Catwalk

Markets and Risks

Markets

The Indian footwear industry is estimated to be worth INR 160bn. It is the second largest global producer of footwear after China, accounting for more than 14 percent of global footwear production of 14.52 billion pairs.

Year 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Value 57.5 60.6 63.8 65.5 62.5 76.7 91.1 104.5 123.6
Growth (%) 7.05 5.41 5.27 2.63 -4.59 22.79 18.63 14.76 18.34

The footwear industry is majorly dominated by the men's segment which comprises almost 60% of the market while the rest 40% comprises the ladies and kids segment - where again the kids segment has more than 50% share. This is particularly surprising considering that the world's major production is in ladies footwear and this inconsistency provides a huge opportunity in the ladies footwear in India.

The table alongside depicts how small the footwear and accessories segment is in the total retail pie, but on the other hand is one of the most organized sectors vis-à-vis the other segments and the whole retail industry as such.

Retail Segment Total Market Value (INR bn) Organized Market (INR bn) Organized Market (%) Value Share in Total Market (%) Value Share in Organized Market (%)
Footwear 160 77.4 48.38% 1.20% 9.89%
Bags 14.7 1.4 9.52% 0.11% 0.18%
Belts 8.4 0.2 2.38% 0.06% 0.03%
Total Shoes and Accessories 183.1 79 43.15% 1.38% 10.09%
Clothing and Fashionable Accessories 1,313 298 22.70% 9.87% 38.06%
Other Retail Segments 11,804 406 3.44% 88.75% 51.85%

 

The industry is currently classified as consisting of the following segments: Luxury; Premium Non- Leather; Premium Leather; Active Sports; Mass Market and Mid/Economy segment.

Risk

Reliance on partners

In a number of product categories CATWALK WORLDWIDE is reliant on a small number of suppliers. During the year, the CATWALK WORLDWIDE continued to strengthen its supply chain management team to enable the further evolution and development of the manufacturing base and also to mitigate the risk associated with over-reliance on a number of key product suppliers. Where suitable alternatives exist, the CATWALK WORLDWIDE has reduced volumes with such suppliers and continues to look for suitable additional alternatives where necessary.

The CATWALK WORLDWIDE has a number of key partners whose business represents a substantial portion of sales. The CATWALK WORLDWIDE dedicates resources to these customers and maintains close relationships with such partners to understand and respond to their needs.

The CATWALK WORLDWIDE closely manages its relationships with key suppliers and partners which includes monitoring their financial and non-financial performance.

Dependence on Certain Geographies

CATWALK WORLDWIDE with its origin in Mumbai has major part of its revenues flowing in from the western region. With Mumbai being the financial hub and the region seeing prolific development earlier than most regions, it has come to dominate the company's revenues. However with the emergence of the NCR as an alternate commercial destination as well as the southern part of the country seeing a spurt in disposable incomes, there has been a trend in reduction in reliance on the western region and the company seems to be moving towards equitable revenue flow from all regions.

In emerging geographies - dependence on partners

In key emerging markets primarily East India, CATWALK WORLDWIDE operates through partners. During the year, the CATWALK WORLDWIDE has strengthened its resources internally, and has its own staff based within these operations who work closely with the partners to further develop operational models to enable greater control and visibility. The CATWALK WORLDWIDE is however drawing up strategies that will reduce its dependence on these partners so as to mitigate any risk that the future may hold.

Supply Chain issues (Delivery @ comparative prices, on time, correct specs, change product according to demand, etc)

CATWALK WORLDWIDE continues to evolve its sourcing strategy, refining its selection of suppliers to maintain and enhance product quality whilst improving sourcing efficiency. During the year, the CATWALK WORLDWIDE announced a local cost efficiency programme which included the restructuring and consolidation of its logistics operations and; the implementation of these initiatives is well advanced. These initiatives may adversely affect relationships with existing suppliers during the transition period. If CATWALK WORLDWIDE's suppliers failed to ship products on time, or quality is substandard, this could result in the CATWALK WORLDWIDE missing delivery dates to its customers, potentially resulting in cancelled orders or price reductions.

During the year, the CATWALK WORLDWIDE established a planning function to further improve inventory management processes and effective product flow, facilitated by improved reporting and visibility provided by RU (Catwalk's in house ERP system). Further opportunities exist to improve inventory management processes and these will help ensure that the CATWALK WORLDWIDE continues to produce merchandise of the right quality, in accordance with its ethical policy and delivered in accordance with its requirements.

The CATWALK WORLDWIDE's business depends, in part, on the ability to shape, stimulate and anticipate consumer demand by producing innovative, fashionable and functional products. Categories are cyclical, so it is critical the CATWALK WORLDWIDE builds responsive product teams to exploit trending categories, launch new categories and balance core apparel and non-apparel categories. The CATWALK WORLDWIDE has evolved its design calendar to enable increased product refreshment and replenishment so as to be more responsive to fashion and consumer trends and to respond more efficiently to changing circumstances and to reduce the risks associated with placing excessive capacity with key product suppliers.

CATWALK WORLDWIDE continues to protect its classic core market by adding innovation to further stimulate sales to current customers, while attracting new customers to the brand. The CATWALK WORLDWIDE balances and plans all categories and brand icons through a strict product hierarchy.

Unforeseen Incidents:

A significant incident such as a natural catastrophe, global pandemic or terrorist attack affecting one or more of the CATWALK WORLDWIDE's key locations could significantly impact the operation of our businesses (e.g.Floods in Kolkatta or the H1N1 scare in Pune and other regions, etc). In such circumstances, the uninterrupted operation of the business cannot be ensured, particularly in the short term. Business continuity plans are in place to mitigate but not eliminate the operational risks.