Scope of the study
The footwear industry as defined for the study purpose covers the business
activities specified in NACE Rev. 1.1 Group 19.3. In
2003, the EU-25 footwear industry's turnover was €26.7 billion,
representing about 0.5% of total EU-25 manufacturing turnover.
The economic background for e-business
The footwear industry is dominated by small and medium sized
enterprises (SMEs). This structure can be considered as both
a strength and a weakness, as SMEs are generally more flexible, and yet
at the same time more likely to lack investment capability. At present,
the footwear industry is also highly globalised. Competition
from countries with low labour cost and less-regulated working conditions
has forced EU footwear production into serious restructuring
strategies and re-location policies. The overall
performance of footwear in the EU has been deeply affected by this unbalanced
supply to the global market.
Today, the European footwear industry is a mature sector where
companies find it difficult to sustain a significant level of growth;
it is strongly pulled by a highly unstable and rapidly changing demand,
due to fashion-related and seasonal fluctuations. A profound restructuring
of the distribution system is also taking place, giving more bargaining
power to the distributors and putting pressure on prices. More
and more, firms need to pursue innovation strategies based on creativity,
quality and differentiation of products.
In this context, cost competitiveness is a critical
objective and driver of ICT adoption in this industry.
Footwear manufacturers focus on initiatives to improve supply
chain management, in order to increase their profitability.
In addition to cost savings, a more efficient supply chain helps reducing
cycle times and better meeting customers’ demands. Technological
investments are therefore mainly used to streamline operations, partially
automate formerly manual processes, improve customers’ service
and knowledge, enable new ways of innovating products and speed
Usage of ICT and e-business in 2006
Among the ten sectors studied by e-Business [email protected] in 2006,
the footwear industry is the one with the lowest overall use of
e-business, in particular among manufacturing sectors. On the other hand,
the survey findings also indicate that footwear firms are quite dynamic
in adopting simple forms of ICT and e-business (e.g.
accounting software), when such systems suit their specific needs, size
and financial capabilities. What is striking is the relatively low level
of e-business activity among the larger footwear companies. Although
the survey results for this size-band can only be indicative, the
overall picture is quite clear: e-business is not used in footwear as
much as in the other sectors analysed this year by e-Business [email protected].
Nevertheless, where needed and when economically justified, footwear
firms also exploit ICT advantages. Several survey indicators point at
this "digital divide" and a “dual face” of
ICT use in footwear:
access at the workplace: On average, significantly fewer workers in
footwear companies have access to the internet at their workplace than in companies
of a comparable size from other sectors.
base of ERP systems: the installed base of enterprise resource
planning (ERP) systems, an important backbone for B2B integration and
cooperation, is low in the footwear sector. This appears to be the case
particularly among the medium-sized and large footwear companies, compared
to the average in other manufacturing industries studied in 2006 by the e-Business
procurement is much less developed in footwear than in any other
sector studied this year. Only about 30% of firms from this industry
said that they place some orders online, compared to a 50% all-sectors
respective average. Interestingly, footwear firms that do use e-procurement
appear to be quite active in ordering production materials online and
in buying from international suppliers.
marketing and sales appear to have gained momentum in footwear – the
gap to other sectors is smaller in this area, also considering that B2B
transactions prevail in this industry. Furthermore, footwear firms are
more active at the international level in this area when compared to
the respective all sectors average. Nevertheless, activity has probably
not yet reached the critical mass needed to trigger ICT uptake on a broad
firms are innovating, especially in terms of products
where – not
surprisingly – the role of ICT is not very pronounced. However,
the importance of ICT is much less pronounced for process innovation in
footwear than on average in the other sectors studied in 2006 by e-Business [email protected].
and cost – the main barriers: companies that did not practice
e-business said that their company was "too small" for
doing e-business and that they could "not afford the required technologies”.
Reasons for the delayed ICT adoption
The overall delay in ICT and e-business adoption by footwear companies
in Europe, relative to other sectors studied in 2006 by e-Business
[email protected], is at least in part caused by the economic circumstances
and this sector’s competitive evolution over the past decades.
