Indian Footwear Industry Report

Reevolv Advisory Services
Private Limited

This document has been prepared by Shilpa Bhattar and Kaustubh
Kulkarni. For any queries or detailed information contact us on
+91 22- 60022001 or email at research@reevolv.in
A shoe has much more to offer than just to walk, perfectly
sums up the Indian Footwear story. Last decade or so has
witnessed a sea change in the footwear industry, from a basic
need based industry to a fashion, style, quality and performance
focused industry.
The size of the domestic footwear market in India was around
Rs. XX Bn in XX, which has grown from Rs. XX billion in 2005 at
a CAGR of XX% p.a. The urban market has been growing at a
faster pace of XX% p.a. (20052010) compared to the rural
market which has been growing at a CAGR of XX%.
As per our estimates, the industry will grow at a CAGR of XX%
p.a. to reach to Rs. XX billion in 2015.

March 2013
Indian Footwear Industry Report
Pages - 167

2

Table of Contents
Particulars
Page Nos.
1. Executive Summary 4
2. Global Footwear Industry Overview 5
3. Indian Footwear Industry Overview
3.1. Market Opportunity 7
3.2. Growth Drivers 10
4. Business Dynamics
4.1. Industry Constituents and Structure 12
4.2. Industry Characteristics 17
4.3. Business Model 18
4.4. Cost Structure 21
4.5. Key Success Factors 22
4.6. Key Challenges 25
4.7. SWOT 27
4.8. Porters Five Forces Model 28
5. State-wise Distribution of Exclusive Brand Outlets across Brands 30
6. Player Profiles
6.1. Action 32
6.2. Adidas 42
6.3. Bata 46

3

6.4. Catwalk 51
6.5. Crocs India 55
6.6. Khadims 59
6.7. Lancer 64
6.8. Liberty 69
6.9. M & B 73
6.10. Metro 77
6.11. Nike 81
6.12. Paragon 85
6.13. Pavers England 93
6.14. Puma 96
6.15. Red Chief 99
6.16. Red Tape 102
6.17. Relaxo 106
6.18. Reliance Footprint 110
6.19. SSIPL RetailLimited 114
6.20. Tresmode 118
6.21. VKC 122
6.22. Woodland 154
7. Select Interviews 157
8. Annexure 160


4

1. Executive Summary

A shoe has much more to offer than just to walk, perfectly sums up the Indian Footwear story. Last decade
or so has witnessed a sea change in the footwear industry, from a basic need based industry to a fashion,
style, quality and performance focused industry. These changes have been driven by a host changing of
demographics and economic factors like growing young and working population, increasing disposable
incomes, increased discretionary spending, growing fashion consciousness, increased media exposure etc.
Around XX of Indias population lives in rural areas. Though the number is gradually decreasing with
increasing urbanization, a sizable population still stays in rural India. As per our estimates, an average rural
consumer spends around Rs. XX per annum on footwear as compared to an urban consumer which spends
around Rs. XX per annum on footwear.

The size of the domestic footwear market in India was around Rs. XX Bn in XX, which has grown from Rs. XX
billion in XX at a CAGR of XX% p.a. The urban market has been growing at a faster pace of XX% p.a. (2005
2010) compared to the rural market which has been growing at a CAGR of XX%.
As per our estimates, the industry will grow at a CAGR of XX% p.a. to reach to Rs. XX billion in 2015.
The urban market is estimated to grow at a CAGR of XX% (2010-2015E) to reach Rs. XXbillion in 2015
from Rs. XX billion in XX.
The footwear market in urban cities (tier 1, 2 and 3 cities) is around Rs. XX billion in 2011 with tier 1 cities
constituting more than XX% of the total market in Tier 1, 2 and 3 cities.
Indian footwear retail is mainly an unorganized market with around XX% market share. The size of the
organised market which was around Rs. XX billion in XXincreased to ~Rs. XX Bn in XX growing at a
CAGR of ~XX% every year since 2008. The market is expected to reach Rs. XX billion by XX growing at
a CAGR of ~xx% p.a.


