India Premium Footwear - Dec'13

India Premium Footwear Market

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Premium footwear market is fast gaining popu-larity in the Indian market. Earlier, bags were the entry points for aspirational consumers in India buying luxury brands. However, this trend is fast changing and consumers are shifting towards buying premium footwear.

With growing fashion consciousness among India’s urban middle class coupled with large number of foreign brands introducing new de-signs and cults, shoes are fast becoming a very important accessory among the elite class.

Over the past few years, a host of luxury shoe brands have entered the Indian Market. Other than Bally, recent entrants in this space include Steve Madden, Paul & Shark and Tod’s. Also, brands such as Ermenegildo Zegna, Louis Vuit-ton, Burberry, Hermès, Chanel, Gucci, Salvatore Ferragamo, Bottega Veneta, Armani, Versace and Hugo Boss have brought in their footwear collections into India. Further, even Reliance Brands has introduced Kenneth Cole in the Indian market.

Premium Footwear Market in India- Overview

With growing fash-ion consciousness

among India’s urban middle class coupled with large number of foreign brands intro-ducing new designs and cults, shoes are fast becoming a very important accessory

among the elite class.


Market Size and Growth

The premium footwear market in India was esti-mated at INR 300 Crore in 2012-13 and is expected to reach INR 774 Crore by 2016-17, growing at a CAGR of around 26.7% during 2012-13 to 2016-17.

With the factors like increasing disposable income among urban middle-class, inclination towards pro-curing branded products and efforts on the part of luxury shoes manufacturers to introduce Indianisa-tion in designs of the global luxury brands & expand in the market, the premium footwear market is expected to witness a growth of around 30% annu-ally in the coming years.

The luxury footwear market in India is dominated by men’s footwear. However, the share of the men’s premium footwear market is coming down. The share has declined from 70% to 60% over the last few years as the women’s footwear segment which is currently underleveraged, is becoming a target market for the luxury brands.

Source: Assocham

Figure1: Indian Premium Footwear Market (Crore INR), 2012-13 to 2016-17 774

594.6472.4

376

300

240

2011-12e 2012-13e* 2013-14e 2014-15f 2015-16f 2016-17f

The premium footwear market is expected to witness a growth of around 30% annually in the

coming years.


In volume terms, India produced 2.065 Billion pairs of footwear in 2012-13 of which the share of premium footwear was estimated at 20%. Premium footwear market was esti-mated at 0.41 Billion Pairs in 2012-13 and is forecasted to grow to 1.38 Billion Pairs by 2016-17, growing at a CAGR of 35.2% during 2012-13 to 2016-17.

The share of premium footwear is expected to grow to 30% in volume terms, in the coming years.

Source: RNCOS

Figure 2: Indian Premium Footwear Market by Category (%), 2012-13

Men’s Luxury Footwear

Women’s & Kid’s Luxury Footwear

40.0%

60.0%

Source: RNCOS

Figure 3: Indian Premium Footwear Market (Billion Pairs), 2012-13 to 2016-17

1.38

1.02

0.75

0.56

0.41

0.31

2011-12e 2012-13e* 2013-14e 2014-15f 2015-16f 2016-17f

• Foreign Brands seeking collaborations with Indian Players With the growth in premium footwear market in India, various foreign brands are eyeing India as a lucrative market. Domestic players can cash upon this opportunity by forming collabora-tions and providing their expertise of labour intensive manufacturing to the foreign players Tata International has teamed up with Wolverine Brands of the US to enable the US manufacturer build base in the Indian market. The JV company plans to kick off with a chain of stores of CAT shoes, to be followed by a dozen other Wolverine brands.

• Opportunity to provide finished leather to foreign players setting base in India India can use the massive availability of raw materials like hides, skins etc to its advantage by supplying finished leather to foreign footwear players opening up stores in India, who other-wise have to import the same from other countries at high costs.

• Men’s footwear dominate premium footwear category The women’s and kid’s premium footwear segments are underleveraged in India. Thus, players in these segments have the opportunity to tap this market with new products. Woodland, owned by the Aero Group, is looking to re-position its sub-brand ‘Woods’ in the luxury footwear segment, focusing primarily on women’s footwear. Nearly 60% of its offerings will be for women.

