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Retail Scenario in India
Key Drivers
Key Challenges
Choice of Retail
Global Scenario (Footwear)
Indian Scenario (Footwear)
Market Size
CAGR (Present + Future)
Key Drivers (footwear)
Key Challenges (footwear)
Bibliography
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India is one of the largest emerging retail markets, with a population of over one billion. It is one of the largest economies in the world in terms of purchasing power. Retailing in India is at a nascent stage of its evolution, but within a small period of time certain trends are clearly emerging which are in line with the global experiences. The Indian retail market is estimated to exceed US$ 750 billion by 2015, according to the India Retail Report 2013 (IRIS Research), presenting a strong potential for foreign retailers planning to enter India.
India's strong growth fundamentals along with increased urbanisation and consumerism opened immense scope for retail expansion. Further, easy availability of credit and use of 'plastic money' have contributed to a strong and growing consumer culture in India. The untapped rural market also has high growth potential.
Until 2011, the Indian Central Government denied Foreign Direct Investment (FDI) in multibrand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or other retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process.
In late 2012, the Government of India passed a Foreign Direct Investment policy which allows foreign retailers to own up to 51 per cent in multi-brand retail and 100% in single brand retail and for cash and carry (wholesale) trading and exports. It is expected that these stores will now have full access to over 200 million urban consumers in India, approximately 47% of which are below the age of 30 with high levels of consumption
According to A T Kearney’s Global Retail Development Index (GRDI) 2012, India is the 5th most favourable destination for international retailers. Of the total Indian retail market, 8% constitutes the organised retail segment which is estimated to grow at a rate of almost 30% by
2015, and hence at a much faster pace than the overall retail market which is forecast to grow by 16% in the same period. Clothing & Apparel make up almost a third of the organized retail segment, followed by Food & Grocery and Consumer Electronics. India currently has a small penetration within the organized retail segment as compared to other emerging markets such as China, which has a penetration of more than 20% within organised retail according to the
Global Retail Index report by the World Retail Conference.
The Retail sector in India can be analyzed as per a SWOT analysis as:
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Using Porter’s Five Forces framework we can analyze the retail sector as:
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Retailing is seen as an important sector of an economy, both in terms of contribution to GDP and share in the total employment. Retail sector accounts for around 10% of GDP of India. The following factors have been identified as being responsible for the growth of the overall retail industry in India.
Demographic Dividend
India has the lowest median age of 24 as compared to developed countries. The composition of the Indian population is shifting towards the age group of 20-49 i.e. the working population with purchasing power. Thus, India has the largest ‘young‘ population in terms of sheer size and this young segment is the major driver of consumption as they have the ability and willingness to spend.
Growth in Private Final Consumption Expenditure
Studies have shown that Private Final Consumption Expenditure (PFCE) which accounts for close to 60% of GDP has seen an average growth of over 8.5% compared with an 8% average GDP growth in the same period.
As Indians continue to climb the economic ladder, the composition of their spending will change considerably. In a pattern witnessed in many other developing countries, discretionary expenditures, such as mobile phones and personal-care products, will take up more room in the nation‘s shopping basket. This shift from necessities, defined as food and clothing, is already under way—and taking place at lower income levels than seen in other countries (Mc Kinsey 2007). It is expected that discretionary spending in India will rise from 52 percent of total private spending today to 70 percent in 2025. South Korea went through a similar transformation in the 1980s, when its per capita income levels were about twice those of India now.
Steady saving rates
In India, the household savings rate has traditionally been very high at about
69% as against 44% in China and 16% in the US, leading to slower consumption growth in the economy, as seen in the past. A primary cause of high saving rate in the country is the absence of any form of social security scheme. At a country level, the savings rate in India stands at 32.4% and household savings account for approximately 70% of this amount (McKinsey 2007). With increased accessibility of organized credit forms and their penetration into the remote areas of the country, the household savings rate is however
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expected to stabilize at the current levels. This implies that the incremental income will comprise lower savings, and hence, drive consumption and further aid the retail growth.
Increasing number of dual income nuclear families
In India, hefty pay packets, nuclear family along with increasing working women population and dual income in family is increasing and contributing to prosperous retail sector.
