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Shoe sector shake-up

ascentfootwearFootwear businesses that have invested in innovation look set to be the winners of tomorrow, according to new data from market researcher IBISWorld.

Senior IBISWorld Analyst Raghu Rajakumar said enterprises focused on technological innovation, process efficiencies and niche, value added products would make significant revenue gains over the next five years, while the outlook was less rosy for companies that failed to innovate.

“Companies that have relied on converting mass subsidies and government assistance to inefficiently produce lower value added products are expected to be phased out of the economy completely,” Rajakumar said.

His comments followed new IBISWorld statistics showing current trade and manufacturing conditions in the Australian footwear sector.

In 2008/09, footwear retailing was expected to turn over revenue of $2.48 billion, a 2.9 per cent fall compared to last financial year. In manufacturing, 2008/09 revenue was expected to decline by 3.3 per cent to $447.1 million.

Meanwhile margin pressures created by low cost overseas competition had been exacerbated for shoe retailers and manufactures by the global economic crisis.

“Deteriorating economic conditions, rising unemployment and poor sentiment is leading to tighter household budgeting and a ‘recessionary’ consumer mindset. A lot of extra spending is being forgone. Despite government stimulus payments, sales are being affected by the changing domestic climate and price discounting is being conducted by most major footwear retailers as well as department stores.”

“The local market is already flooded with imported footwear which is expected to make up 75.3 per cent of domestic demand in 2008/09. Footwear manufacturers now face a downturn in spending as Australian consumers tighten [their belts] in the face of a recession and rising unemployment.”

Luke Bevis, operations & marketing manager for work footwear brand Ascent Footwear said investing in differentiated, innovative product, was driving the brand’s sales.

“We have recently launched a Revolutionary Steel Free Safety Boot that uses technology not seen before in the standard work boot and we did this through investment in innovation.”

The boots featured fibreglass safety toes, Quad Layer heel cushioning, enhanced ankle support and a range of other enhancements, he said.

 

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