2011

ITO Project Report

Export Procedure & Strategy for HS 6403 Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of leather

Group 8Amit Sharma - 4A Dipti Kumar 15A Farah Masroor 16A Prince Jain 32A Swati Jain 47A

TABLE OF CONTENTS
S.NO. 1 Introduction 2 3 Topic Page 3 4 6

Chapter -1: Trends in Global trade of Footware (HS6403) Chapter -2: GLOBAL pattern IN Production & consumption of Footware (HS6403) Chapter -3: Production & consumption trends of Footware (HS6403) Chapter -4: Major Exporters of Footware (HS6403) Chapter -5: Major importers of Footware (HS6403) Chapter -6: Policy & Procedure governing import (export) of Footware (HS6403) Chapter -7: Import planning of Footware (HS6403) for Indian markets Chapter -8: Selling Footware (HS6403) in India : Operational Challenges (marketing; finance ; SCM; Warehousing; Packing Labelling PFA Act ) References

4 5 6 7

9 13 15 16

8 9

22 23

10

25

INTRODUCTION

THE FOOTWEAR
The Footwear is a product which protects the human foot against injuries, the adverse weather influences, dirtiness and which performs the utility and aesthetic function. A. The basic types of footwear The basic types of footwear are divided into two categories (groups). I. Open Footwear The chappals, sandals, slippers fall under this category. II. Closed Footwear The shoes, boots, semi-leg boots and leg boots which cover the entire foot are known as closed footwear. B. Main parts of footwear The footwear can be differentiated into Shoe uppers and Shoe bottoms. C. Shoe Length and Sizing SystemsGlobally five different sizing systems are used for shoe lengths:1. The French Paris stitch system (1 Paris Stitch = 6.666 mm) 2. The English size system (1 Size = 8.46mm) 3. The American sizing system (womens shoes differ by 1 1/2 sizes and American Mens by one Size from the English sizes.) 4. The Japanese system 5. The metric system as the basis of the Mondopoint. D. Footwear Components The shoes are made of the following components:1. Uppers 2. Insole 3. Box Toe (Toe Puff) 4. Counters (Stiffener) 5. Out Sole (Unit Sloe) 6. Heels and Top Lifts
3

CHAPTER 1: TRENDS IN GLOBAL TRADE OF FOOTWEAR (HS6403)

Production of footwear worldwide reached 20 billion pairs in 2010 from 12 billion pairs in 2002. Manufacture of footwear is heavily concentrated in Asia, which produces more than 80% of all the pairs of shoes produced worldwide. USA and EU constitute the major consumers of footwear whereas China and India are the major producers of footwear. While USA, Germany, France are the major importers while China and Italy are the major exporters of footwear. India is the sleeping giant for conventional shoes. It has not reached the full potential as exporter of footwear although it has a well developed industrial infrastructure and potential.Net value of trade increased from US$ 100 billion in 2001 to US$ 200 billion in 2011. China accounts for more than 60% of the total production with India, Vietnam, Indonesia, Pakistan and Thailand too featuring in the list of top 10 producers producing 20% of the total combined. In South America, Brazil is the most important producer, with 4.4% and it accounts for more than 90% of the total production in the region. Mexico, Italy, and Turkey are also among the worlds most significant manufacturers. Together, these ten countries account for 90% of the world footwear production. Exports of footwear reached 13 billion pairs in 2010 from 7 billion pairs in 2000 with Asia again constituting for more than 80% of the exports. In 2010 Europe still represented 38% of the world exports by value, down from 42% at the beginning of the decade. Meanwhile, Asias share, in terms of value, increased from 50% to 56%. World exports rose by 79% in terms of volume and 108% in terms of value, corresponding to average yearly increases of 6% and 7.6%, respectively from 2001 to 2010. Europe constitutes for more than 40% of total imports while North America constitutes for more than 25% of total imports. Individually USA is the major importer by a large distance. Recession and other demographic factors such as aging population and falling birth rates took its toll on the world footwear market with sales witnessing erosions in developed countries and growth slowing down considerably in developing countries. Rising rates of unemployment, falling disposable incomes resulted in retraction of household demand. Major players in the global marketplace include Adidas AG, Bata Shoe Organization, Brown Shoe Company, Deckers Outdoor Corporation, ECCO Sko A/S, Gucci Group, Kenneth Cole
4

