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Indian Footwear Industry - Dec'13


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Indian Footwear Industry - Dec'13

  1. 1. Indian Footwear Industry All rights reserved. This publication is protected by copyright. No part of it may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic mechanical, photocopying, recording or otherwise without the prior written permission of the publisher.
  2. 2. Indian Footwear Industry - Overview Figure-1: Share of Leather & Non- Leather Footwear Footwear Production (2012-13) 49% 51% Non-Leather Footwear Leather Footwear Source: Council for Leather Exports With the advent of globalization and fast changing retail scenario, the footwear market has seen a wide transformation over the past years. The entry of numerous international players has resulted in providing a significant boost to the Indian footwear market. Moreover, de-licensing of the market is also creating expansion opportunities for the production capacities in modern state-of-the-art units. India is the second largest global producer of footwear after China, accounting for 13% of global footwear production. India produced 2065 million pairs of footwear in 2012-13 of which the production of leather footwear was about 1009 Million pairs (including produc- tion of leather shoe uppers), and production of non-leather footwear was about 1056 Million pairs. Nearly 95% of India’s production goes to meet its own domestic demand. Some of the major production centers of footwear in India are :• • • • • • • • Chennai, Ranipet and Ambur in Tamil Nadu Pune and Mumbai in Maharashtra Kanpur and Agra in in U.P. Ludhiana and Jalandhar in Punjab Delhi Sonepat, Faridabad and Karnal in Haryana Kokata in West Bengal Ernakulam and Calicut in Kerela Indian Footwear Industry
  3. 3. Indian footwear industry was dominated by the unorganised sector with a share of 70% in 2012. The unorganized segment comprises of small cottage industry based manufacturers. The organized sector comprising of major domestic and international players like Bata, Liberty, Adidas and Metro etc, accounted for only 30% of the market. Figure-2: Share of Organized and Unorganized Sector in Footwear Market (2012) 30% 70% Unorganized Sector Organized Sector Source: Assocham The organized segment is incorporating advanced technologies in footwear production to increase its share in the market. For instance, Adidas has launched its new shoe, which has superior cushioning, optimal fit and temperature independence, in India. The new technology in Energy Boost is based on an innovative development process created by the sports company’s partner BASF. In the product, the solid granular material (TPU) is blown up and turned into thousands of small energy capsules that make up the footwear’s distinctive midsole. With such developments, the share of organized sector in footwear market is rapidly expected to grow at a high rate in the future from a current rate of 10-15%. Indian Footwear Industry
  4. 4. Market Size and Growth Figure-3: Footwear Market (Crore INR), 2012 & 2015 The domestic footwear market is being driven by growing fashion consciousness due to increased disposable income among urban middle-class and abundant availability of raw materials in the market. 38700 22000 2012e 2015f Source: Assocham The Indian footwear market was estimated at INR 22,000 Crore in 2012 and is expected to touch INR 38,700 Crore by 2015, growing at a CAGR of more than 20%. Previously, the market has been growing at an annual average rate of about 15%. Further, the market is expected to grow at an average annual rate of 25% in the future. The domestic footwear market is being driven by growing fashion consciousness due to increased disposable income among urban middle-class and abundant availability of raw materials in the market. Indian Footwear Industry
