Global market review of branded footwear – forecasts to ... · PDF fileGlobal market...

Global market review of branded footwear –

forecasts to 2010

1st edition

2005 edition

Page i

© 2005 All content copyright Aroq Ltd. All rights reserved.

Global market review of branded footwear – forecasts to 2010 1st edition

by Bill Mills

August 2005

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Page ii


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Page iii


Table of contents

Single-user licence edition............................................................................................................. ii Copyright statement ................................................................................................................. ii

Table of contents ........................................................................................................................... iii

List of tables ................................................................................................................................... vi

List of figures ................................................................................................................................ vii

just-style.com membership......................................................................................................... viii

Chapter 1 Executive summary....................................................................................................... 1 Overview .................................................................................................................................. 1 What is a “brand?”.................................................................................................................... 1 Global branded footwear trends............................................................................................... 1 Market drivers .......................................................................................................................... 2

General wear and tear...................................................................................................... 2 Casual dressing................................................................................................................3 Footwear: a fashion and lifestyle statement ..................................................................... 3 Branding ........................................................................................................................... 3 Growth of sports footwear ................................................................................................ 4 Climate ............................................................................................................................. 4

Chapter 2 The market ..................................................................................................................... 5 Overview of global value and volume ...................................................................................... 5 The major footwear markets .................................................................................................... 9

United States .................................................................................................................... 9 United Kingdom .............................................................................................................. 11 France ............................................................................................................................ 17 Germany......................................................................................................................... 18 Japan.............................................................................................................................. 20 China .............................................................................................................................. 21 The growth of luxury brands in the Chinese footwear market ........................................ 22 Manufacturing changes .................................................................................................. 24 Labour changes.............................................................................................................. 25 Raw material supply ....................................................................................................... 27 Power supply .................................................................................................................. 27 Minimum quantities......................................................................................................... 27 The effect of Chinese footwear production growth ......................................................... 28 Top players in the Chinese footwear market .................................................................. 28 Profiles of some of the top players among China’s footwear companies ....................... 28 The internal Chinese market .......................................................................................... 29 India................................................................................................................................ 30

Page iv


Other markets ........................................................................................................................ 32 Brazil............................................................................................................................... 32 Russia............................................................................................................................. 33 Italy ................................................................................................................................. 33 Latin America..................................................................................................................34 South East Asian countries ............................................................................................ 34

Chapter 3 Design and new products/innovations...................................................................... 36 Trends in leather .................................................................................................................... 36 Technical innovations............................................................................................................. 36 Mass customisation................................................................................................................ 38

Chapter 4 Raw materials .............................................................................................................. 39 Outer material ........................................................................................................................ 39

Synthetic......................................................................................................................... 39 Textile ............................................................................................................................. 39 Leather ........................................................................................................................... 39

Lining material ........................................................................................................................ 40 Sole material .......................................................................................................................... 40

Chapter 5 Supply chain and logistics ......................................................................................... 41 Effect of quota removal .......................................................................................................... 41 Cost reduction ........................................................................................................................ 41 The “front end” of the footwear supply chain.......................................................................... 41 Effect of fast fashion............................................................................................................... 42

Chapter 6 Company case studies................................................................................................ 44 Yue Yuen Industrial (Holdings) Ltd ........................................................................................ 44

Group financial highlights ............................................................................................... 44 Production ...................................................................................................................... 45 Yue Yuen SWOT analysis .............................................................................................. 45 Strengths ........................................................................................................................ 45 Weaknesses ................................................................................................................... 46 Opportunities ..................................................................................................................47 Threats ........................................................................................................................... 47

Dune....................................................................................................................................... 48

Chapter 7 Sales and promotion ................................................................................................... 51 Marketing of branded footwear .............................................................................................. 51 Counterfeiting......................................................................................................................... 51 Ethical trading ........................................................................................................................ 51 Use of e-commerce solutions................................................................................................. 52 The use of the internet ........................................................................................................... 53

Chapter 8 Major global brands .................................................................................................... 55 Nike Inc .................................................................................................................................. 55 adidas-Salomon ..................................................................................................................... 56 Reebok................................................................................................................................... 58 Jones Apparel Group Inc ....................................................................................................... 58