Productions, LaCrosse Footwear, Nike, Nine West Group, Puma AG, R.G. Barry Corporation, San Paulo & Alpargatas, The Timberland Company, Vans, Weyco Group, Wolverine World Wide, among others. Exports of rubber and plastic footwear more than doubled while the volume of leather footwear exported remained stable. Consequently, rubber and plastic footwear's share of world exports increased from 43% to 54%, in terms of volume, while leather footwear fell from 30% to only 17%.But, leather footwear even after showing downward trend still gets a much higher share (>50%) in terms of value due to its higher price. Leather (HS 6403) is the one in which the Chinese position is less dominant, although still representing 44% of the volume of world exports and 23% of its value. In terms of value, Italy comes relatively close, with a world share of 16%, thanks to an average price above 50 USD, the highest in the world. Hong Kong, Vietnam and India from Asia, and Germany, Belgium, Spain, Portugal and The Netherlands from Europe complete the list. Exports in value of Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of leather increased from US $ 26 billion in 2001 to US $ 47 billion in 2010 whereas the imports increased from US $ 29 billion in 2001 to US $ 48.5 billion in 2010.

CHAPTER 2: GLOBAL PATTERN IN PRODUCTION AND CONSUMPTION OF FOOTWEAR (HS6403)

Production Trends
China alone produces more than 60% of the world total followed by India, Brazil, Vietnam, Indonesia, Pakistan, Thailand Mexico, Italy, and Turkey constitute the top 10 producers of footwear which in total produce around 90% of the total footwear produced.

Top 10 producer countries Production(in Pairs)

12500 2000 890 760 650 290 240 240 200 175

Continent wise Production Production Share(in %)

Asia South America Africa North America Europe 8% 2% 2% 5%

83%

Consumption Trends
In terms of consumption also China is the market leader followed by USA and India. In terms of export of 13 billion pairs of footwear, China accounts for more than 70% of total exports. Vietnam, Hong Kong and Italy are the other major exporters.

Top 10 producer countries Consumption(in Pairs)

2700 2300 2000 780 690 620 500 420 410 385

Continent wise Production

Consumption Share(in %)
Asia South America 9% 15% 20% Europe Africa 6% 1% 49% North America Oceania

Asia accounts for 49% of the total consumption of footwear mainly contributed by China and India. Europe accounts for 20% of total consumption followed by North America which accounts for 9% and South America 6%. Europe (> 40%) accounts for major portion of imports followed by North America (> 27 %).Individually USA (> 24.5) accounts for major imports by a country followed by Hong Kong, Spain and UK. Since 2001 the trade of footwear rose rapidly but the recession in 2008 and 2009 slowed down the progress but since then there has been growth in trade and there have been positive signs of recovery. The prices rose from US$ 5.5 in 2005 to US$ 7.22 in 2008 but again fell to US$ 6.4 in 2010.Average export prices fluctuated from US$ 4 in Asia to US$ 23 in Europe. Total export of leather footwear accounted for more than 50% of total trade but with a declining trend while rubber and plastics footwear showed an increasing trend. Share of leather exports represented around 10-30 % of total volume exported in Asia, Africa, South America and North America with a declining trend and in Oceania and Europe leather exports represented around 40-60% of total volume exported. In case of leather exports(HS 6403) although China accounts for around 40% of total exports in terms of volume but in terms of value it accounts for only 22%.Italy on the other hand with low volume in export share account for around 16% of total share due to the highest price > US$ 50 it commands. Hong Kong, Vietnam, Germany, Belgium, Spain, Portugal, Netherlands and India complete the top 10.

