The following report examines three key players in the U.S. athletic footwear market: Nike, adidas Group and VF Corporation. By analyzing the industry in terms of size and understanding meta trends, this report evaluates and projects how the future of the industry will grow.

1. Sports
Footwear
Industry
Analysis
Zara YuJung Chen
Ann Marie Puente
Ali Akbar Sahiwala
DM 662 Money & Markets June 15 2014

2. Footwear Industry - North America
Introduction
Leading Company Profiles
Nike is one of the world's leading designer,
marketer and distributor of athletic
footwear, apparel, equipment and
accessories for a range of sports and
fitness activities. Widening product lines
coupled with strong marketing and
innovation has contributed to Nike's rising
market share in the global footwear
market.
Adidas AG produces sportswear and sports
equipment. It offers its products primarily
through three brands: adidas, TaylorMade
and Reebok. Its strong brand portfolio
does not only enhance the market position
but also boost its topline.
V.F. Corporation designs, manufactures, or
sources from independent contractors
various apparel and footwear products
primarily in the United States and Europe.
The company offers outdoor apparel,
footwear and equipment, sports and
adventure footwear and a wide range of
clothing and accessories.
The athletic footwear industry consists of
a various manufacturers, wholesalers and
retailers. Major wholesalers in the U.S.
market own their own brand names and
typically source shoes from independent
manufacturers. The retail segment of the
industry ranges from owners of large
multinational chains to small local
businesses.
Athletic shoe companies have been around
since the late 1800’s, and have evolved
over the centuries.
Market Aspects
Concentration:
Barriers to Entry:
Competition:
Supplies:
Advertising:
Distribution:
Pricing:
Manufacturing:
Customer Appeal:
The footwear industry is highly concentrated, with the top
50 companies generating about 75% of industry revenue.
Relatively high barriers to entry exist due to firms
commanding strong brand loyalty. Additionally, economies of
scale plays a major role in how companies operate, as
production costs have to be minimized, research and
development budgets must be considerable and outreach
must be very strong to compete effectively.
A range of competing firms dominate the market, each of
which aims to target specific segments according to price,
sport category, styling and age factors. Offerings from fast
fashion and lifestyle brands serve as external competitors
and are impacting sales of athletic footwear.
Typical athletic shoes are constructed from raw materials
like cotton, rubber and foam. All these major inputs are
commodity goods sourced internationally.
Sportstars and celebrities sign million dollar product
endorsements annually. Billions are spent in advertising
around main sporting events, throughout the media.
Shoe stores compete with department stores, mass
merchandisers, apparel retailers, Internet retailers, and some
shoe manufacturers.
Price remains an important consideration though product
quality, innovation and performance levels are increasingly
being demanded by a more sophisticated customer base.
Major firms have experienced considerable public pressure
regarding labor practices of their suppliers and
manufacturers, forcing them to set up standards to ensure
quality of product, decent factory working conditions and
better logistics.
Many brands are focusing on female consumers, who desire
the same level of high-quality sportswear but with fashion
appeal.
DM 662 Money & Markets Zara YuJung Chen | Ann Marie Puente | Ali Akbar Sahiwala
Key Industry Development Milestones
Athletic shoe companies have been around since the late 1800’s,
and have evolved tremendously over the time.
Liverpool Rubber Company developed the Plimsoll shoe
The J.W. Foster company formed - predecessor of Reebok
Keds company formed
Converse All Stars first produced
Adi Dassler equipped Jesse Owens of the USA Olympics team with shoes
Adidas formed
Nike formed
Air Jordans’ first produced
Nike has dominated as the leading athletic shoe
1800’s
1830’s
1895
1916
1917
1936
1948
1964
1980
2000’s
DEFINE
2
50.0 %
1.9 %2.9 %
6.3 %
8.7 %
30.2 %
Men
Female Infant
Male Infant
Girls
Boys
Women
Customer Breakdown in the U.S.
Source: Athletic Footwear Industry Report

3. 18
10
12
14
16
20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Billion U.S. Dollars Source: © Statista 2014
Consumer purchase of footwear in the U.S. 2002 to 2012
$ 185 Billion
$ 75 Billion
$ 14 Billion
US Athletic
Footwear
Global Athletic
Footwear Market
Global
Footwear Market
Size of Footwear Industry
Source: Athletic Footwear Industry Report
Environment Governance
Connectivity
Security
Demographics
Health & Wellness
- Energy Escalation
- Water Inadequacy
- Changing Climate
- Ecosystem Breakdown
- Democracy
Expansion
- Multinationalism
- Ease of Access to
Information
- Free-flowing Finance
- Homogenization of
Global Culture
- Mobility Addiction
- Peace & Terrorism
- Coming of Age in the
Southern Hemisphere
- Women in a New Light
- Illiteracy Persists
- Mutiplying Mega-Cities
- Income Divides & Bridges
- Hunger &
Malnourishment
- The Spread of Obesity
- Disease Outbreaks
Triple Bottom Line Principles
Source: © Nike Sustainability Business Report FY10-11
Footwear Industry - North America
Industry Size & Growth
The U.S. athletic footwear represents
roughly 19% of the global athletic market
and is considered the biggest independent
market in the world. The industry is
measured in terms of monetary value from
footwear components sold.
Sport footwear products purchased were
estimated at 14.14 billion U.S. dollars in
2002. By 2012, the value has increased to
19.03 billion U.S. dollars, a substantial 34%
increase.
Market Insights
Sportswear in the U.S. was a significant
beneficiary of the increasing trend towards
health and wellness. Given this factor,
sportswear is one of the most commonly
counterfeited types of apparel as major
brands are easy to recognize in a generally
commoditized market.
MEASURE
DM 662 Money & Markets Zara YuJung Chen | Ann Marie Puente | Ali Akbar Sahiwala
3
Nike Inc
VF Corp
adidas Group
Under Amour Inc
Skechers USA Inc
Others
U.S. Footwear Market Share 2013
Source: © 2014 Euromonitor International
20.2%
5.9%
5.4%2.9%
2.3%
63.3%
Revenue from 2010 to 2013 AdidasNike Puma
2010
2011
2012
2013
11.52
7.14
1.89
13.43
8.08
1.99
14.54
9.15
2.1
14.54
9.46
1.93
Billion U.S. Dollars
Source: © Statista 2014

