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20181012170906ibis_world_42434_footwear_wholesaling_in_the_us_march_2018.pdf
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 1
IBISWorld Industry Report 42434 Footwear Wholesaling in the US March 2018 Rachel Hyland
Leg up: Rising shoe prices and higher consumer spending are expected to benefit the industry
2 About this Industry 2 Industry Definition
2 Main Activities
2 Similar Industries
2 Additional Resources
3 Industry at a Glance
4 Industry Performance 4 Executive Summary
4 Key External Drivers
6 Current Performance
8 Industry Outlook
10 Industry Life Cycle
12 Products & Markets 12 Supply Chain
12 Products & Services
13 Demand Determinants
14 Major Markets
15 International Trade
16 Business Locations
19 Competitive Landscape 19 Market Share Concentration
19 Key Success Factors
19 Cost Structure Benchmarks
21 Basis of Competition
22 Barriers to Entry
23 Industry Globalization
24 Major Companies 24 Nike Inc.
26 Operating Conditions 26 Capital Intensity
27 Technology & Systems
27 Revenue Volatility
28 Regulation & Policy
29 Industry Assistance
31 Key Statistics 31 Industry Data
31 Annual Change
31 Key Ratios
32 Industry Financial Ratios
33 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | [email protected]
This report was provided to Texas A&M University - Corpus Christi (2129789428) by IBISWorld on 05 September 2018 in accordance with their license agreement with IBISWorld
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 2
Operators in this industry wholesale footwear (including athletic shoes) made of leather, rubber and other materials. Businesses in this industry purchase shoes from manufacturers, and resell them to retailers with
minimal or no further development or processing. Most wholesalers in this industry undertake sales and administrative activities, such as establishing relationships with manufacturers and retailers.
The primary activities of this industry are
Wholesaling athletic shoes
Wholesaling boots (e.g. hiking and Western)
Wholesaling leather stock and pieces
Wholesaling formal shoes
Wholesaling casual shoes
Wholesaling slippers
31621 Shoe & Footwear Manufacturing in the US This industry manufactures footwear.
42432 Men’s & Boys’ Apparel Wholesaling in the US This industry wholesales men’s and boys’ apparel and accessories.
42433 Women’s & Children’s Apparel Wholesaling in the US This industry wholesales women’s, girls’ and children’s apparel and accessories.
44821 Shoe Stores in the US This industry retails shoes and footwear.
Industry Definition
Main Activities
Similar Industries
Additional Resources
About this Industry
For additional information on this industry
www.textileworld.com Textile World
textilesocietyofamerica.org The Textile Society of America
www.census.gov US Census Bureau
The major products and services in this industry are
Athletic footwear
Footwear and shoe accessories
Infants’ footwear
Men’s and boys’ footwear (excluding athletic footwear)
Women’s and girls’ footwear (excluding athletic footwear)
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 3
% c
ha ng
e
8
-8
-4
0
4
2210 12 14 16 18 20Year
Demand from shoe stores
SOURCE: WWW.IBISWORLD.COM
% c
ha ng
e
9
-6
-3
0
3
6
2410 12 14 16 18 20 22Year
Revenue Employment
Revenue vs. employment growth
Products and services segmentation (2018)
62.7% Women's and girls' footwear (excluding athletic footwear)
25.0% Men's and boys' footwear
(excluding athletic footwear)
9.5% Athletic footwear
1.5% Infants' footwear
1.3% Footwear and
shoe accessories
SOURCE: WWW.IBISWORLD.COM
Key Statistics Snapshot
Industry at a Glance Footwear Wholesaling in 2018
Industry Structure Life Cycle Stage Mature Revenue Volatility Low
Capital Intensity Low
Industry Assistance Medium
Concentration Level Low
Regulation Level Medium
Technology Change Medium
Barriers to Entry Medium
Industry Globalization Low
Competition Level High
Revenue
$39.5bn Profit
$1.8bn Wages
$2.4bn Businesses
4,274
Annual Growth 18–23
2.8% Annual Growth 13–18
2.0%
Key External Drivers Demand from shoe stores Per capita disposable income E-commerce sales Price of shoes Import penetration into the manufacturing sector
Market Share Nike Inc. 21.1%
p. 24
p. 4
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 4
Key External Drivers Demand from shoe stores A key market for wholesalers is retail outlets. When retailers experience increased demand, footwear wholesalers benefit from a higher sales volume. Demand from shoe stores is expected to increase in 2018, presenting a potential opportunity for this industry.
Per capita disposable income Per capita disposable income determines an individual’s ability to purchase discretionary goods or services. Rising
disposable income enables consumers to purchase more apparel, leading to increasing demand for goods from wholesalers. In 2018, per capita disposable income is expected to increase.
E-commerce sales E-commerce sales measure the value of online retail sales in the United States. As more domestic consumers use online retails sites for purchasing items such as footwear, industry operators will have less demand from downstream
Executive Summary
The Footwear Wholesaling industry has benefited from improving economic conditions in the United States. Rising disposable income and consumer expenditure levels, along with rising shoe prices, have stimulated industry revenue growth over the five years to 2018. During the period, industry revenue is expected to increase at an annualized rate of 2.0% to $39.5 billion, including forecast growth of 3.1% in 2018 alone.
The industry is has posted consistent gains during the five-year period as
falling unemployment and increasing per capita disposable income have increased consumers’ propensity to spend. In addition, consumer confidence in the economy has sharply risen over the past five years at an annualized rate of 8.8%. Consequently, demand for footwear in the United States has increased, benefiting the industry. In response to rising demand for footwear, shoe prices have risen, despite the increased penetration of low-priced imports into the domestic footwear supply chain. Rising revenue has encouraged new
wholesalers, especially nonemployers, to set up shop, thus increasing industry participation levels. These positive external forces have caused profit margins to remain steady over the five years to 2018.
During the next five-year period, two potential developments could adversely impact industry revenue. The first is a potential expansion of the Berry Amendment to include domestically manufactured footwear, which would facilitate upstream manufacturers’ bypass of this wholesaling industry. The second is the potential tariff hike on imported footwear as a result of rising protectionist rhetoric in the United States. Such a tariff hike would make it costlier for industry operators to source footwear, driving up their purchase costs and threatening their margins.
However, based on current trends and the uncertainty surrounding trade conditions, IBISWorld expects that this industry will continue to grow over the five years to 2023. Sustained economic improvements, such as rising per capita disposable income levels, are anticipated to continue to stimulate consumer demand for footwear. Overall, industry revenue is estimated to grow an annualized 2.8% to $45.5 billion over the five years to 2023.
Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
In response to rising demand for footwear, shoe prices have risen, despite increased penetration of low-priced imports
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 5
Industry Performance
Key External Drivers continued
markets. E-commerce is a growing method of wholesale bypass, and e-commerce sales are expected to increase in 2018, posing a potential threat to the industry.
Price of shoes When the price of shoes decreases, wholesalers experience lower revenue. Additionally, as powerful downstream retailers increasingly set the terms of purchase, wholesalers are left with slimmer margins. Also, an increase in the price of shoes, resulting from an increase in the price of inputs such as synthetic fiber or rubber, can reduce demand for shoes, which can force downstream retailers to cut their inventories and cause industry revenue to fall. Thus, the net impact of a price increase is dependent on the prevailing economic conditions at the time of
such an increase. The price of shoes is expected to increase in 2018.
Import penetration into the manufacturing sector Import penetration into the manufacturing sector has a twofold effect on this industry, both lowering the price of shoes in the domestic market and increasing the importance of wholesalers that source imported footwear. However, a sustained and reasonable increase in the price of shoes, coupled with greater import penetration into the manufacturing sector, can help boost revenue for this industry because it keeps wholesalers relevant to the supply chain, as foreign manufacturers rely on them for distribution of their products. It also helps recover some revenue lost due to wholesale bypass. Import penetration into the manufacturing sector is expected to increase in 2018.