CHAPTER 3: PRODUCTION AND CONSUMPTION TR ENDS OF FOOTWEAR (HS6403)

History
The leather industry is one of the oldest traditional industries. It has several components like tanning, footwear & leather products including garments. First modern tanning was established in 1857. The first modern footwear industry was started in 1887. The footwear sector is the engine of growth for the entire Indian leather industry. India is the second largest global producer of footwear after China. The average growth in the industry has been estimated at 12% and is estimated to touch Rs 50000 crore by 2025. India produces more than 2500 million pairs of different categories of footwear (leather footwear, leather shoe upper and non-leather footwear).It exports about only 5% of its production as 95% of its production goes to meet its own demand. The Footwear product mix Gents 54%, Ladies 37% and Children 9%. There are more than 4200 units engaged in manufacturing footwear in India. The industry is dominated by small scale units with total production of more than 50%. The organised footwear market is estimated at Rs 17,500-20,000 crore, growing at 10-15% a year. The market size of the footwear industry in the top 20 cities in the country is estimated to be 10 crore pairs per annum. The market is dominated by casual and sportswear which makes up nearly twothirds of the total footwear retail market. . Retail market is very price sensitive and major portion of the demand is met by the unorganized sector. The higher end of the price spectrum is dominated by International players whereas the local home grown players and the unorganized sector take care of the lower end price spectrum.

The footwear industry exist both in the traditional and modern sector. While the traditional sector is spread throughout the country with pockets of concentration catering largely to the domestic market, the modern sector is largely confined to select centres like Mumbai in Maharastra, Kanpur in U.P., Jalandhar in Punjab, Chennai, Ranipet, Ambur in Tamil Nadu, Agra, Delhi, Karnal, Ludhiana, Sonepat, Faridabad, Pune, Kolkata, Calicut and Ernakulam. About 2.5 million people are engaged in the footwear manufacturing industry. De-licensing and de-reserving in the footwear sector has paved the way for expansion of capacities on modern lines. 100% Foreign Direct Investment through the automatic route for the footwear sector makes the sector more attractive for foreign players.
9

The major Indian brands sold in India are Red Tape, Bata, Liberty, Khadims, Lakhani, Metro, and Action. Whereas the major MNC brands sold in India are Aldo, Bally, Clarks, Ecco, Florshiem, Ferragammo, Hush Puppies, Lee cooper, Lloyd, Marks & Spencer, Nike, Nine West, New Balance, Reebok, Rockport, and Stacy Adams. Footwear exported from India are Dress Shoes, Casuals, Moccasins, Sport Shoes, Horrachies, Sandals, Ballerinas, Boots, Sandals and Chappals made of rubber, plastic, P.V.C. and other materials.Indias exports are dominated by leather footwear directed at the major European(UK, Germany, Italy) and American markets, which enables the country to achieve a higher average price than is common for many other Asian producers. Imports to India come mainly from China and other Asian countries. Indias Footwear export (leather, uppers & non-leather) is growing at a CAGR of 8.78% in the last five years ending 2010-11

Indias export of leather footwear had increased from US$ 974.33 million in 2006-07 to US$ 1460.42 million in 2010-11. Indias export of footwear components had increased from US$ 219.84 million in 200607 to US$ 215.03 million in 2010-11 Indias export of non-leather footwear has increased from US$ 42.74 million in 2006-07 to US$ 56.59 million in 2010-11

The Indian footwear market is dominated by Men's footwear market that accounts for nearly 60% of the total Indian footwear retail market. In terms of products, the Indian footwear market is dominated by casual footwear market that makes up for nearly two-third of the total footwear retail market.

Indian exports

10

Footwear exports have increased from US$ 99.77 million in 1980-81 to US$ 1732.04 million in 2010-11. Nearly 90% of Indias export of footwear goes to European Countries and the USA. Future growth of Indian footwear in India will continue to be market driven.

