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The State of Footwear’s Recovery: Where Production and Consumption Are Headed

The footwear industry, like many, will be ready to give 2020 the boot.

Though the manufacturing sector for shoes has spread beyond China, the country where the virus began still commands the market share for footwear inputs, which has made this year challenging from both the supply and demand standpoint as the coronavirus pandemic crippled consumer spending, too.

A World Footwear COVID-19 survey conducted by the Portuguese Footwear, Components, Leather Goods Manufacturers’ Association (APICCAPS) in April found that the virus had already sent global footwear consumption down more than 22 percent. In Europe, consumption tumbled 27 percent year over year by April. In North America, it’s down 21 percent, and in Asia, footwear consumption had fallen 20 percent.

“It’s a huge number,” said Joao Maia general manager for APICCAPS, speaking during an Exporiva Schuh virtual event Wednesday.

“Probably we will have a drop of 22 to 30 percent depending on the market, because in Europe the expected drop is bigger,” Maia said, looking at the entirety of 2020. “So we are looking at at least 20 percent drop in consumption worldwide.” Both the U.S. and Europe, each recovering from the biggest sales plunges earlier in the year, in May were only selling half of what they sold during the same month in 2019. And conditions aren’t expected to improve considerably.

“We are expecting significant drops in the June, July, August sales,” Maia said.

The same survey found that the impact on supply chains has also been great. Already, 42 percent of footwear manufacturers are ramping up supply-chain diversification efforts and 39 percent are trying to shorten their supply chains.

“The supply chain will be changed. Brands will look at their supply chains and they will move to other places looking for diversity,” Maia said, adding, “You have to have a shorter supply chain. You cannot depend on this global supply chain where your materials are traveling the world several times before they end up with your consumer.”

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In China, where recovery started sooner than it did in the West because of when each region reached peak pandemic, production and consumption are picking up, but at a slow clip.

“Total production [has] returned to about 70 percent of the normal level now,” said Li Yuzhong, president of the China Leather Industry Association (CLIA).

In India, the industry is optimistic about recovery after fielding crippling cancellations from brands and buyers, but aware there’s still a long way to go.

“We almost got the cancellation of $1 billion from America and Europe, and we thought that was the end of the world,” said Aqeel Ahmed, chairman of India’s Council for Leather Exports (CLE). “Now we are happy to see the business coming forward.”

It’s coming forward, though getting back to 100 percent capacity remains an uphill climb. In May and June, Ahmed said CLIA saw production at 60 percent of last year’s level.

“In July, August and September, we feel that we will do 85 percent of last year’s production,” he said. “We are confident that we will come back strongly.”

For manufacturers in Brazil, the sentiment is similarly optimistic as production is starting to pick up after a painful March that saw production plunge around 30 percent, according to Letícia Sperb Masselli, manager of Brazilian footwear program Abicalçados.

“We are not falling anymore, we are starting to come up again so that’s important,” she said, noting that she’s seen a rearrangement of worldwide footwear consumption in light of the pandemic. “Many, many buyers are looking for Brazil as an alternative for sourcing,” creating strong demand for the South American nation, she added.

As the largest footwear producers outside of Asia, according to Sperb Masselli, manufacturers in Brazil are banding together to capitalize on their opportunity. The supply chain there has started to work more as a union to collectively appeal to buyers keen on minimizing their risk and reliance on Asia for sourcing.

“Our lead time is better, our prices are more competitive because we are working together,” she said.

The fate of spring/summer footwear

With so much of the world still not able to move about as they did pre-pandemic, shopper foot traffic is down everywhere, including at shoe stores. With fewer places to go, consumers aren’t shopping for fancy footwear or much beyond what they need, what’s comfortable or what’s affordable.

“The footfall is decreasing a lot,” said Elvio Silvagni, chairman of Valleverde, a shoe brand in Italy. “Now we are trying to clean up the stock.”

With shoppers at home instead of in stores during prime buying time for spring and summer shoes, many companies are in the same over-inventoried boat.

“We managed to deliver more than 80 percent of our shoes to the clients and we only have 20 percent of the Spring/Summer 2020 shoes in our warehouse, which we will of course need to sell the following year,” Silvagni said.

The problem there, beyond having unsold inventory idle until 2021, is that if footwear brands and retailers are going to attempt to move Spring/Summer ’20 product into the following year’s season, it means they’ll have less to order from factory suppliers.

And already, factories’ orders are smaller and not as far out.

“Our estimation is our production at this moment is 20 percent below our regular number for this time of year,” Maia said. Starting around September, footwear factories would typically be making the coming Spring/Summer’s shoes. “But we are realizing we have not sold summer shoes. Buyers have not ordered summer shoes this summer. We are quite [concerned] we won’t have Spring[/Summer] shoes to manufacture in that moment.”