Page v


Maxwell Shoe Company Inc................................................................................................... 59 Nine West............................................................................................................................... 59 Gucci Group N.V .................................................................................................................... 60 Brown Shoe Company Inc ..................................................................................................... 60 C & J Clarks ........................................................................................................................... 62 The Timberland Company...................................................................................................... 63 Asics Corporation................................................................................................................... 64 Scholl...................................................................................................................................... 65 Bata........................................................................................................................................ 65 Wolverine Worldwide Inc........................................................................................................66 Ecco ....................................................................................................................................... 67 Faith ....................................................................................................................................... 67 Prada...................................................................................................................................... 68 Jimmy Choo ........................................................................................................................... 68 Kurt Gieger ............................................................................................................................. 69 Skechers ................................................................................................................................ 69 LVMH ..................................................................................................................................... 69

Online sources of information ..................................................................................................... 71 Free email newsletters ........................................................................................................... 71 Other research reports ........................................................................................................... 71 Global news and feature articles............................................................................................ 71 Search the web ...................................................................................................................... 71

Your feedback ............................................................................................................................... 72

Page vi


List of tables

Table 1: Change in the UK’s major footwear brands’ market share by company, 1999 and 2004 15

Table 2: US footwear consumption versus imports 1968, 1980, 1990, 2003 ................................ 28

Page vii


List of figures

Figure 1: Global branded footwear market by value, 2000 to 2010 (US$bn)................................... 6

Figure 2: Global branded footwear market by volume, 2000 to 2010 (bn unit pairs) ....................... 6

Figure 3: Global PPP (Purchasing Power Parity) 2004.................................................................... 7

Figure 4: Global cost comparison .................................................................................................... 8

Figure 5: US branded footwear market by value, 2000 to 2010 (US$bn) ...................................... 10

Figure 6: US branded footwear market by volume, 2000 to 2010 (bn unit pairs)........................... 11

Figure 7: UK branded footwear market by value, 2000 to 2010 (US$bn) ...................................... 11

Figure 8: French branded footwear market by value, 2000 to 2010 (US$bn) ................................ 18

Figure 9: German branded footwear market by value, 2000 to 2010 (US$bn) .............................. 20

Figure 10: Japanese branded footwear market by value, 2000 to 2010 (US$bn) ......................... 21

Figure 11: Chinese branded footwear market by volume, 2000 to 2010 (bn unit pairs) ................ 30

Figure 12: Indian branded footwear market by volume, 2001 to 2010 (m unit pairs)..................... 32

Figure 13: Turnover of leading global branded footwear companies based on most recent

company financial results ......................................................................................... 55

Page viii


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Chapter 1 Executive summary Page 1


Chapter 1 Executive summary

Overview

The industry comprises companies involved in designing, manufacturing,

sourcing and the marketing of branded footwear for men, women and children.

This report examines the branded footwear market in global terms and then by

key country markets.

Areas of new product design and innovation are discussed.

The global supply chain for branded footwear is examined.

A selection of the world’s leading brands are examined.

What is a “brand?”

For this report just-style considers that if an item of footwear carries a name

and/or logo it constitutes a branded product and has been included within this

report’s findings. The “brand” aspect of footwear is growing across the globe.

In the opinion of just-style, at least 96% of the world’s footwear output is

“branded”.

Global branded footwear trends

○ Although still aware of price, increasingly the global male wardrobe is

becoming more fashionable, both in clothing and footwear.

○ Retailers are increasingly realising the value that a brand places on a

product. Hence, retailers at the value end of the supply chain are now

using brands to market footwear.

○ The growth of the internet as a distribution channel is growing. This growth

is both in product marketing and direct sales through internet-based

Chapter 2 The market Page 5


Chapter 2 The market

Overview of global value and volume

just-style expects the volume of branded footwear to grow and reach slightly

over 15bn pairs by 2010.

The value of the market will also grow and we expect that by 2010 the global

footwear market will be worth in excess of US$XXXbn, a growth of XX% since

2000.

