The leather footwear and accessories segment in India has undoubtedly witnessed massive expansion and growth over the past two decades, and as a result, the sector has transitioned itself from a primary supplier of raw materials to a value-added exporter of leather and leather goods with large-scale relevance in the global market. As per ASSOCHAM, the Indian leather industry accounts for nearly 13 per cent of the world’s leather production, with India being ranked second in the world in the production of leather footwear. With a market share of 3.3 per cent, the country is the eighth largest exporter of leather footwear in the world, and is ranked second and third respectively for the export of leather garments and saddlery, making the leather sector one of India’s top ten foreign exchange-earners.
In the last five years, many international brands forayed into the Indian market and despite their high price points, have made a space of their own. Apart from the international players, domestic footwear majors have also made huge inroads.
However, due to the COVID-19 pandemic, the last year has delivered extreme challenges for the industry. As per Council of Leather Exports, the pandemic has led to a decline of more than 35 per cent in the export orders. Tamil Nadu alone has lost export orders worth USD 370 million (₹2800 crore) due to unilateral cancellation of export orders by buyers, as against loss of export orders to the tune of USD 1 billion (₹7600 crore) at all India level. Due to the series of lockdown and restrictions, buyers have put-on-hold shipments, leading to losses worth crores.
As per a forecast made by a panel of experts for World Footwear, global footwear consumption fell by 22.5 per cent in 2020, representing a shortfall of 5.1 billion pairs, due to the pandemic. A separate survey showed that sales of footwear and accessories have fallen to zero for stores not equipped with an e-commerce platform after the second lockdown was imposed. For the whole month of April, sales of footwear and clothing through all channels fell by 67.4 per cent.
In India, the COVID-19 outbreak led to a disruption in the retail sales of leather goods during the year 2020, owing to limitations in spending power, shut stores/outlets and widespread economic lockdowns. Leather goods are highly popular among consumers as they have inherent qualities, such as being dustproof, fireproof, crack-proof, and have durability, which are expected to increase the growth of the leather goods market. Moreover, the growing demand for trendy handbags, premium leather wallets, and other leather products is influencing the growth of the leather goods market in the last few years. Also, growing government support for the leather industry is further driving the market growth.
Sales Matrix Have Gone Down
During the first lockdown in 2020, most offline fashion and lifestyle stores were closed for 70 plus days at a minimum, with near-zero sales for brands and retailers. The months of April and May 2021 delivered very similar challenges. “FY21 started with zero sale in the month of April 2020 and with the lockdown easing from mid-May for the online market, sales started picking up maybe at 10-20 per cent and finally by the time we entered the Jan- March quarter it had already reached 85 -90 per cent of the previous year levels,” says Nina Lekhi, MD, Baggit.
“Overall for FY21, sales across all channels was about 60 per cent of FY20 numbers, with online growing about 45-50 per cent and offline dropping more than 50 per cent compared to the previous year,” she adds further.
“The series of lockdowns and unlocking was tough for us as well. The pandemic led to a surge in online spending, speeding up the shift from physical stores. Understanding the consumer sentiments, through analytics, right communication, new ways of reaching customers, e-commerce focus and effective customer relations has helped us survive through these trying times. The consumer response was very slow in the initial stages. Two things stood out for us; convenience and cleanliness. We launched special services to reach out to our customers – home visits, drive-thrus and also setting up pop-up stores,” says Farah Malik Bhanji, MD Metro Brands Ltd.
“Hidesign has not yet touched preCOVID levels, in terms of sales. One of the biggest reasons is that airports which account for a significant part of the turnover are still suffering very badly. The airports have still barely reached 50 per cent of the turnover of last year, whereas the mall’s stores were around 80 per cent when the second lockdown was imposed. It will take us time to get back on our feet,” stated Dilip Kapur, Founder & President, Hidesign in a conversation before the April-May lockdown.
“The impact on the industry has been adverse, when it comes to consumption and definitely whenever it impacts the overall industry it impacts us as well so this recent lockdown has quite an adverse impact on us, what we were expecting that the sales will grow they actually tapered down to a very serious degree,” says Ishaan Sachdeva, Director, Alberto Torresi Footwear.
“With decline in the consumption of fashion leather products, there has been a slump in sales, however there are customers, who still are engaged on social media and leather footwear trends and willing to buy products that they can eventually use later. There is always a revenge ‘phenomenon’ that is seen after the lockdown, where the demand for the leather footwear and bags shoots up, and we are hoping we can capitalise on the same by the time of festive season,” notes Sunaina Harjai, Founder, Hats OffAccessories.
Footwear as a sector was the one of the most impacted fashion categories throughout the pandemic and was the last segment to report recovery. India is currently witnessing the second wave of the pandemic and things have once again started to open, under the looming sky of restrictions and guidelines. The bright side is that the Indian economy has the elasticity and the essentials to bounce back from the economic setbacks and unleash it from pre-existing structural interruptions, but with the threat of a predicted third wave, the situation is still very far from being normal.
“There has been a sudden transition to comfort, and relaxed workwear. However, customers are still very much inclined towards leather products, and now want to invest in more hybrid products, which they can use for work as well as casual outings. Preference for softer leather, cushioned insoles, and High-performance comfort soles will be on rise. And with a positive outlook, dress wear will make a comeback soon hopefully,” Harjai adds.
“Leather bags is an under-penetrated category. Even with a decrease in disbursable income, there was a certain minimum level of buying. But the average selling price dropped, driven by aggressive discounting by everyone because most of the brand owners wanted to convert their stock into cash. They knew pain could be introduced plus the consumer’s unwillingness to buy at full price. They were looking for value for money and greater value either through reduction in price or through greater discounts. So while the sales didn’t drop more than 40 per cent, most of the brands ended up in the negative, in terms of the bottom line because the operating expenditures, including the cost of goods manufactured, could not be met through the revenue,” says Lekhi.
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