Global Footwear Manufacturing C1321-GL IBISWorld

Transcription

IBISWorld Industry Report
04 May 2010
Global Footwear Manufacturing: C1321-GL
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Contents
Industry Definition................................................................................................................................................. 3
ACTIVITIES (PRODUCTS AND SERVICES) ......................................................................................................................................3
SIMILAR INDUSTRIES ........................................................................................................................................................................3
DEMAND & SUPPLY INDUSTRIES ....................................................................................................................................................3
Key Statistics........................................................................................................................................................ 4
CONSTANT PRICES ...........................................................................................................................................................................4
CURRENT PRICES .............................................................................................................................................................................4
REAL GROWTH...................................................................................................................................................................................5
RATIO TABLE......................................................................................................................................................................................5
GRAPHS ..............................................................................................................................................................................................5
Segmentation ....................................................................................................................................................... 7
PRODUCTS AND SERVICE SEGMENTATION ..................................................................................................................................7
MAJOR MARKET SEGMENTS............................................................................................................................................................8
INDUSTRY CONCENTRATION...........................................................................................................................................................9
GEOGRAPHIC SPREAD .....................................................................................................................................................................9
Market Characteristics........................................................................................................................................ 12
MARKET SIZE ...................................................................................................................................................................................12
LINKAGES .........................................................................................................................................................................................12
DEMAND DETERMINANTS ..............................................................................................................................................................13
DOMESTIC AND INTERNATIONAL MARKETS................................................................................................................................13
BASIS OF COMPETITION.................................................................................................................................................................14
LIFE CYCLE.......................................................................................................................................................................................15
Industry Conditions............................................................................................................................................. 17
BARRIERS TO ENTRY......................................................................................................................................................................17
TAXATION .........................................................................................................................................................................................17
INDUSTRY ASSISTANCE .................................................................................................................................................................17
REGULATION AND DEREGULATION..............................................................................................................................................18
COST STRUCTURE ..........................................................................................................................................................................19
CAPITAL AND LABOR INTENSITY...................................................................................................................................................20
TECHNOLOGY AND SYSTEMS .......................................................................................................................................................21
INDUSTRY VOLATILITY....................................................................................................................................................................22
GLOBALIZATION...............................................................................................................................................................................22
Key Factors ........................................................................................................................................................ 23
KEY SENSITIVITIES..........................................................................................................................................................................23
KEY SUCCESS FACTORS................................................................................................................................................................23
Key Competitors................................................................................................................................................. 25
MAJOR PLAYERS .............................................................................................................................................................................25
PLAYER PERFORMANCE ................................................................................................................................................................25
OTHER PLAYERS .............................................................................................................................................................................27
Industry Performance ......................................................................................................................................... 30
CURRENT PERFORMANCE.............................................................................................................................................................30
HISTORICAL PERFORMANCE.........................................................................................................................................................32
Outlook ............................................................................................................................................................... 37
INDUSTRY DEFINITION
Global Footwear Manufacturing
04 May 2010
Industry Definition
Operators in the industry manufacture footwear. This includes footwear for men, women and children. Operators may
manufacture rubber and plastic footwear, plastics, or fabric uppers and rubber and plastics protective footwear. They may
also manufacture house slippers and slipper socks. Operators may manufacture men's or women's footwear designed for
dress, street and work.
ACTIVITIES (PRODUCTS AND SERVICES)
The primary activities of this industry are:
• Athletic shoes manufacturing
• Ballet slippers manufacturing
• Children's shoes manufacturing
• Cleated athletic shoes manufacturing
• House slipper manufacturing
• Infants' shoes manufacturing
• Men's footwear (except athletic) manufacturing
• Other footwear manufacturing
• Rubber and plastics footwear manufacturing
• Women's footwear (except athletic) manufacturing
The major products and services in this industry are:
• Women's shoes (except athletic)
• Men's footwear (except athletic)
• Athletic shoes
• Rubber and plastic footwear
• Children's shoes
• Slippers
• Protective footwear
• Other
SIMILAR INDUSTRIES
Industry: C1311-GL - Global Apparel Manufacturing
Description: Companies in this industry cut, sew (i.e., purchasing fabric and cutting and sewing to make a garment) and
manufacture garments.
DEMAND & SUPPLY INDUSTRIES
A-GL - Global Agriculture, Hunting, Forestry and Fishing
C1931-GL - Global Resin and Synthetic Rubber Manufacturing
F-GL - Global Wholesale and Retail Trade
F4311-GL - Global Wholesale Trade
F4511-GL - Global Department Stores and General Merchandise Stores
© Copyright 2010, IBISWorld Inc.
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KEY STATISTICS
04 May 2010
Key Statistics
CONSTANT PRICES
Industry Revenue
Industry Gross Product
Number of Establishments
Number of Enterprises
2006
2007
2008
2009
*118.5
*122.1
*125.3
*125.9
*54.8
*54.9
*57.5
*57.8
*106,848
*109,940
*111,039
*109,930
2010
*126.9 $Bill
*58.3 $Bill
*111,030 Units
*95,400
*98,161
*99,142
*98,150
*6,705,225.0
*6,835,818.0
*6,979,371.0
*7,118,959.0
Exports
*75.2
*77.9
*81.9
*82.5
*83.7 $Bill
Imports
*75.2
*77.9
*81.9
*82.5
*83.7 $Bill
Total Wages
*21.7
*21.5
*21.7
*21.1
*21.0 $Bill
Total Assets
N/A
N/A
N/A
N/A
Employment
Domestic Demand
Millions of Pairs
*99,130 Units
*7,154,600.0 People
N/A Acres
*118.5
*122.1
*125.3
*125.9
*126.9 $Bill
*11,630
*11,777
*12,024
*12,060
*12,150 Units
2006
2007
2008
2009
*109.2
*115.8
*121.4
*123.7
*126.9 $Bill
*50.5
*52.1
*55.7
*56.8
*58.3 $Bill
*106,848
*109,940
*111,039
*109,930
*111,030 Units
*95,400
*98,161
*99,142
*98,150
*99,130 Units
CURRENT PRICES
Industry Revenue
Employment
2010
*6,705,225.0
*6,835,818.0
*6,979,371.0
*7,118,959.0
Exports
*69.3
*73.9
*79.3
*81.0
*83.7 $Bill
Imports
*69.3
*73.9
*79.3
*81.0
*83.7 $Bill
Total Wages
*20.0
*20.4
*21.0
*20.7
*21.0 $Bill
Total Assets
Domestic Demand
Millions of Pairs
*7,154,600.0 People
N/A
N/A
N/A
N/A
*109.2
*115.8
*121.4
*123.7
*126.9 $Bill
N/A Acres
*11,630
*11,777
*12,024
*12,060
*12,150 Units
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KEY STATISTICS
04 May 2010
REAL GROWTH
2006
2007
2008
2009
2010
Industry Revenue
*4.1
*3.0
*2.6
*0.5
*0.8 %
*4.4
*0.2
*4.7
*0.5
*0.9 %
*0.4
*2.9
*1.0
*-1.0
*1.0 %
*0.4
*2.9
*1.0
*-1.0
*1.0 %
Employment
*3.4
*1.9
*2.1
*2.0
*0.5 %
Exports
*3.6
*3.6
*5.1
*0.7
*1.5 %
Imports
*3.6
*3.6
*5.1
*0.7
*1.5 %
Total Wages
*-4.0
*-0.9
*0.9
*-2.8
*-0.5 %
Total Assets
N/A
N/A
N/A
N/A
N/A %
Domestic Demand
NC
*3.0
*2.6
*0.5
*0.8 %
2006
2007
2008
2009
Imports share of domestic demand
*63.46
*63.80
*65.36
*65.53
*65.96 %
Exports Share of Revenue
*63.46
*63.80
*65.36
*65.53
*65.96 %
RATIO TABLE
Average Revenue per Employee
Wages and Salaries Share of Revenue
*0.00
*0.00
*0.00
*0.00
*18.31
*17.61
*17.32
*16.76
2010
*0.00 $Bill
*16.55 %
GRAPHS
Revenue
Revenue Growth Rate
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KEY STATISTICS
04 May 2010
Employment
Imports and Exports
Note: Unless specified, an asterisk (*) associated with a number in a table indicates an IBISWorld estimate and references to dollars are to US dollars.
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SEGMENTATION
04 May 2010
Segmentation
PRODUCTS AND SERVICE SEGMENTATION
Product/Services
Share
Athletic shoes
20.2%
Children's shoes
Men's footwear (except athletic)
8.0%
24.0%
Other
1.0%
Protective footwear
3.3%
Rubber and plastic footwear
8.2%
Slippers
4.1%
Women's shoes (except athletic)
31.2%
Women's shoes
Women's shoes (excluding athletic) should account for the largest product segment with about 31.2% of industry
revenues. While the economic prosperity of the US is declining in 2010, the relative affluence in the country means that
women in the US are more likely to purchases multiple pairs of shoes than women from most other parts of the world.
Women's footwear should make up about 42% of total shoe imports into the US, the largest market for imports. Women's
shoes regularly change in style which allows for high competition levels between firms.
Men's footwear
Men's footwear (excluding athletic) should account for about 24% of the industry's revenues. Slower changes in the styles
of men's footwear allow existing machinery, equipment and inputs to be used each year. This product has increased in
recent years at the expense of women's footwear. Men's footwear is more generic and is better suited to mass production
in low labor cost countries.
Athletic
Athletic shoes are estimated to make up 20.2% of industry revenue and were produced in Asia. Large athletic shoes
companies like Nike and Adidas often utilize contractors in Asia and other developing countries to produce their athletic
shoes.
Children's shoes
Children's shoes should account for around 8.0% of industry revenue. Most children's shoes are produced in low labor
cost countries as only a very small percentage of consumers purchase children's shoes for design, quality and brand
names.