% c
ha ng
e
4
-4
-2
0
2
2311 13 15 17 19 21Year
Per capita disposable income
SOURCE: WWW.IBISWORLD.COM
% c
ha ng
e
8
-8
-4
0
4
2210 12 14 16 18 20Year
Demand from shoe stores
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 6
Industry Performance
Current Performance
The Footwear Wholesaling industry comprises companies that purchase shoes from manufacturers and resell them, primarily to retailers, with minimal or no further development or processing. The industry has expanded over the past five years as improving economic conditions have stimulated consumer demand for footwear. For example, rising per capita disposable income levels have increased consumers’ propensity to spend on premium footwear during the five-year period. In addition, a sustained increase in the price of shoes also helped maintain profit margins for industry operators. IBISWorld expects industry revenue to increase at an annualized rate of 2.0% to $39.5 billion over the five
years to 2018; this includes a forecast revenue gain of 3.1% in 2018.
% c
ha ng
e
8
0
2
4
6
2410 12 14 16 18 20 22Year
Industry revenue
SOURCE: WWW.IBISWORLD.COM
Downstream markets Footwear retailers, such as shoe stores like DSW, formerly Designer Shoe Warehouse, and Foot Locker, are one of the most important downstream markets for this industry. Additionally, department stores, supercenters and warehouse stores are a crucial source of industry revenue. Collectively, the industry’s downstream retail market is anticipated to generate 63.1% of total industry revenue in 2018. Over the past five years, downstream demand from retailers has increased as consumer expenditure on footwear has risen significantly, in terms of both quantity and quality. Retailers responded to this demand growth by
raising prices, allowing wholesalers to do the same, positively impacting industry profit margins.
IBISWorld forecasts the Consumer Confidence Index to increase at an annualized 11.5% over the five years to 2018. This increase has been stimulated by an annualized increase of 2.4% in per capita disposable income during the period, spurred by improving economic, capital and labor market conditions. The national unemployment rate has fallen during the five-year period to the lowest it has been in over a decade. These factors have helped boost consumer spending on footwear.
Industry products The industry wholesales a variety of footwear products that range from activewear to women’s and men’s, as well as infant and children’s shoes. The largest product segment is women’s and girls’ footwear, which is expected to generate 62.7% of industry revenue in 2018. This product segment has increased as a share
of industry revenue over the past five years. Women’s shoes tend to be higher priced relative to other industry products. Other notable product segments include men’s and boys’ footwear and athletic footwear, which are expected to generate 25.0% and 9.5% of industry revenue in 2018, respectively.
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 7
Industry Performance
Industry profitability and participation
Average industry profit is expected to remain stagnate during the period, at 4.5% in 2018. Upward pricing pressure exerted by downstream retailers has surpassed downward pressures from the increased penetration of low-cost and low-margin apparel imports into the domestic supply chain. As demand for footwear increased, retailers sold products at increasingly higher prices in order to boost margins. Correspondingly, retailers significantly increased their purchases from wholesalers, which prompted wholesalers to raise their prices as well. This trend positively impacted the industry. Additionally, stable industry profitability increased the industry’s appeal to potential entrants, ultimately boosting industry participation levels during the period.
Additionally, the total value of industry wages has expanded to represent 6.1% of industry revenue in 2018.
IBISWorld expects the number of industry enterprises to increase at an annualized rate of 0.6% to reach 4,274 operators over the five years to 2018. An increase in industry participation has stimulated demand for labor. Consequently, IBISWorld expects the number of industry employees to grow at an annualized rate of 2.0% to 31,332 workers during the same period.
Stable industry profitability has increased the industry’s appeal to potential entrants
Industry consolidation
Despite the industry’s strong growth over the five years to 2018, no single industry operator has been able to occupy a commanding share of the market. In fact, the industry has a low level of concentration, as it is highly fragmented with a mix of small and large participants. For instance, the top four players are expected to account for 26.7% of industry revenue in 2018. The industry’s market share concentration has increased slightly in this time frame
as a result of a strong performance by Nike Inc., the industry’s sole major player. Nonetheless, according to data from the US Census Bureau, 61.9% of establishments within this industry are nonemployers. The abundance of small- scale operators catering to demand from localized markets prevents large companies from rapidly increasing their market share, which has kept industry concentration levels low during the five-year period.
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 8
Industry Performance
Potential effects of the Berry Amendment
Uncertainty remains surrounding the implementation of the Berry Amendment, adding a degree of unpredictability regarding the future performance of this industry. Currently, the DoD allows the US military to procure whatever footwear its soldiers prefer and feel most comfortable wearing. The military spends between $65.00 to $75.00 annually on athletic footwear per soldier. In recent years, industry associations and other lobbyists in the footwear industry have been applying pressure on the government to apply the stipulations in the Berry Amendment to the procurement of footwear. Major footwear manufacturer Wolverine Worldwide has indicated that it could produce completely US- manufactured and sourced footwear within the military’s budget. Should such a proposal be enacted, it would inherently lead to wholesale bypass,
adversely impacting the industry. Since soldiers are currently free to buy the footwear they prefer, it is reasonable to assume that they do so from retail outlets. Those retailers procure footwear from wholesalers and other manufacturers, thereby creating a supply chain that starts with raw materials manufacturers and ends with the final consumer. However, if companies, such as Wolverine, sell directly to the DoD, it will eliminate the role of wholesalers and retailers from this specific supply chain, adversely impacting the Footwear Wholesaling industry’s future growth prospects.
Industry Outlook
Two developments could have significant implications for the Footwear Wholesaling industry over the next five years. The Berry Amendment requires the Department of Defense (DoD) to procure 100.0% US-manufactured products, such as uniforms for soldiers; however, this amendment has not been applied to the footwear sectors until now. Additionally, increased calls for trade
protectionism in the United States may culminate in the implementation of heightened tariff barriers. This would adversely impact industry operators by driving up their purchase costs and threatening their margins. Despite these two potential threats, IBISWorld expects that industry revenue will increase at an annualized rate of 2.8% to $45.5 billion over the five years to 2023.
The Berry Amendment may adversely affect the industry as it may promote wholesale bypass
Potential effects of increased trade protectionism
Similarly, reduced international trade at the upstream manufacturing level, while potentially benefiting domestic footwear manufacturers, would adversely impact the Footwear Wholesaling industry. Since imports satisfy a significant proportion of domestic demand for footwear, import penetration gives footwear wholesalers an important role in the supply chain. Foreign manufacturers sell footwear in
bulk at precontracted prices to wholesalers, thereby reducing their risk and giving them a defined market for their products. Wholesalers also directly source products from foreign manufacturers and then sell those products in the domestic market. A hypothetical tariff hike on low-price footwear imports would reduce external pricing pressure on domestic footwear
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 9
Industry Performance
Sustained revenue growth expected
Based on current trends and in the absence of external factors that are presently unknown, IBISWorld expects that this industry will continue to grow in coming years. Profit is expected to stabilize at 4.5% of revenue over the next five years, as growth in the price of shoes is also expected to be counterbalanced by downward pricing pressure from imports and the increasing buying power of retailers.
The industry’s sustained expected growth and profit stability are anticipated to continue to attract interest from potential industry entrants. As a result, over the five years to 2023, the number of enterprises in this industry is projected to
grow at an annualized rate of 1.8% to 4,674 companies. In turn, increased industry participation levels are expected to boost the industry’s demand for labor, thereby increasing its employment count. Over the five years to 2023, the number of industry employees is forecast to rise at an annualized rate of 2.3% to 35,058 workers.
manufacturers. However, such a tariff hike would increase industry operators’ purchase costs. If operators are unable to pass the increased cost onto
downstream retailers, they will experience contracting margins, forcing many businesses to exit the Footwear Wholesaling industry.
