EUROPEAN FOOTWEAR MARKET AND

MARKET ENTRY STRATEGY

PGDM-IBGROUP-MARKETING

FACULTY GUIDES

HARSH SHAH (03) PRACHIRANJAN SWAIN(14) ALLEN SANGEETH(15) VISHAL SHARMA(20) SUDDEPT KUMAR SINGH(33)

PROF ISTVAN ESZES (ESSCA-BUDAPEST)PROF SUDIPTO CHAKRABORTY (ITM-NAVI MUMBAI)

GROUP MEMBERS

CONTENTS• Footwear market in Europe• Porters five forces analysis• Market access requirements for EU• EU’s protective measures• SWOT Analysis.• Possible market entry strategies• Market entry strategy-Recommendation• Major Hurdles• Conclusion

Footwear market in Europe

• Largest market for footwear in the world.

• Supplier of high quality footwear.

• High volume items outsourced to Asia.

• Market affected by recession in 2008.• Consumer focusing on low cost footwear.

• Markets expected to grow by 2011.

Footwear market in EuropeMarket Size & Consumption

Source-Euromonitor-Mintel 2010

Factors contributing to the growth

• Growing economies of Eastern Europe countries

• Accession of new member states.

• Emerging middle classes, higher aspirations, and disposable incomes in EE countries.

• Projected population increase.

Market Segmentation

UserMenWomenChildren

LifestyleDreamersHomebodiesSettledAdventurersRational RealistsOpen-mindedOrganics Demanding.

Price & QualityLuxury, € >300Fine, € 100-300Medium, € 25-100Economical, € <25

Production

Trends

• Outsourcing in China, Vietnam and India

• Innovation and added value

• Attention to workmanship

• Environmental challenges and opportunities

• Cost reduction in the supply chain

• Keep an eye on retailers

• Wider sales network in the EU

Trade channels for market entry

Main Distribution channels

• Importers / wholesalers

• Agents

• Buying Groups

• Local suppliers

• International suppliers or fashion houses

Retailers – footwear specialists

• Footwear chain stores

• Independent Footwear shops - Boutiques

Retailers – non-specialists Department stores Sports retailers Hypermarkets, supermarkets and discounters Street markets and factory outlets Internet sales

Imports• World’s largest importer of footwear.

• Value: 26.7 billion € (2008)

• Volume: 3.1 billion pairs (2008)

• Countries: China, Vietnam, India, Indonesia, Brazil and Thailand

EU Imports of footwear 2004-2008, € million / million pairs

Source: Eurostat 2009

Role of developing countries

• In 2008 imports were:

• 43% of total value (€ 11.4 billion)

71% of total volume (2.2 billion pairs)

• The top four importers (UK, Germany, Italy, France) accounted for 61% (50% by volume).

• Rise of Imports from 36% in 2004 to 61% in 2008.

Porter’s five forces analysis

Competitive Rivalry -High

Bargaining Power of

Consumers-Moderate

Bargaining power of suppliers

High

Threat of Substitutes

-High

Threat of new entryModerate

Market access requirements for EU

• Packaging

• Environmental legislation(REACH)• Intellectual Property rights

• Size marking

• Labeling

• Anti-dumping

• Anti-fraud policy

EU’s protection of local manufacturers

• EU has imposed a 10% anti-dumping duty on China & India specifically.

• European manufacturers have started a campaign of “origin marketing” to boost their marketing in Europe as well as overseas market.

EXAMPLE:- “I love Italian Shoes”, “Made in Spain” etc. are some of the campaigns to promote creativity, fashion ability, origin & craftsmanship at different points.

• European manufacturers have joined with colleagues, designers and trade associations.

• To still be competitive in the market the Indian manufacturers can cash on upon following factors:-

1) Indian Core Competency2) Cheap labor3) Direct marketing strategy4) Past experience

SWOT AnalysisStrengths: Ready availability of skilled & cheap manpower. Availability of raw material. Government incentives. Ability to assimilate new technology & handle mass

production requirements. Emphasis on product development & design upgradation.Weaknesses: International price fluctuation. Lack of warehousing support. Lack of strongholds in global fashion market. Unawareness of international standards required.