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SEGMENTATION
04 May 2010
Rubber and plastic
Rubber and plastic footwear should make up about 8.2% of industry revenue. These products, which exclude sandals and
slippers, have vulcanized, molded or cemented components.
Slippers
Footwear in the slippers segment usually includes house slippers, slipper socks and leather slippers. This segment should
account for 4.1% manufactured footwear. Work and protective footwear, which typically includes steel cap shoes, water
shoes and overshoes, should account for 3.3% of industry revenue. The other segment is expected to include, ballet
slippers, hiking boots, golf shoes, moccasins and theatrical shoes.
These product categories are further segmented into: fashion shoes, work shoes (including school shoes), work boots,
sports shoes, and footwear components.
MAJOR MARKET SEGMENTS
Market Segment
Share
Exports
66.0%
Domestic retailers
15.3%
Domestic wholesalers
14.1%
Other
4.6%
Domestic footwear wholesalers account for an estimated 14.1% of the industry in 2010. Manufacturers tend to distribute
footwear items directly to wholesalers that, in turn, market the goods to specialty retailers such as sports stores, mass
merchandisers and department stores.
Footwear exports account for the largest segment in the industry with an expected 66% of the market in 2010. It should be
noted that many international wholesalers are also purchasers of exports. Major exporters of manufactured footwear
include China, Vietnam, Brazil, Thailand Indonesia and India. Destinations include Canada, Korea, Japan, Mexico and the
UK. Exports are primarily made to international wholesalers and retailers with the major destinations being the US, Hong
Kong, Germany, UK and France.
In many cases, wholesalers are bypassed; this is particularly relevant to larger manufacturers that can exert some
supplier power. These manufacturers often have their own retail outlets and tend to distribute footwear items directly to
their stores to avoid unnecessary costs with wholesalers. Domestic retailers are forecast to account for an estimated
15.3% of the market in 2010
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SEGMENTATION
04 May 2010
The "Other" market segment includes footwear manufacturer direct outlets, government, military and online sales.
INDUSTRY CONCENTRATION
Industry concentration is low
The Global Footwear Manufacturing Industry is considered to have a low concentration level. The four largest players in
the sector are expected to account for around only 6.9% of industry revenue in 2010. The high labor intensity of most of
the industry's production lends itself toward small operations. While large scale manufactures operate in the industry,
developing countries also have a large number of microenterprises that manufacture footwear.
The top eight major players in the sector are expected to account for about 8% of total industry revenue. While industry
concentration is considered to be low, based on the top four and eight companies, the overall footwear market is more
consolidated than other apparel markets.
Concentration within the industry has increased in recent years due to mergers and consolidation of industry participants.
This trend is expected to continue in the future. For example, the major player in this industry, Yue Yuen, has absorbed
several footwear manufacturing operations over the last year. The level of industry concentration is expected to increase
in the next five years as firms merge or consolidate operations.
GEOGRAPHIC SPREAD
Year: 2009
Industry employment
Region
Percentage
North Asia
53.4
India & Central Asia
19.8
South East Asia
12.0
South America
5.5
Europe
5.2
North America
1.9
Africa & Middle East
1.4
Oceania
0.8
Industry production (footwear - pairs)
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SEGMENTATION
04 May 2010
Region
North Asia
India & Central Asia
Percentage
59.6
9.6
South East Asia
13.2
South America
6.9
Europe
5.3
North America
2.5
Africa & Middle East
1.7
Oceania
1.2
North Asia will be by far the largest footwear manufacturing region. In 2009, it is estimated to have contributed 59.6% of
world production and 53.4% of employment in the industry. China will be the largest producer in the Global Footwear
Manufacturing Industry and manufactured approximately 7 billion pairs of shoes or an estimated 58% of total world
production. Taiwan and Korea were previously large regional producers. While many large footwear manufacturing
companies have headquarters in these countries, nearly all of the manufacturing takes place in China.
South East Asia is expected to be the second-largest region in terms of pairs produced, making up about 13.3% of total
production and 12% of employment. These regions included Vietnam, which has grown from about 542.6 million pairs
produced in 2004 to an estimated 964.8 million in 2009. Vietnam's emergence illustrates how China itself has become
vulnerable to cut-rate competitors. This is in contrast to other Asian economies such as Thailand, which sought to align
themselves with China. Countries such as Thailand and Indonesia are still significant manufacturers, although not to the
extent that they were in the 1990s.
India and Central Asia should make up about 9.6% of world production with India the largest contributor and Turkey the
second largest. Despite this, this region still made up about 19.8% of employment due to the large number of micro
businesses that are involved in footwear manufacturing in India. The Indian industry has grown considerably over the last
few years as larger levels of overseas investment from US, Europe and Taiwan has seen the country become a viable
location for producing mid-priced footwear products. The large domestic market also gives India the potential to grow
considerably from an estimated 7.4% of world production in 2009.
South America should make up 6.9% of world production and 5.5% employment. The Brazilian footwear industry is
expected to be the main contributor in 2009 with about 6.5% of pairs produced and 4.9% of employment.
While some Eastern European regions such as Romania are growing, most manufacturers in Western and Southern
Europe have struggled to compete against the increasing level of import penetration from Asia. Europe is expected to
make 5.3% of world production and 5.2% of employment in 2009. Italy is expected to be largest producer in Europe,
contributing about 1.9% of total pairs produced, the majority of which are high- to medium- priced shoes. Many Italian
companies have changed their business models and shifted production to other viable areas - some in Eastern Europe,
others in China and some in India.
North American footwear manufacturing has declined substantially over the last ten years after years of offshoring and
import penetration in the US. In 2009, it represented only about 2.5% of world production and 1.9% of employment.
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SEGMENTATION
04 May 2010
Mexico has also been struggling against import competition but still contributes about 1.9% of world production and 1.6%
of employment. Growth in US manufacturing is likely to occur in niche markets as demand from middle-class consumers
from developing nations such as China and India grows.
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MARKET CHARACTERISTICS
04 May 2010
Market Characteristics
MARKET SIZE
A global economic downturn saw consumer spending on footwear slow in 2009, and is expected to be low in 2010. The
Global Footwear Manufacturing Industry is expected increase by 0.8% in 2010 to $126.9 billion. As consumer spending
power in the US, Europe and other parts of the world falls and unemployment rises, demand for basic, non-discretionary
footwear will continue to remain stable.
Demand for mid- to high-priced European manufactured footwear is projected to fall as consumers tighten their belts in
the face of tight economic conditions. Demand from developing countries, such as China, India, Russia and parts of the
Middle East, for high-end and mid-priced manufactured footwear is expected to be flat in 2010.
International trade is expected to continue to grow, albeit slowly in 2010, as the supply chain in the footwear
manufacturing industry becomes increasingly globalized and developed countries continue to outsource production to lowcost labor countries. Total global trade in manufactured footwear should rise by 1.5% in 2010. This rate compares to an
expected annualized rate of 2.9% per annum in the five years to 2010.
Footwear manufacturers in Europe still dominate the high-priced, higher value-added end of the market. However,
Chinese dominance has risen over the last five years, especially in the international trade of lower-priced footwear. In
2010, it is anticipated that China will represent 57% of production, 32% of global exports and 53% of industry revenue.
Rising wages in China present an opportunity for other countries in Asia to enter the industry as cheap alternatives to
China, both as a source of production and as a source of low-priced imports. Output and exports from China will also be
constrained in 2010 after several years of strong growth as demand from the US and Europe falls.
LINKAGES
Demand Linkages
F-GL - Global Wholesale and Retail Trade
Wholesalers and retailers purchase footwear from manufacturers
F4311-GL - Global Wholesale Trade
Wholesalers purchase manufactured footwear. A rise in demand from footwear wholesalers should lead to rising levels of
footwear manufactured.
F4511-GL - Global Department Stores and General Merchandise Stores
Department Stores and General Merchandisers purchase manufactured footwear from wholesalers or directly from
manufacturers
Supply Linkages
A-GL - Global Agriculture, Hunting, Forestry and Fishing
Hides and skins are part of the supply chain for footwear. Hides and skins are treated at a tannery or involved with
chemical processes. After this, they are used in the manufacture of footwear.
C1931-GL - Global Resin and Synthetic Rubber Manufacturing
Synthetic products are used in the production of various shoes.
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04 May 2010
DEMAND DETERMINANTS
Real household disposable income levels are an important demand factor for footwear. This factor can influence the
quantity, quality and frequency of footwear purchases. As the level of real household disposable income increases, it can
prompt greater demand for footwear. Accordingly, as real household disposable income declines, so too does the
frequency at which consumers purchase discretionary items. This is also related to the price of footwear. If the price of
clothing and other related goods increase at a faster rate than footwear, people will tend to purchase greater volumes of
shoes.
Advertising and marketing of brand names are important ways for footwear producers to differentiate their products.
Consumers are influenced by advertising and brand image. Improving these can lead to higher sales. Established
products such as Nike, Adidas and high-end fashion brands, like Manolo Blahnik, Prada, DKNY and Gucci, can limit the
effect of new footwear styles on the market as they hold such a large portion of the market. Greater spending on
advertising is attributed to the power of branding and the larger the manufacturer the greater the success of creating a
strong and popular brand. Fashion is also a form of differentiation and has influenced advertising and marketing. Fashion
and social trends lead to changing demand for certain footwear styles in the same way that the popularity of sporting
activities affects sales in athletic footwear.
The level of fitness awareness and the age of the population are social factors that affect demand. These affect the
demand for particular types of shoes. For example, with an ageing population in some developed countries, the demand
for walking shoes may gradually increase over sport shoes and school shoes. Seasonal factors and weather conditions
also cause changes to demand conditions. Footwear sales vary according to seasonal and weather conditions around the
world. For example, during the cold winter months, the sale of sandals will decrease and the sale of galoshes will
increase.
