Market Research Report : Footwear market in china 2015 - Sample

Footwear Market – China

January 2015

2 FOOTWEAR MARKET IN CHINA 2015.PPT

Executive Summary

Market

Drivers & Challenges

Government

Competitive Landscape

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’

Government Regulatory Organizations

Standards for Footwear Product Specifications

Standards for Footwear Testing Methods

Upcoming Footwear Standards

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

Major Players

Company 1 Company 2 Company 3

Company 4 Company 5 Company 6

Trends Shift from Manufacturing-Driven Economy to Consumption-Driven Economy

Integration of Various Business Strategies

Emergence of Green Footwear

Challenges

Huge Importer of Raw Materials

Declining Cost Competitiveness


•Macroeconomic Indicators

•Introduction

•Market Overview

•Supply Chain Model

•EXIM Data

•Drivers & Challenges

•Government Initiatives

•Trends

•Competitive Landscape

•Mergers and Acquisitions

•Strategic Recommendations

•Appendix

4

Macroeconomic Indicators (1/3)

Current Account Balance

Exchange Rate: Half Yearly

y5

y4

y3

y2

y1

USD bn

2010

u

2011

t

2012

s

2013e

r

2014e

q

2015e

p

5/1/14

y6

y5

y4

y3

y2

y1

1/1/14 2/1/14 3/1/14 4/1/14

USD/CNY

a5

c5

b5 a4

c4

b4

a3

c3

b3

a2

c2

b2

a1

c1

b1

Period Low Period High Period Average

FOOTWEAR MARKET IN CHINA 2015.PPT

5

Global footwear market has been steadily rising,…

• 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 world’s fastest growing

footwear consumption rate and are the top two

exporters of footwear

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

‘m1’, with ‘a1’ controlling a market share of about

‘r2’%

• 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

Global Footwear Market – Overview (1/2) Global Footwear Market Size and Growth


y6

y5

y4

y3

y2

y1

USD bn

r3%

x6

u

x5

t

x4

s

x3

r

x2

q

x1

p

China’s Share in Global Footwear Exports (2013)

r6% r5%

r4%

Others

Country 2

Country 1

6

China is the world’s largest footwear hub, owing to low cost of production and a strong distribution network

• 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

China Footwear Market – Overview China Footwear Market Size and Growth


y4

y3

y2

y1

USD bn

r3%

x6

u

x5

t

x4

s

x3

r

x2

q

x1

p

China Footwear Market – Segmentation (2013)

r6%

r5%

r4%

Segment 3

Segment 2

Segment 1

Labor Cost for Footwear Production (2013)

y6

y5

y4

y3

y2

y1

y7

Country 4

s1

Country 3

r1

Country 2

q1

Country 1

p1

USD/hour


Supply Chain of the footwear industry comprises numerous stages…

‘i1’ Industry

‘i5’ Industry

Component Suppliers

Manufacturers

‘i2’ Industry

China Footwear Market – Inbound Logistics

‘i7’ Industry ‘i4’ Industry ‘i3’ Industry ‘i6’ Industry


Manufacturers

Level 1

Level 2

Level 3

Consumers

China Footwear Market – Distribution Strategy

• 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

• 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’

• 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’

…before it reaches the ultimate users

China Footwear Market – Distribution Channel

9

Exports – Footwear Total Exports (Value)


r7%

r6%

r5% r4%

r3%

r2%

y5

y4

y3

y2

y1

USD bn

s r q

2012

p

2013 2011 2010

Note: Figures are for the respective calendar years

r10%

r13%

r11%

r12%

r9%

r8%

Others

Country 5

Country 4

Country 3

Country 2

Country 1

Country 4

Others

Country 5

Country 3

Country 2

Country 1

Note: Total Exports includes exports to Hong Kong SAR and Macau SAR

Exports – Country-Wise Segmentation (2011-12) Exports – Country-Wise Segmentation (2012-13)

Rise in footwear production in China…

• 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’

10

…has resulted in eventual rise in exports


r12% r11%

r10%

r9%

r8%

r7%

r6% r5%

r4%

r3%

r2%

r1%

Exports – Product Segmentation (2011-12)

Exports – Product Segmentation (2012-13)

Product 6

Product 5

Product 4

Product 3

Product 2

Product 1

Product 6

Product 5

Product 4

Product 3

Product 2

Product 1

HS code Particulars

HS Codes for Footwear Products


Drivers & Challenges – Summary

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


A number of national and regional footwear standards guide the footwear market of China

Government Regulatory Organizations

Industry Regulations

• x

• x

• 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

13

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

Standard No. Standard Name

Note: The list is not exhaustive


Standards for Footwear Product Specifications (1/2)


Trends – Summary

Key Trends

Shift from Manufacturing-Driven Economy to

Consumption-Driven Economy

Emergence of Green Footwear

Integration of Various Business Strategies


Porter’s Five Forces Analysis

Competitive Rivalry

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of New Entrants

Impact i4

Impact i2

Impact i1

Impact i5

Threat of Substitutes

Impact i3

16

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


17

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

Competitive Benchmarking (2/5)

y4

y5

y3

y2

y1

%

Company 3

c3 b3

a3

Company 2

c2 b2

a2

Company 1

c1 b1

a1

• 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’%


Net Margin Gross Margin Operating Margin

18

Key People

Products and Services

Company Information Locations – China

Corporate Address

Tel No.

Fax No.

Website

Year of Incorporation

Ticker Symbol

Stock Exchange

Public: Company 1 (1/4)

Category Products/Services

Headquarters

Name Designation

Chairman and CEO

Deputy Chairman and VP

CFO and VP

COO and VP


H1

19

Financial Snapshot Key Ratios

Financial Summary

• The company earned a net profit of USD ‘d’ in FY 2013, as compared to net profit of USD ‘c’ mn in FY 2012

• 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

y3

y2

y1

z4

z3

z2

z1

y4

USD mn USD mn

2012

d

s

2011

c

r

2013

b

q

a

p

2010

Improved Decline

Particulars y-o-y change

(2013-12) 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 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

Indicators Value (30/10/2014) Market Capitalization (USD mn)

Total Enterprise Value (USD mn)

EPS (USD)

PE Ratio (Absolute)


Key Financial Performance Indicators


Profit / Loss Total Income

20

Key Business Segments Key Geographic Segments

Business Highlights

100%

50%

0%

2010

p4%

p3%

2009

p2%

p1%

Segment 2 Segment

y3

y2

y1

2013

p1% The company operates

through single reportable segment, namely Segment 1

Segment 1


Note: Business Segments and Geographic Segments are based on total revenues, Geographic Segments for years 2011, 2012 and 2013 are not available


Description News

Overview

• 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

21

T O

W S

Public: Company 1 – SWOT Analysis (4/4)


22

Key People

Products and Services

Company Information Locations – China

Private: Company 2 (1/3)

Category Products/Services

Headquarters


Name Designation

President

H1

Corporate Address

Tel No.

Fax No.

Website

Year of Incorporation

23

Description News

Overview

• 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’

Business Highlights


Private: Company 2 (2/3)

24

T O

W S

Private: Company 2 – SWOT Analysis (3/3)


25

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

Note: Data for the years 2014, 2013 and 2012


Announced Date

Closed Date Transaction

Type Target Buyer/Investors Sellers

Deal Size (USD mn)

26

Thank you for the attention

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