A table showing Indias Export of Footwear(HS 6403) to different countries:

200506 170.97 195.78 134.35 131.07 74.48 63.7 32.96 22.15 25.78 18.37 11.58 6.77 11.95 8.26 3.17 133.9 1045.24 (Value in Million US$) 2006200720082009201007 08 09 10 11 % Share 217.23 246.84 229.65 224.27 279.80 16.15% 208.2 241.37 247.06 296.45 331.92 19.16% 186.11 229.81 221.09 209.95 215.81 12.46% 127.15 136.92 163.03 123.6 139.21 8.04% 99.81 116.03 119.2 144.45 154.72 8.93% 64.57 76.69 91.86 95.99 111.74 6.45% 48.57 72.91 76.2 65.13 78.19 4.51% 35.03 37.34 28.21 22.63 24.38 1.41% 34.64 39.23 39.4 39.61 42.36 2.45% 14.65 17.48 14.78 17.02 16.74 0.97% 10.11 12.52 13.34 15.49 12.54 0.72% 7.99 12.04 12.64 12.2 13.76 0.79% 10.91 10.41 8.96 9.3 10.40 0.60% 12.11 8.52 8.49 9.87 11.07 0.64% 3.07 4.63 8.23 5.45 7.17 0.41% 156.76 226.61 252.18 216.37 282.23 16.29% 1236.91 1489.35 1534.32 1507.51 1732.04 100.00%

Country Germany UK Italy USA France Spain Netherlands Portugal UAE Denmark Australia Sweden Canada South Africa Japan Others Total Source: DGCI&S

Indian industrys strength lies on reliable supply of resources in the form of raw hides and skins, quality finished leather, large installed capacities for production of finished leather & footwear, large human capital with expertise and technology base, skilled manpower and relatively low cost labor, proven strength to produce footwear for global brand leaders and acquired technology competence, particularly for mid and high priced footwear segments. Skilled manpower and materials strength is a comparative advantage for the country.

11

Export & Import of Footwear Category WiseThe graph below shows the exports of footwear in different categories in US$ million.

51 91 99 20 59 19 40 12 30

Footwear,wooden,outer soles of rubber/ Ski-boots, snow-board boots, uppers of leather Footwear,outr sole of rber/plas/leathr,uppers of Sports footwear,o/t ski,outr sole of Footwear, outer soles and uppers of leather, nes Footwear,outr sole/uppr of leathr,strap across the Footwear, outer soles of rubber/plastics uppers of Footwear,outer soles of rubber/plast uppers of Footwear, outer soles and uppers of 0 100 200 300 400 500 600

Last Two digits of HS6403XX

Exported Value in US$ million

The graph below shows the exports of footwear in different categories in tons-

51 91 99 20 40 19 59 12 30

Footwear,wooden,outer soles of rubber/ Ski-boots, snow-board boots, uppers of leather Footwear, outer soles and uppers of leather, nes Sports footwear,o/t ski,outr sole of Footwear,outr sole of rber/plas/leathr,uppers of Footwear,outr sole/uppr of leathr,strap across Footwear, outer soles of rubber/plastics uppers of Footwear,outer soles of rubber/plast uppers of Footwear, outer soles and uppers of 0 1000 2000 3000 4000 5000 6000 7000 Exported Quantity in Tons

India has still not reached its full potential in terms of a world supplier and is often referred to as a sleeping giant.
12

Last two digits of HS6403XX

CHAPTER 4: MAJOR EXPORTERS OF FOOTWEAR (HS6403)

Exports in value of Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of leather increased from US $ 26 billion in 2001 to US $ 47 billion in 2010. Exports of footwear reached 13 billion pairs in 2010 from 7 billion pairs in 2000 with Asia again constituting for more than 80% of the exports. , in terms of value leather footwear still gets a much higher share (52%) but it is showing downward trend , whereas rubber and plastic footwear's share is increasing steadily.
The graph below shows the major exporters of footwear in terms of value in US$ thousand.

Exported Value in US$ Thousand

$12,000,000.00 $10,000,000.00 $8,000,000.00 $6,000,000.00 $4,000,000.00 $2,000,000.00 $0.00 2006 2007 2008 2009 2010

Top 10 Major Exporters

It is clearly evident from the above graph that China has been the major exporter followed by Italy, Vietnam and others. India stands at 11th position in terms of exports in terms of value. China exports stood at US$ 10.4 bn followed by Italy (US$ 7.1 bn), Vietnam (US$ 3.8 bn), Hong Kong(US$ 3.66 bn) and Germany(US$ 2 bn).Indias exports stood at US$ 1.6 bn. The graph on the next page displays the major exporters of footwear in terms of the quantity traded in tons.