Potential effects of increased trade protectionism continued
The industry’s profit stability will continue to attract interest from potential industry entrants
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 10
Industry Performance Industry value added (IVA) is expected to grow at a similar rate as the overall economy during the outlook period
This industry sells well-defined products with little change in technology, but constant changes in design
The market is fully familiar with industry products and product adoption is complete
Life Cycle Stage
SOURCE: WWW.IBISWORLD.COM
20
15
10
5
0
-5
-10
% G
ro w
th in
s ha
re o
f ec
on om
y
% Growth in number of establishments
-10 -5 0 5 10 15 20
Decline Shrinking economic importance
Quality Growth High growth in economic importance; weaker companies close down; developed technology and markets
Maturity Company consolidation; level of economic importance stable
Quantity Growth Many new companies; minor growth in economic importance; substantial technology change
Key Features of a Mature Industry
Revenue grows at same pace as economy Company numbers stabilize; M&A stage Established technology & processes Total market acceptance of product & brand Rationalization of low margin products & brands
Shoe & Footwear Manufacturing
Sporting Goods Stores
Athletic & Sporting Goods Manufacturing
Men’s & Boys’ Apparel Wholesaling
Department Stores
Footwear Wholesaling
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WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 11
Industry Performance
Industry Life Cycle This industry is in the mature phase of its life cycle. While industry value added (IVA), which measures an industry’s contribution to gross domestic product (GDP), for footwear wholesalers is expected to grow at an annualized rate of 2.8% over the 10 years to 2023, while US GDP has an expected annualized growth of 2.1% during the same period. While there is a divergence between these two growth rates, other factors support the industry’s mature classification. Similar to most wholesaling industries, footwear wholesalers have been an important link in the supply chain between footwear manufacturers and retailers for many decades.
Other indicators, such as well-defined product segments and wholehearted product adoption by major markets, also indicate this is a mature industry. Even
as fashion trends change, footwear products as a whole remain a staple for consumers. Additionally, the fundamental nature of industry products has led to little innovation for the mass market in this industry. In lieu of this sparse innovation and the growth of online distribution, industry operators tend to focus on operational efficiencies such as reducing overhead costs and other wastage, in order to preserve margins. As market share concentration increases due to increased competition, enterprise growth is expected to decelerate, while wages as a share of revenue are expected to remain relatively static over the five years to 2023. All these factors indicate that the Footwear Wholesaling industry is in the mature phase of its life cycle.
This industry is Mature
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 12
Products & Services
Women’s and girls’ footwear Women’s and girls’ footwear (excluding athletic footwear) is expected to account for the largest proportion of industry revenue, at an estimated 62.7% in 2018. This segment includes products such as casual and heeled shoes, slippers and formal shoes. This product segment has increased significantly over the past five years, as improving economic conditions have stimulated consumer demand for women’s shoes, which tend to higher priced, relative to other industry
products. Additionally, fast fashion has also provided the impetus for increased footwear purchases due to the need for matching outfits with shoes.
Men’s and boys’ footwear Men’s and boys’ footwear (excluding athletic footwear) is anticipated to account for 25.0% of industry revenue in 2018. Products within this segment include men’s and boys’ sandals, casual and work shoes, slippers and other similar items made from any material.
Products & Markets Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
KEY BUYING INDUSTRIES
44821 Shoe Stores in the US This industry supplies a range of footwear to shoe stores.
45111 Sporting Goods Stores in the US This industry retails athletic shoes from selected wholesalers.
45211 Department Stores in the US This industry supplies a range of men’s, women’s, infants’ and athletic footwear for retailing.
KEY SELLING INDUSTRIES
31621 Shoe & Footwear Manufacturing in the US This industry supplies a range of footwear to wholesalers.
33992a Athletic & Sporting Goods Manufacturing in the US This industry supplies athletic footwear to wholesalers.
33992b Gym & Exercise Equipment Manufacturing in the US This industry supplies athletic footwear to wholesalers.
Supply Chain
Products and services segmentation (2018)
Total $39.5bn
62.7% Women's and girls' footwear (excluding athletic footwear)
25.0% Men's and boys' footwear
(excluding athletic footwear)
9.5% Athletic footwear
1.5% Infants' footwear
1.3% Footwear and shoe
accessories
SOURCE: WWW.IBISWORLD.COM
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 13
Products & Markets
Demand Determinants
Shifts in consumer preferences can change demand. The relative popularity of various sports and fitness activities, as well as the recent trend in athleisure in popular culture and among the general population, will alter the level of demand for athletic shoes from retailers. Aggressive marketing and promotion of certain brands or sports boost demand for the respective footwear. More specifically, trends viewed on designer runways, celebrity endorsements and red carpets create demand for particular styles of footwear.
Household disposable income also affects demand. Typically, as disposable income increases, consumer spending levels will also increase. These shifts in spending are important for this industry because retail demand is primarily driven by changes in consumer spending. Although subtle increases in spending may lead to higher revenue for industry operators, as general income levels continue to increase in most
developed economies, household expenditure on consumer products declines as a percentage of income. Instead, more household spending is directed toward services, such as entertainment and communications. Seasonal changes can also create demand for different types of footwear (e.g. boots are more popular in winter than in summer). Each season, wholesalers must anticipate the timing of weather in order to deliver relevant stock.
The terms and conditions of wholesale license agreements are also important demand determinants. Offering cost- effective terms and conditions on license agreements typically bolster demand from downstream retailers. An increase in the value of the US dollar will make foreign-made clothing relatively less expensive for US importers. These cost savings may be passed onto downstream retailers and consumers, which can further stimulate demand.
Products & Services continued
This product segment’s proportion of revenue has increased slightly over the past five years due to a sustained increase in price for many of these items and increased sales volumes. This segment remains smaller than women’s shoes because men typically do not purchase high-priced designer shoes at the same frequency as women.
Athletic footwear Athletic footwear makes up the third- largest product segment at an estimated 9.5% of industry revenue in 2018. This segment includes casual footwear for sports, including trainers, sports shoes, hiking shoes and other athletic footwear. The proportion of revenue generated by this segment has fallen considerably over the past five years due to significant wholesale bypass. While demand for athletic footwear has increased, major companies that design and market such
footwear, such as Nike and Adidas have increasingly sought to adopt a direct- to-consumer sales model. Consumers have been purchasing through either brand specific stores or through e-commerce methods that both companies have adopted. Additionally, these companies have increasingly sought to sell directly to department stores and other footwear retailers, which has shrunk the space available for other participants to operate in this segment. Consequently, the share of revenue generated by this segment has fallen over the past five years.
Other Other product segments include infants’ footwear and footwear accessories (like shoelaces). These two segments have remained stable as a share of industry revenue over the period, collectively account for 2.9% in 2018.
Provided to: Texas A&M University - Corpus Christi (2129789428) | 05 September 2018
WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 14
Products & Markets
Major Markets
Wholesalers and distributors Wholesalers and distributors are expected to account for 32.4% of the revenue generated by this industry in 2018. Their share of revenue has remained stable over the past five years. Many wholesalers within the industry trade among themselves in order to control inventory shortages during high demand season. Often, larger wholesalers sell imported footwear to smaller wholesalers that cannot source industry items directly from overseas manufacturers. Wholesalers from other industries or wholesalers that operate within different industries also purchase footwear for reselling purposes from industry operators.
Discount stores and specialty footwear retailers Casual and athletic footwear is increasingly being distributed through department stores and discount stores rather than exclusively through athletic footwear stores. In 2018, IBISWorld expects that footwear wholesalers will receive an estimated 39.8% of revenue from specialty footwear stores. Discount stores are a fast-growing retail channel for shoes and are expected to account for 16.5% of industry revenue in 2018.
Discount stores are offering consumers more brand-name products than ever before and deliver the added benefit of offering lower prices than other retail stores. As these companies have grown, they have drawn interest from wholesalers, which view these discount outlets as more lucrative partners. As a result, inventory levels of brand-name merchandise are increasing at discount stores.
Athletic and sporting goods stores Athletic and sporting goods stores are estimated to contribute 11.9% of revenue in 2018. Many sports require specific shoes, such as soccer cleats and golf shoes. Due to their specific nature and high quality, athletic shoes are sold at relatively high prices. Additionally, revenue from sporting goods stores is growing as more consumers are attracted by the ease of buying all their sports equipment in one store, as opposed to athletic footwear stores only carrying shoes.