Changing lifestyle and consumer behaviour
Due to increasing working population, comfortable life, travel and leisure are given importance. These key factors are growth drivers of retail sector in India which now boast of retailing almost all the preferences of life – apparel and accessories,
Appliances, Electronics, cosmetics & Toilets cries etc.
Availability of Credit
There has been a radical change in the Indian consumer’s mindset regarding credit. With the easy availability of credit and declining interest rates, personal credit has witnessed growth. The boom in financing has resulted in an increase in spends on housing and consumer durables such as two-wheelers and cars. The use of plastic money has increased significantly total spending on shopping and eating out.
Supply Chain
The consumer goods sector has been transformed by increased liberalization, continuous reduction in customs duty, a shift from quota to tariff-based systems for imports and sophistication in manufacturing over the past few years. Entry restrictions for multinationals have been removed in nearly all sectors. All this has enabled chain retailers to enjoy better range depth and sourcing options as well as improved average margins. There has been a proliferation in the range across all categories, with a simultaneous increase in the supply of products and quality retail space.
Government norms
On 14 September 2012, the government of India announced the opening of FDI in multi brand retail subject to approvals by individual states. On 20 September 2012, the government of India formally notified the FDI reforms for single and multi brand retail, thereby making it effective under Indian Law. Recent developments on FDI
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(Foreign Direct Investment) in retail are also being seen as a boost to the retail sector, esp. the organized format. The Government of India allowed 51% FDI in multi brand retail wherein up to 49% can come through automatic route. In single brand,
Government has allowed 100% FDI where 49% is via automatic route and rest via
FIPB (Foreign Investments Promotion Board).
The organized retail sector in India has been witnessing various issues and challenges which are proving to be a hurdle for its fast-paced growth. Even though the organized retail sector is in a very nascent stage in India, it provides ample opportunities for retailers, and mitigation of a few challenges will help the sector attain higher economies of scale and growth. Elucidated below are the challenges and risks that the sector faces:
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Global economic slowdown leading to decline in consumption
Competition from the unorganized sector
Retail sector has no recognition as an industry
High real-estate costs
Lack of basic infrastructure
Supply-chain inefficiencies
Challenges with respect to human resources
Margin Pressure
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Consumption declines
Private consumption expenditure is an important indicator of overall economic growth.
In the last couple of quarters, the decline in consumption has further affected the global economic downturn. Moreover, widespread financial crisis severely hit credit availability and household disposable income, even after the general increase in disposable income.
Competition from the unorganized sector
Organized retailers face immense competition from the unorganized retailers or Kirana stores (mom-and-pop stores) that generally cater to the customers within their neighborhood.
The unorganized retail sector constitutes over 94% of India’s total retail sector and thus, poses a serious hurdle for organized retailers. If put numerically, the organized retailers are facing stiff competition from over 13 million Kirana stores that offer personalized services such as direct credit to customers, free home delivery services, apart from the loyalty benefits. During the current economic slowdown, the traditional Kirana stores adopted various measures to retain their customers, which directly affected organized retailers. Generally, it has been observed that customers shop impulsively and end up spending more than what they need at organized retail outlets; however, in Kirana stores, they stick to their needs because of the limited variety. During a downturn, many customers may not like to spend more as is evident from the past few months’ trend that shoppers are increasingly switching from organized retail stores to Kirana.
Retail sector yet to be recognized as an industry
The retail sector is not recognized as an industry by the government even though it is the second-largest employer after agriculture. Lack of recognition as an industry affects the retail sector in the following ways:
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Due to the lack of established lending norms and consequent delay in financing activity, the existing and new players have lesser access to credit, which affects their growth and expansion plans
The absence of a single nodal agency leads to chaos, as retailers have to oblige to multiple authorities to get clearances and for regular operations
High real estate costs
Even though the real estate prices have subsided recently due to the slowdown in economies and the financial crises, these prices are expected to go up again in the near future.
Presently the sector faces high stamp duties, pro-tenancy acts, the rigid Urban Land Ceiling Act
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and the Rent Control Act and time-consuming legal processes, which causes delays in opening stores.
Earlier on the lease or rents on properties were very high (among the highest in the world) at some prominent locations in major cities. The profitability of retail companies were affected severely because real estate costs constituted a major part of their operating expenses. Now companies are moving out from prominent malls of tier I cities and are renegotiating the rental agreements with landlords to reduce costs. Some are even focusing on setting up shops in tier II and tier III cities.
