As per Nuvama’s September research on footwear trends, it is improbable that foreign firms relocating their third-party operations to India will lower product prices for Indian customers. The report states that the main goal of outsourcing is not to lower prices for domestic customers, but rather to increase cost efficiency in international markets.
The report adds that Apache Footwear (Hyderabad) has been the preferred supplier for international players like Nike and Adidas for their production needs since 2008.
However, Nike and Adidas have not lowered their costs globally, even if outsourcing manufacturing to India is a less expensive option than manufacturing elsewhere.
“Taking a cue from this, we think that foreign companies who have relocated their third-party operations to India are not anticipated to benefit Indian consumers in the future from lower production costs,” the research stated.
The Ministry of Commerce and Industry modified the Footwear Quality Control Order (QCO) on 30th August 2024. This gives footwear manufacturers and retailers a grace period until 31st July 2026, to continue selling goods without the Bureau of Indian Standard (BIS) mark.
After then, every pair of shoes sold domestically will need to adhere to BIS regulations. The extension, which expires on 31st July 2024, is only valid for sales and does not extend to the purchase of new goods.
It is anticipated that local manufacture in India would keep expanding the reach of international brands like Adidas and Nike in the supply chain, but it is unlikely to reduce the price difference between mid-premium local products and their global equivalents.
There will be price variations since these companies don’t adjust their rates for local markets; instead, they concentrate more on their worldwide pricing strategy and profitability.
Although local procurement of materials such as PVC and PU is still relatively new in India, there is a substantial opportunity for local raw material suppliers due to the increasing number of third-party activities.