13

Top 10 Major Exporters in Quantity (in Tons)

900000 800000 700000 600000 500000 400000 300000 200000 100000 0

2006 2007 2008 2009 2010

China again is the leader in this category. But it is to be noted that Italy falls to 4 th place in this category from 2nd place in exports by value. The reason behind this is that the value of footwear is highest for Italy among all the exports as a result even though the quantity exported is less but still the total value is more. China has the least value as a result of which it accounts for around for only 23% in terms of value as compared to 44% by volume exported. Italy represents for around 15% of total exports in terms of value. China exported .82 mn tons of footwear followed by Vietnam (.15 mn tons), Indonesia (.11 mn tons), Italy (.09 mn tons) and Hong Kong (.08 mn tons).India exported (.023 mn tons).

14

CHAPTER 5: MAJOR IMPORTERS OF FOOTWEAR (HS6403)

Imports in value of Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of leather increased from US $ 29 billion in 2001 to US $ 48.5 billion in 2010. Europe constitutes for more than 40% of total imports while North America constitutes for more than 25% of total imports. Individually USA is the major importer by a large distance.

Top 10 Importers by Quantity in Tons

600000 500000 400000 300000 200000 100000 0

2006 2007 2008 2009 2010

USA comprises of approx 25% of total imports.USA imported .37 mn tons of footwear followed by .14,.13,.12,.10 mn tons by Italy, UK, Germany and Russian Federation.

Top 10 Importers by Value in Dollars

Imported Quantity in US$ Thousand 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0

2006 2007 2008 2009 2010

Major Countries Importing Footwear

USA was the major importer followed by Germany, France, Hong Kong and Italy.Total imports were worth US$ 48 bn with USA importing of worth US$ 11.5 bn.
15

CHAPTER 6: POLICIES AND PROCEDURES GOVERNING IMPORTS AND EXPORTS OF FOOTWEAR (HS6403)

The policies and procedures governing imports and exports of footwear have been explained in the current foreign trade policy and union budget. The policies and procedures can be discussed below: 1. Foreign Trade Policy: According to the foreign trade policy 2009-2014a) Duty free entitlement for import of trimmings, embellishments and footwear components for footwear (leather as well as synthetic is 3 % of FOB value of exports of previous financial year. Such entitlement shall also cover packing material, such as printed and non-printed shoeboxes, small cartons made of wood, tin or plastic materials for packing footwear. b) Machinery and equipment for Effluent Treatment Plants shall be exempt from basic customs duty.
c) Re-export of unsold hides, skins and semi finished leather shall be allowed from Public

Bonded warehouse at 50% of the applicable export duty.

2. Union Budget: According to Union Budget 2010-2011 the customs duty, central excise duty and service tax for footwear are a) Customs Duty: The main features of customs duty for footwear are i. ii. The Peak Rate of Customs Duty will be 10%. Goods imported in pre-packaged form and intended for retail sale are being provided an outright exemption from additional duty of customs of 4%. The existing exemption by way of refund would continue on other items. The current limit of Rs. 1 lakh per annum for duty free import of samples in terms of notification no. 154/94-Customs dated 13.7.1994 is enhanced to Rs. 3 lakhs per annum.

iii.

16

b) Central Excise Duty: The main features of Central Excise Duty for footwear are Type of footwear Abatement as a % Central of retail sale price Excise duty rate Footwear of MRP exceeding 35% 4% Rs.250 per pair, and not exceeding Rs.750 per pair Footwear of MRP exceeding 40% Rs.750 per pair 10% Actual Central Excise duty payable 2.60%

6.00%

c) Service Tax: According to the Union Budget 2010-2011 the service tax for footwear will remain unchanged at 10%.

