Market Research Report : Footwear market in china 2015 - Sample

Footwear Market – China January 2015

Executive Summary Market

Drivers & Challenges

Trends

Government

 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’ 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

 Shift from Manufacturing-Driven Economy to Consumption-Driven Economy  Integration of Various Business Strategies  Emergence of Green Footwear  Government Regulatory Organizations  Standards for Footwear Product Specifications  Standards for Footwear Testing Methods  Upcoming Footwear Standards Major Players

Competitive Landscape

Company 1

Company 2

Company 3

Company 4

Company 5

Company 6

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•Macroeconomic Indicators •Introduction •Market Overview •Supply Chain Model •EXIM Data •Drivers & Challenges •Government Initiatives •Trends •Competitive Landscape •Mergers and Acquisitions •Strategic Recommendations •Appendix FOOTWEAR MARKET IN CHINA 2015.PPT

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Macroeconomic Indicators (1/3) Current Account Balance USD bn u

y5 y4

p

y3

q

r

2011

2012

t

s

y2 y1 2010

2013e

2014e

2015e

Exchange Rate: Half Yearly USD/CNY

Period Average

Period High

c4

y6

c3

y5 y4 y3 y2 y1

Period Low

a4 c1

a1

1/1/14

b3

c2

b1

c5 b4

b2

b5 a5

a3

a2

2/1/14

3/1/14

FOOTWEAR MARKET IN CHINA 2015.PPT

4/1/14

5/1/14

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Global footwear market has been steadily rising,…

Global Footwear Market – Overview (1/2) • 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

Global Footwear Market Size and Growth USD bn r3%

y6 y5

p

q

r

s

t

u

x1

x2

x3

x4

x5

x6

y4 y3 y2 y1

China’s Share in Global Footwear Exports (2013)

• By 2018, the market is expected to reach a size of INR ‘m1’, with ‘a1’ controlling a market share of about ‘r2’%

r4%

Country 1 Country 2

• 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

Others

r6%

FOOTWEAR MARKET IN CHINA 2015.PPT

r5%

5

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

China Footwear Market Size and Growth

• 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

Labor Cost for Footwear Production (2013)

USD bn y4 r3%

y3 y2

p

q

r

x1

x2

x3

u

y1 x4

x5

x6

China Footwear Market – Segmentation (2013)

USD/hour y7 y6 y5 y4 y3 y2 y1

s

t

r4%

Segment 1

s1

Segment 2 Segment 3

r1

r6%

q1 p1 r5% Country 1

Country 2

Country 3

Country 4 FOOTWEAR MARKET IN CHINA 2015.PPT

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Supply Chain of the footwear industry comprises numerous stages…

China Footwear Market – Inbound Logistics ‘i1’ Industry

‘i3’ Industry

‘i4’ Industry

‘i2’ Industry

‘i5’ Industry

‘i6’ Industry

‘i7’ Industry

Component Suppliers

Manufacturers

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…before it reaches the ultimate users China Footwear Market – Distribution Strategy

China Footwear Market – Distribution Channel

• 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

Manufacturers

Level 1

• 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’

Level 2

• 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’

Level 3

Consumers

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Rise in footwear production in China…

Exports – Footwear

Total Exports (Value)

• 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’

USD bn y5 y4 y3

r

s

p

q

2010

2011

2012

2013

y2 y1 Note: Figures are for the respective calendar years

Exports – Country-Wise Segmentation (2012-13)

Exports – Country-Wise Segmentation (2011-12)

Country 1 r2%

r7%

r3% r5% r4%

Country 1

Country 2

r8%

Country 2

Country 3

Country 3

Country 4

Country 4 r13%

Country 5

r11% r9% r10%

Others

Country 5 Others

r12%

r6% Note: Total Exports includes exports to Hong Kong SAR and Macau SAR FOOTWEAR MARKET IN CHINA 2015.PPT

