Footwear free essay sample

FOOTWEAR RETAIL SCENARIO INDIA Centro Estero delle Camere di Commercio del Veneto Representative Office in India The Indian footwear market is estimated to be over INR 10,000 crore in value terms and has grown at the rate of 810 percent over the last couple of years. Men? s footwear accounts for almost half of the total market, with women? s shoes constituting 40 percent and kids? footwear making up for the remainder. The market is substantially brand-driven, as is evident from the fact that branded footwear constitutes more than 42 percent of the total market size. Centro Estero delle Camere di Commercio del Veneto Representative Office in India One-fourths of the total footwear sales (i. e. INR 2,500 crore) happen through organised retail outlets, and this makes it the second most organised retail segment in the country, next only to watches. Credit goes to players like Bata and Liberty for having set the ball rolling. In terms of volume, the market size of the footwear industry in the top 20 cities in the country is estimated to be 10 crore pairs per annum. For the country as a whole, the annual domestic consumption of footwear is approximately 1. billion pairs per annum, as per government statistics. With a population base of 1 billion, this translates to a per capita consumption of 1. 1 pairs per person per annum. India is the second largest footwear manufacturer in the world, next only to China. Nearly 58 percent of the industry, which is by and large labour intensive and concentrated in the small and cottage industry sectors, remains unbranded. However, as part of its effort to play a lead role in the global trade, the Indian leather industry is now focusing on key deliverables of innovative design, state-of-the-art production technology and unfailing delivery schedules. Globally, the trend towards sourcing to countries with low-cost production continues. Overall, the Far East continues to be the key area for footwear sourcing, but Eastern Europe (Romania and Bulgaria) has become more important as closer proximity helps European retailers to move faster. India and Vietnam are also considered important for sourcing. India is especially strong in the men? s footwear segment though the world? s major production is in ladies footwear. This not only limits the scope for footwear exports, but also points to a huge potential in the domestic market. Proper branding and promotion can greatly increase the domestic demand in ladies footwear. India? s footwear exports have shown a growth of 35. 2 percent over 2002-03 registering a cumulative export of US$ 608. 7 million in both the Leather and non-leather segments taken together. The leather segment accounts for 89 percent of footwear exports. Trend Towards Casual, Cleaner, Younger Styles Manufacturers normally update their brands every year to reflect new directions in fashion. However, during the past couple of years or so, it has become obvious that the current trend toward more casual, cleaner, younger styles represents the mainstream. This is primarily attributable to enhanced global travel coupled with increased media penetration leading to heightened awareness of international trends and lifestyles among the Indian consumers. ?Workplace actualisation? has also had a significant role to play in the rise in demand for casual apparel and footwear. Unlike in the past, this trend is not restricted to women alone as Indian men are also waking up to the need for a wider range of fashion accessories to differentiate them from their co-workers. Their buying habits are becoming more like women? s, in that they care more about the apparel and accessories they choose. Centro Estero delle Camere di Commercio del Veneto Representative Office in India In recent years the market has seen entry of a host of new domestic and foreign brands like Drish, Lotto, Lotus Bawa, Now, Oakridge, Royal Elastic, Sketchers, Teenage, Teva, Timberland and Vans. Fashionable brands like Stryde and Red Tape and MNC brands like Allen Cooper, Franco Leone, Gaitonde, Gucci, Guess, Lee Cooper, are further developing the market by creating new segments. Retail Formats Company owned exclusive Franchise owned exclusive 2003 917 340 No of outlets 2004 858 540 2005 812 560 Opportunity in Ladies Kids? Segment As footwear retailing in India has remained focused on men? s shoes, there exists a whale of opportunity in the exclusive ladies? and kids? footwear segment with no organized retailing chain having a national presence in either of these categories. This is especially surprising as in line with global trends women are the key decision-makers for buying footwear. Of the total footwear market, ladies? shoes account for almost 40 percent though the unorganised segment constitutes 8090 percent of this market, indicating a significant marketing opportunity for organised players. With