FOOTWEAR SECTOR ANALYSIS

BY RATAN RAJPAL
 CONTENTS

1 2
Sector background & Growth drivers for Indian
analysis (India & Global) footwear industry

3 4
Brand comparative Keeping up with
analysis the trend
SECTOR
BACKGROUND
MARKET SEGMENTATION FOR FOOTWEAR

MARKET BY TYPE OF SHOES

B
MARKET BY MATERIAL Athletic and non-athletic
Leather and non-leather (plastic,
synthetic, plant based)
A

MARKET BY MODE OF SALE

Retail- offline and online (via e-commerce
D C MARKET BY GEOGRAPHY
North America, Europe, Asia- Pacific &
platforms and brand’s own website)
LAMEA
 Global Footwear Market
1.1
The Global footwear market stood at US$ 246.07 billion in 2017. The
footwear market is expected to reach US$ 320.44 billion by the end of 2023.

• Type of shoes- Non-athletic shoes dominated the market in 2017. Rising

demand for sports shoes among the health conscious consumers is one of the
major factor driving the market growth of footwear.

• Type of material- Leather captured a significant market share in 2017. Many

companies are innovating their products using vegan and plant based material
due to the rising concerns over animal cruelty

• Mode of sale- In terms of growth, online channels is expected to witness the

fastest growth owing to convenience in shopping, discounts and easy return
policies offered by various manufacturers. However, hypermarkets dominate in
the offline channel.

• Market by geography-
• In 2017, the United States had the largest footwear market in terms of
revenue, with a revenue of 79.86 billion U.S. dollars. China was the
second largest market for footwear with 58.31 billion U.S. dollars in
revenue.
• In terms of production, China was the leading footwear producer,
(producing approximately 13.1 billion pairs of shoes) followed by India.
 Indian Footwear Market
1.2
• Second largest producer along with China. Holds together approximately 60%
of the global market share;

• India took over USA as the second largest consumer market;

• Revenue in the Footwear market amounts to US$7,525m in 2019. The market

is expected to grow annually by 12.6% (CAGR 2019-2023);

• The market's largest segment is the segment Leather Footwear with a market
volume of US$4,745m in 2019;

• In relation to total population figures, per person revenues of US$5.50 are

generated in 2019;

• ‘Internet penetration level is ~26% in India as of 2018. This number is

expected to reach 36% by 2022. Evidently, this could prove to be a growing
opportunity for Indian brands to target young and tech savvy customers with
disposable income by deal-discount methods and festive sales.
DISTRIBUTION
OF INDIAN 61%
Casual
FOOTWEAR
MARKET
22%
AS OF Mass (unorganized)
2017
7%
Sports

As one of the largest

footwear-producing markets
in the world, this consumer
segment in India thrived on a
7%
large share volume of what is Premium leather
called casual footwear at over
61 percent as of 2017. While
the sectors were primarily
categorized into men’s,
women’s and kids’ footwear, 3%
the retailers were dominated
by the unorganized players. Premium non-leather
PORTER’S FIVE FORCES
MODEL FOR FOOTWEAR
INDUSTRY

Porter's Five Forces is a model that identifies and analyses

five competitive forces that shape every industry, and helps
determine an industry's weaknesses and strengths.
 COMPETITOR RIVALRY: HIGH
• Rivalry is more intense as there are lots of
equally-sized competitors in India e.g., Liberty,
Khadims, Mirza International etc.
• Aggressive growth strategy of other brands
(both domestic and international) with low
1
switching costs.

BARGAINING POWER OF CUSTOMERS: HIGH

The potential customers for footwear industries can
be broadly classified into two categories-

2 1. Price sensitive customers who have a huge

bargaining power owing to the presence of low
cost brands and local products.
2. High end customers who prefer to buy
discounted and high sale products from retail
outlets or through online portals.
BARGAINING POWER OF SUPPLIERS:
LOW

The raw materials could be classified as

commodities where the manufacturing process
adds the value. For this reason supplier have
3
limited bargaining power over buyers.
 THREAT OF NEW ENTRANTS: HIGH

• Government has permitted Foreign Direct

4 Investment through the automatic route for the

footwear sector.
• Barriers to entry are almost absent.