5

2. Global Footwear Industry Overview
The worldwide consumption of footwear is dependent on population and consumer income levels. As a result,
factors such as inflation, recession, changes in consumer preferences and purchasing power affect the
footwear industry. With the growing world population, the consumption of footwear has been increasing
steadily.
As per the XXXXXX, the world footwear production has reached a record XXbillion pairs in XX.

Production of footwear is heavily concentrated in Asia with XX% of worlds production of XX pairs coming from
this continent in XXX. This is mainly because of availability of raw material and cheap and skilled labour.
The consumption of footwear however is more evenly distributed compared to production as it follows
population and disposable income. XXXX has the highest consumption of footwear with XXX due to large
population base followed by XXXX and XXX having higher disposable income.

Distribution of Footwear Production by
Continent (quantity) XXX
Distribution of Footwear Consumption by
Continent (quantity) XXX
Source: XXXXX Source: XXXXX

Pie Chart

6

Rank Country
Pairs
Millions
World
share

Rank Country Pairs (millions) World share Per capita (pairs)

XXXis the worlds largest footwear market with XXX billion pairs consumed in XXX. XXXwhich traditionally was
the largest market has been relegated to second place by XXX. XXXis the leader in footwear imports, with
more than XXX. XXX with XXX consumed is the world XXXX largest market.

The average per capita world consumption of footwear has been steadily increasing with around XXX pairs
per year in XXX. Though XX is the worlds XX largest market, the per capita consumption of footwear is below
the world average at XX pairs per year in XX.

XXX produces more than XX% of the worlds footwear
by volume. XX dominates the industry, especially the
cheaper end of the market. Though xx is the largest
exporter, its share is much smaller, in terms of value
(XX) vs. , volume (XX%) as a result of the low average
price of xx.

Italy on the other hand is the second largest exporter
in the world. By value, it has a share of XX%, even if it
represents only XX% of the volume exported with an
average price of almost XX. It leads the market in
production of high-end designer shoes. XX with XX
represents XX of the total global exports by value and
an average price of XX.
Top 10 Footwear production countries
(quantity) XXX
Top 10 Footwear consuming countries (quantity) 2010
Source: XXXX
Source: XXXX

7

3. Footwear Industry Overview
3.1. Market Opportunity
Total Market
The size of the domestic footwear market in India was around Rs. XX, which has grown from Rs. XX billion in
XX at a CAGR of XX. The urban market has been growing at a faster pace of XX. (XX) compared to the rural
market which has been growing at a X.
As per our estimates, the industry will grow at a XX to reach to XX. The urban market is estimated to
grow at a XX (XX) to reach XX in XX from XX in XX.
Fig 2: Footwear Industry Size (XXX)

Rs. In billion 2005 2010 2015E
CAGR%
(200510)
CAGR%
(201015E)
CAGR%
(200515E)
Total

Urban

Rural

Urban Market %

Rural Market %

Organised vs. Unorganized
Indian footwear retail is mainly an unorganized market with around XX market share. The size of the
organised market which was around Rs. XX increased to XX Bn in XX, growing at a XXX every year
since XX. The market is expected to reach XXX by XX growing at a XX.
0%
20%
40%
60%
80%
100%
2005 2010 2015E
Rural Urban
Source Reevolv estimates; based on NSS reports on Household Consumption Expenditure and United Nations estimates
World Urbanization Prospects: The 2011 Revision
Note: The totals may not match due to rounding errors

Out of the total market in XX, the urban market
constitutes XX of the total market size compared
to XX. The share of the urban market is
expected to increase slightly to XX in XX. The
rural market is expected to grow at a XX to
reach Rs. XX from XX in XX.

