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Detailed and clear on the state of shoe markets
19.12.2012 12982

Detailed and clear on the state of shoe markets

While demand for luxury shoes in Asian countries is growing as steadily as bamboo, sports and semi-sports shoes are still the most popular in the world. In this sense, Russia does not differ from its neighbors in the Asian region, only the growth potential of the shoe market is even greater, and production is rising from its knees. Daria Yadernaya, managing director of the Esper group of companies, tells in detail about the reasons for hope, as well as what else the analysts of the world and Russian markets have revealed over the year and show the Shoes Report magazine clearly.

Global trends

The driver of the global shoe market remains the Asia-Pacific region, which includes Russia, China, Taiwan, South Korea, Japan, Oceania, Australia and some other countries. Their aggregate market is the largest in terms of turnover in physical terms and the third in the world in value terms. The average annual sales level in the APR region over ten years (2007-2017) should increase from 3 to 3,6%, which is not a little in real terms.

Solvent demand for shoes in the countries of the Asia-Pacific region is constantly increasing amid rapid GDP growth, growth in employment and incomes. Changes in the standards of their lives, an increase in the number of adherents of sports style, and changes in the perception of the concept of “status thing” also play a significant role in the growing appetites for shoes of consumers from Asia-Pacific countries. This, as well as an increase in the recognition of international brands, creates optimal conditions for increasing sales of designer shoes and luxury shoes. It is worth noting that this price segment developed especially slowly after the 2007-2009 crisis, and currently the shoes in this segment are in the greatest demand just in the Asian market and in the BRIC countries.

As for Europe, its market is unstable. A small but tangible threat of the debt crisis does not contribute to increased demand, and the possibility of destroying the single currency hinders production. All this leads to the fact that the shoe industry in Europe is faced with problems that are difficult to even describe.

Against the background of the already outlined general situation, several noteworthy trends are developing. Firstly, the increasing distribution of private labels is noteworthy. This trend arose as a response of shoe manufacturers to the interest of buyers in budget shoes. National brands are actively introducing cheaper models into their assortment, thus destroying their identity and going down the scale of price positioning. This, in turn, threatens price wars in the shoe market and a decrease in the turnover of shoes of this group in value terms. I must say that this trend is also characteristic of Russia.

Secondly, it should be noted the growing demand for sports and semi-sports shoes. It is due to the spread of a sporting lifestyle, interest in spending leisure time outside the home and softening dress codes. The category of sports and everyday semi-sports shoes today is the most dynamically developing in terms of global sales, and manufacturers of such shoes take first place in the list of world market leaders. This shortest listing has been compiled by companies such as Adidas AG, Bata Shoe Organization, Brown Shoe Company, Deckers Outdoor Corporation, ECCO Sko A / S, Gucci Group, Kenneth Cole Productions, LaCrosse Footwear, Nike, Nine West Group, Puma AG, RG Barry Corporation, Vans, Weyco Group, Wolverine World Wide.

Russia is booming

Unlike the clothing market, in the Russian footwear market the most dynamically developing price segments are from medium to higher. Moreover, luxury is the most active: in 2011, the growth in its sales amounted to 17,78%, and in 2012, it is predicted to exceed 17%. Sales in the middle price segment, which includes shoes at prices ranging from 100 to 250 euros per pair, are also growing at a significant pace. In 2011, they grew by 14,76%, and in 2012, we forecast its growth by 9% (which is one and a half times more than in the same segment in the clothing market). The decrease in growth rates is due to the fact that the average price segment is saturated with supply faster and the competition in it is quite high, although it is concentrated mainly in cities with a population of over one million.

A good illustration of how the average price segment of the Russian shoe market is growing is the decision of the federal network Rendez-Vous to develop in St. Petersburg. Prior to this, it was focused exclusively on the capital, but the excellent prospects for selling shoes of this price category present in the city on the Neva, low competition in the middle price segment and unsatisfied consumer demand inspired Rendez-Vous owners to launch chain stores in the Northern capital.