  5. 5. Market Segmentation Figure-4: Footwear Market by Type (%), 2012 The footwear market can also be bifurcated into men, women and kid’s footwear segments. 10% 61% 7% Casual Footwear Mass Footwear Premium Footwear 22% Sports Footwear Men’s footwear occupies the maximum share in the Indian footwear market. The share of men’s footwear was estimated to be around 55% in 2012, followed by women’s footwear with a share of 30%. Further, kid’s footwear was estimated to capture around 15% share in the market in 2012. Source: RNCOS Estimation Figure-5: Indian Footwear Market by Category (%), (2012) The footwear industry in India is fragmented into casual footwear, mass footwear, premium and sports footwear. The mass footwear usually refers to low price footwear and majorly consists of slippers. On the other hand, casual footwear involves footwear preferred by people for their daily wear in schools, colleges or at the workplace etc. Casual footwear dominates the market followed by mass footwear. The share of casual footwear was estimated to be 61% in 2012. Though casual footwear is expected to dominate the market in the coming years as well, the share of sports and premium footwear is also expected to increase in the coming time. 15% 55% 30% Men’s Footwear Women’s Footwear Kid’s Footwear Source: RNCOS Estimation Indian Footwear Industry
  6. 6. Export and Import Scenario The major markets for Indian footwear exports in 2012-13 were UK with a share of 19.06%, Germany with 13.36% and USA with a share of 11.06%. Nearly 82% of India’s export of foot- wear goes to European countries and USA with exports touching US$ 1456 Million in EU and US$ 227.37 Million in USA in 2012-13. Table-1: India’s Footwear Export Destinations (Million US$), 2011-12 to 2012-13 Country 2012 2011 YOY Growth % Share in Total for 2012-13 UK 391.95 360.48 8 8.73% 19.06% Germany 274.63 353.77 7 -22.37% 13.36% 3 USA 227.37 183.1 24.18% 11.06% 219.79 9 -25.54% 7.96% Italy 163.66 France 156.53 159.27 7 -1.72% 7.61% Spain 101.40 113.85 -10.94% 4.93% Netherlands 91.82 101.72 -9.73% 4.47% UAE 75.46 62.06 21.59% 3.67% Denmark 32.88 24.3 3 35.31% 1.60% Australia 22.41 15.59 43.75% 1.09% Portugal 21.40 28.77 -25.62% 1.04% Japan 18.85 14.63 28.84% 0.92% Canada 14.86 15.01 -1.00% 0.72% South Africa 13.49 14.75 5 -8.54% 0.66% Sweden 11.98 14.08 8 -14.91% 0.58% Others 437.24 396.10 10.39% 21.27% -1.03% 100.00% Total 2055.93 2077.27 Source: DGCI & S In footwear exports from India in 2012-13, Denmark in the European Union showed the highest YOY growth of 35.31%. Though India exports a large proportion of footwear to USA, it still accounts for a small share in the total imports of footwear of USA. On the other hand, footwear in India is mainly imported from China, Vietnam and Italy. The highest share in India’s total imports in 2012 was from China with about 63% of the total imports , as China supplies its goods to India at lower rates and offers a wider variety. Indian Footwear Industry
  7. 7. Opportunities & Challenges Opportunities Foreign Brands seeking collaborations with Indian Players • Tata International has teamed up with Wolverine Brands of the US to enable the US manufacturer build base in the Indian market. The JV plans to kick off with a chain of stores of CAT shoes, to be followed by a dozen other Wolverine brands. Opportunity to provide low cost finished leather to foreign players setting base in India Luxury segment customers vouching for quality Large unorganized women footwear segment offers potential to footwear majors • Bata is planning to shift its focus to women to power its business. It will introduce concept stores for women in India shortly. It will also be introducing a new ladies footwear brand called Sundrops in India. Growing E-commerce trend in Footwear Category Low per capita consumption compared to other nations • Per capita consumption of footwares in India is lowest among BRIC countries at US$ 7.2 (China US$ 25.7, Russia US$ 81.5 and Brazil US$ 107.3) . Challenges International Brands Facing Problem of Getting Adequate Distribution • Recent entrant Skechers of the US is in 200 multi-brand outlets, but is waiting for FIPB clearance to open stores of its own. High Tax Rates Leading to Higher Prices • High customs and excise along with local duties like octroi and VAT lead to almost 35% of the sale price of the footwear. Increasing Imports from China affecting Domestically Produced Products Fake Products of Low Quality Crippling Growth Indian Footwear Industry
  8. 8. Major Players Bata is the leading player in the mass and casual footwear market in India. It’s share was estimated to be around 15% in 2012, followed by Liberty and Relaxo with a share of 10% and 7.5% respectively. Figure-7: Share of Major Players in Mass & Casual Footwear Market (2012) 15.0% 10.0% 7.5% 67.5% Bata Relaxo Liberty Others Source: RNCOS Estimation Note: Share Corresponds to the Organized Sector In the sports footwear market, Reebok dominated the market with a share of 50% in 2012, followed by Adidas with 20% and Nike with 15%. Figure-8: Share of Major Players in Sports Footwear Market (2012) 15.0% Reebok Adidas 15.0% 50.0% Nike Others 20.0% Source: RNCOS Estimation Note: Share Corresponds to the Organized Sector Indian Footwear Industry