Department stores Discount stores surpass department stores as a major market, and the lead has been widening in the past decade. Consumers have increasingly been finding shopping alternatives to department stores, such as e-commerce
Major market segmentation (2018)
Total $39.5bn
32.4% Wholesalers and
distributors for resale
3.3% Direct sales
23.3% Specialty footwear retailers
1.2% Other
16.5% Discount stores
11.9% Athletic and sporting goods stores
11.4% Department stores
SOURCE: WWW.IBISWORLD.COM
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WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 15
Products & Markets
International Trade The value of imports and exports exchanged within this industry is conventionally counted in the Shoe & Footwear Manufacturing industry (IBISWorld report 31621). However, many
wholesalers are importers and exporters of footwear, due to the level of globalization in the industry and the savings realized from purchasing footwear from countries with low labor costs.
Major Markets continued
and specialty discount stores that offer the same or similar brands and products at a reduced cost. In 2018, IBISWorld estimates that 11.4% of wholesale revenue will be generated from sales to department stores.
Other This segment includes sales made to government organizations, businesses for
end use and direct-to-consumer sales. This segment is expected to account for 4.5% of revenue in 2018, with 3.3% of industry revenue coming from direct sales to consumers alone. Over the past five years, sales to consumers and households have increased as industry operators are expanding their participation in the growing e-commerce trends.
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WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 16
Products & Markets
Business Locations 2018
MO 1.7
West
West
West
Rocky Mountains Plains
Southwest
Southeast
New England
VT 0.0
MA 3.0
RI 0.2
NJ 5.7
DE 0.2
NH 0.7
CT 0.6
MD 0.4
DC 0.1
1
5
3
7
2
6
4
8 9
Additional States (as marked on map)
AZ 0.7
CA 33.6
NV 0.7
OR 1.0
WA 1.4
MT 0.3
NE 0.2
MN 0.7
IA 0.1
OH 0.9
VA 1.1
FL 10.2
KS 0.3
CO 1.0
UT 0.3
ID 0.1
TX 5.0
OK 0.1
NC 1.7
AK 0.0
WY 0.1
TN 1.0
KY 0.5
GA 1.6
IL 2.1
ME 0.4
ND 0.1
WI 0.4 MI
0.9 PA 3.0
WV 0.1
SD 0.0
NM 0.3
AR 0.3
MS 0.1
AL 0.3
SC 0.3
LA 0.2
HI 0.6
IN 0.4
NY 15.6 5
6 7
8
3 21
4
9
SOURCE: WWW.IBISWORLD.COM
Mid- Atlantic
Establishments (%)
Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
Great Lakes
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WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 17
Products & Markets
Business Locations Many wholesalers are located near footwear manufacturers and key suppliers to the industry, as well as shoe retailers. The industry establishment spread largely follows population patterns with the three most populous regions being home to the most wholesalers. However, geographic spread in this industry is becoming less important as consumers increasingly shop via the internet. Wholesalers are in danger of being marginalized as manufacturers initiate selling directly to consumers and retailers contract their own manufacturers to produce private label brands.
West The West increased its share of industry revenue over five years to 2018. The West currently accounts for 37.2% of establishments, with California accounting for 33.6% of industry establishments. Many wholesalers are located in this region because major player Nike Inc. is headquartered in Oregon. The West has become an important geographic segment, representing the second-largest region in terms of sales. Two of the largest manufacturing centers in the United States are Los Angeles and San Francisco. Wholesalers are primarily located in both of these industrial areas where zoning exemptions allow for lower overheads. Therefore, there will be higher operating efficiencies and price increases will be minimized. Furthermore, these cities are international hubs for foreign imports. Their relative proximity to Asia makes transportation easier for apparel manufacturers in that region.
Mid-Atlantic The Mid-Atlantic has the second-largest number of wholesalers, accounting for 25.1% of total industry establishments. New York, located in the Mid-Atlantic region, accounts for 15.6% of the establishments in
this industry. Many wholesalers are located in this region because 14.8% of footwear manufacturers are located here (IBISWorld Report 31621). Wholesalers have establishments close to their suppliers to cut down on shipping costs and delivery time. Also, the Mid-Atlantic region is home to some of the largest trade ports in the country, making their locations more attractive to wholesale operations, which often engage in trade activities.
Southeast The Southeast accounts for 17.3% of industry establishments, with Florida being the key state in the region with 10.2% of the industry’s locations. By locating wholesaling establishments close to downstream industries, wholesalers cut down on shipping costs and ensure faster delivery of their goods. The Southeast is also ideally located along the Gulf of Mexico, helping to facilitate low-cost and efficient maritime transport with manufacturers in Mexico.
Other Other main clusters of industry establishments are located in New
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Distribution of establishments vs. population
SOURCE: WWW.IBISWORLD.COM
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Products & Markets
Business Locations continued
England, Southwest and the Great Lakes, which account for 4.8%, 6.0% and 4.9% of industry establishments, respectively. Most
of the industry’s establishments in the Southwest region are based in Texas, which accounts for 5.0% of the total population.
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Cost Structure Benchmarks
Cost structures for companies operating in the Footwear Wholesaling industry vary depending on the size and scope of the individual enterprise. Larger companies, which may be vertically integrated or have established relationships with overseas suppliers, exert greater pricing power, thus
reducing their costs and maximizing their profit margins. The breakdown of costs presented here is an average for all industry players.
Profit Cost structures vary among industry players depending on their product
Key Success Factors Supply contracts in place for key inputs Guaranteed supply of inputs is essential for meeting customer demands. Additionally, locked-in low costs are essential to a wholesaler’s profit margin.
Prompt delivery to market Wholesalers within this industry need to meet customer demands for footwear on time. Women’s shoes, especially, change trends at a fast pace, which requires the entire supply chain to turn products over quickly.
Protection of intellectual property/ copyrighting of output Protection of brands and exclusive contracts is important for footwear wholesalers because many wholesalers have fully integrated operations within
the design and marketing aspects of the supply chain.
Having a cost effective distribution system Operating efficiently and keeping costs low are important for companies within this industry. Over the past five years, the threat of wholesaler bypass has forced the middleman to keep costs low.
Ability to control stock on hand A wholesaler’s ability to deliver in- demand stock quickly relies on its available stock on hand.
Establishment of brand names Building and extending recognizable brand names are important for companies’ sales in this industry.
Market Share Concentration
Industry concentration measures the extent to which major players dominate an industry. The Footwear Wholesaling industry has a low level of concentration, as it is highly fragmented with a mix of small and large participants. Although market share concentration has increased over the past five years, the top four players are expected to account for less than 30.0% of industry revenue in 2018. Concentration growth is expected to continue moving forward as the highly competitive nature of this industry will continue to place pressure on participants to close operations or merge to maintain profitability. Even
wholesaling customers like large, well- established department stores are subject to mergers, acquisitions and bankruptcy, putting further pressures on wholesalers to consolidate. Nonetheless, according to data from the US Census Bureau, 61.9% of establishments within this industry are nonemployers. Additionally, the abundance of small-scale operators catering to the demand of localized markets prevents large companies from rapidly increasing their market share, which is ultimately expected to keep industry concentration low over the next five years.
Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
Level Concentration in this industry is Low
IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
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Competitive Landscape
Cost Structure Benchmarks continued
portfolio, distribution reach, brand name and economies of scale. The retail industry in the United States is very competitive, which forces wholesalers to engage in promotional activity with its customers, keeping margins low. Low returns are also the result of a high level of competition from domestic and foreign companies, as well as pressures from downstream retailers and consumers for lower-priced products in a mature industry. However, margins are expected to stay relatively consistent over the five years to 2018. IBISWorld estimates that average profit margins (measured as earnings before interest and tax) will account for 4.5% of revenue in 2018, unchanged from 4.5% in 2013, This sustained performance has been driven by strengthening downstream demand, along with a sustained increase in the price of shoes.