THREAT OF SUBSTITUTE PRODUCTS:

HIGH
• Consumer can switch from one product to
another if alternatives are available in same
quality and performance.
• Competitive pricing has led the user to choose
5
from various brands which suits his pocket.
GROWTH DRIVERS
FOR INDIAN
FOOTWEAR
INDUSTRY
 FACTORS INFLUENCING THE INDUSTRY’S GROWTH

INCREASED PREFERENCE GROWING OPPORTUNITIES IN

EVOLUTION OF E -COM CHANNELS PREMIUMIZATION
FOR BRANDED FOOTWEAR WOMEN AND KIDS’ SEGMENT
 INCREASED PREFERENCE FOR BRANDED FOOTWEAR

• Second largest producer after China, holds approximately 60% of the global market share;

• Revenue in the Footwear market amounts to US$7,525m in 2019. The market is expected to grow
annually by 12.6% (CAGR 2019-2023);

• The market's largest segment is the segment Leather Footwear with a market volume of
US$4,745m in 2019;

• In relation to total population figures, per person revenues of US$5.50 are generated in 2019.
 EVOLUTION OF E-COMMERCE CHANNELS

• Brick and Mortar retailers have started venturing into Omni channel or E-retailing and are finding
out ways to bridge the gap between offline and digital channels;

• The e-retail sector’s market size has tripled in the last 3 years (FY14-17) on rising internet
penetration, increasing awareness of online shopping, and lucrative deals and discounts;

• However, after the initial phase where e-retailers focused only on gaining market share through
discounts, the next phase will be majorly driven by consolidation of e-com players, geographical
diversification, business realignment and working on customer stickiness.
GROWING OPPORTUNITIES IN WOMEN AND KIDS’ SEGMENT

• Indian footwear segment is majorly dominated by mass or economy segment with ~85% share but
there has been a trend towards increasing share of premium and luxury segment and in terms of
sales (it amounts to ~Rs.4.5 bn as per ASSOCHAM data);

• Women’s footwear constitutes only ~35% of Indian market share currently. As per Khadim India
RHP, the growth rate of the women footwear segment has been significantly higher than that of the
men’s segment in the past few years and it expects women segment to grow by ~18% CAGR over
FY16-FY20 as compared to ~11.4% CAGR for men’s footwear;

• Additionally, kid’s footwear segment which currently contributes only 10% of total market is seeing
a rapid growth;

• Indian players like Khadim, Relaxo and Bata have seen launches/or adding new variants in the
kids segments to cater to the increasing demand of the same;

• For example- Bata has launched various variants in its Bubblegummers brand while Relaxo saw
new launches in School Mate and KIDsFun brand during the last few years.
 PREMIUMIZATION

• Indian footwear segment is majorly dominated by mass or economy segment with ~85% share but
there has been a trend towards increasing share of premium and luxury segment and in terms of
sales (it amounts to ~Rs.4.5 bn as per ASSOCHAM data);

• Product innovation and differentiation leading to premiumization will be one of the key drivers for
the growth of footwear industry;

• Rising concerns over the type of materials used can be helpful for companies to put out the new
innovative products in the market at a premium. The demand of ‘innovation by being responsible’ is
a great opportunity to make products out of plant based vegan materials. Adidas, for example, has
used ocean waste to produce a new line of shoes.
BRAND COMPARATIVE
ANALYSIS
 NOTE

• The following comparison of Metro shoes vs the top 5 brands in the footwear industry globally is based on their
revenues, their status and SWOT analysis

• Most of the points remain same across all parameters of comparison and therefore, are not stated uniformly

• Majority of the data points are taken from the company’s own website and market analysts. Furthermore, the
source references are mentioned in the end of this presentation.

• Revenue figures represent sales from footwear line of the respective brands.

• Few observations originate from personal opinion and perspective of the footwear industry.

`
 Bata
Brand Metro Shoes Nike C&J. Clarks Puma Adidas
(worldwide)

Revenue in
FY17-18 76M 384.8M 22.7B 2.2B 2.5B 12.78B
(in USD)

Status Private Public Public Private Public Public

• Worldwide presence in 70+

• Exclusive in-house brands
• Strong country-wide brand
value with 150+ stores across
Strength
the country
• Leader in affordable pricing
segment
countries with high brand value
• 1200+ stores in India and 5000+
abroad
• Benefit received from the parent
organization for back-office
systems, product innovations and
sourcing.
• In-depth knowledge pool of the • Strong brand heritage since
• Strong global brand
footwear industry since 1825 • Strong partnerships with brands 1949
recognition with presence in
• Great brand awareness in North such as BMW and Ferrari • Efficient distribution channels
180+ countries
American and European market • Main producer of enthusiast i.e. large company owned stores
• “Make to stock” customer
• Strong control over the driving shoes and racing suits in • Highly targeted customer base
order to provide fast customer
distribution channel due to both Formula One and NASCAR due to big-banner games
service
company owned stores fandom such as FIFA and NBA