Lack of basic infrastructure
Poor roads and lack of cold chain infrastructure hampers the development of food retail in India. The existing players have to invest substantial amounts of money and time in building a cold-chain network.
Supply-chain inefficiencies
Supply chain needs to be efficiently-managed because it has a direct impact on the company’s bottom-line. Presently the Indian organized retail has an efficient supply chain but it appears efficient only when compared with the unorganized sector. On an international level the Indian organized retailers fall short of international retailers like Wal-Mart and Carrefour in terms of efficiencies in supply chain.
 Inventory management is the first challenge that retailers face at the local store level as well as at the warehouse level. Excess inventory often leads to an increase in inventory costs, and then to lower profits, so retailers like Pantaloons and Shoppers
Stop have IT systems in place for inventory management. SCM-IT has helped retailers to plan their stock outs, replenish their stock on time, move stock from warehouse to stores, maintain adequate stock at a store to match consumer preferences etc.
However, the retailer may still face a big challenge in terms of efficiently implementing the supply-chain software across stores and integrating it with the central warehouse, which can be a time-consuming process, requiring trained personnel.
 Logistics is another challenge related to the supply chain. It is imperative for any organized food and grocery retailer to establish a robust cold chain. Amul is the best example of this scenario, as it has developed a cold storage chain across India. Until and unless organized retailers like Reliance and Food Bazaar fully develop integratedcold chains, they would continue to incur loss of considerable amount of money through wastages of perishable items while moving huge quantities from one place to another.
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 The third challenge related to the supply chain is procurement. Big organized retailers enjoy economies of scale based on their size and expansion plans. The economical benefits of scale in procurement are achieved when procurement is made in thousands or millions of units; however, the main challenge here is to procure adequate amount of stock according to customer requirements, failing which the resultant rise in inventory can affect bottom-line.
Challenges with respect to human resources
The Indian organized retail players shell out more than 7% of sales towards personnel costs. The high HR costs are essentially the costs incurred on training employees as there is a severe scarcity for skilled labour in India. The retail industry faces attrition rates as high as
50%, which is high when compared to other sectors also. Changes in career path, employee benefits offered by competitors of similar industries, flexible and better working hours and conditions contribute to the high attrition.
Shrinkage
Retail shrinkage is the difference between the book value of stock and the actual stock or the unaccounted loss of retail goods. These losses include theft by employees, administrative errors, shoplifting by customers or vendor fraud. According to industry estimates, nearly 3-4% of the Indian chain’s turnover is lost on account of shrinkage. The organized industry players have invested IT, CCTV and antennas to overcome the problem of shrinkage.
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We had initially zeroed in on three retail segments:
1.
Footwear
2.
Apparel
3.
Jewellery
The reasons for rejecting the apparel and jewellery business are:
Apparel Business:
Indian apparel market is expected to grow annually at 13-15% by 2020. The industry would mainly grow because of the changing fashion trend, growing consumer class and urbanization.
The domestic apparel industry constitutes of five segments – menswear, women’s wear, Kids wear, unisex and uniforms. Menswear is the largest segment whereas uniforms and women’s wear are the fastest growing segments
Reasons for dropping the business:
 Productivity levels for manufacturing various apparel items are far lower in India in comparison with its competitors.
 Less availability of raw materials and inconsistent raw material prices
 Absence of research and development
 Lack of standardization and quality control
 Though there is huge dependency on cotton, it’s per hectare yield is very less.
 Wool, silk and jute textiles have shown negative growth during the first quarter of the current fiscal year 2011-12 (-6.7%).
 Huge slowdown in the industry in the coming years. Compared to the 50% growth in the industry two years, this time the industry is expecting a 30% growth only.
 Labour force giving low productivity as compared to other competing countries.
 Low bargaining power in a customer-ruled market.
 India seriously lacks in trade pact memberships, which leads to restricted access to the other major markets.
 Indian labour laws are relatively unfavourable to the trades and there is an urgent need for labour reforms in India.
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Jewellery Business
The gems and jewellery industry occupies an important position in the Indian economy. It is a leading foreign exchange earner, as well as one of the fastest growing industries in the country.