Purchases Purchases represent the largest expense item for industry operators. In 2018, purchases are expected to account for 67.5% of industry revenue. In general, high purchase costs are characteristic of a wholesaling industry because operators purchase large amounts of stock to resell to downstream industries. Footwear is subject to variable fashion trends and seasons, so wholesalers focus on moving stock quickly to make the most of a particular trend. Over the years, purchasing costs have declined slightly, as low-cost imports have increasingly penetrated the domestic supply chain, enabling wholesalers to curb spending on lower-priced footwear imports.
Wages Wages are estimated to account for 6.1% of industry revenue in 2018. Generally, warehouse operations do not require a
Sector vs. Industry Costs
n Profi t n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other
Average Costs of all Industries in sector (2018)
Industry Costs (2018)
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5.2
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Competitive Landscape
Basis of Competition Internal competition Internal competition in this industry is high as many footwear wholesalers have established relationships with manufacturers and retailers. Strong relationships with retailers give wholesalers the opportunity to maximize the selling space dedicated to their products. Additionally, adjusting the mix of existing product offerings and developing new products, styles and categories creates grounds for competition. Wholesalers that have the latest designs and colors are more likely to retain existing customers and attract new ones. For example, Adidas is committed to introducing at least one new product per year. A diverse brand portfolio is another aspect of competition.
Wholesalers with a wide range of products are more attractive to department and discount stores as they appeal to more consumers. Companies can differentiate their products through different promotional activities and relationship building with various types
of footwear manufacturers. This ability to provide product variety is due to the fact that consumers differentiate footwear based on image and functionality, which are usually highlighted in advertising promotions. This leads to constant change in consumer demand. At the higher end of the market, brand name footwear is generally associated with better quality items. Consumers, in particular, differentiate their buying choices based on the quality of the footwear product.
In addition, wholesalers operate in a very price-sensitive market and are under pressure to offer retailers competitive prices for their brands. By offering strong promotional support for their products, wholesalers are able to obtain sufficient floor space and effective presentation of products across retail stores.
External competition External competition is growing in this industry as e-commerce and other
Cost Structure Benchmarks continued
large number of workers to execute day-to-day tasks. Storage, transportation and sorting are not tasks that require a high level of specialized skills or very precise attention to detail. Consequently, wages are a small portion of total costs. Over the past five years, wages as a share of revenue have remained stable.
Marketing Marketing is estimated to account for 1.6% of industry revenue in 2018. Industry advertising costs tend to be high, given that product branding positively impacts operators’ profit margins. Advertising and marketing expenses have increased as a share of industry revenue since 2013, as industry more companies embrace push- advertising strategies, whereby demand is created at a consumer level, which
then trickles up to the level of wholesalers and manufacturers.
Depreciation, rent, utilities and other costs The industry’s capital expenditure consists of purchases of office equipment, warehouse machinery and computer software. The depreciation costs associated with this capital equipment is expected to account for 0.5% of total revenue in 2018. Conversely, the rent and utilities associated with warehouse management are anticipated to account for 1.5% of industry revenue in the same time period. Other costs include insurance, warehousing, transportation, employee fringe benefits. Collectively, these costs are anticipated to collectively account for the remaining 18.3% of industry revenue in 2018.
Level & Trend Competition in this industry is High and the trend is Steady
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Competitive Landscape
Barriers to Entry License agreements provide wholesalers with exclusive distribution of certain brands, creating contracts between themselves and footwear manufacturers. Some wholesalers will also utilize trademarks on nearly all of their products, adding extra security to future profit margins. This is because penalties are imposed on the infringement of patents and trademarks.
New entrants are must negotiate the long-term nature of supplier and customer relations, which can be challenging and cause great uncertainty for long-term performance. Over the past five years, major department stores and specialty retailers have been increasingly sourcing products from suppliers that are well-capitalized or have established reputations for delivering quality merchandise in a timely manner. Additionally, the industry has high start-up costs to acquire stock and transportation. Acquiring stock can be expensive if supply contracts with low-cost third-party manufacturers are not in place. However, costs of delivery
can be mitigated by renting vehicles and warehouses instead of buying them.
High costs can be incurred by trying to establish brand names among retailers and consumers. Larger players, such as Nike and Adidas, focus a significant portion of their resources on advertising, using high-profile athletes to endorse their products. Without this large brand name, it could be challenging for new entrants to sign high profile personas to market their brand. Hiring athletes and other celebrities is expensive and many will not sign with a brand that is unpopular or too new.
Basis of Competition continued
methods of wholesale bypass have become increasingly popular in recent years. Many large retailers have sought to cut out wholesaling by going directly to manufacturers to stock products. This helps retailers cut input costs by reducing their purchases for industry products. Another growing method of wholesale bypass is the growth of e-commerce which
is a large external threat for this industry. Online shopping allows individuals to shop from home and price compare between many different online retailers. As online shopping grows in popularity for consumers, many brands and manufacturers will set up online stores to be able to sell directly to consumers further enhancing their earnings.
Barriers to Entry checklist
Competition High Concentration Low Life Cycle Stage Mature Capital Intensity Low Technology Change Medium Regulation & Policy Medium Industry Assistance Medium
SOURCE: WWW.IBISWORLD.COM
Level & Trend Barriers to Entry in this industry are Medium and Steady
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Competitive Landscape
Level & Trend Globalization in this industry is Low and the trend is Increasing
Industry Globalization
Since there is no international trade within the industry, globalization is low, even though many larger-scale operators have a significant international presence. Industry operator Adidas AG is a German-owned and -based company that has operations within the United States. This foreign ownership increases the level of globalization within the industry. However, globalization is increasing due to companies looking to beef up market share around the world. In the past year, the value of the dollar relative to other currencies has fallen, which might expedite the participation of foreign operators in the domestic market as it becomes relatively lower-cost for them to do business in the United States. Larger companies in this industry operate subsidiaries in foreign markets; however, smaller players do not have the resources for this.
While international trade is accounted for at the manufacturing level, wholesalers import the majority of their footwear for resale. High and increasing levels of shoe imports and manufacturing outsourcing by footwear producers increase the level of foreign inputs for the wholesaling sector. Many footwear
companies outsource the production of their clothing lines to manufacturers in low-cost countries, such as China, Mexico and Malaysia.
Fifteen years ago, wholesalers had more clearly defined roles in ensuring that distribution between supplier and retailer was performed at maximum efficiency. Today, the ability to select sources and production in line with required inventory levels, sales and budgets may require overseeing operations, teams and marketing campaigns in various locations around the world. Along with this, a greater collaborative working style among companies, buyers and product developers is becoming more important as larger retailers increasingly manufacture their own brands.
Meeting targets on price, quality and delivery for wholesalers was always important in this industry. Now, the ability to manage relationships with overseas factories and suppliers to ensure product lines are replenished in the shortest possible lead times, while still ensuring the lowest possible cost, is just as important.
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Player Performance Nike Inc. (Nike) was founded in 1964 and is headquartered in Beaverton, OR. Nike is currently one of the largest athletic footwear companies in the world and sells its products to more than 27,000 retail clients across the United States. The company also sells its products through a mix of independent distributors, licensees and subsidiaries in 190 countries. Independent contractors manufacture almost all of the company’s products, while the majority of footwear products are produced outside the United States. Nike employs 74,400 workers worldwide. The company generated $34.4 billion in consolidated revenue in fiscal 2017.
The company has seven product categories: running, basketball, soccer, men’s training, women’s training, Nike sportswear and action sports. Nike derives 44.7% of its revenue from US sales. IBISWorld estimates that 60.1% of its US revenue is generated by footwear sales.
Additionally, using the overall company as a proxy, IBISWorld estimates that Nike’s US wholesale business accounts for 84.5% of the company’s total revenue.