Population growth is key driver in this industry. A higher global population leads to greater demand for consumer
products, particularly for basic necessities such as basic footwear. This can lead to growth in the industry. The quality of
locally made shoes compared to imports can also create changes in demand and consumer perceptions, especially for
shoes categorized as discretionary purchases. Domestic consumers may prefer local products due to a sense of loyalty to
local firms. Consumers may also be willing to pay more footwear made in certain countries, such as Italy, over footwear
manufactured in developing countries.
DOMESTIC AND INTERNATIONAL MARKETS
Domestic and International Markets Trade
Trade in this industry is high
The trade trend is increasing
Domestic and International Markets Analysis
International trade makes up a large proportion of trade in the Global Footwear Manufacturing Industry, and is expected to
account for approximately 66% of industry revenue in 2010. The international trade level has risen steadily from 63.5% of
industry revenue in 2006 at $75.2 billion, to a forecast $83.7 billion in 2010, which represents an annualized average rise
of 3.3%.
In 2010, China is expected to be the largest source of international exports. China dominates the industry, especially the
cheaper end of the market. China is projected to export $26.6 billion worth of manufactured footwear, or 31.8% of total
global exports in 2010 from 29.1% of exports in 2006. Exports from China have increased as most major international
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04 May 2010
footwear companies around the world invested heavily in developing manufacturing operation in the country to take
advantage of the lower labor and production costs.
Italy is the second-largest exporter of footwear in the world. Italy leads the market in the production of highly-priced shoes
from prestigious designers and brands. In 2010, Italy is expected to export $9.3 billion worth of footwear or 11.1% of total
exports. The country specializes in providing a wide range of designs to suit current trends and satisfy customer
demands, with the "Made in Italy" label being a significant value-adding component. Italian exports declined from 15.7% of
world exports in 2004 as the Italian industry faced rising competition from Asia. The abolition of quotas on Chinese
products and the consequent flooding of the European market with Chinese footwear decreased exports, especially of
medium-priced Italian footwear. The European Union's two-year anti-dumping duty on China-made leather shoes took
effect in October 2006. Under the EU's new policy, European shoe importers paid a 16.5% tariff on Chinese-made leather
shoes and 10% on shoes made in Vietnam. To counteract the impact of EU's anti-dumping tariffs, Chinese shoe
manufactures have shifted their focus on new markets in South East Asia, South America and Oceania, as well as
speeding up the expansion of the domestic market.
Vietnam has emerged over the last few years as a major exporter, expected to rise from 5.2% of total exports in 2006, to
an estimated 7% of exports in 2010. As wages in China rise, many international firms have been creating footwear
production facilities in Vietnam to take advantage of lower labor costs.
Other export countries in 2010 are expected to include Belgium (3.9%), Germany (3.7%), Spain (3.4), Brazil (3.1%), and
Romania (3.0%).
The US is the largest purchaser of imports in the industry. The level of imports entering the US will be stable in 2009 as
US consumers hold back on spending. In 2010, imports to the US are projected to be worth $23.2 billion, or 24.8% of total
world imports. This is down from 26.8% in 2008 and 26.9% in 2004. As with many other developed countries in this
industry, the US local footwear manufacturing industry has declined as demand for cheaper overseas imports, particularly
from China grows. Most large firms in the US set up manufacturing facilities overseas via third party contractors and
transformed themselves into importers and wholesalers in America.
Hong Kong is expected to be the second largest importer with 8.1% of total imports. This is down from 10% of imports in
2002. The majority of footwear manufacturers in Hong Kong have set up offshore production facilities on the Chinese
mainland to reduce operation costs and stay competitive, leaving only limited capacity in Hong Kong to meet small orders.
Because of this, many manufacturers, after relocation of production facilities offshore, are classified as import-export
establishments.
Cheaper footwear imports, particularly from China and Vietnam have increasingly penetrated the European market. Fears
that these may be disrupting the European economy saw the introduction of tariffs on Chinese and Vietnamese footwear
imports from October 2006. Cheaper footwear imports to Italy, the UK, Belgium, France and Germany have risen
considerably over the last five years.
BASIS OF COMPETITION
Industry competition is medium
Industry competition is increasing
Firms compete with each other on the basis of price, quality and service. Price can be construed to signify the quality of
the product. A firm can gain an advantage in the market by providing good quality products at a reasonable price. The
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04 May 2010
main factor for imported footwear having such a strong competitive position is that generally, footwear comes from low
labor cost countries such as China, which allows consumers in developed nations to take purchase cheaper shoes. At the
other end of the market is high quality footwear, which is usually sourced from Western European countries such as Italy,
who are renowned for their high-quality inputs, such as leather and fabrics.
Product innovation is a significant differentiating factor. This is increasingly becoming a large competitive consideration for
manufacturers. Design teams are constantly creating various ranges of new style footwear, which include added features
such as air pocket soles for outdoor activity shoes. This product differentiation is perceived as one of the main factors on
which consumers choose specific products, aside from price.
Apart from innovation, product branding is crucial to compete in this industry. Established brand names, such as Nike and
Adidas, have created brand image and recognition through varying marketing activities. This has created a loyal
consumer base and companies can use their market share to influence buying habits and create greater market strength.
Similarly, up-market shoe manufacturers may serve a niche market by charging a high price for high-quality shoes that
provide a certain image.
Further, a company that supplies retailers and fills orders in a timely manner can also gain a good reputation and achieve
repeat orders.
Developing or newly developed countries generally compete on their low labor costs. Apart from this, many of them have
large domestic markets with growing middle classes that are experiencing a rise in spending power. Examples of such
counties are China and India.
The competitive strengths of developed countries in the industry include: design of shoes and footwear; quality of
material, particularly leather; brand strengths associated with quality and design; quality of product; and technological
competence. While the technological competence of footwear manufacturers is stronger in the developed world, this is
expected to be limited to a short time span with firms in developing economies increasing their use of similar technologies
with some companies in China already more advanced.
LIFE CYCLE
Life Cycle Stage
This industry is in the mature stage of its life cycle
Life Cycle Reasons
• There is positive growth in both industry revenue and value added
• The number of establishments is rising
• US and European footwear manufacturers have greatly increased outsourcing manufacturing to offshore companies
• Footwear is a product required by most consumers in the world. Therefore, a base level of footwear purchases will
generally exist
• Employment is rising but wage levels are decreasing
Life Cycle Analysis
The Global Footwear Manufacturing Industry is deemed to be in the mature phase of its life cycle. In the five years to
2010, industry revenue is projected to increase at an annualized rate of 2.2%, from $113.8 billion to $126.9 billion
(constant 2010 dollars). Similarly, value added is projected to rise from $52.5 billion to an estimated $58.3 billion over the
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04 May 2010
corresponding period. This represents an annualized rise of 2.1%, less than expected growth in world real GDP over the
same time frame.
There have been an increasing number of manufacturers leaving the US and Europe and setting up operations in the
Asia-Pacific region or using contract manufacturers from these regions. Many operators have chosen this path in a bid to
take advantage of the lower wage and production costs which countries such as China offer. This is seeing a larger
percentage of low-cost products enter the market and constrained the growth in value added.
The number of footwear manufacturers operating in this industry has increased, which in turn has increased employment
levels. In the five years to 2010, employment and establishment numbers are expected to rise 2% and 0.9% each year on
average. Despite this, total industry wages are projected to fall 1.5% a year as firms continue to take advantage of
cheaper labor costs, mainly in the Asia-Pacific region.
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INDUSTRY CONDITIONS
04 May 2010
Industry Conditions
BARRIERS TO ENTRY
Barriers to entry in this industry are medium
These barriers are increasing
The industry is deemed to have a medium barrier entry level, although this is increasing given the general availability of
offshore contract manufacturing. Barriers to entry are lower in countries such as Vietnam, China and India. Governments
and companies in these countries actively seek foreign investment in order to develop the industry and exploit the
comparative advantage they have over more developed countries. Firms in these countries also have greater access to
cheaper labor. Companies from developed countries looking to manufacture have to compete with low-cost countries as
well as large multinational companies that have the capability to set up manufacturing operations overseas.
Over the years, footwear manufacturers in the US, Europe, Hong Kong and Taiwan are increasingly shifting their
operations offshore to developing countries to take advantage of low production and wage costs. This has, in turn,
increased the level of import competition in the industry, which has made it extremely difficult for domestic manufacturers
from developed countries to compete with low-priced imports from countries such as China, Brazil and Vietnam.
Manufacturers need access to wholesale and retail distribution networks. For example, Taiwanese major player, Yue
Yuen, which mostly manufacturers in China and Vietnam, provides footwear under contract for most of the larger sporting
good brands around the world.
There are high costs associated with establishing brand names. In addition, there is competition from existing brands such
as Nike and Reebok. This heightens the costs associated with advertising and maintaining brand awareness. Apart from
brand names, it can be costly to acquire capital equipment and machinery to manufacture footwear on a large scale.
TAXATION
There are no specific taxation regulations specific to this industry.
INDUSTRY ASSISTANCE
The level of Industry Assistance is medium
The trend of Industry Assistance is steady
Key Tariffs
Goods
Tariffs on Footwear Imported into the US
Low Rate* High Rate*
0.0
37.5
*Percentage of value unless otherwise specified
The World Trade Organization sets global rules of trade between nations participating in the Footwear Manufacturing
Industry. WTO agreements lay down the legal ground rules for international trade as well as the market-opening
commitments taken up by its members. These agreements are negotiated and signed by all members of the WTO, and
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INDUSTRY CONDITIONS
04 May 2010
ratified in their parliaments. Most of the WTO's current work comes from the 1986-94 negotiations called the Uruguay
Round, and earlier negotiations under the GATT. The organization is currently the host to new negotiations, under the
Doha Development Agenda (DDA) launched in 2001.
