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Retail 2010-06-28

Footsteps towards franchise gains

The footwear industry is walking forward swiftly from unorganised to organised retail. Franchising is further kicking the industry towards profit realisation. Stride through the article to know how.

By Sub Editor, Franchise India Holdings Limited, Web Division
Footsteps towards franchise gains

The annual domestic consumption of footwear in India is 1.1 billion pairs per annum, as per a recent study. However, despite the presence of a large number of brands, both national and international, unorganised players reign over the market share with over 50 per cent share in its pocket. Factors like inexpensive price tags and easy availability are aiding to its strong foothold.

Moving towards the organised market, the numbers stand at about US $ 2 billion accounting for about 48.4 per cent of the market. However 23 per cent of the share is being commanded by the franchise stalwarts who are taking the industry ahead in terms of expansion.

Success avenues

The realisation of working people, to make a distinction between office wear, party wear and casual footwear has come about in a large way. Consciousness for owning for more than just two or three basic pairs of shoes has given an impetus to the demand and thus encouraged franchisors to open more stores and rope in greater number of franchisees. The media has brought the whole world closer and has heightened the fashion sense of the customer by lending an exposure to international lifestyles and dressing styles. The advent of new age marketing initiatives like association of franchise names with Bollywood stars and movies is also adding greatly to the brands recognition which is a good sign for a franchisee looking to partner with a footwear label.

Franchising: Spells its magic

Footwear retail is an essential sector in franchising and is playing its role well. Demographics is a key aspect which is given due attention by franchisors when on the look out for apt locations for store openings. The exploration for locations for stores by franchisors both domestic and international, North India has found to be the most favoured vicinity with 43 per cent share. Sportswear and casual wear footwear lead the list of the most franchised concepts and together account for about 23 per cent of the franchise share. With between 30-40 franchise concepts to pick from, small format stores (500 -1000 sq. ft) are the most preferred format for a franchise store.

International intervention

The Indian market is flooded with internationally renowned franchise brands like, Reebok, Carlton London, Adidas, Jimmy Choo, Pavers England, Gucci, Moschino and many more. Many joint ventures between international franchisors and Indian partners have also come to the fore in the year gone by giving customers an easy access to shoes that were possible to own either on an overseas visit or brought to them by a loved one residing abroad. EBOs at high-class retail addresses are the ideal locations that international franchisors are looking at. Andreas Gellner, Managing Director, adidas India informs, “India is a key growth market for the adidas Group and we are looking at expansion through our exclusive stores.” The concept of exclusive stores is however gaining greater significance in this segment for other verticals besides sports wear as well.

Category segmentation

Footwear can be categorised in various classes on several foundations. On the basis of price they can be categorised as Low priced, mid economy range and luxury branded footwear. Opportunies are vast in the mid economy segment as it has the highest share in the footwear segment. The low priced sector is second in the stack with26 per cent share followed by the luxury sector which has a market share of 0.08 per cent.

We can also categorise footwear as formal and semi formal or casual footwear. Casual footwear makes up for nearly two-third of the total footwear retail market. Sportswear footwear which has a major share in the franchised sector also falls under the casual category of footwear.

India’s share of the global trade in leather footwear is US $30 billion and around 909 million pairs of leather footwear are produced in India in a single year. So the potential and openings that the sector poses for aspiring franchisees is quite obvious. On the other hand, when we talk of non leather footwear, the global trade in non-leather footwear is pegged at US $18 billion with India’s share being a meagre .15 per cent. However, in India, its production is higher than that of leather footwear and stands at 1056 pairs a year. Metro shoes, Action shoes, Bata, Liberty, M&B, Woodland, VI-GA and Red Tape are some of the most common franchise names in the industry.

Men’s Wear: Men’s wear market in India ranks higher than the women’s wear market reigning with 52 per cent of the share. The market stands tall at US $ 1.04 billion and caters to a number of franchise concepts.

