Athletic Footwear Industry
Athletic footwear industry is a global sub-industry that deals with a wide range of sports luxury goods, apparel and textiles. The industry also includes manufactures, producers and marketers of athletic footwear, apparel and different sports equipment being sold across the globe. The products are often sold through company owned stores, franchises, wholesalers and online stores.
What is the size of athletic footwear industry?
Athletic footwear market in terms of revenue is approximately $ 53.7 billion or 82.8 percent. This is contributed by major players in the industry including Adidas AG (ADDYY) and Nike International or Nike Inc.
Despite being a younger company than Adidas, Nike has a larger market share of 47.1 percent. Other players in the industry include Wolverine World Wide, Inc., Under Armour (UA) and Decker’s Outdoor Corporation.
Revenues from the industry have been increasing over the past years. It is expected that the industry will grow by six percent yearly as the economy recovers from the 2008 recession.
Growth of footwear industry is also attributed to product innovation over the years and exceptional marketing strategies. Under Armour is one of the smallest players but it has outperformed Adidas and Nike in terms of revenue in the last three years. The company spends 24 percent of its revenue on marketing its products. As a result, it is one of the leading performance footwear suppliers of National Basketball Association.
Gross margins and supply chain of athletic footwear industry
The industry enjoys and boasts of an average gross margin of approximately 45 percent. This is because of low input charges, affordable raw materials and premium pricing of finished apparel and other sports products.
Adidas and Nike often contract other manufacturers of athletic products. Mainly, their suppliers are Asian and they help the companies to grow their gross margins. This is because of low labor charges in Indonesia, China, India and Vietnam. Nearly all of Nike footwear is manufactured outside the US by contracted companies in Asia.
Nike has also signed agreements with factories in Brazil, India, Mexico and Argentina. The products are manufactured and branded Nike, then sold within the countries. By doing so, Nike increases its profit margins while cutting down on labor costs and other related expenses.
Major athletic footwear categories
There are three major categories in athletic footwear across the globe. They include running, casual and basketball. Currently, running has the largest market share of about 35percent. Basketball on the other hand is growing at the highest rate and is bound to capture the largest market share.
Basketball also enjoys higher margins and Nike is benefiting mainly from the growth in the category. Jordan, Nike’s basketball brand alone contributes 58 percent of US footwear category revenues.
Seasonality of athletic footwear industry
The demand for athletic footwear is quite high. It is even highest in third quarter of the year. This is the time when a wide range of sports activities take place as a result of improved footwear seasonality and good weather conditions. What’s more, NBA and NFL seasons often start at the third quarter. Industry revenues are estimated at 4.5 percent during the season.
Currently, there are different athletics footwear companies and Nike seems to be winning the race in the industry by a significant margin. There are smaller players with a great potential based on their strong and ever increasing profit margins. However, Nike appears to have a better control of the market. Its dominant position in the industry will enable it to increase its revenues based on premium pricing.
With the popularity of soccer across the globe, FIFA World Cup is still expected to offer a significant boost to the industry’s revenues, as it did in 2014. Based on an overall outlook, the industry is highly lucrative and positive. This is enhanced by different sports events that take place on yearly basis.
What’s more, sports apparel companies take advantage of affordable raw materials. It is important to note that major raw materials used in athletic footwear production include plastic compounds, leather, nylon and synthetic rubber. Others include canvas, polyurethane and rubber. They are affordable especially in Asian countries thus, enabling sports apparel manufacturers to increase their gross margins.
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