A number of “spikes” of demand will be seen coinciding with three major

sporting events:

○ Football World Cup 2006

○ Football European Championship 2008

○ Olympic Games 2008

The overriding feature of both the historical and projected figures is the ever-

increasing share of the market supply coming from lower labour cost countries.

Of the predicted 15bn pairs to be produced in 2010, China alone will contribute

X.Xbn pairs, XX% of the world’s total.

Low labour cost countries such as Vietnam, Cambodia, Bangladesh and India

stand to gain as footwear companies seek even more affordable options to

China.

Vietnam for example, which has moved from just making athletic shoes to

other footwear styles, is quickly catching up with China, thanks to a December

2001 bilateral trade agreement with the US. According to American Apparel

and Footwear Association figures, Vietnam produced more than 30m pairs of

shoes in 2003, compared to zero in 1990.

In early July 2005 The Central American Free Trade Agreement passed

through the US Senate. If the agreement is passed by The House of

Representatives it will eliminate US trade barriers with Costa Rica, El

Chapter 3 Design and new products/innovations Page 36


Chapter 3 Design and new products/innovations

Trends in leather

Soft colours are still in evidence, with high levels of detail and working. The

detail is often punched, laser cut, decorated and embroidered. Footwear

components such as heels and soles are being coloured and having effects

added.

The trend in men’s leather is still the slightly dirty look particularly the whitened

antique finish.

Women’s leather is still very brightly coloured, with the use of metallic effects,

reptile embossing and “crackling” of the hide.

Tanneries are now realising that by increasing the level of detail and post

treatments in their leather ranges, they are making potential “copies” more

expensive and difficult to re-produce.

An increasing number of tanneries are now offering machine washable leather.

Technical innovations

Shoe linings are now being offered that contain finishes to combat bacteria

and fungus build-up. These bio-physical finishes oscillate on the surface and

reduce the ability of single cell organisms to divide and hence grow and

spread.

Shoe linings are also being offered that contain a sanitised finish that can

combat increased levels of sweat.

Phase-change materials are now moving from apparel into footwear. One such

example is Outlast Adaptive Comfort, which works on the basis of micro

encapsulation; around 1,000 tiny capsules fitted on to a surface the size of a

pin head. Inside the patented microcapsules, called Outlast Thermocules,

Chapter 4 Raw materials Page 39


Chapter 4 Raw materials

Outer material

Synthetic PVC, PU, rubber, leatherette, and polymers are all examples of materials that

have a similar look as leather but their characteristics do not measure up to the

qualities of natural leather as far as breathing, absorption and flexibility are

concerned. Synthetics are suitable in combination with breathable linings and

new materials such as PVC and PU.

New options in colour and shapes inspired a rise in new designs especially in

younger fashion footwear. Apart from this design flexibility the next obvious

advantage of these materials is their low price.

Polymers: These are synthetic hides, which are trying to mimic both the look

and physical characteristics of natural hides. Polymers when used in footwear

are easy to care for.

Rubber: This has very similar characteristics to synthetic materials, and can

be used very successfully in safety footwear. Rubber can be combined with

other materials. Particularly in sports footwear to give many colour and design

variations.

Waterproof membrane: This special type of material provides both water

resistance, and breathability to footwear; an example is Gore-Tex.

Textile This is characterised by being light in weight, can be dyed to match

outfits/accessories, and is mainly used in summer footwear.

Leather This is the most used natural material with ideal characteristics for footwear.

Leather breathes, is soft to handle, has good absorption ability and is able to

adjust to the shape of the foot.

Chapter 5 Supply chain and logistics Page 41


Chapter 5 Supply chain and logistics

Effect of quota removal

When quotas were in force, many companies had to “quota-hop” from country

to country to avoid their shipments being embargoed.

In the post-quota era the response of many brands has been to perpetuate a

“buyer/vendor” relationship between themselves and their supplier. Many

retailers have seen that the way to reduce cost, shorten time to market and

improve quality is to develop closer partnerships with fewer suppliers.

