What’s footwear industry analysis?

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Footwear industry analysis is the study of financial statements, market data, and industry trends to determine the financial health of the footwear industry. Entrepreneurs, investors and financial advisors employ footwear industry analytics to identify the most profitable segments of this economic sector. Proper analysis of the footwear industry requires research that helps funders understand the nature of the industry and analysis techniques that allow the researcher to discern the meaning of these facts and figures. Once data is gathered and reviewed, footwear industry analytics users create projections for future market, revenue, and earnings growth. If analysis of the footwear industry reveals that the factors influencing profitability are favorable, the business or investor is likely to commit capital.

Research is an integral aspect of footwear industry analysis. People using industry analytics need to know the history of the field, the most influential companies and special interest groups associated with the segment of the footwear industry they want to invest in, and how general business cycles affect revenue and profit. Such characteristics of the footwear industry influence the way the evaluator perceives the industry. Consequently, the data obtained must be accurate and timely. Footwear industry analysts generally use trade magazines, business publications, and published financial reports as sources of information.

Information collected for analysis of the footwear industry is used to determine levels of competition, consumer purchasing power, barriers to entry and supplier influence. Identifying key companies and market share totals across the footwear industry allows analysts to see how saturated with competition a market segment is. This information is usually found in industry reports published by leading business magazines. If a particular segment has a lot of competition, companies need to spend more money on marketing features and products that distinguish their shoes from others in the field. Furthermore, competition makes consumers more price sensitive and increases their purchasing power because there are other shoes they can buy.

Companies looking to enter the market for the first time use footwear industry analysis to delineate barriers to entry that increase costs. To do this, they learn about the nature of the shoe business through trade magazines and industry reports. For example, manufacturing represents one of the biggest costs for shoe companies. Mass production lowers costs per shoe; however, a company entering the industry must spend heavily on the technology, employees, and infrastructure required to produce these quantities. Footwear industry analysis helps the expanding company see these costs, so they can decide whether they can venture into the new market.

Understanding the history of the shoe business also shows entrepreneurs and venture capitalists that the sector relies on a supply chain. For example, manufacturers need raw materials to produce shoes. Retailers need to receive shoes in order for them to exist. As a result, suppliers have bargaining power that they can use as leverage in negotiating contract terms. Reviewers look at the income statements of companies operating in the industry to see the impact of this leverage on profitability.

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