SWOT contd.Opportunities:Rising potential in domestic market.Utilization of Information Technology & Decision

Support Software to optimize the production cycle.Use of e- commerce in direct marketing.Threats:Major part of industry is unorganized.Stricter international standards.Difficulty in obtaining bank loans.Limited scope for mobilizing funds.High competition from Eastern European & Asian

countries.

Possible market entry strategy

• Importers/wholesalers • Agents • Buying groups • Retail chain stores and department stores • Direct sourcing

Why should we enter with leather product

• Slowdown in Europe leading to customers to go for lower price footwear.

• Chinese producers are facing serious problems due to rising labor cost, which has risen by around 40% since January 2008, and currency appreciation.

• Chinese products, which used to be cheaper by around 10% compared to the Indian products, are no longer cheaper.

• Implementation of the European Union (EU) anti-dumping duty.

• India’s expertise and skilled labour force in leather industry.

Contd….

• India has state-of-the-art manufacturing plants. • Export of footwear from India increased manifold over the

last four decades. • Today, India’s footwear export is valued at US$ 1507.51

million, constituting 44.33% share in total export of leather & leather products

Mode of Entry Europe is a highly competitive market as it is home to many

major fashion houses. Being a new player, a pre-established channel of distribution

is ideal to minimize risk factor. An ideal market entry channel could be through Retail Chain

& Departmental Stores. Local retailers like Shoezone, Stylo, Vivarte, Deichmann etc.

are some of the potential retailers in EU footwear market. These retailers require & search quality oriented & reliable

suppliers. After the global slowdown, consumers are more price

sensitive & are increasingly looking at non-specialist retailers for buying all the stuff.

Super/Hyper markets & Departmental stores have become the obvious choice for shopping.

Entry Segmentation

Branding StrategyMulti branding strategy, focusing on a wide array of

fashion leather shoes, dress shoes, fashion lady dress shoes, casual leather shoes, winter boots, women leather sandals, women’s ballet flats etc.

Focus on obtaining greater shelf space outnumbering the competition.

Saturating the market by filling all price & quality gaps.

Focusing on Brand Switchers who like to experiment with different brands.

Generating internal competition to keep Branding managers on their toes

Major hurdles

• Indian manufacturers will face tough competition• Major competitors according to segment are:-1. Luxury (>300 €)- Dolce & Gabanna, Prada & Gucci etc.2. Fine-euro (100-300€)-Bally, Burberry Boss, Chloe etc.3. Medium- (25-100€)- Converse, Dr. Martin, Nike, Adidas etc.4. Economical- >(Euro 25€) -Imitations of successful brands and

non branded.

Conclusion• EU being largest importer has got great opportunities.• Main concern is that we have to differ our products according

to different culture in different countries of Europe.• During recent times due to recession these European

countries are trying to cut its cost and innovate.• After detailed study and analysis we selected best possible

solution and product that a developing country like India can export.

• Keeping countries like china in our mind as a tough competitor we have tried to find out the deficiency and the way we can seize this window of opportunity to our advantage.

Recommendation

On the basis of study of European footwear market few suggestions can be brought out.

• Detailed study of the market before entry.• Keeping in mind the environmental, consumer health

and safety & social concerns in mind before exporting.• To recognize our own competitiveness and efficiency and

to focus on technology & innovation.• To follow the European standards and regulations for

exporters.

References

http://www.cbi.eu/marketinfo/cbi/docs/the_luggage_and_leather_accessories_market_in_hungary

http://www.powerhomebiz.com/vol136/shoe.htm http://www.cbi.eu/marketinfo/cbi/docs/

the_footwear_market_in_the_eu http://www.ehow.com/way_5831822_strategic-

economic-trends-shoe-industry.html