| Trainee Manager Institute: Footwear Design And Development Institute
Status: Offline Posts: 1 Management Paradise Rupees.: 400 Join Date: Mar 2009 | Re: Commercial Banking -
March 17th, 2009
INTRODUCTION
OVERVIEW OF THE GLOBAL FOOTWEAR AND SPORTSWEAR INDUSTRY
World Footwear Market is projected to reach 13.9 billion pairs corresponding to a value of US$192.4 billion by 2010. United States continues to lead the global footwear market.. Europe, one of the largest markets in terms of value, is likely to be overshadowed by the United States and the ever-burgeoning Asian region, in years to come.
Global Footwear Market is intensely competitive, pitching large and small players alike against each other. Principal tools of competition within the industry include product design, quality, product performance, price, brand image, promotion, marketing, and customer service. Unique marketing & promotional efforts and technical innovation have become key ingredients in setting up the battle for a pie of the footwear market. A highly charged environment, the industry demands competitors to always remain on their toes.
U.S.A.
The fashion and performance-driven US footwear market is likely to witness one of the world's strongest growth in terms of value sales with consumers increasingly becoming upwardly mobile in terms of price points afforded by them. In value terms, Asia-Pacific (excluding Japan) is projected to be the fastest growing region exhibiting a compounded annual growth rate (CAGR) of 4.8% through 2001-2010 period. Asia, particularly China & India, and Latin America are unraveling robust growth opportunities, as footwear manufacturers best their efforts to induce the price-conscious consumers to shell out bigger bucks for their favorite international brands. Revolutionary improvements in retailing and distribution formats have propped the developing economies' penchant for branded fashion footwear from the overseas. Nevertheless, affordability is still a concern, pressurizing the multinational footwear brands to stoop to domestic pricing to achieve break-even volumes. Asia-Pacific represents the largest footwear market, in terms of volume, while casual footwear is the fastest growing as well as the largest product segment, with an estimated 7 billion pairs market for 2006.
Worldwide sales of sports equipment, apparel, and footwear increased a healthy 4% to $278.4 billion (185.6 billion euros) in 2007.Despite its slowing economy, the US posted the highest growth rate among the top six developed countries, showing a 3% gain in the sports market, according to the data: Growth was evenly distributed between footwear (3%), apparel (4%), equipment (3%), and bikes (3%).
The fastest-growing markets were South Asia & Central Asia (13%), Middle East (16%), and Central and Eastern Europe (20%).
Europe
Western Europe, Scandinavia, Japan, and Canada posted flat growth rates. Europe experienced a strong upward trend in 2007 on bikes and accessories (7%). However, the equipment market, excluding bikes, suffered (0% growth) due to comparison with 2006, which was a World Cup year, and lack of snowfall during ski season. The main segment, apparel, has seen its prices remain below the level of inflation level, with no growth in units.
Asia
In Asia, the sport and sport-inspired apparel & footwear market is the force driving the upward trend. Despite a sluggish Japanese market, Asia has several countries soaring at the moment.
This sport-fashion trend is even more of an opportunity for big brands (Nike, Adidas, Reebok, Puma). They already have a huge lifestyle business (as opposed to brands specialized by sport). The big sport brands can also afford to be present in the less mature markets, precisely where the sport-fashion business is booming and the consumers are focused on brand names.
China
China is estimated to be a $7.9 billion sports market that grew 15% in 2007.
The sport & sport-inspired Chinese market segments:
• Footwear, $1.6 billion
• Apparel, $3.3 billion
• Equipment, including bikes, $3 billion
For China selected sport are as follows:
• Football/soccer (excluding rugby and American football): $252 million
• Running: $550 million
• Basketball: $118 million
• Swimming: $244 million
Dominant global forces in the market are adidas, Brown Shoe, Fila, Nike, Reebok, and Timberland among others. In addition to the global leaders, the report offers detailed profiles of the dominating players in the US footwear market - Brown Shoe Company, Weyco Group, Kenneth Cole, Phoenix Footwear, Skechers, and Wolverine World Wide, among others. Bata of Canada, Puma of Germany, Gucci Group of Italy, and several other regional players are also profiled in the report.
THE SUPPLY CHAIN
The supply chain of the industry starts with Agro Industries and progresses through
the chemical industry and tanning to manufacturing. Leather is a by-product of the
food industry. It is a commodity and as such is subject to market forces in a similar
way to tea, sugar, coffee, etc.
Shoe export supply:
Asia
World footwear manufacturing is notorious for its pursuit of so called “cheap”
labour. In the 1960’s Japan was the main source of supply of low cost footwear. Japan
was the first Far Eastern supplier of Nike Sports shoes. (Nike is the Greek goddess of
victory). Low labour costs, supplies of leather and a tradition of shoemaking made
Japan the launch pad for the Far East shoe manufacturing industry. The industry
then moved to Taiwan as labour costs in Japan grew. It in turn moved to South
Korea, then to Indonesia and Thailand. Taiwan and South Korea no longer have any
significant shoe manufacturing industries.