the Indian woman becoming more brand-conscious as opposed to the past state of being product-conscious, more and more internationally renowned players are expected to enter the Indian market to fill this need-gap. Further, given India? s very young population, the market for children? s footwear is also attractive for new organized players to enter and earn supernormal profits. The London-based Carlton group became the first overseas player to enter the Indian women? s footwear market when it set up its first store at the MGF Metropolitan Mall in Gurgaon Centro Estero delle Camere di Commercio del Veneto Representative Office in India ecently. Levi? s has also announced plans to introduce its range of footwear (including ladies? shoes) in the country through a tie-up with the Noida-based MB Footwear by next year. So far, due to the lack of quality retail space at economical prices, most of the footwear retailers have steered clear of company owned and operated outlets and have i nstead chosen to concentrate on expansion through either leasing space or through franchising. Sportswear: Top 3 International Brands See Good Potential The entry of specialty sportswear retailers such as Royal Sporting House, Sports Station and Planet Sports providing the best shopping experience for customers and a platform to showcase the world? s top sports and active lifestyle brands has transformed the organized retailing scenario in the country. Royal Sporting House has over 40 stores in India, many of which are placed in prime locations within shopping malls. It is the exclusive distributor of brands such as Mizuno, Caterpillar, TYR, Dunlop Sports and non-exclusive ones such as Reebok, Adidas, Nike and Skechers. Planet Sports, with 20 outlets in the country, is the licensee in India for leading sports brands such as Puma, Speedo, Converse and Wilson, among others. The sportswear market is the only sector in India that has the presence of all three top international brands. The year 1996 witnessed the entry of Nike, Reebok and Adidas that gave a new dimension to footwear and fashion retailing in the country. Playful promotion campaigns, world class merchandising and the internationally styled stores enthused consumers to go for an extra pair of shoes and a couple of extra Tee Shirts and add a little bit of sporty images to their lifestyle. Each of these three brands is today targeting nationwide expansion and the Rs. 495 crore active sportswear market is suddenly beginning to look a lot bigger than its actual size. As mentioned above, these brands are not just confined to footwear. Merchandise at Reebok, for example, includes 45 percent apparel. The company has been experiencing a combined annual growth (CAGR) of about 36 percent. Nike stocks 60 percent footwear, 35 percent apparel and 5 percent fitness sports equipment. The emphasis though remains on male customers with 70 percent offerings to this category, 25 percent to ladies and remaining 5 percent to kids. These brands are banking on the strength of the burgeoning Indian middle class and the fashion-conscious upper class, especially in the sports and casual wear segment. While Adidas and Reebok chose the joint venture route for entry into India, Nike came in through a licensing arrangement with Sierra Industrial Enterprises Ltd. It is only now that Nike has decided to set up a wholly owned subsidiary for its Indian operations in line with its strategy in other international markets. Among other prominent players are Woodland, Puma, Fila, Converse and Action. In the face of increasing competition from leading multinational players, domestic footwear retailers have also woken up to the opportunity that the segment beckons and are realizing that Centro Estero delle Camere di Commercio del Veneto Representative Office in India exposure to shopping standards abroad have made Indian consumers demand the same formats and experience here. Responding to this challenge, major domestic players like Bata and Liberty have significantly transformed their retail formats to become more lifestyleoriented and are positioning themselves as vibrant and contemporary Indian brands. Value Retailing In the recent past, numerous factory outlets for shoes offering branded products at very affordable prices have mushroomed in the exteriors of urban locations. The number of factory brand exclusive outlets as a proportion of high street outlets of the same brands is alarming even in comparison with western economies where this format was conceptualized in the first place. Consumers are driven to these factory outlets in search of discounted prices and as a consequence buying from regular stores suffers. Again, the emergence of domestic category killers such as the Hiranandani-owned Loft store has broken new ground in organized retailing in the footwear segment. This format has high potential for