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Footwear Market China

January 2015

Executive Summary
Market

Drivers &
Challenges

Trends

Government

Global footwear market is growing at a CAGR of r1% and is expected to reach USD m1 by 2018
Chinese footwear market is the largest in the world, growing at a CAGR of r2%
China is also the largest exporter of footwear in the world, commanding a share of r3% in the global
footwear exports market
c1 dominates the market, followed by c2 and c3
Drivers
Healthy Economy and Rising Income
Expanding Consumer Base
Accelerating Urbanization and Changing Lifestyle
Rising Demand for Leather Footwear
Growing Retail Industry
Changing Lifestyle and Fashion Trends

Challenges
Huge Importer of Raw Materials
Declining Cost Competitiveness

Shift from Manufacturing-Driven Economy to Consumption-Driven Economy


Integration of Various Business Strategies
Emergence of Green Footwear
Government Regulatory Organizations
Standards for Footwear Product Specifications
Standards for Footwear Testing Methods
Upcoming Footwear Standards
Major Players

Competitive
Landscape

Company 1

Company 2

Company 3

Company 4

Company 5

Company 6

FOOTWEAR MARKET IN CHINA 2015.PPT

Macroeconomic Indicators
Introduction
Market Overview
Supply Chain Model
EXIM Data
Drivers & Challenges
Government Initiatives
Trends
Competitive Landscape
Mergers and Acquisitions
Strategic Recommendations
Appendix
FOOTWEAR MARKET IN CHINA 2015.PPT

Macroeconomic Indicators (1/3)


Current Account Balance
USD bn
u

y5
y4

y3

2011

2012

y2
y1
2010

2013e

2014e

2015e

Exchange Rate: Half Yearly


USD/CNY

Period Average

Period High

c4

y6

c3

y5
y4
y3
y2
y1

Period Low

a4
c1

a1

1/1/14

b3

c2

b1

c5
b4

b2

b5
a5

a3

a2

2/1/14

3/1/14

FOOTWEAR MARKET IN CHINA 2015.PPT

4/1/14

5/1/14

Global footwear market has been steadily rising,


Global Footwear Market Overview (1/2)
Footwear market falls under the broader segment of
s1
By type of material used, footwear can be classified
as t1, t2, t3, t4 and t5, among others
Globally, a2, a3 and a4 are the top three
consumers of footwear, constituting nearly r1% of
the total market
a2 and a4 have the worlds fastest growing
footwear consumption rate and are the top two
exporters of footwear

Global Footwear Market Size and Growth


USD bn
r3%

y6
y5

x1

x2

x3

x4

x5

x6

y4
y3
y2
y1

Chinas Share in Global Footwear Exports (2013)

By 2018, the market is expected to reach a size of INR


m1, with a1 controlling a market share of about
r2%

r4%

Country 1
Country 2

Footwear market is expected to grow sustainably


over the next few years, fuelled by changing fashion
trends, product innovation, increase in disposable
income and retail boom

Others

r6%

FOOTWEAR MARKET IN CHINA 2015.PPT

r5%

China is the worlds largest footwear hub, owing to low cost


of production and a strong distribution network
China Footwear Market Overview

China Footwear Market Size and Growth

China is the world's largest footwear production hub


Between 2012 and 2013, footwear production
increased by r1% to n1 pairs
The domestic footwear market is growing at a CAGR
of r2%, one of the highest in the world
c1 accounts for the biggest share of the domestic
footwear market

Labor Cost for Footwear Production (2013)

USD bn
y4
r3%

y3
y2

x1

x2

x3

y1
x4

x5

x6

China Footwear Market Segmentation (2013)

USD/hour
y7
y6
y5
y4
y3
y2
y1

r4%

Segment 1

s1

Segment 2
Segment 3

r1

r6%

q1
p1
r5%
Country 1

Country 2

Country 3

Country 4
FOOTWEAR MARKET IN CHINA 2015.PPT

Supply Chain of the footwear industry comprises numerous


stages
China Footwear Market Inbound Logistics
i1 Industry

i3 Industry

i4 Industry

i2 Industry

i5 Industry

i6 Industry

i7 Industry

Component
Suppliers

Manufacturers

FOOTWEAR MARKET IN CHINA 2015.PPT

before it reaches the ultimate users


China Footwear Market Distribution Strategy

China Footwear Market Distribution Channel

Companies with small turnover, limited knowledge of


the market, lack of access to distributors or minimum
investment plans usually hire p1 to distribute their
products
Such companies are generally domestic start-ups or
foreign players testing the initial market response

