Market Challenges And Opportunities

Market Drivers:

Increasing disposable income: Increasing disposable income is positively impacting the growth of the global footwear market. As people's disposable incomes are rising across various regions of the world, their spending capacity on non-essential goods has increased substantially. Footwear, being a fashion item, falls under the category of non-essential goods for many consumers. With higher disposable incomes, people are now able to spend more on premium and branded footwear compared to the past.

This rise in discretionary spending has provided financial flexibility to consumers to purchase better quality and high fashion footwear made from premium materials. Various international organizations’ data shows that the middle-class population globally has increased considerably over the past few years.

Growth in e-commerce channels: The footwear market has witnessed significant changes in the past few years due to the rapid rise of e-commerce platforms. As more consumers conduct product research and make purchases online, footwear brands and retailers have shifted their focus to prioritizing their digital presence and capabilities. E-commerce offers consumers a much wider variety of options compared to physical stores, as online retailers can sell styles from all around the world on a single website. These can also leverage technologies like personalized recommendations and size guides to help customers find the perfect fit. This has made researching and buying footwear much more convenient for buyers. According to statistics by the United Nations Conference on Trade and Development, the value of global e-commerce sales had increased by 27% between 2019 and 2020 alone.

Rising health consciousness:Rising health consciousness is significantly impacting the growth of the market. People are increasingly focusing on their physical well-being and choosing footwear that allows comfortable movement and physical activities. Sports and fitness have become an important part of daily lives for many due to the associated health benefits. As a result, athletic and sport-specific shoes are gaining wide popularity.

Footwear brands are innovating to introduce shoes made of lightweight breathable materials that keep feet cool and comfortable during workouts or exercises. Some shoes are engineered to provide extra cushioning, absorb impact, and offer natural motion. For example, running shoes now come with thick soles and extra padding on heels and toes to protect the feet from injuries. Their flexible uppers allow natural ankle movement. Such features attract health-conscious customers and motivate them to be physically active on a regular basis.

Market Restraints:

Fluctuating raw material prices: Fluctuating raw material prices have been a major challenge restraining the growth of the market. Footwear manufacturing is a raw material intensive market that relies significantly on materials like leather, rubber, plastics and textiles. The prices of these key raw materials have exhibited high volatility in recent years due to various macroeconomic and geopolitical factors. For instance, leather prices saw a significant rise in 2021 mainly due to supply chain bottlenecks caused by the COVID-19 pandemic across major leather producing nations like Brazil and China. As per United Nations Conference on Trade and Development (UNCTAD) data, the inflation adjusted price of hides and skins had increased by over 10% from 2020 to 2021.

Counter Balance: Footwear companies can diversify their sourcing of raw materials to include multiple suppliers and regions. This can help mitigate the impact of price fluctuations in any single sourcing location. Utilizing hedging strategies to lock in prices for raw materials can provide stability and predictability in the face of price volatility. This can involve using financial instruments such as futures contracts to secure prices for raw materials.

High competition among manufacturers: The footwear market has become highly competitive over the past decade as established brands look to capture market share from each other. Companies are consistently under pressure to cut costs and outdo their rivals' offerings. This has led to an intense price war scenario where manufacturers are slashing prices to the barest minimums to stay ahead. However, this strategy is unsustainable in the long run and acts as a restraint on the overall market growth potential.

With costs continuing to rise due to global issues like inflation, this leaves little cushion space for footwear brands to drive profitable growth over the medium to long run. Unless companies can find ways to better manage cutthroat competition, it will remain a constraining factor capping the ceiling of potential expansion for the overall market.

Counterbalance: Manufacturers can focus on unique value propositions, such as versatility and comfort, to differentiate their products from competitors. Investing in innovative technologies, such as sustainable and convertible footwear, can help companies stand out in the market and attract consumers.