The Doha Development Agenda (DDA) comprises both further market opening and additional rule making. The agenda
takes measures necessary to integrate developing countries into the world trading system, notably by strengthening
assistance to build capacity. The main objective of the new round is to put development at the heart of the world trade
system in a way that will help them combat poverty.
The European Union operates a system of trade defense instruments. These instruments - Anti-Dumping, Anti-Subsidy
and Safeguard measures - are designed to protect EU producers against unfairly traded or subsidized imports and
against dramatic shifts in trade flows if they are harmful to the EU economy. The use of these instruments is based on
rules derived from WTO agreements.
Between January 1995 and December 2004, the EU imposed 189 definitive anti-dumping measures. The US imposed
262 and India 306. In the same period, the EU initiated 300 investigations, the US 352 investigations and India 383
investigations. As of 31 October 2006, the EU has 12 anti-subsidy measures in force.
The United States and the European Union are becoming more forward in holding China to account over its WTO
obligations. Investigations carried out by the EU's Trade Commission showed that China and Vietnam were benefiting
from cheap bank loans, tax holidays and other government subsidies which had allowed them to export footwear at
below-cost prices. Protectionist advocates urged EU officials to strictly enforce anti-dumping regulations and impose
retaliatory duties, if needed, against their rivals from the developing world. A new EU anti-dumping scheme to tackle
Chinese and Vietnamese leather shoe imports put a two year duty of 10% on all leather footwear imports from Vietnam,
and 16.5% on all imports from China from October 2006.
The biggest users of anti-dumping measures in the global economy, since the signing of the WTO Anti-dumping
Agreement in 1995, in terms of absolute numbers of definitive measures imposed are India, the US, the EU, Argentina,
Australia, South Africa, Canada, Turkey, Brazil, Mexico and China (in that order).
Countries such as Mexico, Canada, Colombia, Chile and South Africa, continue to maintain restrictions on footwear
imports from China where many US companies manufacture most of its footwear. However, many US manufacturers are
able to serve these markets through exemptions or alternative sourcing from outside China.
Duties on footwear into the US range from zero percent to 37.5%. This rate will depend upon manufacture and whether
the principal component is leather or other materials such as rubber, plastic or pig skin.
REGULATION AND DEREGULATION
The level of Regulation is light
The trend of Regulation is steady
Industry regulations vary greatly between countries. However, on the whole, the industry is regulated at a light level. As
with other sectors of apparel industries, the Global Footwear Manufacturing Industry is subject to several environmental
laws and regulations as well as the requirements deemed by many local and international laws.
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04 May 2010
Activity within this industry is influenced by several regulations and issues. The United Nations strongly urges many
corporations in manufacturing industries to embrace the standards set by the International Labor Organization, which are
set to protect the human rights of all labor workers globally. Companies must also abide by various occupational health
and safety legislation.
Rules regulating working conditions vary from country to country. After the criticism of exploitative practices of large
companies such as Nike's use of "sweatshop labor", large footwear companies are encouraged to monitor the labor
conditions of companies they contract in countries with less strict work-place laws as opposed to the "hands-off" approach
that took place in the 1990s.
Manufacturers must abide by patent and trademark laws that relate to the protection of intellectual property. Penalties are
imposed on the infringement of patents.
Companies within this industry are subject to environmental and anti-dumping laws regarding the discharge of material
waste of some footwear material such as synthetic and leather made footwear.
"Anti-dumping" trade (separate to environment laws) restrictions prevent manufacturers in one country exporting a product
to another country at a price which is either below the price it charges in its home market or is below its costs of
production. While not prohibited by the WTO, GATT allows countries the option of taking action against dumping.
COST STRUCTURE
Year: 2010
Item
Cost %
Purchases
45.7%*
Wages
16.5%*
Tax and Interest
9.8%*
Depreciation
4.9%*
Contract Labor
2.3%*
Rent
2.2%*
Management and Administration
1.8%*
Utilities
1.7%*
Research and Development
1.1%*
Other
6.7%*
Profit
7.3%*
The cost structure of individual firms within this industry varies and depends on: the type of footwear products being
manufactured, the country, the labor and technology mix, and the structure and size of the company. Companies
operating in this industry are forecast to generate profit margins of around 7.3% of industry revenue in 2010. High levels
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INDUSTRY CONDITIONS
04 May 2010
of competition from domestic and foreign companies, and pressures from downstream retailers and consumers for lowerpriced footwear, tend to keep returns at a medium level. This is down from about 7.9% of revenue in 2007 with falling
demand for high-priced shoes hurting margins and order numbers in 2009.
The major component of a company's expenses is made up of purchases, which includes leather, natural and synthetic
rubber, plastic compounds, foam cushioning materials, nylon, canvas, polyurethane films, packaging items, buckles, laces
and other materials. Purchases are expected to account for 45.7% of industry revenue in 2010. To minimize wastage and
maximize returns, footwear manufacturers need to control material usage and monitor changes in industry demand trends
to supply the market accordingly.
Labor costs should make up a large proportion of a firm's expenses at a forecast 16.5% of industry revenue in 2010. This
is down from about 18.3% in 2006, and a peak of 24.1% in 2001, as firms continue to seek to manufacture in countries
with low labor costs. The current level of labor costs is still high and indicates the industry is quite labor-intensive.
However, the high technological requirements for some of the industry's products, particularly for specialized and molded
shoes, means some firms in the US and Europe are able to further reduce their reliance on wages and compete with low
labor cost countries in Asia and South America in these niche industries. Large firms, such as Taiwanese company, Yue
Yuen, also spend substantial amounts of revenue on improving production efficiency and reducing reliance on wages.
Contract labor and other labor costs, such as management, administration, research and development, and contract labor
are forecast to account for 5.2% of industry revenue in 2010.
An indication of the level of capital costs within the industry is the moderate percentage of depreciation allowed for. This is
expected to be around 4.9% for the typical firm and is allocated for manufacturing equipment and machinery, office
equipment, computer technology and software.
Other expenses include other conversion costs - such as dyeing and processing, advertising and promotion, insurance,
and freight costs - and are expected to make up 6.7% of expenses. As firms attempt to gain an advantage in the market,
advertising and promotion costs increase. Insurance costs have increased in the past years due to corporate scandals,
current financial instability and increased anxiety about terrorism with firms attempting to maximize security. While dipping
in 2008 and 2009, high oil prices have caused freight prices to increase in the past and threaten to do so again as crude
oil prices remain relatively high.
CAPITAL AND LABOR INTENSITY
The level of Capital Intensity is medium
•
•
•
•
A significant labor component of footwear manufacturing is the cutting and stitching of materials
Machinery can be used to assist the manufacturing processes. However, they still require human operations
Capital expenditure is relatively low compared to labor inputs
There are a number of manual steps involved in footwear assembly processes
According to IBISWorld estimates, footwear manufacturers will utilize approximately 4.4 units of labor for each unit of
capital in 2010. A labor to capital ratio of 4.4:1.0 indicates a medium capital intensity level. There are many manual steps
involved in the assembly process of shoes and as such, even large technological innovations in the manufacturing
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INDUSTRY CONDITIONS
04 May 2010
process will not alter this significantly. It is difficult to replace labor with automated processes in particular parts of
production. For instance, shoe-making still requires workers to operate machines for stitching leather and other material.
The typical process of producing shoes includes: the design, pattern making, cutting and upper making, lasting, bottoming
and finishing. Many of these processes are manual in nature. Although machinery, such as sewing and cutting machines,
can be used to assist the processes, they still need human operation.
Automation levels in footwear manufacturing vary depending upon styles. Plastic shoes that are injected molded require a
great deal of capital equipment. In contrast, high-quality, all-leather shoes may be individually hand stitched and
assembled.
Firms have increased investment in technologically advanced footwear manufacturing equipment in recent years. Capital
investment has predominantly been on equipment to produce niche products such as specialized and molded shoes.
TECHNOLOGY AND SYSTEMS
The level of Technology Change is low
Technological advancement in the Global Footwear Manufacturing industry is deemed to be low. Much of the production
is still very labor intensive as it comprises of sewing and cutting machines that still need to be operated with human
intervention.
Internet technology has connected the world and is used to communicate product information globally. This has further
internationalized global supply chains in the worldwide footwear manufacturing industry with companies operating in
various international locations. For example, product design, strategy and marketing are often done in developed
countries while manufacturing often takes place in other parts of the world. While this still took place before the advent of
internet technology, the speed of conversion from footwear design to manufacturing has increased.
Most research surrounds the development of new material components and improved production procedures. The
implementation of production cost saving measures at all levels is ongoing. Companies such as Adidas have recently
made significant progress to increasing their speed to market, including taking 30 days out of the footwear production
process.
Computerizing functions performed by machines, such as the introduction of computerized stitching improved efficiency
aided efficiency. Machines now perform the functions of "roughing", which is the removal of the top surface of leather,
which previously required highly skilled labor. Injection molding (which enabled mass production of items such as
synthetic soles and heels) and computerized cutting by water jets (to replace manual cutting processes) were both
significant developments.
Tagless labeling technology is expected to allow for increased consumer comfort, branding opportunities, cost savings
and security management. The garment manufacturer or contractor can incorporate brand logos, anti-counterfeiting tools,
barcodes and potentially radio-frequency identification (RFID) technology into labels, in one relatively simple process.
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INDUSTRY CONDITIONS
04 May 2010
INDUSTRY VOLATILITY
Industry revenue volatility is low
While revenue from footwear manufacturing changes from year to year, it is a product that most consumers in the world
purchase. Growth is mainly driven by world population growth and GDP growth. The world's population will continue to
grow in 2010, despite weaker global economic conditions. Because of this, revenue from footwear manufacturing is still
expected to grow.