Fig 3: Share of Urban and Rural Market (XX)
Source Reevolv Estimates

8

Urban Market Tier 1, 2 and 3 cities
The footwear market in urban cities (tier 1, 2 and 3 cities) is around Rs. XXX in XX with XX constituting
more than XX of the total market in XX.
Fig 4: Footwear Industry Size Tier 1, 2 and 3 cities

Tier 1 Delhi-NCR, Mumbai, Kolkata, Bangalore, Chennai, Hyderabad, Pune, Ahmadabad (cities with population of more than 5 million).
Tier 2 Agra, Allahabad, Amritsar, Asansol, Aurangabad, Bhopal, Coimbatore, Chandigarh, Dhanbad, Durg-Bhilainagar,
Vishakhapatnam, Gwalior, Indore, Jabalpur, Jaipur, Jamshedpur, Jodhpur, Kannur, Kochi, Kanpur, Kollam, Kota, Kozhikode, Ludhiana,
Madurai, Malappuram, Lucknow, Meerut, Nashik, Patna, Nagpur, Raipur, Rajkot, Ranchi, Srinagar, Surat, Thiruvananthapuram, Thrissur,
Tiruchirappali, Vadodara, Varanasi and Vijaywada. (cities with population of 1 to 5 million).
Tier 3 Ajmer, Aligarh, Amravati, Bareilly, Belgaum, Bhavnagar, Bhiwandi, Bhubaneswar, Bikaner, Bokaro, Cuttack, Dehradun,
Durgapur, Erode, Firozabad, Gorakhpur, Gulbarga, Guntur, Guwahati, Hubli-Dharwad, Jalandhar, Jammu, Jamnagar, Jhansi, Kolhapur,
Malegaon, Mangalore, Moradabad, Mysore, Nanded, Waghala, Nellore, Puducherry, Rourkela, Saharanpur, Salem, Sangli, Siliguri,
Solapur, Tiruppur, Ujjain, Warangal (cities with population of 0.5 to 1 million).

Fig 5: Tier 1 Footwear Industry Size
(2011) - XXX
Cities No. of Cities Rs. million
Tier 1 cities

Tier 2 cities

Tier 3 cities

Total

The total tier 1 market that constitutes metros
and other cities is around XX. Of all the cities in
India, XX is the largest footwear market with XX
followed by XX with XX. Among the XX, XX is
the largest market, followed by XX, XX and XX.
Source Reevolv Estimates.

9

Urban Market State wise

Fig 7: Footwear Urban Market

Key States
Urban Population (2010)
[in millions]
Urban Market Size (2010)
[Rs. billion]
Per Capita
Expenditure on
Footwear Services
(Rs.)

Fig 6: State-wise Footwear (Urban) Market
(2010)
Source Reevolv Estimates; NSS Reports
Among the states, XX with XX has the
largest market share of urban footwear
market followed by XX and XX.

Among the major states (with urban
population XX), XX has the highest urban
per capita expenditure followed by XX and
XX. XX, XX and XX have the lowest urban
per capita expenditure on footwear.

10

3.2. Growth Drivers


11

4. Business Dynamics
4.1. Industry Constituents and Structure
The domestic footwear industry is estimated to be around XX. The unorganized nature of the industry,
especially on the upstream of the value chain offers a host of opportunities. The unorganized players have a
XXX of the total production in footwear industry. The footwear industry is classified in two types namely leather
footwear and non leather footwear.

Fig 1: Footwear industry structure


12

Manufacturing Process:

1. Leather Footwear:

2. Non Leather Footwear manufacturing:


13

4.2. Industry Characteristics


14

4.3. Business Model

Fig 6: Business Model:

Above is the pictorial representation of a generic footwear business model.


