Footwear Industry

Term Report Presentation

Introduction

Inelastic demand Pakistan is among the most populous countries of the world, so demand continues to increase. Footwear industry is of pivotal importance for it provides and creates jobs, earns foreign exchange from exports and fulfills local consumption.

60% of world footwear is made entirely of nonleather materials and for the remaining 40% only the upper part of shoe is made up of leather. Mostly concentrated in Punjab. Chinese footwear pose a serious threat to the local footwear products. Leather, man-made materials, rubber/canvas, synthetic and textile accessories are used to make footwear.

Highly protected industry 24% tariff World footwear production exceeded US $ 20 billion out of which Asian countries produced 87% Pakistan produced 295 million pairs out of which 2 million were exported.

Government agencies including PFMA have acted dormant and failed to earn incentives for the manufacturers Online trading of footwear Imported raw material for production. Faisalabad is the center for locally manufactured leather shoes Chinese footwear mostly cater to male footwear while local footwear cater to ladies demand

Why Pakistan imports from China?

Style, quality and innovative designs Varieties in quality Automated production Local manufacturing slightly declining; Chinese footwear filling the gap Bulk import Cheap

Reasons for the transfer of industry to Punjab:

Cheap labor Closely connected stations More demand Deteriorated law and order situation in Karachi Tanneries in Qasur

Supply Chain
Local manufacturers Importers Wholesalers

Customers

Retailers

Popular Footwear Brands

S. Naveed ul Kamil

Popular footwear brands in Pakistan

Subsidiary of Bata Shoes international One of the oldest and footwear companies in Pakistan Working since 1951 400 retail stores across the country Targets middle/upper middle class men women and children Provides employment to 10,000 people In 2010 Bata produced over 17.2 million pairs Exported 1 million pairs to European and African countries. Generated turnover of Rs.6.5, billon As of 2012, showed a constant growth of over 15% for last 4 years

Oldest local footwear company 1941 Subsidiary of Servis Industries Limited (SIL) Pakistan's largest footwear manufacturer and exporter Humble start with single retail footwear outlet Aggressive growth- today it has 500+ stores presence in Pakistan, 2000+ dealer-base Successfully opened stores in UAE and Saudi Arabia Exports to Germany, UK, Kenya, Belgium, France

Shafi Shoes

Licensed for Production of most popular French brand Pierre Cardin. Local brand; Urbansole Established in 1998 Capacity to produce around 1 Million pairs annually of Leather shoes. 30 retail outlets and 48 dealers across the urban centers in Pakistan Targets relatively high end urban consumers State-of-art production facilities Exports to Germany, Italy, Spain, France, Greece, Belgium, Switzerland, Austria, Portugal, Netherland, Croatia .

Started business in Pakistan in 2001 One of the most popular (US based) global footwear brands operating in 150 countries. Targets high end customers in urban centers of Pakistan through its 25 retail outlets. Famous for top quality and toughness of the shoes . Local Production in Shaikhupura

Aero Soft Shoes

Aerosoft is a specialized brand in making sandals and slippers for men and women No local manufacturing, all the products are imported from Thailand. Wide presence across the country through its retail stores and dealers. Targets middle class and upper middle class segment Direct competitor of Bata and Servis

Stylo Shoes

One outlet in Lahore in 1974 A constant growth over the years Market leader in ladies shoes Makes all types of ladies footwear in Lahore Follows all latest trends in fashion. 100+ outlets across the country. Exports to UAE, Saudi Arabia, and USA

Miscellaneous
Askari Shoe Project

Established in 1990 for production of the DMS boots for Pak army. A unit of Army Welfare Trust Currently it produces all types of shoes, competing with other local
manufacturers.

Peshawari Chappal

Chappal/'Kheri' has over hundred years old history It is widely worn footwear by men in Pakistan/India/Afghanistan with the traditional dress of Shalwar Kameez. New trend : Chappal is now worn with Jeans and the new fashion of using Chappal as summer shoes is getting popular each day Mostly manufactured in Peshawar/Charsadda by cottage footwear industry. Greatly exported to Afghanistan (especially before Eid)

Some crazy shoes

Some local manufacturers make shoes from Ostrich, snake and crocodile skin Landlords in Punjab use them as a status symbol a pair costs up to Rs. 50,000

Imports and Exports

Salah uddin

Production

Exports Trend

Exports to various countries

(US Dollar thousand)

Source: ITC COMTRADE

Important Trade Indicators

Top Ten Exporters

Imports Trend

Imports from various countries

(US Dollar thousand)

Source: ITC COMTRADE

Important Trade Indicators

Top Ten Importers

Problems
Murtaza

Problems

Inconsistent and non-focused government policies Duty drawback for export is nominal Pakistans immigration authorities have the policy of granting visas to business visitors on arrival The Government does not understand the economics of trade The Government does not encourage free exhibitions at shoe fairs worldwide

Problems

Export promoting bodies, especially TDAP, are not playing an active role in representing footwear exporters at international level Non liberal policy for the import of footwear machinery and raw material The environment is highly volatile making it insecure for local and especially foreign investment

Problems

Footwear buyers throughout the world have become choosier about designs and quality Long lead times There is a dire need for a fashion and design development institute High cost imports of raw materials from USA and Europe

An Interview with an Online Shoe Brand (Shoe-preneur)

Porters Five Forces and Recommendations

Manal Yousuf

Porters Five Forces in the Footwear Industry

Threat of new entrants:

Increasing energy crisis and inputs prices The start-up capital is costly and is both labor and capital intensive All of this greatly affects the ability of new firms to enter the market. Despite this, there are still many firms, both on a large scale (such as Servis Shoes) and smaller scale (locally made sandals, for example).

Threat of substitute products or services

Competition with the emerging economies like India and China. Despite of competition with China, the footwear industry is doing better and is regaining the strength to fulfill local demand as well as compete efficiently in the world market. Imports of Chinese footwear

Bargaining power of customers Consumers have very high control in this market because of the many substitutes and competitors, which gives them have a lot of purchasing options. Bargaining power of suppliers Suppliers have medium control, because of substitute brands. Thus, the suppliers have less bargaining power than their customers, and need to offer good value in order to compete effectively.

Recommendations

Build footwear training institutes Invest in R&D to update production methods Create a mechanism of collaboration between industry units and related research organization and academic institution. Provide adequate transport and utility infrastructure facilities. Compete with foreign competitors on the basis of price when it comes to the lower classes, and on the basis of quality when dealing with middle to upper classes.