Volatility can be created by fashion changes. These can fluctuate rapidly and are difficult to predict. A change in fashion
can make footwear styles outdated and lead to poor sales. Changing fashion can also make some footwear more popular.
Styles of footwear and the popularity of different products may change, but as long as world population is growing, in the
long term, revenue from footwear manufacturing is likely to continue to grow steadily.
Fluctuating competition from imports can create volatility. Import levels vary as price competitiveness relative to domestic
footwear changes. This is also influenced by exchange rates and the presence of tariff restrictions and quotas.
GLOBALIZATION
The level of Globalization is high
The trend of Globalization is increasing
The Global Footwear Manufacturing Industry is highly globalized with many firms pursuing new markets around the world.
This is attributed to the fact that this type of manufacturing has a high labor component. Footwear manufacturing is
difficult to totally automate and as such, is highly labor intensive. Consequently, manufacturers tend to contract work to
countries that have low labor costs or establish production facilities offshore.
Export supply chains from low-cost countries are organized mainly on a global basis. Major players operating in this
industry, such as the Taiwanese firm, Yue Yuen, have set up extensive manufacturing operations and distribution
networks in China and other Asian locations. Large shoe wholesalers and retailers, such as Nike Inc, outsource
manufacturing mostly to Chinese contractors due to the cheaper labor and overall low production costs within the Chinese
market. Footwear is then imported around the world and distributed to retail outlets for resale to the final consumer.
Increasingly, as wage levels begin to rise in China, manufacturers are looking to the other locations such as Vietnam,
Brazil and India to source manufactured footwear. It is anticipated that in the coming years, more companies will shift part
of their production overseas in the pursuit of cost savings.
Another contributing factor to the move toward a more globalized market is import competition around the world
increasing in the past five years. The increasing liberalization of international trade in the industry has also encouraged
greater flows in exports and imports. Manufacturers from developed nations have been unable to compete with cheaper
overseas imports. It is expected that this trend will continue as the demand for footwear increases and greater cost
pressures are placed on manufacturers. Exports from developing and newly developed nations have consistently
increased over the last five years while import penetration into Europe and the US has risen.
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KEY FACTORS
04 May 2010
Key Factors
KEY SENSITIVITIES
The key sensitivities affecting the performance of the Global Footwear Manufacturing industry include:
Air Cargo Prices
This Global Footwear Manufacturing Industry can be affected by the level of downstream demand from footwear retailers.
In times of high footwear consumption, retailers will demand more footwear items from manufacturers.
Downstream Demand - Wholesale Trade
The Global Footwear Manufacturing Industry can be affected by the level of downstream demand from footwear
wholesalers. In times of high footwear consumption, wholesalers will demand more footwear items from manufacturers to
sell to retailers.
Import Taxes (Duties) - Footwear mfg
Tariff rates applicable will affect the global demand for the products in this industry. A rise in footwear tariffs on products
from particular manufacturing countries can limit output as the demand for exports may reduce.
Population Growth - World
The level of population growth will influence the type and number of footwear products manufactured and purchased.
Price Index - Articles Produced: Clothing and Footwear
A rise in the price of footwear, especially low-cost footwear, can lead to a reduction in demand.
Real Household Disposable Income
Changes in real household disposable income levels can have a significant effect on this industry's profitability. Regular
footwear is not a luxury item, but a rise in real household disposable income can lead to increased demand for more
expensive footwear, as well as increase the average number of shoes purchased by a consumer.
KEY SUCCESS FACTORS
The key success factors in the Global Footwear Manufacturing industry are:
•
Establishment of brand names
Brand strength and consumer demand for branded footwear products (i.e. Nike).
•
Effective quality control
Firms that have an emphasis on quality are able to build up a base of loyal customers.
•
Establishment of export markets
Footwear manufacturers that have an export marketing capability are able to earn additional revenues.
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KEY FACTORS
04 May 2010
•
Economies of scope
Footwear manufacturing firms need to produce a wide range of footwear products to satisfy consumer demand
•
Understanding government policies and their implications
Tariff rates and import duties of competing footwear imports and own imported items.
•
Automation - reduces costs, particularly those associated with labor
Technical efficiency, as well as an emphasis on improving labor productivity and increasing capacity utilization, can
benefit footwear manufacturers.
•
Economies of scale
To produce footwear items at the lowest marginal cost.
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KEY COMPETITORS
04 May 2010
Key Competitors
MAJOR PLAYERS
Market Share
Major Player
Pou Chen Corporation
Other
Market Share
Range
3.9% (2010)
96.1% (2010)
PLAYER PERFORMANCE
Pou Chen Corporation
Market Share: 3.9%
Yue Yuen is world's largest manufacturer of branded footwear. Taiwanese sporting goods material maker Pou Chen owns
more than 50% of the company. It produces shoes for the biggest names in sportswear such as Adidas, ASICS, New
Balance, Nike, Puma, Reebok, and Timberland. About 60% of Yue Yuen's revenue is attributable to the manufacture and
sale of athletic shoes. Yue Yuen is also in the sportswear manufacturing industry, after the 2003 purchase of 73% of Pro
Kingtex Industrial.
Yue Yuen is improving manufacturing facilities and expanding retail operations on the Chinese mainland. By the end of
September 2009, the group operated 4,583 counters/stores in China. In addition, there were about 1,245 distributors in
the Greater China region for the group's wholesale operations for its two licensee brands: Hush Puppies and Wolverine.
The company expects potential appreciation of the Chinese Yuan and the implementation of new regulations on labor will
exert further pressure on manufacturers with production bases in the mainland. In 2009, the group reduced production
lines by 17 to take the total number to 423. The geographical distribution of production includes 211 lines in mainland
China, 112 in Vietnam and 100 in Indonesia.
In fiscal 2009, the company manufactured 246 million pairs of shoes, down 3.5% from the previous year. However,
revenue increased 2% to $5.02 billion, with net profit of $445.3 million. Revenue from the company's main product,
athletic shoes, decreased 2.6% for the year, with retail sales of shoes and apparel increasing by 19.6% to over $1 billion.
Geographically, revenue from China increased by around 5% for fiscal 2009. The company had around 310,000
employees in 2009, down 3.1% for the year.
Yue Yuen had another year of exceptional growth in 2008. Revenue grew by 19.6% to $4.92 billion. Despite a slowing US
and world economy over the year, the group produced 255.1 million pairs of shoes, up 9.9% from 2007. Its growth in
footwear production and revenue growth from footwear manufacturing far outpaced the rate of the global footwear
manufacturing market.
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KEY COMPETITORS
04 May 2010
Sustained order flows from existing customers, as well as the addition of new customers in the casual shoes category
fueled volume growth. The company was able to increase the average selling price of its shoes through double-digit sales
growth in the Asia, South America and Europe markets for leading athletic brand name companies. This saw net income
rise by 30.4% to $468.7 million. Revenue from athletic shoes increased 19.2% for the year. Athletic shoes remained the
group's major product category, accounting for 56.5% of revenue. Revenue from casual/outdoor shoes and sports
sandals declined 0.2% and 5.6% respectively with a decrease in production volumes.
During the year, Pou Sheng International (Holdings), the company holding the retail operations in the Greater China
region, was listed on the Hong Kong stock exchange. This listing allowed Yue Yuen to strengthen its financial position and
create a new avenue for fund raising to support the growing operations of its retail business. China's growing consumer
market is being taken advantage of by the group. Yue Yuen's retail sales grew by a dramatic 73.8% for the year to $849.0
million, mainly driven by growth in the retail sales operations in the Greater China region.
The group had a strong year in 2007 with revenue and production growth rates outperforming the global footwear
manufacturing industry. Revenue rose in 2007 by 12.5% to $4.15 billion compared with $3.66 billion in 2006. Net income
for the fiscal year 2007 rose by 1.6% to $359.4 million. There was steady revenue growth in each of the group's
geographical segments - the US, Asia and Europe. Growth was particularly strong in the emerging market regions of
South America and Asia. Surging retail sales in the China region drove much of the rise in Asia. Revenue from the
wholesale and retail sales operations in the Greater China region rose by a dramatic 48.8% over the year to $488.4
million. Apart from wholesale and retail, the company's core footwear manufacturing continued to expand greatly. The
company expanded its joint venture capabilities and production lines with total production volume in 2007 increasing by
18.2% to 232.2 million pairs, up from 196.4 million pairs in 2006. Revenue from athletic shoes and casual/outdoor shoes
grew by 10.6% and 9.5% year-on-year respectively.
In 2006, revenue grew for the 14th consecutive year since the group listed on the Stock Exchange of Hong Kong in 1992.
Revenue grew by 15.9% to $3.66 billion and net income rose by 20.8% to $366.4 million during the year. These
substantial rises were attributable to the expansion of the core manufacturing footwear operation as well as strong growth
in the China wholesale and retail sales operations. The company's strategy to expand into different footwear product
categories saw returns during the year with solid increases in the sale of athletic and casual/outdoor shoes, which grew by
11.1% and 12.0% respectively. Turnover from the wholesale and retail operations in the Greater China region climbed
80.4% for the year. The group has also focused on expanding in to a wider range of footwear products and this also saw
revenue surge during the year. Shoe production grew to 196.4 million pairs in 2006, up from 130.4 million in 2002.
Revenue rose by 16.0% to reach $3.15 billion in 2005. The core manufacturing business of the group continued with all
product categories reporting growth during the year. There was strong 15.8% growth in the casual/outdoor shoes and
sandals categories while athletic shoes grew by 14.0%. Apart from growth in manufacturing, the move into mainland
China saw a 128% jump in turnover in the retail division during the year. Despite the growth in revenue, during the year,
net income remained at $303.3 million as rising oil and petrochemical derivative prices, rising labor costs, more expensive
utility costs and the appreciation pressure of the Chinese Yuan saw the Group's profit margin contract from 11.15% to
9.6%.