• Slow expansion as stores are
company-owned
Weakness • Relatively less brand
partnerships
• Expansion in international
market by brand collaborations
Opportunity • Adoption of franchise model to
grow
• Sales through online channels
• Increasing penetration of
international brands with modern
design increases scope of
adoption of new brands
• Scope of increasing brand
presence in developing nations
• Global expansion in the premium
segment
• Strong dependency on the US
market alone – 42%
• High price-sensitive pressure
from retailers
• Increasing health
consciousness and changing
lifestyle
• More focus on product
development and, innovation
and digitalization
• Major sourcing dependency on • Concentrated customer base
• Relatively narrower product
the Asian market due to high-pricing point
range than the competition
• Considered as a cheaper • High-level of outsourced
• Weak ad campaigns for its niche
alternative to big brand manufacturing in Asian markets
products such as trek boots
competitors (i.e. 93%)
• Brand’s focus on women
• With acquisition of Reebok,
• Expansion of product lines into segment
scope of expansion of product
health and fitness category with • High growth potential with
line
focus on women segment building strong brand value by
• Entering into markets where
• Addition of footwear accessories sponsorships and
competition is relatively less
in the product line merchandizing
• Increasing health consciousness
• Puma entering into lifestyle
and changing lifestyle
segment

• Tough competition from Puma,

• Increased costs due to non- Nike and Skechers
• Tough competition in the mid- • Increased costs due to non- • Increase in taxes (for ex. UK)
• Intense competition limits the compliance and legal issues • Increased costs due to non-
pricing segment from brands compliance and legal issues could lead to lesser margins
overall market share • Tough competition market compliance and legal issues
Threat such as Khadim, Bata, etc. • Controversial ad-campaigns • High employee costs in prime
• Increasing imitations of brand’s • Imitations of Puma brand is • With its 35% products
• Increasing imitations of brand’s • Tough competition from Puma, markets
design can hurt loyal customers extensively increasing causing manufactured in China, duty &
design can hurt loyal customers Adidas and Skechers
losses tariffs plays a critical role in the
pricing
KEEPING UP WITH
THE TREND
 FUTURE TRENDS IN SHOE MARKET

• Athleisure Will Remain Dominant, but Fashion Will Regain Some Share
Slowing growth doesn’t mean a shrinking market. Sport leisure footwear sales will continue to climb, but as the pace of
the increase slows, fashion footwear brands have the opportunity to take back some share by incorporating the comfort
and style elements that drove consumers to love their athleisure;

• Function and Comfort Will Become the Standard

Brands that carefully consider their product’s end use and tailor to comfort, versatility, and accessibility will succeed. This
may seem extreme, especially for fashion categories, but consumers are placing value on these features and benefits;

• Stores Show Some Promise, but Online Growth Will Continue

While online sales continue to generate most of the dollar growth in fashion footwear, the proportion of growth coming
from stores increased throughout 2018. Millennials drove much of this momentum, but it was mostly isolated to branded
retailers such as vertical shoe stores and factory outlets, rather than department stores.

• Social and Environmental Consciousness Will Take Centre Stage

Forty-one percent of consumers surveyed indicated that eco-friendly/sustainable materials are important when
considering their footwear purchases*. These issues will only grow in importance, so footwear brands need to figure out
how to participate here, in order to remain relevant to a new generation of consumers.

*Source: CivicScience/ June 2018

THANK YOU
 RESOURCES

1. https://www.hdfcbank.com/assets/pdf/privatebanking/Sector-Update-Footwear-Sector-June-
2018.pdf

2. https://www.npd.com/wps/portal/npd/us/blog/2019/fashion-footwear-and-accessories-keeping-up-
the-momentum-in-2019/

3. https://www.globenewswire.com/news-release/2019/01/22/1703300/0/en/Global-Footwear-Market-
to-Gain-USD-320-44-Billion-by-2023-Zion-Market-Research.html

4. https://www.marketwatch.com/press-release/footwear-market-global-industry-size-share-trends-
growth-demand-and-forecast-2018-2026-2018-11-20

5. https://www.statista.com/topics/4571/global-footwear-market/

6. https://www.owler.com/company/bata

7. https://www.statista.com/statistics/735289/share-of-footwear-market-by-segment-india/