  9. 9. Over the past few years, many premium brands have entered or have plans to enter into the Indian market. August 2013: Pavers England plans to up its ante in India. It is planning a further US$10 Million investment within the next 12-18 months on top of its US$10 Million already invested in buying out its franchisee. May 2013: Ruosh which is in the men’s premium footwear space is planning to take its store count to 20 in 2013. The brand currently has eight stores across Bangalore, Mumbai, Chennai and New Delhi. April 2013: Premium Italian footwear brand Geox has entered into a retail and distribution arrangement with Delhi-based G&B Footcorp to set up its mono brand stores. G&B Footcorp has set up three stores and plans to add two more stores in the current fiscal year. It also plans to have at least 20 stores in next three years. January 2013: C&J Clarks International has plans to expand the number of standalone stores in India to 100 in the next five years. Indian Footwear Industry
  10. 10. Future Outlook Keeping in view its past performance, the industry’s inherent strengths and growth prospects, the footwear industry aims to augment production, thereby enhancing its exports from the current levels. According to Assocham, exports are expected to grow at a CAGR of 15% in the next 5 years. The industry will continue to focus on the European countries and the US markets for exports. With more and more Indian woman joining the workforce, the ladies footwear market in all the categories/segments will grow rapidly throwing up huge opportunities in an area yet to be fully tapped by various players. The government is considering the creation of training centres where the laborers can be imparted training and making efforts towards provision of new and advance technology to the footwear industry so that it can become more competitive. Further, it is looking into the fact that the footwear industry needs to improve cost competitiveness through value chain efficiencies. There should be implementation of best practices at a firm level and at the sectoral level through cluster based approach by setting up cross-industry clusters and supporting them through governmental interventions on infrastructure like port clearances and power. All this, would increase the efficiency and scale of operations of the industry and would attract more and more FDI. The footwear sector had seen only INR 500 Crores of FDI in 2012 (Which is only 0.65 percent of India’s total FDI in 2012). The total imports of footwear of US in 2012 were 2,28,19,69,730 pairs, with majority of imports being from China. The share of India in total footwear imports of USA was just 0.6%, creating an opportunity for India to further increase its exports to USA in the future, by warding off competition with China through supply of better quality products. Indian Footwear Industry
  11. 11. Looking for an in-depth study Our Proposition RNCOS is a leading Business Consultancy firm helping its clients to enter new geographies and in attaining growth by developing market strategies for them. GROWTH PARTNER We help you make informed decisions through the practical application of research, hand holding you to your success… Critical questions that businesses need to address: • • • • Where should you set up your business? Who should be your distributors? What is the current market structure & size? Who should be your customers? We understand your immediate needs and your long-term goals and objective and work with you on how to accomplish them. RNCOS blends the best of strategy consulting with the best of market research to provide organizations with accurate, succinct answers to their most important business questions. Our offerings Product Segments Market Insights • • • What is the market size Structure of the market Who are buyers • • Identification Competitive Assessment • Most suitable distributors and channels for your business. • Analyzing their strength, credibility. Similar products in the market Features, attributes & market share of these products • Customer preferences • Price range of these products • Financial & strategic analysis of existing competition • Acceptance level among customers Indian Footwear Industry
  12. 12. For more information on how we can work with you, contact MARKETING TEAM RNCOS E mail: Website: Phone: +91 120 4224700 /01 / 02/ 03