International footwear brands shifting their third-party operations to India are not expected to lower product prices for Indian consumers, as noted in Nuvama‘s September report on footwear trends.
Outsourcing͏͏ is͏͏ primarily͏͏ focused͏͏ on͏͏ achieving͏͏ cost͏͏ efficiency͏͏ in͏͏ international͏͏ markets,͏͏ rather͏͏ than͏͏ delivering͏͏ lower͏͏ prices͏͏ to͏͏ domestic͏͏ consumers,͏͏ according͏͏ to͏͏ the͏͏ report.
The͏͏ report͏͏ notes͏͏ that͏͏ international͏͏ companies͏͏ like͏͏ Nike͏͏ and͏͏ Adidas͏͏ have͏͏ been͏͏ outsourcing͏͏ manufacturing͏͏ to͏͏ Apache͏͏ Footwear͏͏ in͏͏ Hyderabad͏͏ since͏͏ 2008,͏͏ primarily͏͏ to͏͏ serve͏͏ their͏͏ international͏͏ markets.
Global͏͏ Pricing͏͏ Strategies͏͏ Remain͏͏ Firm:
However,͏͏ despite͏͏ outsourcing͏͏ manufacturing͏͏ to͏͏ India,͏͏ which͏͏ offers͏͏ a͏͏ more͏͏ cost-effective͏͏ alternative͏͏ to͏͏ production͏͏ abroad,͏͏ Nike͏͏ and͏͏ Adidas͏͏ have͏͏ not͏͏ reduced͏͏ prices͏͏ globally.
The͏͏ report͏͏ states,͏͏ “Based͏͏ on͏͏ this͏͏ information,͏͏ we͏͏ believe͏͏ that͏͏ international͏͏ players͏͏ who͏͏ have͏͏ relocated͏͏ their͏͏ third-party͏͏ operations͏͏ to͏͏ India͏͏ are͏͏ unlikely͏͏ to͏͏ pass͏͏ on͏͏ the͏͏ benefits͏͏ of͏͏ reduced͏͏ production͏͏ costs͏͏ to͏͏ Indian͏͏ consumers͏͏ in͏͏ the͏͏ future.”
Regulatory͏͏ Changes͏͏ Impacting͏͏ Quality͏͏ Control:
On͏͏ 30th͏͏ August͏͏ 2024,͏͏ the͏͏ Ministry͏͏ of͏͏ Commerce͏͏ and͏͏ Industry͏͏ revised͏͏ the͏͏ Footwear͏͏ Quality͏͏ Control͏͏ Order͏͏ (QCO),͏͏ granting͏͏ footwear͏͏ manufacturers͏͏ and͏͏ retailers͏͏ a͏͏ transition͏͏ period͏͏ until͏͏ 31st͏͏ July͏͏ 2026͏͏ to͏͏ sell͏͏ products͏͏ that͏͏ do͏͏ not͏͏ display͏͏ the͏͏ Bureau͏͏ of͏͏ Indian͏͏ Standards͏͏ (BIS)͏͏ mark.
Continue͏͏ Exploring:͏͏ Global͏͏ fashion͏͏ giants͏͏ struggle͏͏ as͏͏ India͏͏ mandates͏͏ BIS͏͏ certification͏͏ for͏͏ footwear production
After͏͏ this͏͏ period,͏͏ all͏͏ footwear͏͏ sold͏͏ in͏͏ the͏͏ domestic͏͏ market͏͏ must͏͏ comply͏͏ with͏͏ BIS͏͏ standards.͏͏ However,͏͏ the͏͏ extension͏͏ is͏͏ limited͏͏ to͏͏ sales͏͏ and͏͏ does͏͏ not͏͏ apply͏͏ to͏͏ the͏͏ procurement͏͏ of͏͏ new͏͏ merchandise,͏͏ which͏͏ will͏͏ conclude͏͏ on͏͏ 31st͏͏ July͏͏ 2024.
Local͏͏ production͏͏ in͏͏ India͏͏ is͏͏ anticipated͏͏ to͏͏ further͏͏ expand͏͏ the͏͏ supply͏͏ chain͏͏ footprint͏͏ of͏͏ international͏͏ brands͏͏ like͏͏ Nike͏͏ and͏͏ Adidas;͏͏ however,͏͏ it͏͏ is͏͏ unlikely͏͏ to͏͏ narrow͏͏ the͏͏ price͏͏ gap͏͏ between͏͏ mid-premium͏͏ local͏͏ brands͏͏ and͏͏ their͏͏ international͏͏ counterparts.
Price͏͏ differences͏͏ will͏͏ remain,͏͏ as͏͏ these͏͏ companies͏͏ prioritize͏͏ their͏͏ global͏͏ pricing͏͏ strategies͏͏ and͏͏ profitability͏͏ over͏͏ adjusting͏͏ prices͏͏ for͏͏ local͏͏ markets.
Although͏͏ local͏͏ procurement͏͏ of͏͏ materials͏͏ such͏͏ as͏͏ PVC͏͏ and͏͏ PU͏͏ is͏͏ still͏͏ in͏͏ its͏͏ early͏͏ stages͏͏ in͏͏ India,͏͏ the͏͏ increasing͏͏ number͏͏ of͏͏ third-party͏͏ operations͏͏ offers͏͏ a͏͏ substantial͏͏ opportunity͏͏ for͏͏ local͏͏ raw͏͏ material͏͏ suppliers.
Global͏͏ OEMs͏͏ such͏͏ as͏͏ Shoetown,͏͏ Feng͏͏ Tay,͏͏ Pou͏͏ Chen,͏͏ and͏͏ Apache͏͏ have͏͏ concentrated͏͏ exclusively͏͏ on͏͏ manufacturing͏͏ while͏͏ steering͏͏ clear͏͏ of͏͏ retail͏͏ operations.
As͏͏ companies͏͏ enhance͏͏ their͏͏ back-end͏͏ processes͏͏ and͏͏ work͏͏ to͏͏ streamline͏͏ non-core͏͏ inventory,͏͏ the͏͏ sector͏͏ encounters͏͏ a͏͏ combination͏͏ of͏͏ challenges͏͏ and͏͏ opportunities.
