Niche high end shoes a sure bet

IBIS_Lux_shoes_w250As worldwide economic pressures continue apace, the future of the Australian shoe industry lies in high end or niche products, according to recent data and commentary released by business research giant IBISWorld.

Footwear manufacturing and retailing industries are feeling footsore this financial year, with global economic uncertainty and lower consumer confidence keeping a firm grip on sales. The result is that revenue for Australia’s footwear retailing industry fell by 2.9% in 2008-09 to $2.48 billion; and revenue for footwear wholesalers fall by 2.7% to $1.49 billion.

According to IBISWorld, high-end fashion spending has been particularly hard hit since items once seen as “must-have” are a tougher sell during hard economic times. However IBISWorld general manager (Australia) Robert Bryant said the current low for luxury footwear would be largely short-term and Australian shoe manufacturers should be looking to establish themselves within high-end and niche markets.

“There are a number of challenges facing the sector right now, particularly in relation to financial pressures and competition from international competitors, but opportunities exist to create our own premium line products, or Jimmy Blues,” Bryant said.

At present, the local shoe market was flooded with imported products, he added, and in 2009-10 IBISWorld expected imports to make up a staggering 76.6% of demand, with 60% of all imports coming from China.

“The dominance of low cost foreign competitors, tariff reductions and import penetration has seen the structure of the industry change – and in the five years to 2008-09 revenue in the footwear manufacturing industry has declined by an annualised 7.9%,” Mr Bryant said.

“And as the structure of the industry changes, Australian shoe manufacturers must also change their approach. It is incredibly difficult for Australian manufacturers to compete with low cost imports from Asia, and although the current economic climate is seeing consumers look to these cheaper footwear options, the answer lies with high-end heels and babies booties,” Mr Bryant said, acknowledging that gender plays a major part in footwear spending with adult males spending an average $85 last financial year on shoes, compared to women’s $173.

Currently, women’s footwear accounts for 50% of the market’s product share, with women purchasing more pairs (of more expensive) shoes than men. “This is largely a function of fashion,” explained Mr Bryant, “but women also see emotional benefits attached to shoe purchases, as well as a more pressing need to update their shoes in line with the season’s latest styles.” He added that margins were materially higher for women’s shoes than for other segments, given the high proportion of fashion shoes sold.

Men’s footwear accounts for half the total product share of women’s (25%), since men demand a more limited variety of styles and colours and are less likely to purchase as many pairs of shoes, although that trend is changing as more men switch from athletic shoes to casual and more fashionable “street” styles.

Bryant also noted that the smallest size soles presented a new opportunity for footwear manufacturers, with children’s and infants’ shoes now accounting for 18% of the market, growing from an almost non-existent base.

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