In 2017, Nike’s Converse brand generated nearly $2.0 billion, representing a significant return on investment considering that Nike acquired the company for a mere $305.0 million in 2003. Converse, while only accounting for 10.0% of Nike total footwear revenue, has been the company’s most rapidly growing footwear segment over the past five years. This is due to a resurgence of the iconic shoe through popular culture and as an everyday footwear choice. Nike’s core athletic shoes business, including its NIKE and Jordan brands, have also posted healthy, albeit slower, growth over the past five years.
Financial performance Over the five years to fiscal 2019, IBISWorld expects Nike’s industry-
Major Companies Nike Inc. | Other Companies
78.9% Other
Nike Inc. 21.1% SOURCE: WWW.IBISWORLD.COM
Major players (Market share)
Nike Inc. (US industry-specifi c segment) - fi nancial performance*
Year** Revenue
($ million) (% change) Operating Income
($ million) (% change)
2013-14 6,136.7 N/C 594.5 N/C
2014-15 6,943.3 13.1 742.6 24.9
2015-16 7,626.5 9.8 885.7 19.3
2016-17 7,800.6 2.3 962.9 8.7
2017-18 7,942.6 1.8 781.3 -18.9
2019-19 8,319.7 4.7 983.4 25.9
*Estimates, **Year-end May SOURCE: ANNUAL REPORT AND IBISWORLD
Nike Inc. Market share: 21.1% Industry Brand Names Nike Jordan Converse Hurley
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Major Companies
Other Companies Adidas AG Estimated market share: 3.8% Adidas AG (Adidas) is a sporting brand in the global sporting goods market. Headquartered in Germany, the company has been producing shoes for almost a century and has maintained a significant presence in the US market since the 1950s. Adidas generates 48.1% of its revenue from footwear sales. Customers include sporting goods stores, athletic specialty and family footwear retailers, in addition to high-end department stores and directional accounts in the Sport Heritage division. In May 2017, Adidas sold their Taylor Made Golf business as a way to focus on their footwear sales. Adidas also operates company-owned stores, which sell products directly to consumers. Nonetheless, Adidas’ wholesale business generates the majority of the company’s revenue, accounting for an estimated 64.3%. In 2018, IBISWorld expects Adidas to generate $1.5 billion in industry-specific revenue
Caleres Inc. Estimated market share: 1.9% Caleres Inc. (Caleres), was originally established as the Brown Shoe Company in 1875. It was incorporated in 1913 and specializes in retailing and wholesaling footwear. The company generated $2.6 billion in global revenue in 2016 (latest data available). The company employs 12,000 people and is headquartered in St. Louis. Additionally, they operates various brands including Famous Footwear, Healthy Living and Bzees. According to Caleres’s most recent annual report, 63.0% of the company’s revenue is generated by the sale of women’s footwear, 22.0% from men’s footwear and 9.0% from children’s footwear. Additionally, Caleres’s wholesale business accounts for 33.0% of the company’s total revenue. Over the five years to 2018, Caleres’s industry- specific revenue is expected to grow at an annualized 3.2% to $751.6 million
Player Performance continued
specific revenue to grow at an annualized rate of 6.3% to $8.3 billion. During the same period, Nike has focused a significant portion of its resources on marketing, usually using famous athletes to endorse company products. This includes increased advertising and development of the apparel for Team
USA for their participation the 2018 winter Olympics in Pyeongchang, South Korea. The company’s strong brand image and wide range of athletic footwear for many different sports have helped the company capitalize on rising levels of disposable income and consumer expenditure.
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Capital Intensity Historically, the Footwear Wholesaling industry has been labor intensive. Much of this labor has been used for administrative tasks, such as selling or managing stock, and for physical tasks like moving stock. These roles do not add much value to the products, and as a result, advances in computer technology have been able to automate an increasing number of these tasks. IBISWorld estimates that the industry spends $0.08 on capital investments for every dollar spent on labor in 2018, increasing from $0.05 in 2013.
Technology is used for stock control, inventory management and supply chain management. Some capital expenditures that wholesalers may encounter include purchases and
maintenance of large fleets of vehicles for transporting goods, mobile phones for communication between staff, large
Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Tools of the Trade: Growth Strategies for Success
SOURCE: WWW.IBISWORLD.COM
La bo
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Capital Intensive
Change in Share of the Economy
New Age Economy
Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.
Traditional Service Economy
Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.
Old Economy
Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.
Investment Economy
Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.
Shoe & Footwear Manufacturing
Sporting Goods Stores
Athletic & Sporting Goods Manufacturing Men’s & Boys’ Apparel Wholesaling
Department Stores Footwear Wholesaling
Capital intensity
0.5
0.0
0.1
0.2
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0.4
SOURCE: WWW.IBISWORLD.COM Dotted line shows a high level of capital intensity
Capital units per labor unit
Footwear Wholesaling
Wholesale Trade
Economy
Level The level of capital intensity is Low
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Operating Conditions
Revenue Volatility This industry is characterized by a low level of revenue volatility. Since most footwear products are considered essential goods, consumers’ demand for such goods exhibits a high degree of
stability during normal economic conditions. Over the past five years, industry revenue is estimated to have increased as little as 1.1% in 2016 and as much as 3.1% in 2018.
Technology & Systems The main technological development in the footwear wholesale sector has been the electronic management of the supply chain. Distribution management software provides complete end-to-end supply chain management solutions by combining planning, execution, collaboration and monitoring capabilities. These systems can be delivered via the web, and provide advanced order management capabilities, integrated with a comprehensive warehouse and branch inventory management and replenishment system. Supply chain management software enables inventory to be stored on a national or international basis, requiring fewer regional distribution centers. Internet technology is used to communicate product information globally. This has further internationalized global supply chains in the worldwide footwear industry, with companies operating in various international locations. For example, product design, strategy and marketing are often done in developed countries while manufacturing often takes place in countries with relatively low labor costs. While this still took place before the advent of internet technology, the speed of conversion from footwear design to manufacturing to wholesaling has increased.
Adopting XML (Extensible Markup Language) is expected to cut transaction costs as distributors and manufacturers will be able to exchange business documents electronically. Documents are able to be tagged and can then be more easily translatable than in HTML. Radio Frequency Identification (RFID) technology is also being introduced to make existing supply chain processes more efficient. Products are “tagged” with chips that “announce” their identity when hit with a non-line-of-sight electromagnetic field. This assists with forecasting demand and managing inventory levels. Electronic data interchange (EDI) is used by many wholesalers to send orders and receive merchandise and invoices. Supply chain management software enables inventories to be stored on a national or international basis, requiring fewer regional distribution centers.
Additionally, more wholesalers are turning to cloud-based customer relationship management (CRM) tools. Such internet-based software permits midsize companies to compete more effectively with larger companies by offering lower-cost ways to attract, sell and serve customers such as department stores and mass merchants.
Capital Intensity continued
commercial wholesaling properties for housing stock and information technology systems for tracking and ordering stock. Nonetheless, the industry has become more labor
intensive over the past five years. With stable margins and sustainable growth expected over the next five years, capital intensity in this industry is anticipated to increase further.
Level The level of Technology Change is Medium
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Operating Conditions
Regulation & Policy Wholesaler trademark holders must abide by US Patent and Trademark laws that relate to the protection of intellectual property rights. Penalties are imposed on the infringement of patents. Wholesalers that import footwear are also subject to quotas imposed by bilateral agreements between the United States and the countries from which the goods are being imported. These agreements impose quotas on the amount and type of the imported goods. Wholesalers that import products are also subject to US customs duties and restrictions.
The American Apparel & Footwear Association (AAFA) released a proactive international trade policy in 2002 that updates the AAFA’s trade agenda to recognize today’s global environment affecting the apparel and non-rubber footwear industries. Some of the policy’s tenets include promoting flexible and liberalized access to international markets and inputs, promoting the protection of intellectual property rights and adherence to international trade rules, and promoting common sense customs operations.