Kids wear: The kids wear segment claims the second spot in the footwear category spectrum. With 26 per cent share to its name, it is valued at US $ .54 billion. Kids wear segment has huge franchise potential with brands working on designing exclusive ranges aimed at children. Reebok Junior, the kidswear line by Reebok was launched last year.

Women’s wear: The women’s wear market is third in the lead in India as compared to the world where it commands the number one spot. Its share accounts for 22 per cent of the market. However, when we talk of franchising, it tops the list with it being the most franchised segment.

Sportswear: The sportswear market in India is almost insignificant when compared to the world market of which its share is just .25 per cent. The biggest international players are present in the Indian market in this segment and have taken up franchising to make inroads into the country. They’ve not just taken up franchising but also dominate the sector with 60 per cent of the share. The mounting realisation in people for staying fit is the prime reason for the growth of this realm of footwear. adidas and Reebok are the two most dominant franchise players in this category.

Margins in the franchise arrangement

When it comes to financial dynamics, the margins in the footwear business are relatively lower. The success of the business is defined by the volume of business that is carried out by the franchisors and the franchises. Location and catchment area play key roles for defining the volumes of business that can be carried out. The investment begins at 10 lakh and rises further with shift in categories as we move up to the higher end of the spectrum. The returns range anywhere around 15 per cent of the investment put into the business. For luxury footwear stores, the returns are higher but so is the investment. Also in the case of luxury stores, the returns are prolonged. Gellner, says, “adidas offers a predetermined margin to the partners, who retail from adidas’ exclusive stores. All new franchisees are provided with a detailed return on investment.”

Challenges in running a franchise

The footwear industry also has its share of hiccups that affect the business. Amongst the most serious ones, is the supply chain management, service, quality, evolving styles and managing inventory. International labels have a comparative edge over national brands in these respects. Gellnar says, “Footwear business involves storing a large inventory of products keeping in mind varying consumer preferences, variety due to fast evolving fashion trends and the sizes. Therefore, there is a requirement of large working capital and extra effort to mange the logistics.” Adding to this Rafique Malik, Chairman and Managing Director, Metro Shoes says, “The footwear business is a unique sector with high entry barriers. As such it witnesses relatively lesser competition as compared to other sectors. For those that are willing to invest and work hard, footwear provides ample opportunity to succeed and prosper.”

Store formats

When we talk of footwear we usually visualise MBOs where there is access to categories across the board for footwear. It is a one stop shop for a family’s need for footwear. MBOs however can cater to only a limited range from each of the franchise brands. Sportswear however is one such category where EBOs are more prevalent. International franchisors who are prevalent in this segment have brought with them tried and tested franchise store models which they are replicating in India.

Potential franchise opportunity

The Indian footwear retail market is expected to grow at a CAGR of over 20 per cent till 2011. With certain sectors in the footwear industry not been explored to their potential and considering the lop-sided growth, the opportunities are humungous. Ladies, kids wear and ethnic footwear markets have plethora of openings with room for many. Franchisors are working on devising plans for exclusivity in these segments as well. “The standard of living of the people is improving awareness of footwear as a fashion accessory is increasing. There are also a lot of foreign brands who are beginning to look at India as an important market and are entering the country with stand alone stores. Organised manufacturers of footwear are also looking at the domestic footwear industry besides exports as a growing opportunity. In view of all these factors, I see a bright future for the growth of footwear franchises in India,” says Malik. So step in and move forward on the path of high yields.

malvika : 30, Mar 2010 at 04:02 AM
If you can`t measure you can`t manage..The same is true for franchise success
malvika : 30, Mar 2010 at 04:03 AM
If you can`t measure it ,you can`t manage it.The same is true about franchise success
Johnd3 : 18, Mar 2015 at 04:47 PM
As soon as I detected this site I went on reddit to share some of the love with them.
Umesh : 26, Mar 2015 at 11:22 AM
Hey this is amazing!
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