non-

athletic use. The company has three main product categories: Rbk, Performance, and Classic.

Each of these product categories features product offerings for both men and women that are

designed for specific consumer groups. Reebok has operations in the UK, Europe and in variousand in various Asian countries. It is headquartered in canton, Massachusetts. The acquisition of

Reebok by Adidas-Salomon was completed in January 2006.

Bata: Bata industries is a specialized division of the worlds largest shoe manufacturer: the Bata

shoe Organization (BSO). Bata industries has operations and production facilities in most of the


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countries worldwide. Bata India Limited is the largest footwear retailer in India. Bata India is a

manufacturer of footwear. Types of footwear offered by the company include rubber, canvas,

leather and plastic footwear. The company also markets apparel under the brand names of North

Star, Power and Ambassador. Bata India has five manufacturing plants and acquires its leather

from two tanneries in Mokamehghat (Bihar) and Batanagar. It is headquartered in West Bengal,

India.

Relaxo: Relaxo entered into footwear industry in 1976. It started off with the manufacturing of

Hawaii slippers and subsequently diversified into manufacturing casuals, joggers, school and

leather shoes. Relaxo has the capacity to manufacture over 100 million pairs, per annum. It has

the customer base of around 100 million.

COMPARISON OF COMPANIES:

Companies Average Growth Rate(2005-

08)

Nike 10.5%

Adidas 22.46%

Bata 7.8%

Liberty 11.16%

COMPARISON OF COMPANIES (PORTERS MODEL):

Basis of

comparison

Nike Adidas Relaxo Action Bata Liberty

Barriers to Absent Absent Absent Absent Absent Absent


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Entry

Bargaining

Power of

buyers

Low Low High High High High

Bargaining

power of

suppliers

Low Low High High High High

Threats of

Substitute

High High High High High High

Rivalry

among the

existingcompetitors

High High High High High High

SUPPLY CHAIN IN FOOTWEAR

In nutshell the supply chain in footwear starts from the farmers end and ends with finished goods

in the customers hand. The farmers who tame the animals send the skins to skins & hides

collector in their respective area, then these raw materials are sent to the tannery which

transforms these skins into raw material for the shoe manufacturing companies, which in turn

convert this into finished goods in the form of footwear.

Further these footwear are sent to warehouse of the manufacturing companies, after that these

goods are supplies to customers through various channel members like retailers, wholesalers,


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retail chains, department stores. The diagrammatic illustration is shown below:

KEY ISSUES:

Employment of children in the footwear industry: Children are employed in the

manufacturing of shoes, particularly in the Agra area of U.P. where approximately 25000

children are estimated to be involved in the process of shoe making for domestic as well as

international markets. These children are between the age group of 10 15 mainly employed for


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the assembling shoes process. Furthermore these children are exposed to physical factors like

leather dust, benzene and p-tert butyl phenol, poor illumination. Thus these children suffer from

problems like respiratory problems, skin infections etc.

Occupational Health Hazards in Footwear Industry:

Occupational Cancer: Studies have proved that employment in the shoe production and repair

plants is associated with enhanced risk for cancer. The exposure to leather dust which contains

several harmful compounds can lead to lung cancer to both male and female. It also causes

aplastic anemia, leukemia and other health problems.

Neurotoxicity: The organic solvents present in the adhesives and glues are mostly neurotoxic,

causing shoemakers paralysis that is more or less form of paralysis.

Injuries: The children employed in the footwear industry usually carry out the sewing process

manually. During this they are susceptible to injuries from sharp special needles.

Exposure to adverse physical factors: As discussed above about 80% of the child labours work

on contract basis, thus they do some extra work at their home in order to generate some money

where they work in poor illumination which results in eye-strain, headache and communicable

diseases.

Skin Ailments: Footwear workers develop dermatitis due to exposure to chemical present in the

additives used in processing of leather and rubber footwear which results in occupational vitilgo.

MARKET FORECASTS

Market Value Forecast:


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In 2010, the Indian footwear market is expected to have a value of $4,380.3 million, an increase

of 62.1% since 2005. The compounded annual growth rate of the market in the period is to be

10.1%

India Footwear Market Value Forecast; $ million, 2005-10

Year $ Million INR Billion Growth

2005 2701.5 119.2 9.10%

2006 2960.4 130.6 9.60%

2007 3256 143.6 10%

2008 3589.7 158.4 10.2%

2009 3963.8 174.9 10.4%

2010 4380.3 193.2 10.5%CAGR,2005-10 10.1%

Market Volume Forecast:

In 2010, the market is expected to have a volume of 3.2 billion pairs, an increase of 59.2% since

2005. The compound annual growth rate of the market volume in same period is predicted to be

9.7%

India Footwear Market Volume Forecast: Pairs billion, 2005-10

Year Pairs billion % Growth

2005 2.0 8.80%

2006 2.2 9.40%

2007 2.4 9.70%

2008 2.6 9.80%

2009 2.9 9.90%

2010 3.2 9.90%

CAGR, 2005-10 9.7%


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RECOMMENDATIONS

Prohibit employment of Children in Footwear Industry

Provide hygienic environment for workers in the industry

Indian Footwear companies should opt for modern technologies

Companies like Bata, Relaxo, Liberty should focus on Upper class customers

also.

20961632-footwear-sector-analysis

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