4. Footwear Industry - North America
Transparency
The industry is increasingly being evaluated
by how transparent brands are.
One aspect includes how firms manage
their supply chain; they have been
demanding access inside factories for
quality control and benchmarking.
Additionally, firms are engaging with third
party manufacturers to ensure compliance
with human rights groups, allowing
workers to voice their workplace concerns
and deploy fair wage programs to ensure
safety for all.
In terms of reporting to external
community/stakeholders, firms have
exerted effort in reporting sustainability
progress, which is becoming industry norm.
Safety standards like BlueSign are being
increasingly adopted across the industry.
Industry Benchmarks
Product Enhancement
EVALUATE
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4
Safety:
Chemistry:
Sustainability:
Virtualization:
Responsiveness:
Leading Sustainability Efforts
The industry is adopting the BlueSign standard in order to be
safe, specially by eliminating toxic and hazardous chemicals.
The adidas Group was the first global brand to introduce a
total ban on key hazardous chemicals in the workplace.
adidas Group replaced hazardous glues with water-based
chemicals in their athletic shoe offerings and have led in the
development of technical training to help build knowledge of
health and safety in countries such as China and India.
The adidas Group has already committed to phase out the
use of long-chain PFCs by no later than January 1, 2015. As a
further step, the company commits to being 90 percent PFC
free in its products as of June 15, 2014, and 99 percent
PFC-free by no later than December 31, 2017.
Brands are expected and evaluated now based on how
sustainable their internal systems and product offerings are.
Production and design efforts are being conducted via Life
Cycle Assessments, producing footwear with materials and
processes less harmful to environment. Product packaging is
being improved, to minimize materials wastage, distribution
costs and to enhance brand image.
Businesss are investing efforts increasingly to rely on
computer based modeling and displays, meaning less
footwear samples need to be produced. Virtualization thus
not only improves sustainability but also allows for
innovation, speed, cost savings, and thus creativity.
Although evolving, brands are now expected to be
increasingly responsive to consumers. Products are expected
to go beyond the normal expectations and utilize latest
technologies such as wearable technology, syncing to mobile
devices and allowing results to be shared on social media.
Nike has set sustainability design standards that are being seen as industry benchmarks. The following diagram is based of the
framework used by the Sustainability Apparel Coalition, which is based of Nike’s design standards.

5. Footwear Industry - North America
Meta Trends
Overarching meta trends affect various
industries and the athletic footwear
market is no exception. Scarcity of
competing resources makes production and
material development difficult.
Additionally, consumer awareness of major
world issues is increasing exponentially
through the widespread adoption of social
media and technology across the world.
A worldwide lens on sustainability issues
mandates greater regulation. Currently,
voluntary and pilot programs are being
adopted such as the Sustainable Apparel
Coalition. The future will require
mandatory compliance as governments will
have to soon adopt these measures.
Innovation Spheres
PROJECT
REFERENCES
DM 662 Money & Markets Zara YuJung Chen | Ann Marie Puente | Ali Akbar Sahiwala
5
With the advancement of technology and 3D printing, it is questionable whether
footwear manufacturing in 15 years will exist as it does today. For instance, 3D
printers in-house also allow for quick prototyping rather than waiting for a
sample from the factory.
In addition, technology will serve as a bridge for brands to be responsive to
consumer needs through customization based on individualized data and
preferences. Design Management can be utilized because strategic technology can
be leveraged to create innovation and hence provide shareholder value.
The current state indicates many of these initiatives are in testing/pilot phase. In
the near future, business models may need to change based on advancement of
these technologies; for instance, local manufacturing at 3D printer hubs would
lead to lower costs due to ease of prototyping and scaled production.
To ensure a competitive edge, the industry will increase efforts to discover and
create materials to enhance performance. By extension, companies will claim
intellectual property and rights to specialized materials to remain competitive.
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http://www.adidas-group.com/en/sustainability/reporting-policies-and-data/sustainability-reports/
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Retrieved from http://www.gizmodo.com.au/2013/03/new-balance-adopts-3d-printing-to-create-hyper-customised-track-shoes/
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http://community.timberland.com/earthkeeping/green-index/
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