3. Duty Drawback: The Drawback rates for all the goods falling under the chapter 64 have been divided under adult and children head on the basis of sizes. Under Adult head leather shoes, boots or half boots shall comprise the following sizes, namely: a) French Point or Paris Point or Continental Size above 33. b) b. English or UK adult size 1 and above. c) c. American and USA adult size 1 and above. Under Children head leather shoes, boots or half boots shall comprise the following sizes, namely: a) French Point or Paris Point or Continental Size upto 33. b) b. English or UK children size upto 13. c) c. American and USA children size upto 13. The Drawback rates when CENVAT facility has not been availed which took effect on September 20, 2010 are:a) Leather Shoes/Boots, the DBK rate has been reduced from 10.5% to 9.5% b) Leather Sandals DBK rate has been reduced from 9.3 to 8.3. c) Leather Shoe Uppers, DBK rate has been reduced from 9.5% to 8.5% and Sandal Uppers DBK rate has been reduced from 9% to 7.6%.
17

d) Sports Gloves of Leather, DBK rates has been reduced 10.8% to 9.3%. e) Sports Gloves of leather in combination with synthetics, the rate has been reduced from 16% to 10%,

18

19

The rates were again revised and the DBK rates were reduced by 0.3% for most of the items which took effect from October 01, 2011.

4. DEPB Rates: The DEPB rates for footwear with effect from 5.1.2008 are Sl. No. Description DEPB Rate ( New) 1 2 Children Leather Shoes including in CKD/SKD Children Rubber and Canvas Shoes with moulded soles including in CKD/SKD Finished Leather for general purpose / shoe upper lining/ garments Gents Leather half/ full Shoe Uppers including in CKD/SKD Gents leather half/full boot uppers including in CKD/SKD Gents leather boots including in CKD/SKD Gents/ladies leather sandles uppers Gents leather Sandles with PU Soles/ Rubber sole/PVC Soles Gents leather shoes including in CKD/SKD Gents Rubber and Canvas Shoes with moulded sole including in CKD/SKD Ladies leather shoes including in CKD/SKD Ladies leather boots including in CKD/SKD Ladies leather shoe/ boot uppers Ladies leather sandles with PU sole/ Rubber Sole/ PVC sole Ladies Rubber and Canvas shoes with moulded soles including in CKD/SKD Rubber and Canvas footwear with rolled soles. Sports shoes with leather upper and moulded sole/ PVC sole 6 8

3 4A 4B 5 6 7 8 9

8 6 6 7 7 7 7 8

10 11 12 13 14

7 7 7 6 8

15 16

8 8

20

including in CKD/SKD. 17 18 Unstiched Gents leather shoe uppers PU Unit sole 6 9

5. Import Duty Structure: The import duties applied for imports of footwear from major countries are as follows:
MFN RATE Country Name Brazil China France Germany Hong Kong Italy Netherlands Portugal Russian Fed United Kingdom USA Chapter 64 18 - 35% 10 - 24% 3 - 17% 3 - 17% Free 3 - 17% 3 - 17% 3 - 17% 5 - 15% 3 - 17% Free - 48%

21

CHAPTER 7: IMPORT PLANNING OF FOOTWEAR (HS6403) FOR INDIAN MARKETS

Leather sector is one of the focus sectors for the Indian government under the national foreign trade policy. The Department of Industrial Policy & Promotion (DIPP) has undertaken various plans to build an integrated development programme for leather. According to the current programme from 2007-2012 the purpose of the plan is to provide investment to the sector to upgrade and modernize production facilities, build upon sector related institutions for science and technology and link training of human resources to move away from traditional artisan manufacturing methods towards design and technology led modern methods of production. The plan is also known as the Integrated Development of the Leather Sector (IDLS). In order to support the leather industry and make easier for domestic producers to source machinery, import raw materials and equipment aimed at improving environmental performance the Indian government have compiled a series of measures which can be summarized as follows: The entire leather sector is now de-licensed and de-reserved, paving way for expansion on modern lines with state-of-the art machinery and equipment Promotion of industrial parks (one leather park in Andhra Pradesh, one leather goods park in West Bengal, one footwear park in Tamil Nadu and one footwear components park in Chennai) 100% repatriation of profit and dividends, if investments made in convertible foreign currency. Duty neutralization / remission scheme Duty free imports of critical components for footwear, garment and leather goods manufacture 100% foreign ownership and investment is permitted Duty free import of raw, tanned, crust, split and finished leather Customs duty exemption on imports of equipment and machinery for effluent treatment plants Several duty drawback schemes and simplified import/export procedures Funding support for export promotion & market development Import of tannery and footwear machinery allowed at 5%. Gradual lowering of import tariff current peak duty is 10%. Funding provided to upgrade technology, including infrastructure, human resource, and environmental safeguards and modernising production units.