Manufacturers

Level 1

Majority of the footwear companies in China rely on


p2 or p3 to push their products to consumers
However, many also prefer to skip p2 and retail
their products through p4

Level 2

Recently, a large number of footwear companies


have identified p5 as a lucrative and additional
source of revenue with minimum operating cost
Some of the prominent footwear companies that
have presence in online retailing include c1 and c2

Level 3

Consumers

FOOTWEAR MARKET IN CHINA 2015.PPT

Rise in footwear production in China


Exports Footwear

Total Exports (Value)

China has witnessed a CAGR of r1% in exports in the


last 4 years, owing to a large manufacturing base of
footwear, skilled labor and price competitiveness
Primary export destinations include c1, c2, c3,
c4 and c5
The most exported products are p1

USD bn
y5
y4
y3

2010

2011

2012

2013

y2
y1
Note: Figures are for the respective calendar years

Exports Country-Wise Segmentation (2012-13)

Exports Country-Wise Segmentation (2011-12)

Country 1
r2%

r7%

r3%
r5% r4%

Country 1

Country 2

r8%

Country 2

Country 3

Country 3

Country 4

Country 4
r13%

Country 5

r11% r9%
r10%

Others

Country 5
Others

r12%

r6%
Note: Total Exports includes exports to Hong Kong SAR and Macau SAR
FOOTWEAR MARKET IN CHINA 2015.PPT

has resulted in eventual rise in exports


HS Codes for Footwear Products

HS code

Exports Product Segmentation (2012-13)


r1%
r5% r6%

Particulars

Product 1
Product 2
Product 3

r4%

r2%

Product 4
Product 5
Product 6

r3%

Exports Product Segmentation (2011-12)

r11%

r7%
r12%

Product 1
Product 2
r8%

r10%

Product 3
Product 4
Product 5
Product 6

r9%

FOOTWEAR MARKET IN CHINA 2015.PPT

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Drivers & Challenges Summary

Drivers
Healthy Economy and Rising Income
Expanding Consumer Base

Challenges

Accelerating Urbanization and


Changing Lifestyle

Huge Importer of Raw Materials

Rising Demand for Leather Footwear

Declining Cost Competitiveness

Growing Retail Industry


Changing Lifestyle and Fashion Trends

FOOTWEAR MARKET IN CHINA 2015.PPT

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A number of national and regional footwear standards guide


the footwear market of China
Government Regulatory Organizations

In terms of proclaimed legal operations, the most relevant bodies of law regulating the Chinese
footwear sector are b1, b2 and b3
Items within these bodies contain policy guidelines for production and distribution of shoes, as well as
clauses demarcating registration and inspection

Industry
Regulations

FOOTWEAR MARKET IN CHINA 2015.PPT

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All domestic and international players are subject to a host


of national standards
The government of China has adopted various standards, specifying product classification, technical requirement,
test methods, inspection rules and marking issues, among others
All local and imported footwear products must be in compliance with the national standards

Standards for Footwear Product Specifications (1/2)


Standard No.

Standard Name

Note: The list is not exhaustive


FOOTWEAR MARKET IN CHINA 2015.PPT

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Trends Summary
Shift from ManufacturingDriven Economy to
Consumption-Driven
Economy

Key
Trends
Emergence of Green
Footwear

Integration of Various
Business Strategies

FOOTWEAR MARKET IN CHINA 2015.PPT

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Porters Five Forces Analysis


Threat of New Entrants

Impact
i4
Bargaining Power of Suppliers

Impact
i1

Impact
i5
Competitive Rivalry

Threat of Substitutes

FOOTWEAR MARKET IN CHINA 2015.PPT

Impact
i2
Bargaining Power of Buyers

Impact
i3

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Competitive Benchmarking (1/5)


Public Trading Comparable (FY 2013)

Company 1

Company 2

Company 3

Company 4

Company 5

Market Capitalization
(USD mn)

Share Price (USD)

EV/EBITDA (x)

EV/Revenue (x)

PE Ratio
Note: Top 5 Public companies based on the Market Capitalization; Market Capitalization, Share Price and PE ratio is as of 30/10/2014
FOOTWEAR MARKET IN CHINA 2015.PPT

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Competitive Benchmarking (2/5)


Key Ratios of Top 3 Companies Operational Basis (FY 2013) (1/3)
Gross Margin

%
y5
y4
y3

Operating Margin

Net Margin

a2
a1

a3
b1

c1
b2

c2

b3

c3

y2
y1
Company 1

Company 2

Company 3

Company 2 recorded gross margin of a2%, higher than both Company 1 and Company 3 which recorded gross margin
of a1% and a3% respectively
Company 1 recorded operating margin of b1%, higher than both Company 2 and Company 3 which recorded operating
margin of b2% and b3% respectively

Company 3 recorded net margin of c3%, higher than that of Company 2 which recorded net margin of c2% but lower
than that of Company 1 which recorded net margin of c1%

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Public: Company 1 (1/4)


Company Information

Locations China

Corporate Address
Tel No.
Fax No.