Opportunities

Opportunities & Challenges

• International Brands Facing Problem of Getting Adequate Distribution Many international brands are facing distribution issues, which may have direct effect on the Indian footwear industry revenues. For instance, recent entrant Skechers of the US is in 200 multi-brand outlets, but is waiting for FIPB clearance to open stores of its own.

• High Tax Rates Leading to Higher Prices Footwear continues to be a highly taxed category. High customs and excise along with local duties like octroi and VAT lead to almost 35% of the sale price of the footwear.

• International players facing restraints in entering the market on their own stream Despite the opening of single-brand retail and 100% foreign direct investment allowed in the segment, none of the luxury footwear brands have opted for this route, though the interest is high. Although many luxury brands are keen to enter on their own stream, the 30% sourcing-from-India norm is acting as a deterrent for them, so they end up coming through the joint venture route.

Challenges



Latest Developments

Over the past few years, many premium brands have entered or have plans to enter into the Indian market through various routes.

Premium Italian Luxury Brands eyeing India

July 2013: Furla, has sought government’s approval to operate single-brand retail outlets through a 51:49 joint venture with Gurgaon- based Genesis, which currently runs two Furla stores as a franchisee and plans to open a third one in either Kolkata or Bangalore. The joint venture plans to invest about INR 13 Crore in the first 4 years to open stores, with Furla bringing in INR 6.6 Crores. Source: Footwear Times

May 2013: High-end and super-expensive Italian shoemakers are looking at India as a replacement for their production base in Europe, increasingly a high-cost location for them. These brand manufactur-ers are also scouting for local partners. Some of these are leading brands such as Baldinini, LORIBLU, Giovanni Fabiani, NeroGiardini, Janet & Janet, FABI and Fratesi. They are looking at more and more joint ventures and collaborations with Indian producers because Indian industry gives them the volume that these companies are looking for. Source: Business Standard

April 2013: Premium Italian footwear brand Geox has entered into a retail and distribution arrange-ment with Delhi-based G&B Footcorp to set up its mono brand stores. G&B Footcorp has set up three stores and plans to add two more stores in the current fiscal year. It also plans to have at least 20 stores in next three years. Source: The Hindu Business Line

Foreign Brands on an expansion spree through increased investment in the Indian Market

August 2013: Pavers England plans to expand its base in India. It is planning a further US$10 Million investment within the next 12-18 months on top of its US$10 Million already invested in buying out its franchisee.Source: InsideRetail.Asia

May 2013: Woodland, owned by the Aero Group, is looking to re-position its sub-brand ‘Woods’ in the luxury footwear segment and is planning to invest about INR 60 Crore to unveil a string of 30 small boutique stores in high-end shopping malls across the country in this financial year.Source: Yahoo Finance

May 2013: Ruosh which is in the men’s premium footwear space is planning to take its store count to 20 in 2013. The brand currently has eight stores across Bangalore, Mumbai, Chennai and New Delhi.Source: FashionUnited

January 2013: C&J Clarks International has plans to expand the number of standalone stores in India to 100 in the next 5 years. Source: Franchise Mart


Global premium footwear brands are queuing up for an entry into the Indian market. These brands are more than enthusiastic with the approval of 100% FDI in single brand retail. This category will be seeing lot of action in the coming days with several brands entering the market. Some of them have been rely-ing on licensing or franchising, while other have formed partnership with leading business houses.

Brands like Steve Madden, Timberland and Kenneth Cole have partnered with Reliance, Wolverine with Tata, and Clarks with Future Group. The brands that are doing the groundwork to enter the market include French brand Mephisto and the US sports shoe brand Airwalk.

The share of premium footwear is expected to increase in India in the coming years, with premium footwear players looking for setting up base in markets having potential for growth, to beat the losses in stagnant markets like Europe. Having a distribution partner or a franchisee in the initial years will help the brand to set up a base in the market. But once they understand the market, they may also opt for retailing on their own. The brands can also meet the sourcing clause by sourcing footwear fully or in parts from the Indian markets.

Moreover, the number of ultra high net worth households in India is expected to increase from 1,00,900 units in 2012-13 to 3,29,000 units in 2017-18, with their net worth increasing from 86,00,000 Crore in 2012-13 to 380,00,000 Crore in 2017-18 . This, will give a boost to the total spending on luxury items like footwear in the Indian market.

Future Outlook


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