Finding its feet

Apparel has always dominated the world of fashion but it is footwear that completes the look. At the recently concluded India Fashion Forum there was a special session on the India Shoes and Accessories forum (ISAF) dedicated to the rise of the footwear industry in recent times. The ISAF put forth factors which make this an attractive industry to step into despite the barriers to growth and the steady trend towards footwear retail getting more organised.

According to an Assocham report, the shoes and accessories industry is worth Rs 38,000 crore, and is poised to grow to Rs 45,000 crore by 2025. Men’s footwear accounts for 48 per cent followed by woman’s at 41 per cent, kids’ 11 per cent kids and accessories 10 per cent. Barriers include high rentals and infrastructure. Location, product focus, a realistic business model, technology and a good price model are other things that will help this industry move forward.

India continues to be the one of the rare countries where men’s footwear is still the largest category, unlike in other countries where women’s shoes dominate.

The increasing number of footwear brands is leading the category to get organised rapidly with most brands going national.

The challenges remain almost the same as those faced by apparel brands except that this sector continues to be heavily taxed.

There are national and international brands in the market now. From footwear majors such as Pavers, Skechers and Clarks adopting the single-brand retail route to domestic ones such as Metro and Khadim’s, there are hardly any regional footwear brands today. Some of them have even appointed brand ambassadors.

With competition increasing in the category, high-profile brand ambassadors have also been roped in to keep the brand apart from the clutter. Recently, Delhi-based Relaxo Footwear spent heavily on high-profile brand ambassadors such as Salman Khan, Katrina Kaif and Akshay Kumar, while Metro Shoes has Saif Ali Khan and Kareena Kapoor to endorse the brand.

Gaurav Dua, Executive Director, Relaxo Footwear, says, “Bringing in these three high-profile brand ambassadors is to help us have a pan India presence. We are still a North India-based brand but expect to have a presence in States such as Maharashtra and Gujarat where film stars are easily recognisable. We would be spending almost Rs 12 crore on the new endorsers.’’

Distribution and logistics are also challenges. As Dua adds, “It is akin to the FMCG business where there is a constant need for stock replenishment. Logistics plays a major part and local depots or manufacturing facilities are needed to cater to different footwear sizes.’’

Shilpa Bhattar, Director, Reevolv Advisory Services, a consultancy and research firm, says, “Footwear is like the FMCG category where distribution is the key. It is difficult to break regional barriers and even a player like Metro Shoes took five years to go national.’’

While most shoe retailers continue to expand the number of stores, diversification into new categories such as FMCG is also on the cards. For instance Indian footwear major Woodland is getting ready to make a splash in the FMCG category with a range of personal care products which will be sourced from a German company. It would be using the distribution strength of its own stores before selling it across retailers with its range of products such as sunscreens and anti-bacterial creams.

Harkirat Singh, Managing Director, Woodland, said, “We would be using the company-owned 380 stores that we already have to launch our FMCG range under the Woodland brand. These are not typical FMCG products in the beauty space but more about protecting the skin while being outdoors.”

It has earmarked an investment of Rs 80-100 crore this fiscal as it expands with new stores and enters the FMCG business.

The 20-year-old footwear brand intends opening 50-60 stores this year and all of them will be company-owned.

Distribution

The biggest challenge for the footwear brand is to get adequate distribution. Recent entrant Skechers of the US is in 200 multi-brand outlets, but is waiting for FIPB clearance to open stores of its own. It has plans to open 40-50 stores in the next three years. These would be smaller stores measuring 1,500 sq. ft. across malls and high streets with a minimum investment of Rs 1 crore for every store.

Sanjeev Agrawal, Managing Director, Skechers, South-East Asia, said, “Once we get FIPB clearance we are also hoping for our own standalone stores. Being a new entrant we are working through wholesale distributors to reach out to retail chains currently’’

Harsh taxes are another concern. “Footwear continues to be a highly taxed category. High customs and excise along with local duties like octroi and VAT lead to almost 35 per cent of the sale price of the footwear. There is no big advantage even if we are locally sourcing from the country,’’ says S. Ramprasad, CEO, Clarks Future Footwear.

Delays in mall development have slowed down the pace of expansion for the retailer as it intends launching a variety of stores sizes ranging from 600 sq. ft. to 2,500 sq. ft. across malls and high streets. “We expect to have a total of 40 stores this year but due to mall development delays there might be hurdles,’’ adds Ramprasad.

The recent budget has also not given any respite to the category which is already reeling under high taxes, unlike apparel.

“Shoes are also worn on the body, like apparel, and give employment. It is a labour-intensive segment. We are already heavily taxed in footwear with excise and VAT duties,’’ said Inder Dev S. Musafir, Director, M&B Footwear.

Jaiprakash Desai, CEO, Metro Shoes, for footwear retail said, “The Budget is disappointing for the footwear industry. We were expecting parity to the industry at par with comparable industries, at least in the excise duty.’’

Cheap Chinese imports are also crippling the footwear industry. “Apart from high excise and VAT duties, the government should also clamp down on cheap imports from China. The government should look at this industry from a retail perspective and not just as a leather exporter,’’ adds Ketan Vyas, Managing Director, Woly, a Germany-based premium brand for shoe care.

In fact shoe manufacturers would rather import their wares than try local manufacturing.

As Asif Merchant, Managing Director, Catwalk and Vice-Chairman of All India Footwear Manufacturing and Retailing Association, observes, “Footwear manufacturing is expensive due to the excessive local taxes which are almost 24 per cent of the total realised value of the product. Imports prove to be cheaper today.’’

However, the footwear industry is supported by adequate growth drivers to ensure some of its challenges are mitigated.

After all, the last decade has seen several changes in the footwear industry from a basic need-based industry to a fashion, style, quality and performance focused one. These changes have been driven by changing demographics and factors such as a young and growing population, increasing disposable income and discretionary spending, growing fashion consciousness and media exposure.

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