The economic problems in the late 1990’s had a major negative impact on the
footwear industries of Indonesia and Thailand. This created many problems in
the supply chain, particularly in USA, with the result the industries in these two
countries have never fully recovered because buyers lost confidence in the factories
abilities to make timely deliveries at stable prices.
Meanwhile China was liberating its economic policies. Taiwan Chinese
entrepreneurs were looking for a new manufacturing base. Hong Kong became a
new capitalistic part of China. Operating through Hong Kong for political reasons,
the Taiwanese industrialists set up shoe factories directly opposite Taiwan on the
Chinese mainland, where there were green field sites and labour was plentiful and
cheap. Thus the industry then moved on again to China as the lowest labour cost
country in the region.
This left China emerging as the dominant player because of it’s high capacities
installed (at least for the USA), infrastructure, and component supply industry.
It is difficult for a non Far East country to compete head to head with China. They
must find market niches China does not do particularly well. For example leather
trumocs, side wall stitch, McKay stitch, St Crispin, safety shoes etc. These shoes are a
bit more difficult to make and do not lend themselves to the automated production
lines prevalent in China. They are also in constant demand in the market.
It is claimed that Vietnam is an even lower cost producer than China. Vietnam is
building up its infrastructure aiming to become a serious player but it has a difficult
relationship with USA.
In parallel with these developments India was also targeting its large somewhat
informal leather sector to modernise. Through Government legislation the sector
has now become one of the dominant leather shoe supplying countries.
Today the main international suppliers of low cost footwear from Asia are China,
Indonesia and India; Vietnam and Thailand follow.
According to SATRA (Shoe and Allied Trades Research Association, UK), in 2002,
India, China, and Indonesia accounted for about 75.2%, 9.4 billion pairs, of a
global production of 12.5 billion pairs of shoes.
India
India has emerged in recent years as a relatively sophisticated low to medium
cost supplier to world markets –The leather industry in India has been targeted
by the Central Government as an engine for economic growth. Progressively, the
Government has prodded and legislated a reluctant industry to modernise. India was
noted as a supplier of rawhides and skins semi processed leather and some shoes.
In the 1970’s, the Government initially banned the export of raw hides and skins,
followed this by limiting, then stopping the export of semi processed leather and
encouraging local tanneries to manufacture finished leather themselves. Despite
protestations from the industrialists, this has resulted in a marked improvement in
the shoe manufacturing industry. India is now a major supplier of leather footwear
to world markets and has the potential to rival China in the future (60% of Chinese
exports are synthetic shoes).
India is often referred to as the sleeping giant in footwear terms. It has an installed
capacity of 1,800 million pairs, second only to China. The bulk of production is
in men’s leather shoes and leather uppers for both men and ladies. It has over 100
fully mechanised, modern shoe making plants, as good as anywhere in the world
(including Europe). It makes for some upmarket brands including Florsheim (US),
Lloyd (Germany), Clarks (UK), Marks and Spencer (UK).
India has had mixed fortunes in its recent export performance. In 2000, exports of
shoes were US$ 651 million, in 2001 these increased to 663 million but declined
in 2002 to 623 million dollars (See annex).
The main markets for Indian leather shoes are UK and USA, which between them
take about 55% of total exports.
India has not yet reached its full potential in terms of a world supplier. This is due
mainly to local cow leather that although plentiful, has a maximum thickness of 1.4
– 1.6mm, and the socio / political / infrastructure of the country. However, India
is an excellent supplier of leather uppers, a fact that Jordanian shoe manufacturers
could take advantage of. Importation of uppers from India does not infringe FTA
with Europe or the USA (It might be a problem in the QIZ system because of the
stipulation of value added).
The potential is set to change albeit slowly, but with a population rivalling China for
size, there is no doubt the tussle for world domination in footwear supply will be
between these two countries.
Italy
Italy is the driving force of the EU footwear industry, as the leading exporter and
producer. Its main export markets (extra EU) are USA, Romania, Switzerland,
Russia and Japan. The industry is geared towards leather footwear of medium to
high quality with many international, though smaller, brand names. Average ex
factory price is US$ 22 – 25. Exports have been holding steady for the last few years
at around US$ 7.5 billion per annum (See annex for details). Exports in 2003 were
320 million pairs.
Italian flair and styling is well known, it is the innovator in the market place.
Consequently, is usually the first to offer new products, ensuring at least the bulk
of initial orders. In this manner, it manages to hang on to market share. In a sense,
the fact that its exports have declined only by 6% since 1999, is quite a creditable
performance. Much of this decline must be a result of currency fluctuations, which
in turn distorts export prices. However, with the intense competition now prevalent,
it is difficult to keep ahead of the followers who manage to bring similar products to
market not so far behind the Italians at lower prices and acceptable quality.
Part of the strength of the Italian industry is its structure, which is the exact opposite
of China. The Italian industry is composed mostly of small firms employing 12
– 20 people (Of course there are some larger companies, Filanto, Effi etc). There
are more than 7,000 firms in the sector 900 of which are shoe producers. They
co-operate together, sharing manufacturing processes, and marketing plans. They
are very flexible, have quick reaction times, low minimum ordering quantities,
elastic production capacities and an image of good quality. They can easily act
as subcontractors for the bigger companies, this satisfies the needs of the more
upmarket retailers and distributors. In this way they keep overheads and costs
to a minimum and manage to compete internationally in their market segment.