The two major segments of the sector in India are gold jewellery and diamonds. Gold jewellery forms around 80 per cent of the Indian jewellery market, with the balance comprising fabricated studded jewellery that includes diamond and gemstone studded jewellery. Besides,
India is world's largest cutting and polishing Industry for diamonds.
Gold jewellery market is growing at 15 per cent per annum and the diamond jewellery market at 27 per cent per annum.
Reasons for dropping the business:
 Most of it is unorganized
 Need huge capital to start off
 It is expected to grow at a CAGR of around 13% during 2011-2013, which is very low compared to the footwear industry.
 Gold being the most used jewellery in India, Indian gold production has shown a decline over the years.
 Prices of stones have gone up by about ten times in the last four years.
 Several small enterprises are finding it hard to exist with severe competition, margin squeeze, high cost of capital and high investment.
 Increase in diamond prices by approximately 35-40% on average primarily due to a supply shortfall.
 Increase in competition from China which is expected to become the biggest manufacturer of jewellery in a few years
 Synthetic diamonds and other artificial jewellery sales may reduce the popularity of real diamonds amongst consumers as diamond prices continue to rise and consumers become more price conscious
Footwear Business
Growing at a compound annual growth rate (CAGR) of about 20 per cent on an average the
Indian footwear industry is likely to reach about Rs 38,700 crores by 2015 from the current level of about Rs 22,000 crores.
India produces nearly 300 crores pairs of footwear annually, exports over 10 per cent and accounts for about 15 per cent of annual global footwear production which is over 2,000 crores, according to a study titled ‘Indian Footwear Industry: An Analysis’ released by The
Associated Chambers of Commerce and Industry of India ( ASSOCHAM).
The footwear is divided into various segments – formal, semi-formal, casual and sports.
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The domestic footwear market is driven by growing fashion consciousness together with increased disposable income among India’s urban middle class which contributes about 45 per cent of overall footwear market making India the second largest global producer of footwear across varied segments after China.
Hence, we have finally chosen to start a retail business involving footwear under a multi brand outlet format (along with private label) named “
using the Hindi name for shoes as our brand name.
According to a new market report published by Transparency Market
Research ”Footwear Market – Global Industry Size, Market Share, Trends, Analysis,
and Forecast, 2012 - 2018,” the global footwear market was worth USD 185.2 billion in
2011 and is expected to reach USD 211.5 billion in 2018, growing at a CAGR of 1.9% from 2011 to 2018. In the overall global market, Asia Pacific is expected to maintain its lead position in terms of revenue till 2018. Asia Pacific is expected to enjoy 30.1% of the global
footwear market revenue share in 2018 followed by Europe.
The global footwear market is experiencing a stable growth rate due to changing fashion trends. This market has exhibited sustainable development owing to driving factors such as rising demand for innovative designs, growing awareness about healthy and active lifestyle, rising population and disposable income levels, and rise in retail culture.
The athletic footwear market is expected to grow at a CAGR of 1.8% from 2011 to 2018 to reach USD 84.4 billion by 2018. Non-athletic footwear is the largest market segment and is expected to grow at a faster CAGR as compared to the athletic footwear segment. Various fashion trends in the market such as demand for innovative designs and styles, and celebrity endorsement is driving the non-athletic footwear market. The global footwear market is segmented into Men, Women and Kids footwear. Men’s footwear market is a leading segment with 52% market share of the overall footwear market. Kid’s footwear market is expected to grow at a CAGR of 3.7% due to the high demand of comfortable and designer footwear for kids.
Based on type of distribution, footwear retailing is sub-divided into store-based and
non-store retailing. Store-based footwear retailing accounted for most of the footwear market revenue and is valued at USD 173.6 billion in 2011. Non-store footwear retailing is expected to gain pace in future and is expected to grow at a CAGR of 6.9% from 2011 to
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2018 to reach USD 18,588 million by 2018.The Asia Pacific region holds the largest share at
42% of the overall footwear market and is expected to grow at a CAGR of 2.1% from 2011 to
2018 followed by Europe with 21% of market share. The Asia Pacific region remains the point of focus for footwear manufacturers due to the cheaper cost of manufacturing and faster growth in population and disposable income of consumer groups.