The group diversified in to the manufacturing of ladies shoes in 2003 and safety shoes in 2005. In 2004, Yue Yuen
purchased 30% of apparel manufacture Eagle Nice (International) Holdings Limited (it later increased its share to 45%). In
2004, UT also purchased 30% of Taiwanese sportswear maker, Prosperous Industrial Holdings, which produces
backpacks, sports bags, and travel accessories.
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KEY COMPETITORS
04 May 2010
Yue Yuen - revenue by product category 2008-09*
Million Dollars
Revenue
Percentage
Sales
Athletic shoes
2709.7
54.0
Casual/outdoor shoes
781.8
15.6
Sports sandals
71.8
1.4
Soles and components
390.0
7.8
Retail sales - shoes
Year
1015.5
20.2
Other
48.1
1.0
Total
5016.9
100.0
Source: Annual Report
Note: * Year end September
Yue Yuen - revenue by region 2008-09*
Year
Million Dollars
Revenue
Percentage
Sales
USA
1543.1
30.6
China
1422.0
28.3
Europe
1117.9
22.3
Rest of Asia
554.6
11.1
Other
388.2
7.7
Total
5016.9
100.0
Note: * Year end September
OTHER PLAYERS
Feng Tay Enterprises Company Ltd.
Estimated market share: 1.0%
Headquartered in Touliu City, Yunlin, Taiwan, Feng Tay Enterprises is principally involved in the manufacturing and
selling of sports shoes and shoe material. The Group operates factories China, India, Indonesia and Vietnam. It exports
its products in Asia, Australia, Europe and the US.
The company produces most of its shoes in Vietnam and China. It has been aggressively expanding production abroad to
maintain a commanding position in contract manufacturing of famous-brand athletic shoes, the market for which continues
to grow.
IBISWorld estimates that Feng Tay had revenue of around $830 million in 2009 and $840 million in 2008, with revenue of
from $830 million in 2007 and $717.2 million in 2006. Feng Tay has spent about $3 million to upgrade facilities in Vietnam.
It currently makes approximately 55 million pairs of shoes a year.
For more than 20 years, Feng Tay produced shoes only for Nike, and still produces around 20% of Nike's output. The
company is building an R&D Center for Nike at its headquarters in Touliu in Yunlin County, which will also provide office
space for Nike personnel in Taiwan. The company has diversified into the casual shoe market, which is growing even
more quickly than the athletic shoe market, and it now produces shoes for Rockport and Clarks.
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KEY COMPETITORS
04 May 2010
The company is expanding its operations through cooperation with H.H. Brown, an affiliate of the US based BerkshireHathaway Group. Feng Tay forecasts that the annual sales volume of H.H. Brown shoes might reach two million pairs in
Asia by 2015, with an estimated sales value of more than $176.5 million.
Li Ning
Estimated market share: Less than 1%
Li Ning is one of the leading sportswear companies in China. Its products include footwear, apparel, and accessories
which are mainly sold under its Li-Ning and Kappa brands. The group has a large distribution and retail network in China.
Li Ning has a joint venture with the France-based, Aigle International, which includes a 50-year exclusive right to
manufacture, market, distribute, and sell Aigle outdoor sports products in China. The company was founded by Chinese
gymnast, Li Ning, in 1989. Over 2008, the company purchased a 57.5% interest in Shanghai Double Happiness Co., Ltd a
sports equipment manufacturer.
Company revenue increased by 25.3% in 2009 with increased sales and growth in the company's badminton segment
and Lotto brand. Net profit also increased strongly due to higher margins and lower costs. Footwear accounted for 42.4%
of company revenue, down from 44.2% in 2008. Apparel made up for 46.9% of revenue in 2009, with sporting equipment
and accessories accounting for the balance of 10.7%. Footwear revenue increased by 20.1% for the year. Around 98.5%
of company revenue was from the China market in 2009. There were 7,249 Li-Ning brand stores in operation in 2009, up
16.1% from 2008.
The company experienced a year of strong growth in 2008. China's per capita income continued to rise rapidly and
sporting goods operators like Li Ning benefited from a strong boost brought about by the Beijing Olympics. This combined
strong expansion in the company's production capacity, saw revenue grow by a dramatic 69.2% to $981.3 million.
Revenue for the year included contributions from Double Happiness and Lotto brands - two brands Li Ning added to its
brand portfolio during the year. Over the year, the group consistently invested in brand marketing resources and promoted
product development strategies that gave prominence to footwear. Revenue from footwear grew from 42.7% of revenue in
2007 to 44.3% in 2008.
In 2007, total revenue is estimated to have grown by 45.4% to approximately $579.8 million. Approximately 45.3% of Li
Ning's revenue is derived from footwear products. During 2007, the group focused on forging international co-operative
partnerships, strengthening proprietary brand-building, as well as intensifying product research and development. In 2006,
Li Ning established strategic collaboration with the National Basketball Association, Association of Tennis Professionals,
China University Basketball Association, China University Football League and NetEase. Li Ning also became the first
Chinese sportswear company to sign a current American player of the NBA after signing a two-year contract with
Cleveland Cavaliers' guard Damon Jones. In April 2007, the company launched a new brand called Z-Do. Z-Do's products
include sports footwear, apparel and accessories, and primarily targets the hypermarkets as its sales channel.
The company performed strongly in 2006. For the year ended 31 December 2006, the group's revenue grew by 33.4% to
$398.8 million. Sales of Li-Ning branded products, which accounted for 99.6% of total revenue, surged during the year.
Profit attributable to equity holders rose by 62.3% to $37.0 million. Footwear production represented 39.3% of revenue
and rose by 34.4% from $102.8 million in 2005 to $156.9 million in 2006. The Flying Armor series of basketball shoes and
Flying Feather series of running shoes were well-accepted by the market. High sales of these products, as well as the
group's hallmark, anti-shock product "Li-Ning Bow" launched in the second half of 2006, added to the substantial revenue
rise.
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KEY COMPETITORS
04 May 2010
The rising popularity of sports activities as a result of the 2008 Olympic Games as well as strong economic growth,
increasing affluence and consumption power saw revenue of Li Ning for the year ended 31 December 2005 rise by a
substantial 31.7% to $298.9 million. Li Ning's focus on branding, strengthening product design, research and
development, and improving supply chain management saw profit attributable to equity holders rise by 54.0% to $22.8
million.
Aokang Group
Estimated market share: Less than 1%
Aokang Group is a footwear manufacturing company based in Wenzhou City in east China's Zhejiang province. It is the
largest privately owned footwear manufacturer in China, and was established in 1988. It has more than 30 subsidiaries,
over 2,000 franchise stores and sale outlets across China, and has opened agencies in Italy, Spain, the United States and
Japan. The Aokang Group Co., Ltd was founded in 1988, one of the top 100 private enterprises in China with $600 million
in assets.
Aokang Group Co., Ltd. is estimated to have grown rapidly over the last five years. The company's revenue is estimated
to have grown from $220 million in 2004 to $332.6 million in 2008, an annualized rate of 10.9%. The company sells at the
medium- to high-end of the market and is developing markets both in China and internationally.
In 2007, Aokang established three subsidiaries outside mainland China - the US, India and Hong Kong - all aimed at their
local markets. In 2008, Aokang became the 2008 Olympic supplier of leather goods.
In 2004, Aokang had revenue of $220 million and produced approximately 10 million pairs of shoes. As overseas demand
for Chinese footwear continued to spike and the company's production capabilities continued to improve. By 2006, the
company is estimated to have turned over approximately $282 million, produced 13 million pairs of shoes and exported 3
million pairs. Aokang Group was the first Chinese shoemaker to begin proceedings after the EU imposed two-year antidumping duties of 16.5% on leather shoes made in China in October 2006.
Li Ning Company Limited - financial performance
Year
Million Dollars
Revenue
% change
Growth
Million Dollars
NPAT
2005
2006
% change
Growth
299.0
N/C
22.8
N/C
398.8
33.4
37.0
62.3
2007
579.8
45.4
70.8
91.4
2008
981.3
69.2
106.7
50.7
2009
1230.0
25.3
139.0
30.3
29
INDUSTRY PERFORMANCE
04 May 2010
Industry Performance
CURRENT PERFORMANCE
In the five years to 2010, the Global Footwear Manufacturing Industry is expected to grow steadily. Most consumers in the
world require footwear for practical reasons, and it is a product used by most people in the world. As the world's
population increases, so too does footwear demand. Revenue is projected to rise from $113.8 billion in 2005 to an
estimated $126.9 billion in 2010 (constant 2010 dollars). This represents an annualized average growth rate of 2.2%. The
past five years is characterized by rising levels of international trade, due to several factors including: reductions in barrier
protection, changing consumer preferences and the further internationalization of capital and workforces. This industry is
relatively labor-intensive and production and revenue from low labor-cost countries continues to rise. For the most part,
the world-wide footwear supply chain is clearly structured across global lines, with design and marketing done in the
developed world and manufacturing conducted in the developing or newly-developed world.
Manufacturers of less expensive footwear and athletic shoes are mainly situated in developing regions of Asia and South
America, while designers, large wholesalers and retailers are predominantly located in Europe, the US, and developed
Asian regions, such as Taiwan. Footwear is an actively-traded product in international markets and is being delocalized
from developed countries to developing ones. China is clearly the dominant footwear manufacturer in the world and its
market share, while reaching a plateau, has grown substantially over the last five years.