In June 2005 EU trade commissioner Peter Mandelson announced an anti-

dumping investigation into Chinese footwear. The investigation is a result of a

specific complaint on safety shoes, but the investigation will cover other

aspects of footwear.

The investigation is expected to take nine months to complete.

In a recent interview for just-style a footwear executive stated: “It is a relief that

the EU is at last on the surface, appearing to wake up to the threat of [China]

flooding the market.”

Cost reduction

One of the advantages of a consolidation of the supply chain is potential cost

savings. Much of the product development work can be moved to the front of

the supply chain to a trained team overseas if the communication problems

can be overcome.

The “front end” of the footwear supply chain

This is arguably the most under-served segment of the supply chain, as many

companies attempt to manage this process with a variety of fragmented and

unsophisticated tools such as fax, spreadsheets and email. Studies have

Chapter 6 Company case studies Page 44


Chapter 6 Company case studies

Yue Yuen Industrial (Holdings) Ltd

The largest branded athletic and casual footwear manufacturer in the world,

with a global market share of XX%.

This case study will review the company’s history and conduct a SWOT

analysis of the business.

Many of the themes of the SWOT analysis are not unique to Yue Yuen and

can be applied to large scale branded footwear manufacturers across the

world.

The Tsai family founded Yue Yuen Industrial Holdings in 1988. The company

was listed on the Hong Kong stock exchange in 1992.

In 1996, the company set up manufacturing facilities in Vietnam. During the

same year, the company acquired Pou Chen, a company engaged in research

and development, sourcing and trading of raw materials for footwear

production.

In 2002, 2003 and 2004 Yue Yuen acquired or formed joint ventures with a

number of South-East Asian businesses engaged in logistics, distribution and

manufacturing to both grow and strengthen its position in the market.

The company is an original equipment manufacturer/original design

manufacturer (OEM/ODM) for a number of major global brands such as Nike,

adidas-Salomon, Reebok, New Balance, Asics, Timberland, Puma and

Rockport.

Group financial highlights 2004

Turnover: US$X,XXXm

Profit: US$XXXm

2005 half-year

Chapter 7 Sales and promotion Page 51


Chapter 7 Sales and promotion

Marketing of branded footwear

Danielle Bottari New York advertising executive said:

“People have less time than ever…we’ve become so desensitised, people flip

right by print and online ads; billboards and bus shelters have become

wallpaper.”

The public have become more media savvy and so trying to connect and then

sell is becoming harder and harder. Both the budgets and the level of

inventiveness of companies are increasing.

Counterfeiting

Global counterfeiting for both footwear and apparel is a major issue for brands.

At one level it reduces sales revenue but also there is a danger that the brand

is associated with a counterfeit product, which may be unsafe and harm the

brand’s reputation.

The footwear industry has to try to ensure that the laws passed in source

countries are sufficiently rigorous. While many of the source countries do have

adequate laws on their statute books, to satisfy their international obligations,

frequently it is not the actual law that is the problem, rather the application of

the law.

Technological changes in label printing quality have added to the problem as

counterfeit labels are improving in quality and availability.

Ethical trading

Worldwide consumers are becoming increasingly aware of the ethics of

trading, and the treatment of workers used to manufacture goods.

Chapter 8 Major global brands Page 55


Chapter 8 Major global brands

Figure 13: Turnover of leading global branded footwear companies based on most recent company financial results

Source: Company annual reports

The global branded footwear market as a whole is dominated by three

sportswear brands each of which has a large footwear presence, namely:

Nike, adidas-Salomon, Reebok.

For an in-depth review of the branded sportswear market see just-style.com

report entitled: “Global market review of active sportswear and athletic

footwear-forecast to 2010”, published February 2005.

Nike Inc

For year ending 31st May 2005, Nike posted sales of US$XX.Xbn, an increase

of XX% on 2004. Profit rose XX% to US$X.Xbn. Footwear contributes XX% of

the total turnover.

During 2005 Nike benefited from currency changes, increased sales of its

higher price footwear such as Air Jordan and Nike Shox and increased

demand for its subsidiary brands Cole Haan and Converse.

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