Nike is the world leader in athletic and non-athletic footwear segment and comprehensively leads the overall global footwear market. The footwear market is largely consolidated with top five players including Nike, Adidas, Reebok, Puma and New Balance holding around 70% market share. Other major players in the footwear market are Asics,
Converse, Sketchers and K-Swiss. The popularity of local manufacturers and growing piracy in developing countries remains the major challenge for global footwear manufacturers.
With a direct employment of 2, 50,000 (with 50% of them being Women) and an export earnings of $14 billion, leather industry is a significant driver of economic growth. The Indian leather industry enjoys abundant availability of raw materials, availability of low cost skilled labour, and availability of supporting institutions. More than 4000 units are engaged in manufacturing, of which 95% are SME. India’s share in the global footwear imports is around
1.4% and future growth is expected from the SME’s venturing into value added products. Major competitors in the export markets for leather footwear are China (14%), Spain (6%), and Italy
(21%). 55% of India’s leather export comes from US and UK, and Dubai in recent years had emerged as a trading destination to Africa and other markets. Global recession had a major impact on the industry, in terms of revenue fall and markets. Some saw a dip over 30% in their revenue. SME focusing on exports and producing only semi-finished leather witnessed low demand, increasing margin pressures and high inventories. With the collapse of traditional
North American, Eastern Europe market, SME were expecting Dubai to bail them out. However, that did not happen. Cheaper alternate markets such as Russia, Eastern Europe emerged to fill in the coffers. A major challenge faced by the SME’s, especially in Vaniyambadi, Tamil Nadu is the cost of effluent treatment. Some SME’s tanneries that could not meet the cost of CETP norms were closed.
The recession and the hardening of Indian Rupee against US Dollar is propelling leather companies the need to diversify and de-risk their business. Eyeing the sizeable mall-hopping consuming class, manufacturers are turning retailers, either going ahead on their own or forging alliances with international partners.
Foresight, Chennai based company is partnering with Pavers, of UK to introduce
European fashion footwear brand Staccato in India. Reliance Brands has entered into an
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agreement with The Timberland Company, a major manufacturer of outdoor footwear and apparel. Future Group and the UK shoe retailer, Clarks, have formed a JV to bring high quality shoes to India.
Domestic footwear retail business is witnessing a shift in channels too. With large volume brands sales remaining at high streets, and mid segment customers preferring to purchase shoe and other accessories in tandem with clothes, some of the retailers are reworking their presence. Footwear retailers prefer to use Malls to de-risk their channels and product lines. Domestic brands are moving beyond regional markets and embarking pan-India presence. From a primarily NCR player, Mahtani Fashion, an aggressive shoe retailer who owns
Vi-Ga has plans to build a national presence. Domestic market offers tremendous opportunity and hope for diversification, de-risking the export heavy business. However, it does pose challenges and issues for new entrants.
Customer Segments
Retail footwear segment in Indian is very price sensitive and has been steadily growing over the year. Major part of the demand is met by the unorganized sector and still there is a shortfall of 300 million pairs. Branded shoe market only account for 20% of the entire market.
While international brands largely dominate the higher end of the spectrum, the lower end of the market is dominated by home-grown players as well as unorganized players. While men's footwear is the biggest target category (contributing almost 48%), children's (11%) and women's lifestyle footwear (41%) is not behind in the race.
Segment wise classification of price ranges in the men’s footwear segments:
Segments
Mass market
Economy market
Sports market
Premium leathers
Price Ranges (in Rs)
185 – 700
700- 1000
1000 – 3000
3000- 5000
% of growth
60% (Liberty Bata)
30% (Bata Liberty)
7% (Nike Adidas)
5% (Charles and Keith)
Luxury 10000- 50000 1% (Gucci Louis Vuitton)
Segment wise classification of women footwear segment:
Segments
Traditional footwear
Designer Footwear
Formals
Casual Wear
Sports Shoes
Price Ranges (in Rs)
699 – 999
599 – 799
299 – 699
499 – 799
500- 699
% of growth
5%
10%
40%
25%
20%
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The kid’s footwear segment is one of the fastest growing segments in India. The Indian kid’s footwear segment is highly fragmented and dominated by the unorganized sector. The branded kid’s footwear segment has a big card to play as India has the world’s largest child population. The overall kid’s retail segment has a robust margin of 20 – 25 % which is huge potential opportunities for organized branded retail footwear players. S&M is one of the players who have ventured into kids wear segment which has 27 exclusive outlets through franchise model. S&M sees a huge potential with age group of 3 – 16 years kids segment in the domestic market after the economic slowdown in the international market that hit the company’s revenues has now been targeting the growing consumers market of India. It has set up store in store format for optimized revenue flow. The store in store format of business model has been the trend among many retail footwear players in India.
