The coronavirus has sent markets tumbling, as its ramifications to a swath of businesses and industries become more apparent. The cascading effect of the coronavirus is crippling the footwear industry too. Besides, the outbreak has led to the complete lockdown with the closure of malls, theatres, educational institutes, gyms and several tourist sites, thereby leading to a significant fall in economic activity.
According to the UN Conference on Trade and Development, the coronavirus outbreak might cost the global economy $1-2 trillion in 2020, where several sectors are already feeling the pain and footwear industry is no exception. The pandemic has come up with fresh challenges for the country's economy, causing a severely disruptive impact on both demand and supply-side elements that has the capacity to derail the growth story.
Impact of Covid-19 on Indian Footwear Businesses
The virus is taking a massive toll in the economic front, shutting down businesses, curbing international travel and impacting production lines of major global businesses. For India, the trade impact of coronavirus is said to be around 348 million dollars. The list of top 15 most-affected economies due to the COVID-19 outbreak includes India too. If we look at the footwear industry in the country, the major brands have shut down their stores, and some of them have also delayed their new collection release. All this has come in the part as the public health officials have encouraged social distancing and the limiting of non-essential interaction in large groups while COVID-19 cases and death tolls rise.
Being the epicentre of the virus, China is also a major supplier of raw materials and components. The shutting of factories and production in China has wreaked havoc in the supply chain, leading to a sharp increase in the prices of various items. Due to this shutdown, the leather shoe market in India is facing the challenge. Agra, the city which is known to be the largest footwear hub in India, has been affected drastically. Leather shoes worth over Rs 3,000 crore are exported to European countries from Agra every year. The city is the largest footwear hub in India, and the industry is adversely impacted as manufacturers imports several components such as laces, shoe lining, buckles, ornaments, insoles, outsoles, cellulose board, shank board, foam and packing material from China. But due to this outbreak supply from China has dried up, it has affected manufacturing here. Apart from this, other Indian footwear brands have also hit hard due to a decrease in sales, both offline and online.
The impact of coronavirus in the economy has been felt globally. According to Moody’s Investors Service report, coronavirus will likely depress global growth in 2020 below 2.5%, the recessionary threshold for the world economy.
There was an ongoing trade war between the U.S. and China with which the footwear industry was already dealing. The trade war got on fire with the spread of the coronavirus in China, prompting quarantines and shuttered factories. Matt Priest, president and CEO of the Footwear Distributors & Retailers of America, told CNBC in an interview, that U.S. footwear imports from China just had their worst January in more than a decade The 15.7% drop was also the worst year-over-year decline in four years. Also, 70% of shoes sold in the U.S. come from China, according to the industry organization. It has more than 500 members, including Walmart, Nike, Crocs and Steven Madden. Many shoemakers had already started to diversify their supply chains and reduce their reliance on China as a result of the higher tariffs.
Footwear companies such as Adidas and Puma are also experiencing major effects due to the coronavirus headwinds. Most of their stores have been closed in the virus-driven countries. It lost sales of $50 million to $60 million due to the outbreak. Other luxury labels are predicting serious blows to their sales too.
Hope is the Way Forward
The world is facing the worst epidemic industries have ever experienced. Everyone is in hope to get out of it, and things will bounce back to normal soon. The business has literally come to a standstill, and everyone is bleeding in an already challenging business scenario. The time is challenging for not only footwear but across industries. Even if the Covid-19 cases decline, the recovery will still take at least 8-10 months.
The article has been authored by Ambud Sharma, CEO, Escaro Royale