15

4.4. Cost Structure

Tanneries (Producing Finished Leather)
Description As a % of Sales

Operating Profit / EBIDTA

Footwear Manufacturing
Description As a % of Sales

Operating Profit / EBIDTA

Source Reevolv Research
Source Reevolv Research

16

4.5. Key Success Factors


17

4.6. Key Challenges


18

4.7. SWOT of the Indian footwear market

Strengths Weakness

Opportunities Threat


19

4.8. Porters five forces model

No Five Forces Remarks Current Trends
1. Power of Supplier
a.
Raw material
Unorganized
Imports from China,
Taiwan, Singapore
Availability of
suppliers of
footwear
components

2. Availability of Substitutes

Nature of substitutes
Supply of
substitutes
Price differential
Brand erosion

3. Entry Barrier

20

Time and cost of
entry
Designs
Brand play
Market access

4. Power of Customers
Changing customer
trends
Availability of
multiple options
Discretionary
purchases

5. Competitive Rivalry
Type of competition
Unorganized players
Influx of foreign
brands


21

5. State-wise Distribution of Exclusive Brand Outlets across Brands
States Players
Andhra Pradesh

Bihar

Chandigarh

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu & Kashmir

Jharkhand

Karnataka

Kerala

Madhya Pradesh

Maharashtra

NCR

Odisha

Punjab

Rajasthan

Tamil Nadu

Uttar Pradesh

Uttarakhand

West Bengal

Assam

Other States

Grand Total


22

States Players Grand Total
Andhra Pradesh
Bihar
Chandigarh
Chhattisgarh
Goa
Gujarat
Haryana
Himachal Pradesh
Jammu & Kashmir
Jharkhand
Karnataka
Kerala
Madhya Pradesh
Maharashtra
NCR
Odisha
Punjab
Rajasthan
Tamil Nadu
Uttar Pradesh
Uttarakhand
West Bengal
Assam
Other States
Grand Total


23

6. Player Profiles (for 21 players)
6.1.

6.1.1. Overview
Description
Company Name
Company Profile
Promoter
Brands
Year of
Incorporation

Production
Facilities (Capacity
and Sales)

Distribution
Raw Material
Institutional
Footwear

Other Key
Businesses

Future Plans
Location

6.1.2. Locations
Northern Region
Exclusive Stores
Main Cities
Eastern Region
Exclusive Stores
Main Cities
Western Region
Exclusive Stores
Main Cities


24

6.1.3. Target Customer Segment
Men Women Kids
Formal

Casual/ Semi Formal

Sports

6.1.4. Pricing
Brands Rs. Per pair


25

6.1.5. Financials (wherever available based company filings)
Profit & Loss Account for the year ended XX
Rs. Mn 2008 2009 2010 2011
Net Sales
Other Income
Total Income
Expenditure
Cost of Goods Sold
Employee cost
Selling & Distribution Expenses
Rent Rates and Taxes
Other Expenses
Total Expenses
EBITDA
Depreciation
EBIT
Interest
PBT
PBT after extraordinary profit/ loss
PAT

Shareholders Funds
Paid up capital
Reserves & Surplus (net of P&L debit balance
and Misc Expenditure)
Total
Loan Funds
Secured loan
Unsecured loan
Total
Deferred Tax
Total Liabilities
Gross Block
Less Accumulated Depreciation
Net Block
Capital work-in-progress
Total
Current Assets
Debtors
Inventory
Others
Total
Current Liabilities & Provisions
Current Liabilities
Provisions
Total
Net Current Assets
Cash & Bank
Net Current Assets incl. Cash & Bank
Total Assets

26

Key Ratios 2008 2009 2010 2011
Expenditure Ratios
COGS %
Personnel Expenses %
Selling & Distribution Expenses %

EBITDA %
PBT %
PAT %

ROCE %
ROE %

Capital Employed
Total Debt/ Net Worth
Secured Debt/ Net Worth
Total Debt to EBITDA

Working Capital Turnover Ratio
Net Fixed Assets turnover ratio
Inventory Days
Debtors Days
Creditor Days

DuPont Analysis
EBIT/ Total Income
PAT/EBIT
PAT/ Total Income
Total Assets/ Net Worth
Total Income/ Total Assets


27

7. Select Interviews
Interviewer 1: Retailer
Questions Answers
What are the margins for a distributor in footwear
Industry?