becoming a ? destination store? drawing in crowds from a catchment area unparalleled by any footwear retail brand chain store. The Loft store in Mumbai is spread over 18,000sq. ft and houses a collection of over 90 brands under one roof. Further, value additions like an in-house cobbler service, pedicure centre, large delivery counters and a huge parking space in an otherwise crowded city are also offered to enhance the shopping experience. The Loft has achieved record 2,000 customer walk-ins per day on an average the highest in the country for a footwear store. Set up in September 2002, it has plans to replicate this model across five other Indian metros (including Hyderabad where one store is operational) by 2005. Further, shopping malls are likely to be a driver of growth for this sector. With malls cropping up across the length and breadth of the country in the coming years, footwear retailers would be inundated with numerous options to enhance their visibility and presence either through exclusive showrooms in malls or as shop-in-shop arrangements with epartment stores that serve as anchor tenants in these malls. Competition From Non-Specialist Retailers As has been observed in developed markets like UK, in the near future ? mainstream? footwear retailers in India like Bata, Liberty, Nike, Woodland etc will face increasing competition from ? non-specialist? retailers like apparel retailers diversifying into footwea r and discount hypermarkets and retailers such as Big Bazaar and Vishal Mega Mart. These non-specialist retailers are likely to grow their market shares by increasing range of products offered and shopping space allocated to footwear. Mainstream retailers would have to respond to this threat by continuing to invest in their brands, store environments and product differentiation in order Centro Estero delle Camere di Commercio del Veneto Representative Office in India to stay competitive and enticing. Nike, Adidas and Reebok have shown the way to differentiate, others need to find better ways. This shows the company is gradually reducing its involvement in day-to-day management of stores by taking on more franchisees. Sales increased from over Rs. 82 crore in 2003 to Rs. 611. 4 crore in 2004 and the company is hopeful of achieving Rs. 673 crore in 2005. The change is certainly paying off. But Bata has thus far remained exclusive to footwear with just 5 percent income from other items. Introduction of an exclusive range of merchandise that compliments the core product could possibly work wonders. Innovative locations distribution strategies In USA, shoe retailers are getting creative as far as location selection is concerned. In an ? overmalled? nvironment, retailers are hunting for alternative and even innovative locations to reach out to their target segment. Thus, shoe retailers are opening up shop in health clubs, resorts, airports, train stations etc. However, in the Indian context, this trend is not foreseen in the near future though once footwear retailer’s exhaust the option of expanding presence through shopping malls, the need to search for such innovative locations would evolve. Offering a wide range of products along with experiential retailing are key factors to achieve success in the footwear retailing market in India. Further, establishing a wide distribution network across the country is also vital. Traditional players like Bata and Liberty have established a stranglehold in the industry primarily due to their massive distribution capabilities both through exclusive showrooms as well as multi-brand outlets. Moreover, coming together of competitors within the segment through cross-promotions and tie-ups benefits not only the players involved by enhanced reach, but also the consumer as it gives them access to a wider range of products and brands. This is in line with international trends and is already prevalent to a certain extent in India. Action too is one example of a brand gaining significant market share without much emphasis on its exclusive retail network. This sports and relaxed footwear brand today has sales figures that closely match that of market leader Bata. Cross-promotions gain an even greater significance in the Indian context with the absence of legislation favouring foreign direct investment in the retail sector. These tie-ups enable international players to ride on the existing distribution network of local players and go a long way in creating visibility for the foreign brand. For example, Reebok India tied up with Bata in 2001 for sale of its Reebok and Rockport footwear in Bata outlets. Lastly, for footwear retailing to truly thrive, government initiatives are required to rationalize the current tax structure that favours the unorganised segment. Centro Estero delle Camere di Commercio del Veneto Representative Office in India Main retail brands present in India