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…has resulted in eventual rise in exports HS Codes for Footwear Products

HS code

Exports – Product Segmentation (2012-13) r1% r5% r6%

Particulars

Product 1 Product 2 Product 3

r4%

r2%

Product 4 Product 5 Product 6

r3%

Exports – Product Segmentation (2011-12)

r11%

r7% r12%

Product 1 Product 2 r8%

r10%

Product 3 Product 4 Product 5 Product 6

r9%

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Drivers & Challenges – Summary

Drivers Healthy Economy and Rising Income Expanding Consumer Base

Challenges

Accelerating Urbanization and Changing Lifestyle

Huge Importer of Raw Materials

Rising Demand for Leather Footwear

Declining Cost Competitiveness

Growing Retail Industry Changing Lifestyle and Fashion Trends

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

• 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

•x

Industry Regulations

•x

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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

Standards for Footwear Product Specifications (1/2) Standard No.

Standard Name

Note: The list is not exhaustive FOOTWEAR MARKET IN CHINA 2015.PPT

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Trends – Summary Shift from ManufacturingDriven Economy to Consumption-Driven Economy

Key Trends Emergence of Green Footwear

Integration of Various Business Strategies

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Porter’s Five Forces Analysis Threat of New Entrants

Impact i4 Bargaining Power of Suppliers

Impact i1

Impact i5 Competitive Rivalry

Threat of Substitutes

FOOTWEAR MARKET IN CHINA 2015.PPT

Impact i2 Bargaining Power of Buyers

Impact i3

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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 FOOTWEAR MARKET IN CHINA 2015.PPT

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Competitive Benchmarking (2/5) Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (1/3) Gross Margin

% y5 y4 y3

Operating Margin

Net Margin

a2 a1

a3 b1

c1 b2

c2

b3

c3

y2 y1 Company 1

Company 2

Company 3

• 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’%

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Public: Company 1 (1/4) Company Information

Locations – China

Corporate Address Tel No. Fax No.

Website Year of Incorporation Ticker Symbol Stock Exchange

Products and Services Category

H1

Headquarters Products/Services

Key People Name

Designation Chairman and CEO Deputy Chairman and VP CFO and VP COO and VP

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Public: Company 1 (2/4) Financial Snapshot Total Income

USD mn y4

b

a

y3 y2

Key Ratios

q

p

Profit / Loss c

Particulars

USD mn d

z4 z3

r

s

y1

z2 z1

2010

2011

2012

2013

Financial Summary

• 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

Key Financial Performance Indicators Market Capitalization (USD mn) Total Enterprise Value (USD mn) EPS (USD) PE Ratio (Absolute)

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

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

Indicators

y-o-y change (2013-12)

Value (30/10/2014)

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 Improved

FOOTWEAR MARKET IN CHINA 2015.PPT

Decline

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Public: Company 1 (3/4) Key Business Segments

Key Geographic Segments

Segment 1

Segment

y3

Segment 2

100%

p1%

y2

The company operates through single reportable segment, namely Segment 1

y1

p1%

50%

p3% p2%

0% 2013

2009

p4% 2010

Business Highlights Description

Overview

News • 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 Note: Business Segments and Geographic Segments are based on total revenues, Geographic Segments for years 2011, 2012 and 2013 are not available FOOTWEAR MARKET IN CHINA 2015.PPT

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

S

W

O

T

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Private: Company 2 (1/3) Company Information

Locations – China

Corporate Address Tel No. Fax No.

Website Year of Incorporation

H1

Products and Services Category

Headquarters Products/Services

Key People Name

Designation President

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Private: Company 2 (2/3) Business Highlights Description

Overview

News • 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’

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

S

W

O

T

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

Closed Date

Transaction Type

Target

Buyer/Investors

Sellers

Deal Size (USD mn)

Note: Data for the years 2014, 2013 and 2012

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Thank you for the attention Footwear Market – China report is part of Netscribes’ Retail and Services Series.

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