indian footwear industry report - april 2015
TRANSCRIPT
Reevolv Advisory Services
Private Limited
Indian Footwear Industry Report
This document has been prepared by Shilpa Bhattar and Kaustubh
Kulkarni. For any queries or detailed information contact us on
+91 22 – 6002 2001 /+91 – 22 – 2436 3161
or email at [email protected]
”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 2010, 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. (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.
APRIL 2015
Indian Footwear Industry Report
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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. Porter’s 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
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6.4. Catwalk 51
6.5. Crocs India 55
6.6. Khadim’s 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 Retail Limited 114
6.20. Tresmode 118
6.21. VKC 122
6.22. Woodland 154
7. Select Interviews 157
8. Annexure 160
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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 India’s 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. XXX per annum on footwear as compared to an urban consumer which spends
around Rs. XXX per annum on footwear.
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. XX billion in 2015 from Rs. XX billion in 2010.
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 2010 increased to ~Rs. XX Bn in 2011, growing at a CAGR of ~XX% every year since 2008. The market is expected to reach Rs. XX billion by 2015
growing at a CAGR of ~XX% p.a.
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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 XXXXXXXXXXXX, the world footwear production has reached a record XX billion pairs in XXXX.
Production of footwear is heavily concentrated in Asia with XX% of world’s production of XX billion pairs
coming from this continent in XXXX. 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. Asia has the highest consumption of footwear with XX% due to large
population base followed by Europe (XX%) and North America (XX%) having higher disposable income.
Distribution of Footwear Production by Continent (quantity) XXXX
Distribution of Footwear Consumption by Continent (quantity) XXXX
Source: XXXX Source: XXXX
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Rank Country Pairs Millions
World share
1 2 3 4 5
6 7 8 9
10
Rank Country Pairs (millions) World share Per capita (pairs) 1
2 3 4 5 6 7 8 9 10
China is the world’s largest footwear market with XXX billion pairs consumed in XXXX. XXX which traditionally
was the largest market has been relegated to second place by XXX. XXX is the leader in footwear imports,
with more than XX billion pairs imported in XXX. India with XX billion pairs consumed is the world third largest
market.
The average per capita world consumption of footwear has been steadily increasing with around XX pairs per
year in XXXX. Though XXX is the world’s third largest market, the per capita consumption of footwear is below
the world average at XXX pairs per year in XXXX.
XXX produces more than XX% of the world’s footwear
by volume. XXX dominates the industry, especially the
cheaper end of the market. Though XXX 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.
XXX 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. XXX with USD
XX Bn represents XX% of the total global exports by
value and an average price of USD XX.
Top 10 Footwear production countries (quantity) XXXX
Top 10 Footwear consuming countries (quantity) XXXX
Source: XXXXX
Source: XXXX
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3. Footwear Industry Overview
3.1. Market Opportunity
Total Market
The size of the domestic footwear market in India wasaround Rs. XXX Bn in 2010, which has grown from Rs.
XX billion in XXXX at a CAGR of XX%p.a. The urban market has been growing at a faster pace of XX% p.a.
(XXXX–XXXX) 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. The urban market is estimated to grow at a CAGR of XX% (XXXX-XXXXE) to reach Rs. XX billion in XXXX from Rs. XX billion in XXXX.
Fig 2: Footwear Industry Size (XXXX–XXXXE)
Rs. In billion 2005 2010 2015E CAGR% (2005–10)
CAGR% (2010–15E)
CAGR% (2005–15E)
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 billion in XXXX increased to ~Rs. XX Bn in XXXX, growing at a CAGR of ~XX% every year since XXXX. The market is expected to reach Rs. XX billion by XXXX growing at a CAGR of ~XX% p.a.
0%
20%
40%
60%
80%
100%
2005 2010 2015ERural Urban
Out of the total market in XXXX, the urban
market constitutes XX% of the total market size
compared to XX% in XXXX. The share of the
urban market is expected to increase slightly to
XX% in XXXX. The rural market is expected to
grow at a CAGR of XX% to reach Rs. XX billion
in XXXX from Rs. XX billion in XXXX.
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 Fig 3: Share of Urban and Rural Market (XXXX–XXXXE)
Source — Reevolv Estimates
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Urban Market— Tier 1, 2 and 3 cities
The footwear market in urban cities (tier 1, 2 and 3 cities) is around Rs. XX billion in XXXX with tier 1 cities constituting more than XX% of the total market in Tier 1, 2 and 3 cities.
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 Vijayawada.(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 (XXXX) - XXXX Rs. million
Cities No. of Cities Rs. million Tier 1 cities Tier 2 cities Tier 3 cities Total
Source — Reevolv estimates, XXXX and XXXX Reports.
The total tier 1 market that constitutes metros
and other cities is around Rs.XX billion. Of all
the cities in India, XXX is the largest footwear
market with Rs. XX billion followed by XXX with
Rs XX billion. Among the tier 2 cities, XXX (~Rs.
XX million) is the largest market, followed by
XXX (~Rs. XX million), XXX (~Rs. XX million)
and XXX (~Rs. XX million).
Source — Reevolv Estimates.
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Urban Market — State wise
Fig 7: Footwear Urban Market — Key states and per capita expenditure (XXXX)
Key States Urban Population (XXXX) [in millions]
Urban Market Size (XXXX) [Rs.billion]
Per Capita Expenditure on
FootwearServices (Rs.)
Fig 6: State-wise Footwear (Urban) Market (XXXX) — Market Size Rs. XX Billion
Source — Reevolv Estimates; XXX Reports
Among the states, XXXX with ~Rs. XX Billion (XXXX) has the largest market share of urban footwear market followed by XXX and XXX.