Disney kid’s is another international brand which has forayed into exclusive kids shoes in
India and has targeted kids within the age group of 5-10 years. Disney shoes have a tie-up with
Sierra Industrial Enterprises to manufacture and market Disney shoes for kids in India. Disney aims to become the market leader in the kid’s footwear segment in India.
The Disney shoe collection will include boots, sandals, slippers and sports shoes for boys and girls. The footwear’s has a price range from Rs 150 – Rs 850. Disney has targeted malls across the country and in prominent chain stores such as Lifestyle, Loft, Shopper’s Stop,
Pantaloon and Central.
Bata is one of the oldest brands which have a more than 50% share in the executive segment. As the young Indian executive class matures in terms of quality, design and brand, the preference will be more towards branded footwear and the growth is expected to be high in this segment with the migration of people from villages to cities for better career and profession. The footwear retail segment is currently one of the most organized sectors within the retail domain. However, this is purely due to the highly organized nature of the men’s footwear segment. The women’s category is largely unorganized, in fact close to 95% of the category is unorganized. With respect to the rest of the world, this is an anomaly as the women’s category is majorly organized and forms a big chunk of the market. Thus for us as retailers in the women’s footwear category, the market is still largely untapped and hence a big opportunity for growth. At present, almost all of the organized retailers in the women’s footwear category are located in the metros and Tier I cities and towns. The Tier II and Tier III towns have over the last few years seen a spurt in income driven by the service industry boom.
Hence these towns definitely are a potential target.
Organized footwear market Vs Unorganized footwear market
The average growth in the industry has been estimated at 12% and is estimated to touch Rs 47000 crore by 2025. Presently the Indian organized foot wear market is dominated by men’s footwear segment that contributes for nearly 60% of the market where the casual
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footwear has been better off with two thirds of the share in the men’s segment. The unorganized players have the lions share in the ladies and kids segment with 80 percent share.
The organized footwear brands have less penetration in the ladies footwear segment mainly due to the complex buying behaviour of Indian women. The ladies and kids segment is one of the fastest growing segments in the branded footwear market and many foreign brands like
Catwalk have ceased the opportunity and have set their footprints in this segment which has been untapped by major traditional Indian footwear brands. Considering this many of the
Indian footwear brands have seen growing opportunities in the segment to widen their product portfolio, widen their risk appetite and increase their market share in the footwear segment by contributing to newer growing consumer segment which will boost the bottom lines of the retail players. The business models of the footwear retail players have been different with a wide popularity of stores in high streets, malls and new formats such as store in store has been catching up even with international brands having gone the store in store model which has been the most cost effective model in terms of testing the markets.
Major challenges in running domestic retail a) Retail presence: Till recently, most companies invested in own stores as the means to grow and expand. With commercial rents increasing in last few years, capital required for expansions was a bottleneck. b) Credit Management: Brands that had no local presence, but preferred the thirdparty retail route had to face the challenge of receivables, often the credit period as high as 120 days. c) Brand: Many of the leather firms are SME’s, have great experience in trading and vendor management, but completely lack brand building experience. Even when attempts were made, they lacked focus and consistent efforts, thereby diluting the impact. d) Low IT investment: Except the major leather manufacturers, none of the companies had an ERP connecting POS data so as to effectively manage inventories. It was not common to have rounded the year’s discount offerings to get over the inventories.
The SWOT analysis of Indian footwear industry can be given as:
STRENGTHS: -
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Existence of more than sufficient productive capacity in tanning.
Easy availability of low cost of labour.
Exposure to export markets.
Presence of qualified leather technologists in the field.
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Easy availability of raw materials and other inputs.
Massive institutional support for technical services, designing, manpower development and marketing.
Exporter-friendly government policies.
Tax incentives on machinery by Government.
Well-established linkages with buyers in EU and USA.
WEAKNESSES: -
 Low level of modernization and upgradation of technology
 Less number of organized product manufacturers.
 Lack of modern finishing facilities for leather.
