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As the Indian economy is flourishing, and more people are joining the workforce, it is an exciting time for the Indian footwear industry. The Indian middleclass is becoming bigger with every passing year. There is more discretionary spending being done in every sector. The footwear industry is also not untouched.
The competition is cutthroat in the footwear industry. Not only are there a large number of players in the organized branded segment, there are innumerable players in the unorganized segment. Then there are multinationals with deep pockets and outsourced manufacturing facilities in the cheapest of places in the world. There are factories across India and elsewhere that can produce knockoffs any day. Countering the counterfeits is impossible, even the auto makers have failed to do so.
The Indian Footwear Industry
According to the 1Lattice report, the five challenges that every footwear company faces are:
- Unorganized sector
- Low margins due to intense competition
- Labour intensive manufacturing
- Knockoffs
- Complex inventory management
Add Supply Chain, quality and regulatory issues to the above five.
The 1Lattice report on footwear industry in India predicts that the market should grow at a CAGR of 11% between FY25 and FY28. It is estimated by 1Lattice that the Indian footwear market will grow to touch ₹190,900 crore by FY28. Another report by International Market Analysis Research and Consulting Group (IMARC) projects the Indian footwear market to reach $42.8 billion by the end of CY32. This means that the market should grow at CAGR of 10.5%.
India had exported footwear goods worth ₹22,800 crore in FY23. India’s market share in the international footwear exports is just about 2%.
The next Nike or Adidas
After being a trader of sports and running shoes for 8 years, Phil Knight launched Nike in 1972. It took years for Mr. Knight to reach a stage where he could claim that the design was completely his own. Nike never ditched the contract manufacturing model. Even when they had their own factory in the US, they turned it into an R&D center as the operation was not sustainable to produce shoes there due to high cost of production. Mr. Phil Knight started with Japan as his manufacturing base in 1964, moved to Taiwan in 1976, added Korea in 1977 and started moving his manufacturing base to China from 1980. By 1997 he had added three factories in Vietnam. Manufacturing in these countries was outsourced, whenever he sensed trouble, he moved to a new country.
What turned them from a pure trading company to a shoe company was the innovation in design and material. From a fledgling trading company in 1972, then have now become one of the biggest brands in the world. Mr. Knight was himself an athlete who competed at the University level. So, he knew well enough about running shoes.
Adidas and Puma have been in the sports shoe business since 1949 as separate companies. They too went in for the outsourcing model.
There was a time when no sports shoe company was respected until a sports person had won a gold at the Olympics wearing its shoe.
India has primarily been a country of Slippers and Sandals. Shoes were worn at formal places such as Schools and Offices or on formal occasions such as social gatherings or an award functions. But mostly those were leather shoes. But things are changing fast. As the income of the middle class is increasing, the spending on shoes is also increasing. As more and more Indians are taking up sports actively, not just as a pastime, the sale of sports shoes is also increasing. A large number of people have starting wearing sneakers to work. The trend is moving towards non-leather shoes among both men and women. Indian footwear companies are adopting fast and they are fast launching new products every year.
Competing against the giants
If you go to amazon’s website and click on random items from Nike, the country of origin turns out to be Vietnam. When you click on the link next to an Adidas shoe, it shows the country of origin as Indonesia. When you do the same exercise for a US Polo Association or a Puma shoe, it almost always shows China. So, the giants are manufacturing in China, Vietnam, Indonesia, Taiwan, and Bangladesh and selling them in India. The sports shoes sold by the giants are priced competitively.
It is extremely difficult for the local players to compete against the global giants. In the sports shoe category, instead of buying a ₹2,000 Bata or a Campus shoe, an aspiring sports person may choose to buy a Nike or an Adidas by paying ₹1,000 extra. A Nike or an Adidas also gives the essence of something big to the owner. They are BRANDS.
Campus has a number of running shoes in the ₹500-1,500 range. Campus may itself become a big brand one day. For now, its most expensive shoe costs ₹2,999. Campus Activewear is staying away from the turf of the giants.
Relaxo Footwear has a different brand for running and athleisure shoes. It is SPARX. The company has a large catalog of these shows and the costliest of them sells at ₹2,399.
Metro Brands is the largest listed footwear company in India, Metro Brands is primarily a retailer, but it also has its own brands.
Bata India has two brands in the sports shoe category, Power and Weinbrenner. A few of the shoes are sourced from China. Bata has adopted the age old philosophy that says “If you can’t beat them, then join them”. Power has existed since ages, it was the official footwear of 1987 ICC World Cup. People still visit a Bata showroom, but they mostly turn towards the sections where leather shoes, chappals, floaters and sandals are kept. Bata encroaches into the territory of the other giants in terms of price, but fares badly in terms of design offerings.
When it comes to leather shoes, Bata sources a few of them from other Indian manufacturers. The company is following the path which the global giants took. While Bata may claim that it is a global player, but they are limited to India, Pakistan, Bangladesh, and a few South East Asian and African countries. A big chunk of Bata’s revenue comes from sale of apparels.
Companies such as Khadim and Sreeleathers have lost the momentum they had got in the 1990s and the first decade of the new millennium. They were touted to be the next Batas. Khadim was growing so fast that it was being cheered as the Bata beater.
Redtape is fully going the Nike way. It sources its sports shoes from Bangladesh. Their website shows the county of origin as India, but Amazon shows it as Bangladesh. There is no harm in sourcing from Bangladesh as it is legal. Bangladeshi manufacturers also cater to the global giants, so, they have a clear idea about the design ideas and the materials used. But an Indian mid-level player won’t have the same amount of bargaining power as an American Nike or a German Adidas would have.
Arvind Lifestyle Brands markets US Polo Association products under a license in India. Its products are procured from China.
As the Indian footwear sector grows, the biggest beneficiary may be the MSME sector. It the demand is high and the incentives are greater, then the global giants may start procuring from Indian manufacturers. Many startups have also ventured into this space. Flush with funding from the VCs, these startups are going fast. Most of them have adopted the outsourcing model and sourcing their raw material or finished products from the same places from where the global giants source their products.
The government needs to give a major push to the footwear industry. Otherwise, the indigenous industry won’t be able to sustain itself due to the cheap and good quality raw material and finished product coming in from China, Taiwan, Vietnam, Indonesia and Bangladesh. A PLI scheme is required for the footwear sector.
References
- The Sole of Fashion, Footwear Industry, 1lattice, January 2024 https://www.1lattice.com/WebImages/ReportPdf/the-sole-of-fashion-footwear-industry-1lattice.pdf
- India’s Footwear Revolution, Marching towards a $90 billion future, GTRI Report, January 2024 https://gtri.co.in/DisplayFlagshipReports.aspx?ID=28
- About Indian Footwear Industry, ITPO-Indian Trade Promotion Organization, May 2019 https://indiatradefair.com/uploads/About_Indian_Footwear_Industry_14_05_2019.pdf
- Shoe Dog: A Memoir by the Creator of Nike, Phil Knight
- Proposed PLI Scheme for the Footwear Industry, https://retail.economictimes.indiatimes.com/news/industry/commerce-ministry-recommends-rs-3489-crore-for-pli-scheme-for-toys-rs-2600-crore-for-footwear/107341521