22

CHAPTER 8: SELLING FOOTWEAR (HS6403) IN INDIA: OPERATIONAL CHALLENGES (MARKETING; FINANCE ; SCM; WAREHOUSING; PACKING LABELLING PFA ACT )

Although India enjoys abundance of raw materials and low cost labour but it still faces various challenges which need to be encountered in order to make it again a force which was envisaged back in 1980 when it constituted 8.8% share in world trade as compared to 2% in 2010 and challenge Chinas supremacy in the leather market which rose its share from .41% in 1980 to more than 30% in world trade. In India more than 4200 units are involved in the manufacturing of footwear out of which more than 90% are SMEs. These SMEs enjoyed a smooth journey in terms of growth till 2008, but the recession put a full stop on their growth and turned out to be an eye opener for these industries. Following the recession the companies started diversifying and de-risking their business. In order to tap the mall going consumer class manufacturers are turning into retailers by either going alone or by forging alliances with international partners. The major challenges faced by Indian Footwear Industry are: 1. Retail Sector : The major problems faced while running retail in footwear market are:a) Retail Presence: Due to increase in commercial rents, capital expansions are turning out to be a bottleneck. b) Credit Management: Brands which relied on third party retail route are facing this problem. c) Brand: Many firms lack brand building experience. d) Inventory Management: Most of the firms turning to retail are facing the problem of retail management. 2. Labour: The labour employed in the footwear industry is mostly uneducated. Along with that 40% of the workers are unskilled doing table work operation in assembly line. Also the
23

increasing attrition (>15%) in this sector has also led to the lack of skilled and semi skilled labour in the sector. 3. Infrastructure: India has long way to go in terms of quality of infrastructure in order to compete with major players. Some of the major problems witnessed in this area are:a) Higher clearance time (> 4 days as compared to 16hrs in market leader China) in entry locations like ports and other border agencies. b) Warehousing costs driven by inland transportation delays (average 30 Km per hr as against 60 km per hr in Europe). c) Power outages are very frequent in India. Indian companies are losing 8% every year on sales due to this factor. d) Raw Material Availability: Although India has the highest share of bovine animals in the world but due to ban on cow slaughtering in many Indian states results in low production of hides from bovine animals.

4. Lack of coordination : Indian companies are very particular about buyer information and although the footwear production is concentrated in very few centres, the lack of coordination among major players result in supply chain imbalances, high inventory and wastage across the supply chain, making it more disadvantageous for them to operate in the marketplace. 5. High instalment costs of ERP: Less than 50% of the firms have an enterprise application (ERP) for transaction processing and management information due to high instalment costs is also turning out to be a major deterrent for footwear industry. 6. Supporting industries for footwear components are not well developed in India which leads to high dependency on imports. Apart from the cost of labour which is low in India, it needs to improve in other areas such as infrastructure, access to market etc and other areas in order to be a force both domestically as well as internationally.
24

REFERENCES

1. Trademap.org 2. http://www.leatherindia.org/footwear_2010.asp 3. Union Budget 4. Foreign Trade Policy 2009-2014 5. ITC Geneva 6. Council of Leather Exports ,CLE, (2008), Export of Leather & Leather Products Facts & figures 2007-8. 7. Council for Leather Exports, India Presents Indian Leather & Footwear Industry Presentation at INDIAN DELEGATION TO TAIWAN 31st Aug to 2nd Sep 2006, Taiwan. 8. glbal_footwear_analysis_and_jordan 9. Footwear: A Global Strategic Business Report by San Jose, CA (Vocus/PRWEB) January 12, 2011 10. 2011WorldFotwearYearbook 11. Strategies and Road Map Development A Report for NMCC,Deloitte_Report_LeatherandFootwear

25