 Highly unhygienic environment.
 Awareness of international standards by many players is low as the segment is mostly comprised of SME’s
 Difficulties in access to testing, designing and technical services.
 Environmental problems.
 Non availability of quality footwear components
 Lack of fresh investment in the sector.
 Uneconomical size of manufacturing units.
 Competition among units vying for export orders leading to undercutting.
 Little or no brand image.
 Low machine, material & labour productivity.
 Delayed deliveries
 Weak support infrastructure for exports
OPPORTUNITIES: -
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Abundant scope to supply finished leather to multinationals setting up shop in India.
Growing fashion consciousness globally.
Use of information technology and decision support software to help eliminate the length of the production cycle for different products
Product diversification: there is lot of scope for diversification into other products, namely, leather garments, goods etc.
Growing international and domestic markets.
Exposure to newer markets through Fairs/ BSMs
Aim to present the customer with new designs, infrastructure, country & company profiles.
Use of modern technology
Exhibit strengths in manufacturing, for example, strengths in classic shoe manufacturing, hand crafting etc.
De-reservation of the footwear sector.
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THREATS: -
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Entry of multinationals in domestic market.
Stiff competition from other countries (The performance of global competitors in leather and leather products indicates that there are at least 5 countries viz. China, Indonesia,
Thailand, Vietnam and Brazil, which are more competitive than India.)
Improving quality to adapt to the stricter international standards.
Fast changing fashion trends are making it difficult to adapt for the Indian leather industries.
Limited scope for mobilizing funds through private placements and public issues, as many businesses are family-owned.
For this research we have taken the following global and local players respectively:
Global Players:
 Puma
 Wolverine World Wide Inc.
Local Players:
 SreeLeathers
 Liberty
The data on revenues and EBITDA for each of the players is given as:
Global Players:
Revenue
Cost of goods sold
EBITDA
Global Players
Puma Wolverine World Wide Inc.
2011 (in million) 2012 (in million) 2011 (in million) 2012 (in million)
2288
1131
2466
1246
1,409,068
852,316
1,640,838
1,008,197
285 168 170,218 113,724
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Local Players:
Revenue
Cost of goods sold
Local Players
SreeLeathers Limited
2011(in lacs) 2012(in lacs)
4032.31 4427.8
- -
Liberty Shoes
2011(in lacs) 2012(in lacs)
29694.02 33228.52
- -
EBITDA 612.25 774.52 2516.29 2958.25
 Current Scenario:
The current market size of footwear retail in India is around $35 billion (which comes up to about Rs. 22,000 crores).
 CAGR (present & future):
The current CAGR is 15% and is expected to touch 25% in next 10 years, bringing the average CAGR to about 20%.
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The drivers for the footwear industry in India can be stated as:
 Increasing disposable income and growing number of middle-class households leading to increase in aspiration levels
 Growing fashion-consciousness
 Increasing number of working women
 Increasing penetration in Tier II and Tier III cities
 Online availability
 Low-cost production
 Abundance of raw material
 Skilled manpower
 Government initiatives boosting the industry
 High export potential
The challenges for the footwear industry in India can be stated as:
 Entry of large players to stiffen competition
 High rate of turnover
 Stiff competition from other countries leading to cheaper products being made available
 Fast changing fashion trends make it difficult for local players to compete
 Environment related issues
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http://www.rasci.in/downloads/2008/Retail_Scenario_India_Unlimited_Opportunity_2008.pdf
http://www.slideshare.net/isha021093/indian-retail-scenario http://www.dnb.co.in/IndianRetailIndustry/insight.asp
http://www.deloitte.com/assets/Dcom-
India/Local%20Assets/Documents/Thoughtware/Indian_Retail_Report_Opening_more_doors.pdf
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http://rajeshthambala.blogspot.in/2013/02/indian-retail-industry-2012-2013.html
http://economictimes.indiatimes.com/fullcoverage/fdi-in-retail http://timesofindia.indiatimes.com/business/india-business/Indian-footwear-industry-loses-foothold-ininternational-market-Study/articleshow/21529684.cms
http://footwearsinfoline.tripod.com/swotanalysis.html
http://www.wolverineworldwide.com/investor-relation/annual reports/WWW_2012_oar/assets/WWW2012AR_with_10K_119pg.pdf
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