The development of sales in the middle and above the middle price segments is also facilitated by the entry of new brands on the Russian market. Among the most significant recent “newcomers” of this price category are Thomas Munz and MShoes.

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What is the buyer ready for

Russian consumers are characterized by less elasticity of demand for the price of shoes, which means that they choose shoes based on their ideas about quality, and not on price. According to the buyer, shoes have important functional features and a direct relation to health, so it’s worth overpaying for it. On average, a consumer with an income of up to 40 000 rubles per month is willing to pay from 8000 to 12 000 rubles for one pair of shoes, but does not want to pay more than 2500 rubles for one piece of clothing that is not outerwear.

In practice, this leads to the fact that typical mass-market consumers in the clothing and accessories segment will prefer to buy shoes in mid-range brands, for example, Fashion Galaxy, Rendez-Vous or Ecco. Surveys conducted by Esper Group showed that Russian buyers believe that shoes below 92 Euro are a priori poor. It is interesting to note that in 2011 the threshold price was 80 euros, and in 2010 only 38 euros, which was one of the important reasons for the rapid growth of budget shoe networks such as Shoe Factory and Centro. Today, demand in the footwear market for the budget segment, which includes shoes priced at up to 100 euros, has stabilized and even declined somewhat due to an active price war between the leaders of this group. High competition between shoe mass-market chains led to a general decrease in turnover in value terms, while sales growth in real terms is still observed.

It will not be out of place to say that the growth potential of the shoe market in Russia in terms of consumption is simply enormous: today the average Russian purchases 4,4 pairs of shoes a year, whereas in 2010 this figure was only 2,6 pairs. The global level of shoe consumption is also suggestive of great potential. In the countries of the Asia-Pacific region, it amounts to 4,9 pairs of shoes per year (with a milder climate than in Russia), in the USA and EU countries this indicator reaches 14 and 12 pairs of shoes per year, respectively. And since seasonality is clearly expressed in Russia, the need for high-quality shoes should certainly not be lower than in other countries of the world.

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Russian shoes are getting bigger

Domestic footwear production is developing more and more actively every year. Despite the fact that it is still premature to summarize the 2012 year, we can trace the positive trend by the results of previous years. According to 2011 estimates, the volume of Russian footwear production amounted to 97 022 thousand pairs, thus providing 22,1% of the footwear market in Russia (in 2008, the share of domestic footwear was only 13%). In 2010, domestic enterprises produced 57 456 thousand pairs, which means that over the year the increase in production rates amounted to 69%. Agree, a very impressive indicator.

The increase in demand for domestic shoes and, as a consequence, the increase in its production can be explained both by the success of individual large shoe makers in the modernization of production, and by the general development of modern competitive enterprises and retail. During the crisis, many Russian shoe companies reoriented to the domestic market and conducted a cycle of optimization of the production process in order to reduce costs (for example, for the purchase of still imported leather) and improve the inventory management system. Not without the help of the state. This, in particular, is about increased duties on the import of shoes. Even though there are also considerable duties on importing leather, this nevertheless allows Russian manufacturers to be somewhat equal in opportunities with foreign importers-shoe makers.

In fairness, I must say that a number of Russian companies are able to compete with foreign manufacturers without the help of the state. First of all, these are Ralf Ringer, Bris-Bosphorus and the Yegoryevskaya shoe factory that produces children's shoes under the Kotofey brand. The experience and success of these companies confirm that with economies of scale it is possible to ensure profitable footwear production in Russia, especially if it is oriented to the domestic market.

Problems with exports to other countries for Russian manufacturers are still relevant. In the light of joining the WTO, this is especially offensive, as domestic leaders in terms of price-quality ratio have every opportunity to actively expand to foreign markets, primarily to the market of Eastern Europe. In practice, it turns out that it is easier to do to such domestic companies, such as, for example, Obuv Rossii. They locate production in China, from where it is easier to organize a supply chain. 

While demand for luxury shoes in Asian countries is growing as steadily as bamboo, sports and semi-sports shoes are still the most popular in the world. Russia in this sense does not ...
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