Revenue Volatility continued
Industry revenue is affected by factors such as changes in per capita disposable income and the price of shoes. Downward pressure on prices from downstream retailers and consumers combined with increased competition from low-cost importers has been the source of some industry volatility over the past five years. Wholesale bypass has also had the effect of putting downward pressure on apparel prices; retailers have begun to source products directly from manufacturers in an effort to save on purchasing costs. In order to stay relevant within the supply chain, wholesalers have had to lower
prices for their products. Consumer confidence has increased over the past five years, as the economy grows and employment rises. With improving consumer sentiment, demand for apparel is increasing, in turn boosting revenue. Changes in fashion cycles can also create industry volatility because retailers require a steady supply of stock, and need to update selections for each season. However, the maturity of the industry limits volatility, with steady import streams and established distribution networks resulting in regular revenue generation.
SOURCE: WWW.IBISWORLD.COM
Volatility vs. growth
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Hazardous
Stagnant
Rollercoaster
Blue Chip
* Axis is in logarithmic scale
A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.
When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.
Footwear Wholesaling
Level & Trend The level of Regulation is Medium and the trend is Steady
Level The level of Volatility is Low
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Operating Conditions
Industry Assistance The American Apparel & Footwear Association (AAFA) is the national trade association representing apparel and footwear companies, as well as their suppliers, which compete in the global market. AAFA lobbies on behalf of these companies in order to limit trade regulations and restraints. Its aim is to promote and enhance its members’ competitiveness and profitability by allowing them to step more freely into the international market.
Footwear Industries of America (FIA) is the national association for footwear manufacturers and distributors of leather and similar goods. The organization runs programs to aid members in productivity, marketing and representation within the domestic market.
Footwear Distributors and Retailers of America (FDRA) is a Washington, D.C.-based trade association. Its main purpose is to represent the US and international footwear-specific issues and
relations to importers and retailers who might be affected.
Athletic Footwear Association (AFA) serves an international group of manufacturers and marketers of athletic footwear. AFA provides a range of marketing, management and other services to its members and also identifies and monitors key issues affecting the industry. The AFA serves as a liaison and source of information to those interested in the industry.
Import tariffs Imports of certain products included in this industry are subject to a number of import tariffs. The level of tariffs imposed on items depends on the specific product. In 2005, the quota on footwear and apparel from all WTO (World Trade Organization) countries was eliminated. However, industry operators are concerned about potential tariff hike on imported footwear as a
Regulation & Policy continued
Wholesaler-distributors with medium- duty fleet managers will be under increased regulatory scrutiny over the next few years because state and federal vehicle enforcement officials are expected to step up their safety inspections of trucks, specifically medium-duty units. General regulations that are economy- wide and apply to this industry are the Sherman Antitrust Act (1890), the Wilson Act (1894), the Clayton Act (1914) and the Robinson-Patman Act (1936), along with other regulations regarding unfair competition. In addition, several states have enacted their own antitrust laws to ensure that the general public is provided with best prices, quality and competition among businesses.
The possibility of implementation of the Berry Amendment is something many industry operators have been monitoring closely, as this policy will change a lot of
production factors for this industry. This regulation poses a threat to industry operators as it would create substantial wholesale bypass between manufacturers and the US Military. The Berry Amendment requires the Department of Defense (DoD) to procure 100.0% US-manufactured products, such as uniforms for soldiers. Until now, this has not been applied to footwear. Currently, the US military is allowed to purchase footwear that soldiers prefer regardless of the country it is manufactured in. This leads to many industry operators selling large supplies of footwear to the US military for products that might be manufactured abroad. If the Berry Amendment is applied to footwear, the military will stop purchasing from wholesalers and turned to purchasing directly from US manufacturers.
Level & Trend The level of Industry Assistance is Medium and the trend is Steady
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Operating Conditions
Industry Assistance continued
result of rising protectionist rhetoric in the United States.
Duties on footwear into the US range from zero percent to 37.5%. This rate will depend upon the manufacturer and on the nature of the principal component
used in the footwear. For example, shoes with a protective metal toe-cap or shoes covering the knee have a 37.5% tax rate. Golf shoes have a 8.5% tax rate. However, most other athletic shoes, such as tennis shoes or basketball shoes, are not taxed.
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Key Statistics Revenue
($m)
Industry Value Added
($m) Establish-
ments Enterprises Employment Exports Imports Wages ($m)
Domestic Demand
Per capita dis- posable income
($) 2009 30,581.9 3,693.5 3,871 3,803 26,395 -- -- 1,859.0 N/A 35,620.0 2010 32,781.3 4,380.3 4,031 3,972 26,856 -- -- 2,096.4 N/A 35,684.0 2011 33,721.6 3,873.4 4,121 4,065 25,520 -- -- 1,948.2 N/A 36,299.0 2012 34,531.4 4,309.9 3,974 3,877 27,077 -- -- 2,073.1 N/A 37,163.0 2013 35,749.5 3,819.7 4,249 4,140 28,373 -- -- 2,108.8 N/A 36,369.0 2014 36,682.3 4,653.9 4,236 4,128 30,828 -- -- 2,274.4 N/A 37,439.3 2015 37,106.8 4,531.1 4,233 4,132 29,500 -- -- 2,271.9 N/A 38,720.1 2016 37,612.0 4,225.7 4,259 4,155 30,072 -- -- 2,316.4 N/A 38,989.4 2017 38,345.3 4,338.6 4,321 4,215 30,351 -- -- 2,347.1 N/A 39,849.8 2018 39,521.2 4,404.2 4,387 4,274 31,332 -- -- 2,429.4 N/A 41,031.6 2019 40,553.1 4,501.2 4,463 4,346 31,744 -- -- 2,474.0 N/A 42,095.3 2020 41,623.1 4,629.2 4,524 4,401 32,696 -- -- 2,553.0 N/A 43,194.2 2021 42,755.9 4,754.8 4,613 4,486 33,244 -- -- 2,608.0 N/A 44,395.2 2022 43,902.2 4,885.3 4,680 4,547 34,149 -- -- 2,685.8 N/A 45,579.8 2023 45,450.7 5,049.9 4,813 4,674 35,058 -- -- 2,771.5 N/A 47,204.0 Sector Rank 49/82 38/82 47/82 37/82 57/82 N/A N/A 52/82 N/A N/A Economy Rank 468/2233 466/1571 976/2233 886/2233 1160/2233 N/A N/A 921/2233 N/A N/A
IVA/Revenue (%)
Imports/ Demand
(%)
Exports/ Revenue
(%)
Revenue per Employee
($’000) Wages/Revenue
(%) Employees
per Est. Average Wage
($)
Share of the Economy
(%) 2009 12.08 N/A N/A 1,158.62 6.08 6.82 70,430.01 0.03 2010 13.36 N/A N/A 1,220.63 6.40 6.66 78,060.77 0.03 2011 11.49 N/A N/A 1,321.38 5.78 6.19 76,340.13 0.03 2012 12.48 N/A N/A 1,275.30 6.00 6.81 76,563.13 0.03 2013 10.68 N/A N/A 1,259.98 5.90 6.68 74,324.18 0.02 2014 12.69 N/A N/A 1,189.90 6.20 7.28 73,777.09 0.03 2015 12.21 N/A N/A 1,257.86 6.12 6.97 77,013.56 0.03 2016 11.23 N/A N/A 1,250.73 6.16 7.06 77,028.47 0.03 2017 11.31 N/A N/A 1,263.39 6.12 7.02 77,331.88 0.03 2018 11.14 N/A N/A 1,261.37 6.15 7.14 77,537.34 0.03 2019 11.10 N/A N/A 1,277.50 6.10 7.11 77,935.99 0.03 2020 11.12 N/A N/A 1,273.03 6.13 7.23 78,082.95 0.03 2021 11.12 N/A N/A 1,286.12 6.10 7.21 78,450.25 0.03 2022 11.13 N/A N/A 1,285.61 6.12 7.30 78,649.45 0.03 2023 11.11 N/A N/A 1,296.44 6.10 7.28 79,054.71 0.03 Sector Rank 19/82 N/A N/A 22/82 49/82 67/82 11/82 38/82 Economy Rank 1388/1571 N/A N/A 120/2233 2067/2233 1396/2233 490/2233 466/1571
Figures are in inflation-adjusted 2018 dollars. Rank refers to 2018 data.