Slow growth as the world cuts discretionary spending
In 2010, moderate growth is expected in light of dampened consumer spending with economic recessions in developed
countries such as the USA, Japan and Europe lowering demand for discretionary footwear. Revenue in the Global
Footwear Manufacturing Industry is expected to rise by only 0.8% to $126.9 billion. The credit crisis is making banks
reluctant to lend to small and medium sized businesses, which is expected to lead to some contraction in footwear
manufacturing capacity. Despite this, large, financially strong companies still have the opportunity to receive more orders
from brand customers.
Footwear manufacturing in the developing world continued to grow in 2009, but the effects of a declining US and world
economy, suffering from a credit crunch, saw the previous strong growth levels taper off, especially in China. Slowing
consumer demand in the developed world impacted on demand for manufactured exports from Asia. For China, the most
prominent developing Asian nation and footwear manufacturer, enormous macroeconomic changes are taking place. The
US credit mortgage crisis escalated into a global economic crisis, which constrained output in China's economy. There
are also rising uncertainties of the external factors affecting China's continuous economic growth. Meanwhile, consumer
confidence suffered a blow caused by a number of factors, including consumer price index rises, the stock market
downturn, and a spate of natural disasters. However, China's per capita income continued to rise rapidly in 2008, and the
footwear manufacturing industry in China benefited from the Beijing Olympics in 2008.
In 2008, slowing US and world economies limited revenue growth in the Global Footwear Manufacturing industry to 2.6%.
While still extremely high, growth levels in China slowed to a slightly lower rate than the previous year as gradual wage
pressure in the country saw manufacturers begin moving to Vietnam and other developing countries to take advantage of
lower labor costs. Despite the trend for China to source from cheaper wage alternatives, Vietnam contributed only 4.1% of
total footwear manufacturing revenue in 2008. China continued to have the infrastructure and a large domestic market for
ongoing expansion in the industry and made up about 53.5% of industry revenue during the year. Industry revenue in
2008 was constrained by a slowing US economy and softening EU economies. Because of this, demand for cheap- to
mid-priced products manufactured in China, Vietnam and India continued as US consumers choose low "value added"
30
04 May 2010
imported footwear over more expensive European and locally-produced brands. However, demand from developing
nations for luxury items from Europe dropped substantially.
IBISWorld estimates that total industry revenue grew by 3.3% in 2007 to $120.5 billion. Worldwide real GDP rose at by
5%. Revenue in the Chinese footwear manufacturing industry increased by 24.7% and made up approximately 40.7% of
worldwide revenue.
In 2006, industry revenue also grew by 4.1% and again, revenue from Chinese footwear grew by 17.3%. The growth in
China was slightly less than the previous year as gradual wage pressures in the country saw manufacturers move to
Vietnam to take advantage of lower labor and production costs. The introduction of tariffs on imports to the European
Union also limited growth. The already large Indian industry grew during the year as companies from the US, Italy and
Taiwan continued to invest in sourcing manufactured footwear from India.
Profitability
Industry profitability has remained relatively stable over the past five years to 2010, and is expected to account for
approximately 7.3% of industry revenue in 2010. This is down from about 8% in 2007 with the majority of consumers
around the world demanding fewer high-priced, high-end shoes. A drop in profitability is also expected with wages paid to
factory workers in developing manufacturing nations, especially in China, beginning to rise.
Manufacturers in India and China, and many parts of South East and Central Asia are already feeling the sting of rising
energy prices and price rises of raw materials like cotton. Other raw material costs include leather and synthetic material.
While dipping in 2009, the profitability of European luxury footwear producers is expected to increase, from approximately
10.4% of revenue in 2004 to about 12.5% of revenue in 2009, with the increasing willingness of prosperous classes in
Asia to spend on luxury items counterbalancing some of the tightening of spending in the US and EU.
Rising international trade
International trade is a very important component of revenue in this industry. The total value of trade is expected to
increase from $72.6 billion in 2005 to a forecast $83.7 billion in 2010, with annualized increases of 2.9%. In 2009, China is
expected to export 31% of total global footwear exports. While up from about 27% of revenue in 2005, China is not
expected to increase substantially from 30.3% of exports in 2006 as its domination of production starts to plateau. Trade
rose throughout the period as many manufactures in the US, Europe and other countries such as Taiwan and Korea
effectively converted themselves from domestic manufactures to wholesalers of overseas manufactured footwear.
International trade is expected to rise from 63.5% of industry revenue in 2006 to 66% in 2010.
The rise in the amount of sourced footwear manufactured in low-wage countries by contractors and company-owned
facilities is causing the rise in imports. The US is the largest importer in the industry. It is estimated to purchases 31.9% of
the word's imports in 2009. This is down from 32.9% of total world imports in 2008 as the recession saw US consumers
tighten spending on discretionary footwear. Tariff reductions in the US market have seen a greater flow of Chinese
products enter the country. The declining US economy in 2009 should see some stability in the rate of Chinese imports
entering the country as US consumers substitute more expensive branded European footwear with lower-priced
alternatives.
Cheaper footwear imports, mainly Chinese but also Vietnamese, have been penetrating the EU over the last five years.
"Anti-dumping" tariffs on Chinese and Vietnamese footwear entering the EU were implemented in 2006. These tariffs,
10% on all leather footwear imports from Vietnam, and 16.5% on all imports from China, limited the growth in Chinese and
Vietnamese imports to the EU in 2007 and subsequent years. Demand from consumers with increasing affluence and the
31
04 May 2010
accompanying culture of displaying affluence in China and India is benefiting manufacturers and exporters of high-priced
goods with fashionable brand names and stylish designs in Europe. This is expected to continue as the Chinese and
Indian economies grow over the next five years.
Wages and employment moving to the developing world
Total industry wages have declined at an estimated 1.5% a year on average during the past five years, from $22.6 billion
in 2005 to a forecast $21 billion in 2010 (constant 2010 dollars). Wages as a percentage of revenue are expected to
decrease from 18.3% in 2006 to 16.5% in 2010. As a greater proportion of footwear is being manufactured in Asia and
South America, wage levels have declined over the last few years in relation to revenue.
Despite the decline in wages, employment has steadily increased. While employment in the US and most parts of Europe
has contracted severely, the number of low-cost workers engaged in footwear manufacturing in China, Vietnam, India and
Brazil has consistently risen over the past five years. Total employment is expected to increase from 6.71 million workers
in 2006 to a forecast 7.15 million in 2010.
China dominates production
In 2010, the Global Footwear Manufacturing Industry is expected to produce approximately 12.15 billion pairs of shoes, up
from 11.63 billion in 2006. Developing countries dominated production volumes in the industry. In 2010, approximately
57% of total shoes manufactured in the world, or 6.9 billion pairs of shoes, are expected to be Chinese-made shoes. This
was up from around 6.5 billion pairs, or 56% in 2006.
Vietnam is projected to be the next largest manufacturer with about 975 million pairs produced or 8% of total world
production in 2010. This is up from 700 million pairs or 6% of world production in 2006. The Vietnamese footwear
manufacturing industry has developed considerably through substantial overseas investment. Manufacturers have moved
to the country to take advantage of the low labor costs; production costs in the country are less than in China. India's
production is expected to grow from 700 million pairs in 2006 to 950 million pairs in 2008. India's production of footwear
has the potential to contend with some of China's market share, but its manufacturing infrastructure is not currently as
well-developed as China's. Brazil is also a large shoe manufacturer, expected to make up 6.5% of production in 2010.
Down from 9% of revenue in 2006, Italy is still expected to make up a significant 6.7% of industry revenue in 2010. As the
country specializes in the production of high quality fashion labels and more expensive designer shoes, it is only expected
to make up about 230 million pairs, or 1.9% of total pairs in 2010. This is down from about 330.0 million pairs in 2004.
While it still leads the world in high-end shoes, Italy has struggled to compete against importation of mid-priced shoes
produced in Asia.
HISTORICAL PERFORMANCE
Footwear originated many thousands of years ago. Early footwear grew out of the necessity to provide protection when
moving over rough terrain in varying weather conditions. Initially footwear was probably made from plaited grass or
rawhide held to the foot with thongs. New styles emerged as the rich and influential began distinguishing themselves by
craftsmanship and decoration, which characterized their shoes. The evolution of foot coverings, from the sandal to
present-day athletic shoe, are products of research and engineering that continues even today, as manufacturers find
new materials to cover our feet.
32
04 May 2010
The introduction of rubber led the later part of the 19th century to several new fashion fads. In the 1890's, rubber heels
become popular. In the 1950's, leather was still popular after the war, but it was being rivaled by new, synthetic materials.
Plastics started to replace leather for women's shoes as early and by the late 60's, a large number of shoes were made of
a material other than leather. In the 1970's, plastics, leathers, fabrics, wood and countless other more materials were
used to create and decorate footwear. In the 1980's, the greatest change in footwear was from athletic footwear, with the
evolution of hundreds of different styles and brands, each with their own special construction. In the 1990's, materials
such as microfibers, stretch fabrics, and other synthetic were incorporated into shoe production. Technology had also
improved manufacturing processes with computerized embroidery and other new methods of decoration bringing
elaborate designs to the mass market.
Until the second half of the 19th century, individual cobblers working either alone or with one or two apprentices produced
the majority of all footwear in the world. Through the years and the growth of technology, such as the creation of the
sewing machine, local shoe making shops expanded and turned into factories. A great advancement in ready-to-wear
shoes was the introduction of standard sizes. By 1890, sizes were standard in Britain and the United States later ensuring
consumers could get a correct fit without the expense of custom made footwear.
Many developments in the shoe industry emerged from Europe. The machines made in Asia are, in the main, derivations
of shoe machines developed in Europe. Europe developed the CAD systems now used in many shoe companies around
the world. The creation of "white" shoes may have been developed in parallel with the USA, with brands like Nike and
New Balance. Despite this, Reebok and Hitec started in the UK; Adidas and Puma, in Germany; Lotto and Fila in Italy;
and Le Coq Sportif in France. Italy has been the world leader in terms of fashion and design. It also has a vibrant shoe
machinery making industry based on progressive technology and has been a major supplier of shoe components to the
world for a large part of the 20th century.