What are the general margins for a retailer in
footwear industry?

What are the inventory levels maintained by a
retailer?

How do the companies ensure that the distributor
doesnt charge higher margins than stipulated?

How many days it takes for the distributor to deliver
goods once the order is placed?

What are the brands you sell?
Do you have any fixed customer base?
What are the margins offered to retailer by
established brands?

What type of footwear is fast moving and why?
Do footwear companies take feedback from retailer?
What is the price differential between organized and
local players?

What are the seasonal products?
How is the buying pattern of a typical female
customer?

How is the buying pattern of a typical male customer?

Interviewer 2: Manufacturer
Questions Answers
What is the type of footwear you manufacture?
Do you manufacture for other big brands?
What is the arrangement with international brands
which you retail in India?

What is the domestic and export share?
What factors determine the pricing of raw material in
case of footwear?

Has the domestic share changed over the years?
How many distributors you have per state?
Where is your manufacturing plant located?
Do you outsource the manufacturing job to smaller
vendors?

Is the labour easily available?

28

Do you pay the labour on a per piece basis or on a
salary basis?

What are the main buying criteria for footwear?
How is the childrens footwear market outlook?
What is the trend you are observing for last 5 years in
footwear industry?

How do you see China as a threat to leather footwear
manufacturing?

What are the key challenges for footwear
companies?
-
What is the basis of forecasting?
What is the SKU per male and female to be carried?
What is the margin offered to the retailer?
What is the average sales price for your product?
Is there any shortage of capacity?
What are the generic geographic variations which are
observed?

Is the distributor critical?
What is the credit period offered to distributors?
What is the difference between apparel retail
compared to footwear retail?

What is the strategy to build customer retention and
loyalty?

Questions Answers
What is your main product?
In how many MBOs / LFRs do you have presence?
What are the other states?
Do you have your own manufacturing unit?
When was the company incorporated?
What are the other types of products manufactured
by your company?

From where do you procure leather?
Why have you chosen Chennai as your
manufacturing base?

What is the margin you offer to retailers?
What is the margin you offer to distributors?
Is there any return goods policy?
What is the credit period you offer to the distributors?
What is your price point?
How many exclusive outlets do you have?

29

Questions Answers
What is the main season for sports shoes?

In which states your product is available?
Do you sell to retailers?
How many distributors do you have in every state?

What is the credit period offered to distributors?
Is there any minimum quantity the distributor has to
order?

Who bears the logistics cost?

Does the MRP vary from state to state?
So how do you manage same price when the state
taxes are different?
What is your daily production?
Do you pay labourers on per piece basis or on salary
basis?
Why do you not package your products in a box?
From where do you procure the Raw Material?


30

8. Annexure
8.1. Annexure 1
Manufacturing Process:
1. Leather Footwear:

Fig 2: Manufacturing process of finished leather


31

a. Manufacturing:

Fig 2: Manufacturing process of leather footwear


32

2. Non Leather Footwear manufacturing:

Fig 3: Manufacturing process of EVA footwear:

Fig 4: Manufacturing process of PU footwear:


33

About Reevolv
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Founded in 2008, Reevolv is a team of CAs, MBAs and Engineers with functional and industry expertise and
diverse background of investment banking and management consulting.

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For any queries or detailed information contact us on
+91 22- 60022001 or email at research@reevolv.in
Address: No. B/002,Vision Court Staney Fernandes Wadi CHS Ltd., Plot no. 746, MTNL Exchange
Lane, Dadar (West), Mumbai 400 028
You can also email the research analyst at
Shilpa Bhattar
shilpa@reevolv.in
Kaustubh Kulkarni
kaustubh@reevolv.in

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