Revenue (%)
Industry Value Added
(%)
Establish- ments
(%) Enterprises
(%) Employment
(%) Exports
(%) Imports
(%) Wages
(%)
Domestic Demand
(%)
Per capita dis- posable income
(%) 2010 7.2 18.6 4.1 4.4 1.7 N/A N/A 12.8 N/A 0.2 2011 2.9 -11.6 2.2 2.3 -5.0 N/A N/A -7.1 N/A 1.7 2012 2.4 11.3 -3.6 -4.6 6.1 N/A N/A 6.4 N/A 2.4 2013 3.5 -11.4 6.9 6.8 4.8 N/A N/A 1.7 N/A -2.1 2014 2.6 21.8 -0.3 -0.3 8.7 N/A N/A 7.9 N/A 2.9 2015 1.2 -2.6 -0.1 0.1 -4.3 N/A N/A -0.1 N/A 3.4 2016 1.4 -6.7 0.6 0.6 1.9 N/A N/A 2.0 N/A 0.7 2017 1.9 2.7 1.5 1.4 0.9 N/A N/A 1.3 N/A 2.2 2018 3.1 1.5 1.5 1.4 3.2 N/A N/A 3.5 N/A 3.0 2019 2.6 2.2 1.7 1.7 1.3 N/A N/A 1.8 N/A 2.6 2020 2.6 2.8 1.4 1.3 3.0 N/A N/A 3.2 N/A 2.6 2021 2.7 2.7 2.0 1.9 1.7 N/A N/A 2.2 N/A 2.8 2022 2.7 2.7 1.5 1.4 2.7 N/A N/A 3.0 N/A 2.7 2023 3.5 3.4 2.8 2.8 2.7 N/A N/A 3.2 N/A 3.6 Sector Rank 15/82 15/82 26/82 23/82 8/82 N/A N/A 9/82 N/A N/A Economy Rank 672/2233 516/1571 1103/2233 1111/2233 502/2233 N/A N/A 549/2233 N/A N/A
Annual Change
Key Ratios
Industry Data
SOURCE: WWW.IBISWORLD.COM
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WWW.IBISWORLD.COM Footwear Wholesaling in the US March 2018 32
Apr 2016 - Mar 2017 by company revenue Apr 2013 - Apr 2014 - Apr 2015 - Apr 2016 - Small Medium Large Mar 2014 Mar 2015 Mar 2016 Mar 2017 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 1.6 1.5 1.7 1.5 1.5 1.9 1.4 Quick Ratio 0.8 0.7 0.8 0.8 0.7 0.9 0.7 Sales / Receivables (Trade Receivables Turnover) 8.9 8.2 9.1 9.2 9.6 9.8 7.3
Days’ Receivables 41.0 44.5 40.1 39.7 38.0 37.2 50.0 Cost of Sales / Inventory (Inventory Turnover) 4.1 3.8 3.7 3.8 3.5 2.9 5.4
Days’ Inventory 89.0 96.1 98.6 96.1 104.3 125.9 67.6 Cost of Sales / Payables (Payables Turnover) 11.1 13.0 11.1 9.0 9.6 7.2 9.8
Days’ Payables 32.9 28.1 32.9 40.6 38.0 50.7 37.2 Sales / Working Capital 10.3 7.0 6.9 7.7 8.3 5.9 12.4
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) / Interest 5.2 5.8 4.6 3.1 1.8 5.0 3.4
Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 2.7 2.1 n/a n/a n/a n/a n/a
Leverage Ratios
Fixed Assets / Net Worth 0.1 0.1 0.2 0.1 n/a 0.1 0.3 Debt / Net Worth 1.7 2.0 2.0 1.7 1.7 1.6 3.0 Tangible Net Worth 29.5 29.3 28.2 27.0 30.9 36.4 8.5
Operating Ratios
Profit before Taxes / Net Worth, % 23.2 21.9 17.3 10.5 3.5 19.8 12.4 Profit before Taxes / Total Assets, % 6.9 6.9 6.3 4.3 0.9 5.5 4.8 Sales / Net Fixed Assets 95.0 75.9 78.9 61.7 113.6 89.6 42.6 Sales / Total Assets (Asset Turnover) 2.3 2.0 2.1 2.4 1.9 2.4 2.5
Cash Flow & Debt Service Ratios (% of sales)
Cash from Trading 31.4 28.2 32.0 35.9 37.6 35.9 n/a Cash after Operations 3.0 1.8 3.4 6.2 4.4 7.5 n/a Net Cash after Operations 3.5 1.9 3.2 5.6 4.3 6.6 n/a Cash after Debt Amortization 0.9 -0.8 0.7 1.8 3.7 1.3 n/a Debt Service P&I Coverage 3.0 1.3 3.1 4.3 4.8 5.4 n/a Interest Coverage (Operating Cash) 3.9 2.4 5.2 6.8 8.5 6.8 n/a
Assets, %
Cash & Equivalents 10.4 10.1 9.8 10.2 10.6 12.6 6.2 Trade Receivables (net) 27.0 28.0 25.4 26.7 26.0 24.8 30.3 Inventory 40.1 39.6 43.2 40.4 43.1 44.4 31.5 All Other Current Assets 3.4 4.4 3.4 4.5 3.1 4.2 6.4 Total Current Assets 80.9 82.0 81.9 81.8 82.8 86.0 74.4 Fixed Assets (net) 6.3 6.0 6.2 7.2 11.5 5.1 6.0 Intangibles (net) 5.2 5.6 5.5 6.2 3.2 4.5 11.8 All Other Non-Current Assets 7.6 6.4 6.5 4.8 2.5 4.4 7.9 Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Assets ($m) 2,239.8 2,367.4 3,394.1 2,371.5 57.6 435.5 1,878.4
Liabilities, %
Notes Payable-Short Term 13.2 19.3 16.0 16.7 17.7 14.9 18.4 Current Maturities L/T/D 1.1 1.5 0.8 1.1 1.0 0.4 2.3 Trade Payables 24.9 16.9 20.7 23.2 24.7 23.7 20.8 Income Taxes Payable 0.1 0.2 0.1 n/a n/a 0.1 n/a All Other Current Liabilities 11.6 9.7 9.7 9.1 7.9 7.5 12.6 Total Current Liabilities 50.9 47.5 47.2 50.0 51.3 46.6 54.1 Long Term Debt 5.8 5.6 5.9 8.5 9.8 8.6 7.1 Deferred Taxes 0.1 0.3 0.2 0.3 n/a n/a 1.0 All Other Non-Current Liabilities 8.5 11.6 13.1 7.9 4.9 3.9 17.4 Net Worth 34.7 34.9 33.7 33.2 34.1 40.9 20.3 Total Liabilities & Net Worth ($m) 2,239.8 2,367.4 3,394.1 2,371.5 57.6 435.5 1,878.4
Maximum Number of Statements Used 99 79 103 86 25 37 24
Industry Financial Ratios
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.
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Jargon & Glossary
BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.
EXPORTS Total value of industry goods and services sold by US companies to customers abroad.
IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.
INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.
INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.
PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.
Industry Jargon
IBISWorld Glossary
FAST FASHION A term that refers to moderately priced clothing collections that are based on the latest runway trends.
LEAD TIME The time that passes from the moment a supplier receives an order to the moment the order is received by the purchaser.
OFFSHORING The relocation of a company’s business process, such as manufacturing or accounting, from one country to another, whether the work is outsourced or stays within the company.
RADIO FREQUENCY IDENTIFICATION (RFID) A technology that tracks products from the time they leave the assembly line to the time they leave the store by releasing continuous signals from a chip.
WHOLESALE BYPASS A popular trend within retail and manufacturing industries where producers supply goods directly to stores, eliminating the middleman.
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Jargon & Glossary
VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.
IBISWorld Glossary continued
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