Website
Year of Incorporation
Ticker Symbol
Stock Exchange

Products and Services


Category

H1

Headquarters
Products/Services

Key People
Name

Designation
Chairman and CEO
Deputy Chairman and VP
CFO and VP
COO and VP

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Public: Company 1 (2/4)


Financial Snapshot
Total Income

USD mn
y4

y3
y2

Key Ratios

Profit / Loss
c

Particulars

USD mn
d

z4
z3

y1

z2
z1

2010

2011

2012

2013

Financial Summary

It reported total income of USD s in FY 2013, registering a decrease


of r1% over FY 2012
It reported an operating margin of r2% in FY 2013, an increase of
r3 percentage points over FY 2012
It reported debt to equity ratio of n1 in FY 2013, a decrease of
r4% over FY 2012

Key Financial Performance Indicators


Market Capitalization (USD mn)
Total Enterprise Value (USD mn)
EPS (USD)
PE Ratio (Absolute)

2013

2012

2011

2010

Profitability Ratios
Operating Margin
Net Margin
Profit Before Tax Margin
Return on Equity
Return on Capital Employed
Return on Working Capital
Return on Assets
Return on Fixed Assets

Cost Ratios

The company earned a net profit of USD d in FY 2013, as compared


to net profit of USD c mn in FY 2012

Indicators

y-o-y change
(2013-12)

Value (30/10/2014)

Operating costs (% of Sales)


Administration costs (% of
Sales)
Interest costs (% of Sales)

Liquidity Ratios
Current Ratio
Cash Ratio

Leverage Ratios
Debt to Equity Ratio
Debt to Capital Ratio
Interest Coverage Ratio

Efficiency Ratios
Fixed Asset Turnover
Asset Turnover
Current Asset Turnover
Working Capital Turnover
Capital Employed Turnover
Improved

FOOTWEAR MARKET IN CHINA 2015.PPT

Decline

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Public: Company 1 (3/4)


Key Business Segments

Key Geographic Segments

Segment 1

Segment

y3

Segment 2

100%

p1%

y2

The company operates


through single reportable
segment, namely Segment 1

y1

p1%

50%

p3%
p2%

0%
2013

2009

p4%
2010

Business Highlights
Description

Overview

News
Company 1 is a subsidiary of n1
The company was listed in n2 in y1
It holds trademarks for the footwear brand n3 in China
In d1, the company became the official marketing and merchandising partner of n4 and also raised USD
a1 through sale of shares

Operations

Company 1 operates a2 retail outlets under the brandings n5 and n6


It also operates a3 kids sportswear outlets and a4 outlets under the brand n3
The company also retails its products online through n7, n8, n9 and n10, among others
Note: Business Segments and Geographic Segments are based on total revenues, Geographic Segments for years 2011, 2012 and 2013 are not available
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Public: Company 1 SWOT Analysis (4/4)

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Private: Company 2 (1/3)


Company Information

Locations China

Corporate Address
Tel No.
Fax No.

Website
Year of Incorporation

H1

Products and Services


Category

Headquarters
Products/Services

Key People
Name

Designation
President

FOOTWEAR MARKET IN CHINA 2015.PPT

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Private: Company 2 (2/3)


Business Highlights
Description

Overview

News
Company 2 was founded in y1 and is one of the oldest footwear companies in China
It was acquired by n1 in the year y2
Subsequently, all of its subsidiaries, namely n2, n3, n4, n5 and n6 were moved out of the parent
and made subsidiaries of n7

Company 2 retails its footwear under the brand n8

Operations

Company 2 distributes its products through a1 retail outlets all across China
In FY 2013, the company generated revenues of USD a2

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Private: Company 2 SWOT Analysis (3/3)

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Mergers and Acquisitions (M&A) (1/2)


Announced
Date

Closed Date

Transaction
Type

Target

Buyer/Investors

Sellers

Deal Size
(USD mn)

Note: Data for the years 2014, 2013 and 2012

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Thank you for the attention


Footwear Market China report is part of Netscribes Retail and Services Series.
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