Non-metro a new target for expanding footwear industry

Reebok, a part of Adidas, the world’s second largest sportswear maker, said last month it would make a $1 shoe for India. Even with a less valuable rupee , that’s a pair at roughly Rs 52. Though Reebok has cautioned that this is not the final price, the market is agog. It is clear the company is seeking volumes in India’s growing rural market, where a lot of people do not wear footwear at all.

Reebok is not the only brand targeting the rural consumer. A number of footwear makers say they have discovered the enormous growth potential of India’s non-metro market.

Harkirat Singh, managing director of Woodland, an India-bred premium footwear brand, took a risk and opened a store in the market area of Udaipur, Rajasthan in 2004. He was forced to down shutters for want of demand. Today, much to Singh’s bemusement, a similar style Woodland shop set up in 2009, with a similar stock range, in the same market locality in Udaipur, is doing excellent business.

“It was amazing. The same product, in the same area at similar price points was a bust five years back, and today in a Tier-II city, the store is doing exceptional business. Much of it, I assume, is to do with the evolving retail ecosystem,” Singh said. The ecosystem, said Singh, feeds off itself.

“There are stores of Nike and Adidas in the vicinity, which means buying patterns have evolved. India’s per capita shoe consumption or the number of footwear (shoes, chappals, sandals) worn by an individual has gone up from 1.4 shoes a year in 2004 to 2.2 shoes per year in 2010, according to data from the commerce ministry. “While in absolute percentage terms this might not seem like a lot, in a country of a population of one billion people, the fact that in six years people have gone from consuming 1.4 shoes a year to 2.2 shoes a year is a big change,” said Suman Roy Burman, president, Khadims, a Kolkata-based manufacturer and retailer. The average shoe consumption in developed countries is about five per person per year.

An interesting detail of India’s complex footwear industry is that it is a fairly big manufacturer of shoes as well. These shoes are used within the country. About 2.2 billion pairs of shoes are made in the organised and unorganised sector.

“While it is tough to peg the exact number of shoes sold for the country, it would be safe to say that it hovers around the two billion mark, which includes all kinds of footwear like leather shoes, and chappals, among other shoes,” said Gopalakrishna Bachi, president of Indian Shoe Federation, an association which looks after small and medium footwear makers.

Sizeable unorganised market
Consultant Technopak Advisors pegs the footwear market in India at Rs 25,000 crore. The market, said associate vice-president Arindam Saha, is growing at 10 per cent per year. About 40 per cent is in the organised segment while close to 60 per cent of the market is dominated by unorganised players. Also, almost 70 per cent of the market comes from small towns to rural areas.

At Dillip’s Stall in Kolkata’s New Market, chappals with a Facebook motif, priced for Rs 200, sell in blue, pink and red, rubbing shoulders with those with sequins and colourful bows. College students, most living on pocket money, throng here for bargains.

The stall is one among the 300 roadside footwear vendors in the city’s historic market, replicated in Delhi’s Lajpat Nagar and Sarojini Nagar markets and Mumbai’s Lincoln Road. Much of the footwear is imported from Hong Kong, Bangkok and China by wholesale dealers who in turn sell to local retailers. Besides imports, a lot of this footwear is manufactured in Agra.

The average chappal is priced at Rs 200, which means a margin of Rs 30 for the shopkeeper. A shop in these markets sells Rs 6000-8000 worth of footwear daily. "I get a mix of consumers, from students to housewives," said Dillip, who did not disclose his last name.

Industry watchers expect more footwear brands to enter the organised segment in India though the unorganised segment is unlikely to shrink.

“Entry of more brands is expected in the organised retail sector, which will grow faster. More apparel brands will extend its product range to footwear. We will see lot of activity in the women footwear market,” said Technopak’s Saha.

Most shoe makers, just like Reebok, will look for growth from non-metro and rural customers. “The goal of the project remains – to create an affordable product that meets the needs of the consumer,” said Daniel Sarro, spokesperson for Reebok International, in reply to questions on e-mail.

Experts say small towns are generating demand for more footwear across varied categories. For, a footwear retailing portal, 37 per cent of the traffic comes from urban areas, while an equal number comes from towns with a population of less than half a million.

“For many, footwear remains a utility product. But this is fast changing. In urban centres, while usage already equals that of developed countries, buying patterns are fast evolving in smaller towns as well,” said Shailen Amin, chief executive of which has up to 250 stock keeping units or SKUs online, as opposed to a brick and mortar retailer that would have up to 10 SKUs available for those shopping in a small town.

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