Among the major states (with urban
population more than XX million), XXX has
the highest urban per capita expenditure
followed by XXX and XXX. XXX, XXX and
XXX have the lowest urban per capita
expenditure on footwear.
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3.2. Growth Drivers
2006E 2011E 2016E 2021E
Fig 9: Break-up of India’s Consumer Expenditure (XXXX and XXXX)
Fig 8: India’s Working Population Break-Up (XXXX–XXXXE)
Source – XXXXX
Source —XXXXXX
0% 20% 40% 60% 80% 100%
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4. Business Dynamics
4.1. Industry Constituents and Structure The domestic footwear industry is estimated to be around Rs XX Bn. The unorganized nature of the industry,
especially on the upstream of the value chain offers a host of opportunities. The unorganized players have a
market share of around XX% 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
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Manufacturing Process:
1. Leather Footwear: 2. Non Leather Footwear Manufacturing
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4.2. Industry Characteristics
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4.3. Business Model
Fig 6: Business Model:
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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
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4.5. Key Success Factors
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4.6. Key Challenges
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4.7. SWOT of the Indian footwear market
Strengths Weakness
Opportunities Threat
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4.8. Porter’s five forces model
No Five Forces Remarks Current Trends
1. Power of Supplier (Low) a.
• Raw material
• Unorganized
• Imports from China,
Taiwan, Singapore
• Availability of
suppliers of
footwear
components
2. Availability of Substitutes (High)
• Nature of substitutes
• Supply of
substitutes
• Price differential
• Brand erosion
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3. Entry Barrier (Low)
• Time and cost of
entry
• Designs
• Brand play
• Market access
4. Power of Customers (High)
• Changing customer
trends
• Availability of
multiple options
• Discretionary
purchases
5. Competitive Rivalry (High)
• Type of competition
• Unorganized players
• Influx of foreign
brands
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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
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States Players
And hra 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
Note - XXXXXXXX
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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 •
Online Sales •
Future Plans •
Location
Source : Company Website and Reevolv Research
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6.1.2. Locations
Tier I Cities Tier II Cities
State Wise Region Wise
Others include : XXXXXX
Source: Company Website and Reevolv Research
1
2
3
44
3
2
1
0
1
2
3
4
5
Tier 1 City Tier 1 City Tier 1 City Tier 1 City
EBO MBO
1
2
3
44
3
2
1
0
1
2
3
4
5
Tier 2 City Tier 2 City Tier 2 City Tier 2 City
EBO MBO
10
20
30
4040
30
20
10
05
1015202530354045
Maharashtra Punjab Karnataka West Bengal
EBO MBO
North, 40
East, 20
South, 30
West, 10
North East South West
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6.1.3. Target Customer Segment
Men Women Kids
Formal •
Casual/ Semi Formal •
Sports • •
6.1.4. Pricing
Brands Rs. Per pair
Source — Company Website and Reevolv Research
Source —Company Website and Reevolv Research
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6.1.5. Financials
Profit & Loss Account for the year ended 31st March (Rs. Mn) FY2012 FY2013 FY2014
Balance Sheet as at 31st March (Rs. Mn)
FY2012 FY2013 FY2014
Source: Company Filings, Totals may not tally due to rounding off errors
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Key Ratios FY2012 FY2013 FY2014
Source: Company Filings and Reevolv Research
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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 doesn’t 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?
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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?
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 children’s 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?
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Interviewer 3: Manufacturer
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?
Interviewer 4: Manufacturer
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?
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8. Annexure
8.1. Annexure 1
Manufacturing Process: 1. Leather Footwear:
Fig 2: Manufacturing process of leather footwear
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2. Non Leather Footwear manufacturing:
Fig 3: Manufacturing process of EVA footwear:
Fig 4: Manufacturing process of PU footwear:
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8.2. Annexure 2:
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8.3. Annexure 3: Ratios
Key Ratios
Direct Cost % Material + Other Direct Expenses –
increase / decrease in Stock Total income
X 100
Personnel Expenses % Personnel Expenses
Total income X 100
Selling & Distribution Expenses %
Selling & Distribution Expenses Total income
X 100
Rent, Rates & taxes % Rent, Rates & taxes
Total income X 100
EBITDA % EBITDA
Total income X 100
PBT % PBT
Total income X 100
PAT % PAT
Total income X 100
ROCE % EBIT
Capital Employed X 100
ROE % PAT
Net Worth X 100
Capital Employed Total of Asset / Liabilities (Liabilities = Shareholders funds + Loan Funds + Deferred Tax + Minority Interest)
Working Capital Turnover Ratio
Total Income Net Working Capitalexcl. Cash Bank
Net Fixed Assets turnover ratio
Total Income (Net Fixed Assets excl Capital Work in
Progress)
Inventory Days Inventory
Direct Cost X 365
Debtors Days Debtors
Total Income X 365
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8.4. Annexure 4: Abbreviations
Abbreviations used
Rs Rupees
Mn Million
Bn Billion
NCR National Capital Region
NSS National Sample Survey
NA Not Available
NM Not Meaningful
EBITDA Earnings before interest, tax, depreciation and amortisation
EBIT Earnings before interest and tax
PBT Profit before tax
EVA Ethyl Vinyl Acetate
PAT Profit after tax
PVC Polyvinyl Chloride
PU Polyurethane
TPR Thermoplastic Rubber
DOP Di-Octyl-Phthalate
DOA Dioctyl adipate
DIDP Bis(n-butyl)phthalate
MBO Multi Brand Outlet
LFR Large Format Retail
ERP Enterprise Resource Planning
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