It is a unique Italian structure that works well in Italy due mainly to the culture
and tradition of shoemaking in the country. It is an ongoing question and debate
whether this system can be replicated in other countries.
SPORT SHOES
Sport shoes have been developed with the aim of providing protection from potentially injurious forces and to help optimize performance. All sport shoes have common key features comprising cushioning elements, a relatively rigid heel counter, durable shoe outsole and a degree of medial and lateral heel flare.
An athletic shoe is a generic name for a shoe designed for sporting activities and is different in style and built than a dress shoe. Originally known as sporting apparel today they are known as casual footwear, depending on what part of the world one lives in they can also go by the name trainers in British English, sand shoes in Australia, running shoes or runners in Canada or sport shoes, running shoes, gym shoes, tennis shoes, sneakers in United States.
Use of sports shoes in sports activities and casual purpose:
The athletic shoes are used for running; basketball and tennis (amongst others) but tend to exclude shoes for sports such as football (soccer) and rugby which are generally called boots or cleats.
The sport shoes are made of flexible material they are light in weight so as to provide extra comfort to the wearer.
Athletic shoes have also been tailored for the casual market and are popular especially with young people. The term sneakers and trainers tend to associate more with the casual use of athletic shoes.
Sneakers are worn casually and are made with simpler designs which are made to be more aesthetically than sneakers specifically designed for sports or exercise. However ironically, the sneakers that were once designed for athletic purpose are now more commonly used for fashion. For example Converse’s Chuck Taylor All Star designed for basketball, the Dunlop Volley for tennis and the Adidas Samba boot created for indoor soccer.
The designs vary enormously depending upon the origins of the manufacturer.
The popular brands include Adidas, Puma, Reebok, Nike, Fila, Converse, New Balance, Brooks etc.
COMPANY PROFILE
Lotto Sport Italia is an Italian sports apparel manufacturer. It began in June 1973 and has since become a world-renowned apparel company. Lotto was founded by the Caberlotto family, who used to own Italian soccer team Treviso. It originally made tennis shoes; basketball, volleyball, athletics and football apparel all followed. Its products are now distributed in more than 60 countries. Lotto's new top-of-the-range football boots are the Zhero Gravity shoes which sport a unique and revolutionary laceless design and provide more comfort when kicking a ball.
Founded 1973
Headquarters Treviso, Italy
Type Privately Held
Status Operating
Industry Sporting Goods
Products Footwear, Sportswear
With headquarters in the Italian shoe district of Montebelluna, Veneto region, Lotto Sport Italia is the leading Italian company in the production and distribution of sports footwear, clothing and accessories. The company's products are distributed in over 80 countries worldwide through independent sports-article stores, specialised chain-stores, large stores with specialized sports departments, and in over 300 monobrand stores. Lotto ended 2007 with overall sales at 300 million Euro with a growth of +8% on the previous year, divided into: 44% footwear, 50% clothing and 6% accessories.
Significant growth in all the key markets
and major progress in both the technical segment and leisure segment
Trevignano (Italy), 10 July 2008. – Lotto Sport Italia S.p.A., the leading Italian company in the production and distribution of sports footwear, clothing and accessories, closes 2007 with total sales of 300 million Euro and 8% growth, compared with 2006.
2007 has seen the company involved in the launch of some important projects which are the fruits of its Research & Development activities. The most significant of these is the Twist’ngo technology, the first rotating stud applied to a football shoe. Equally important in terms of the brand’s development abroad is the signing of the new licensing agreement with Filon Confeccoes Ltda in Brazil, a high potential market where Lotto is already a protagonist with four teams in the first division and the Brazil Cup victory with Sport Recife. As to the Lotto brand non-core products, the new Watches and Eyewear lines have been added to Cosmetics, Stationery, Underwear and Socks.
An international vocation is a fundamental strategic decision for the company, whose market is distributed as follows:
Italy 24%; Europe 40%; America 14%; Asia Pacific region 16%; Africa 3% and Middle East 3%.
GLOBAL MARKET DISTRIBUTION
Positive growth signs have been recorded in numerous markets: Romania +90%, Bulgaria +68%, Holland +67%, Portugal +24%, Ukraine +19%, Slovenia +18%; Greece +17%, Austria +16%, Spain +15%, Russia +11%, Belgium +7%; in the Americas, South America has enjoyed excellent 25% growth (thanks to Brazil’s performance); in Asia overall growth is 15%.
MARKET GROWTH RATE
As regards the products, there has been growth in all product categories: footwear accounts for 43% of total sales with 10% growth compared to 2006, clothing 48% (+6%), accessories 6% (+21%). As a whole, football, five-a-side football, tennis and running account for 46%, and the remaining 54% is made up of leisure products.
Alberto Landi, Lotto Sport Italia Marketing and Communication Director, |
Commercial Banking -
April 7th, 2007
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