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)

 Footwear Industry
Market definition:
The footwear market consists of the total revenues generated through the sale of all type of
men’s, women’s and children’s shoes. The global figure includes the Americas, Asia Pacific
and 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

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 is
having 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 1998 2000 2002 2004 2008

(Millions of pairs)
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.
Table: showing the breakdown of major consuming countries and their areas.

Country Consumption Population Per Capita

Millions/ pairs Millions 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
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 world’s 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.
The Indian footwear retail market is expected to grow at a CAGR of over 20% for the period
spanning from 2008 to2011. Footwear is expected to comprise about 60% of the total leather
exports by 2011 from over 38% in 2006-07. Presently, the Indian footwear market is dominated
by Men's footwear market that accounts for nearly 58% of the total Indian footwear retail
market.
By products, the Indian footwear market is dominated by casual footwear market. As footwear
retailing in India remains focused on men's shoes, there exists a plethora of opportunities in the
exclusive ladies' and kids' footwear segment. The Indian footwear market scores over other
footwear markets as it gives benefits like low cost of production, abundant raw material, and has
huge consumption market.
India is now a major supplier of leather footwear to world markets and has the potential to rival
China 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 of
1,800 million pairs, second only to China. The bulk of production is in men’s leather shoes and
leather uppers for both men and ladies. It has over 100 fully mechanized, modern shoe making
plants, 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 690.66 733.34 798.69 870.06 948.04
Goods
Saddlery & 81.85 105.66 127.85 154.7 187.19
Harness
Total 2981.79 3892.26 4682.01 5689.17 6980.21

Approximately 4000 units are involved in manufacturing footwear in India. The major chunk of
the industry is contributed by small scale units with the total production of 55%. The total
turnover of the footwear industry including leather and non-leather footwear is estimated at
Rs.8500-9500 crores including Rs.1200-1400 crore in the household segment. India's share in
global leather footwear imports is around 1.4% Major Competitors in the export market for
leather footwear are China (14%), Spain (6%) and Italy (21%).
The footwear industry exists both in the traditional as well as modern sector. While the
traditional sector is spread throughout the country with clusters of concentration catering largely
to 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 mechanized
sector in South India consist of women. In fact, this sector has opened up plenty of employment
opportunities for women who have no previous experience.

STATISTICAL INFORMATION:
India’s Exports of Footwear – Country-wise Share in Total Exports (2007-08)
Major Markets for Indian Footwear:
The European Union and the USA are the major markets for Indian Footwear accounting for
79.95% and 9.22% share respectively in India’s total footwear export. The major markets for
Indian 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 10
countries together accounts for nearly 81.49% of India’s total leather products export.
Footwear Industry – PEST Analysis
Political
• 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
• 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
WOODLAND

ADIDAS

BATA

RELAXO

LIBERTY

ACTION
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. Company’s 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 footwear’s. 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 various
and 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 world’s largest shoe manufacturer: the Bata
shoe Organization (BSO). Bata industries has operations and production facilities in most of the
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 (PORTER’S MODEL):

Basis of Nike Adidas Relaxo Action Bata Liberty

comparison
Barriers to Absent Absent Absent Absent Absent Absent
Entry
Bargaining Low Low High High High High
Power of
buyers
Bargaining Low Low High High High High
power of
suppliers
Threats of High High High High High High
Substitute
Rivalry High High High High High High
among the
existing
competitors

SUPPLY CHAIN IN FOOTWEAR

In nutshell the supply chain in footwear starts from the farmers end and ends with finished goods
in the customer’s 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,
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
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 shoemaker’s 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:
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%
 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.