In such a labor intensive industry, footwear manufacturers around the world have consistently pursued low cost labor. A
look at the movement of footwear in the last ten years will show that the influence of price and costs has been
instrumental. For example, in 1996 the average wage rate in Western Europe was around $7 per hour, in China, only
$0.30 per hour.
Large supplies of leather, a history of shoemaking and low labor costs saw Japan emerge as the main source of supply of
low cost footwear in the 1960's. Japan was the original far-eastern supplier of Nike sport shoes. As labor costs in Japan
grew, the industry then moved to Taiwan. It then moved to South Korea, Indonesia and Thailand. During 1980s, Taiwan
and South Korea accounted for 45% of world footwear. By 1994, the share of world exports supplied by Taiwan and South
Korea had fallen to 7%, whereas China's share had increased to 50% (from 8% in 1986). Taiwan and South Korea no
longer have any significant shoe manufacturing industries.
The most obvious trend since the early 1980s has been the movement of footwear production from Taiwan and South
Korea to Vietnam, India, Indonesia, Thailand, and above all, to China. It was during this period that China continued to
further liberate its economic policies and emerged as the dominant country in this industry. Taiwanese industrialists,
searching for a new manufacturing base and operating through Hong Kong for political reasons, set up shoe factories
directly opposite Taiwan on the Chinese mainland. Thus, the industry then moved again to China as the lowest labor cost
country in the region. The Asian Economic Crisis in the late 1990's had a damaging effect on the footwear industries of
Indonesia and Thailand. This created many problems in the supply chain, particularly in the USA, with the result being that
the industries in these two countries still have not returned to their previous levels.
The US is the largest purchaser of footwear in the world. Over the years, it has become extremely difficult for US and
European footwear manufacturers to compete with low-priced imports, which has been further affected by the rate at
which imports are growing. For example, from 1980 to 1995, footwear imports increased from an average 30.5 million
33
04 May 2010
pairs per month to 90 million pairs per month to the US. In addition, in 1960, foreign shoe manufacturers held only 4% of
the US market; in 1995, their share was more than 80%. Between 1994 and 1998, production fell more than 30%, as
more US plants continued to shut down. In 1968, there were around 2,000 footwear factories operating in the US, by 2000
this had fallen to 1,000.
In 2002, revenue is estimated to have risen by 2%. Slow world real GDP growth of approximately 2.8% limited growth in
the footwear industry. The largest markets for footwear in 2002 were the US and Europe, which combined, purchased
approximately 46.7% of total footwear produced. Low demand from the US in 2002 after the economic climate after
September 11 also limited turnover growth for the year with total imports entering the US reducing by 0.5% during the
year.
Revenue grew a substantial 2.7% in 2003 as real world GDP growth expanded to 3.6% and imports and exports both
grew substantially. China, already the largest footwear manufacturer in the world, grew in its domination of the industry
with its revenue from footwear manufacturing growing by 19.1%. US, European and Taiwanese companies continued to
open manufacturing facilities in China to take advantage of lower labor costs and its manufacturing infrastructure.
While the Chinese market continued to grow, the US and most countries in the EU were unable to compete with China,
and both declined in 2005. The large Italian industry, famous for its high-quality shoes, also began to contract in 2005 as
demand from Europe for its mid-priced products shifted to alternative Asian products. During the year, despite 4.4%
growth in real GDP, revenue is estimated to have risen by only 0.5%. While total shoe production in the world is estimated
to have risen by 1.4% to 11 billion pairs, the total value of shoes is estimated to have declined. Price reductions are
expected to have seen value added fall by 0.1% during the year.
In 2004, industry revenue grew by 2.2% as imports to the United States and Europe grew substantially. The increasing
availability of cheaper imports to Europe and the United states saw price reductions on low-end footwear products.
Growth in Chinese footwear manufacturing was 15.4% in 2004 as it continued to dominate the export market and also
expanded further into the substantial domestic Chinese market.
Revenue (constant prices)
Revenue $ Billion
Growth %
1997
130.6
N/A
1998
120.6
-7.7
1999
119.4
-1.0
2000
113.5
-4.9
2001
105.8
-6.8
2002
107.9
2.0
2003
110.8
2.7
2004
113.2
2.2
2005
113.8
0.5
2006
118.5
4.1
2007
122.1
3.0
2008
125.3
2.6
2009
125.9
0.5
2010
126.9
0.8
34
04 May 2010
Revenue
Revenue Growth Rate
Gross Product (constant prices)
Gross Product $ Billion
Growth %
1997
57.5
N/A
1998
53.7
-6.6
1999
53.7
0.0
2000
51.0
-5.0
2001
48.7
-4.5
2002
49.6
1.8
2003
52.1
5.0
2004
52.7
1.2
2005
52.5
-0.4
2006
54.8
4.4
2007
54.9
0.2
2008
57.5
4.7
2009
57.8
0.5
2010
58.3
0.9
35
04 May 2010
Gross Product
Gross Product Growth Rate
36
OUTLOOK
04 May 2010
Outlook
Revenue (constant prices)
Revenue $ Billion
Growth %
2011
128.4
1.2
2012
131.9
2.7
2013
136.7
3.6
2014
141.2
3.3
2015
145.6
3.1
2016
149.5
2.7
Revenue Growth Rate
Revenue
Gross Product (constant prices)
Gross Product $ Billion
Growth %
2011
59.4
1.9
2012
61.1
2.9
2013
63.0
3.1
2014
65.0
3.2
2015
67.0
3.1
2016
68.7
2.5
37
OUTLOOK
04 May 2010
Gross Product
Gross Product Growth Rate
Over the five years to 2015, IBISWorld forecasts that Global Footwear Manufacturing industry revenue will increase at an
average annual rate of 2.8%, to $145.6 billion. Companies in the industry will continue sourcing footwear from
independent contractors and company-owned facilities in countries that offer low wage rates combined with manufacturing
infrastructure. Steady annual average population growth and stronger worldwide real GDP growth from late-2010 should
see demand in the industry grow steadily in future years. The footwear manufacturing sector is expected to continue
facing market pricing pressure, as there is constant demand for value-added services and cost savings along the supply
chain.
The industry will also increasingly feature competition based on branding and increased globalization. Given their current
share of world exports, low labor cost countries are likely to expand their overall share of global markets at a slower rate
than in the past five years. Leading source countries, such as China and Vietnam, continue to increase their shares of
world low-cost exports (at the expense of smaller ones). Given the competitive strength of China, the success of other
low-cost source countries depends on their ability to develop an advantage in single product categories.
Rising international trade
International trade is expected to continue growing over the next five years. Trade is projected to grow at an annualized
average rate of 4.2% to $102.8 billion in 2015. Steady levels of international sourcing should see trade grow in importance
from 66% of industry revenue in 2010, to 70.6% in 2015. When the effects of the current economic downturn begin to
lessen, developing countries like China will further benefit from a large local consumer class increasing in buying power.
This will also benefit manufacturers in the developed world.
During the next five years, manufacturers in the US and Europe may remain competitive by developing niche markets for
certain footwear products, particularly at the higher-priced end of the market. For example, women's dress shoes that are
made from expensive materials are less likely to be made in developing countries. The desire for particular consumers to
maintain an image of quality may not be achieved from imported footwear from China, Brazil or Indonesia. Many offshore
production facilities focus on low-cost, but high-revenue footwear that target mass markets. Unless dress shoes are made
38
OUTLOOK
04 May 2010
in the US, Italy or other countries with a strong brand name for quality, high-end consumers may be less likely to purchase
them.
Key trends
Increasing demand for high quality footwear from growing affluent and middle classes in India and China should also see
a rise in niche and luxury exports from Europe and the US.
A key driver of growth will be demand from developing countries in Asia, especially China, India as well as Russia and the
UAE. Major companies have already been lobbying through institutions (such as the European Union) to have import
tariffs into these countries reduced and major companies are also likely to direct more advertising expenditure into these
growth regions. In contrast, slower economic growth and aging populations will continue to constrain industry growth in
Europe. Tariffs on Chinese and Vietnamese footwear implemented by the EU are only expected to have a short-term
impact on these countries before they find alternative markets.
The "sleeping giant" for conventional shoes is India. It has a developing industrial infrastructure and competitive pricing. It
has also not yet reached its potential as an exporter of footwear. Nevertheless, the shoes that it does export are
competitively priced and are of increasing quality. With such a large domestic market and scope for industrial capacity,
India is the one country with the potential to significantly make inroads into China's dominance over the next five years. As
the Indian economy grows, it is expected to not only be a larger producer of footwear, but also a significant importer of
foreign made footwear.
Over the years in the US (the largest purchaser of manufactured footwear), imports have made up a significant proportion
of domestic demand. While demand from the US will be lower in 2010 as the country goes through a major economic
crisis - as tariffs continue to remain low and local markets developed by foreign companies - imports will continue to
absorb more of the US market over the next five years. Most footwear manufacturers in US will be unable to compete with
imported shoes and there will ultimately be further contraction within the country's industry.
Over the next five years, manufacturers in Europe and US can further develop an advantage over foreign suppliers in
footwear items, particularly in areas where consumers are less sensitive to price. For example, at the high end of the
market, particularly niche exclusive branded shoes (e.g. Manolo Blahnik shoes), consumers are less influenced by pricing
and are more concerned with quality design, materials, finishing and brand image. Footwear manufacturers that are able
to develop and grow these advantages will be in a better position to continue operating in the increasingly intense
competitive environment with foreign manufacturers.
39

Global Footwear Manufacturing C1321-GL IBISWorld

Transcription

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