The main reasons for this delay are:
reasons: the high prevalence of small craft & trade
companies, many of which have a low propensity toward ICT adoption.
of “pull-potential” from distribution chains and business partners:
in this industry, neither large firms nor distribution appear to be driving
the adoption of e-business as in other industries. The strong competitive
pressure (even in terms of survival) pushes footwear firms to be more
focused on other strategic concerns, such as international competition
from low cost countries. It appears that most companies do not see ICT
as a viable tool to address this challenge.
and the management factor. In micro and small
footwear companies, the use of ICT equipment and access to the internet
are often limited to the owner and to a few other key people. Knowledge
and governance are not spread across organisations,
while changing skills requirements and ICT-skill gaps are not considered
as key issues.
capability. The average small size and fierce
pressure on prices and margins reduce footwear firms’ investment
capability. Nevertheless, results from the survey illustrate that, presently,
footwear firms are fairly in line with the average of all sectors studied
in 2006 by e-Business
[email protected] as regards current and planned investments in ICT.
- Thus, although the picture of a ‘digital
divide’ prevails, it can also be argued that the 2006 survey data
illustrate a cautious and selective approach to e‑business
by footwear firms in Europe. This applies
whether ICT investments are estimated as a share of total costs or in absolute
terms, within the same size bands. However, considering that micro and
small companies account for more than 95% of the total in this industry
and the fact that the sector’s larger companies seem to be the
most reluctant to spending, the sector overall is not likely to accelerate
its pace towards e-business integration.
- The complexity
of technology. Footwear companies interviewed in the survey
said that the complexity of technology was a main reason for not using
The picture is varied, however. There are examples of companies
that reported difficulties in finding suitable solutions on the market
for e-business integration with their distribution network (see the case
studies on Alpina and Moreschi).
Other examples show that even small companies can successfully adopt e-business,
when user-friendly and low cost solutions are available (as illustrated
in the case studies about INESCOP and SHOE D-Vision).
This potential dichotomy indicates that there might be a need for affordable,
sector-specific e-business solutions addressed to footwear industry’s
Important e-business trends and implication
This study focuses on the following e-business trends and implications
which were identified as particularly relevant for this specific sector:
role of e-business in supporting enterprises’ networking.
The need to efficiently manage the complex and diverse organisation of production
is the main driver towards the adoption of e-business solutions in the footwear
industry. A key prerequisite for any kind of cooperation along the value chain
is sharing data and management information among business partners. Survey
results indicate, however, that tools for online cooperation are not yet widely
used in this industry and that e-integration of business processes along this
supply chain is limited.
with distribution. The competitive positioning of different
footwear firms is strongly conditioned by the way they manage and integrate
distribution. The main challenge is to manage effectively alternative
product distribution mechanisms and resources in complex and fragmented
distribution networks. There are examples of successful implementation
of proprietary distribution networks in the footwear industry. However,
online integration with external networks and, especially, with independent
wholesalers operating with a high number of suppliers is relatively uncommon
in this industry.
- The diffusion
of RFID is still limited, despite technological developments
that have made this technology more functional and less expensive. RFID
applications in the footwear industry presently focus on supply chain
management, as well as on reducing losses due to object misplacement
and/or theft. RFID is also applied in this sector for enhancing quality
control procedures, product tracking and for ensuring the authenticity
of objects, representing a protection against counterfeiting. However,
RFID tags are currently being used more for warehouse pallets than being
embedded in individual items.
The difficult economic situation and the fact that trading relations
in this sector do not require particularly advanced ICT solutions account
for the cautious attitude of most of footwear manufacturers
towards ICT use. The identified low level of ICT
adoption across this sector is consistent with the finding that only
about half the companies felt that "e-business constitutes a
part of how they operate". In addition and
in contrast to other sectors studied this year, the share of large footwear
companies that regard e-business as relevant for their operations is
not higher than the respective share of SMEs in this sector.
Nonetheless, footwear companies also observe that e-business has
influence on internal work processes, business process efficiency
and customer service. It appears that the main impact
concerns operational improvements, in particular of logistic
flows along the value chain.
The e-business impact on companies’ performance (e.g.
revenue growth) and on savings (e.g. for procurement
costs) are less pronounced, or at least more difficult to confirm by
survey results and case studies. But this holds true for most of the
sectors studied by e-Business [email protected] in 2006. As regards the
anticipated future impact of ICT, footwear firms identify
management and accounting, as well as customer support as the most important
areas, followed by marketing.
On the basis of evidence from this report, the following issues have
been identified as particularly relevant for policymaking:
and standardisation. The support of projects aiming at enhancing
interoperability for the exchange of computerised data in this sector
could continue. Emphasis, however, should be placed on a global classification
and standardisation scheme of products. This includes
the development of such schemes, as well as their dissemination in
order to raise footwear companies’ awareness about global classification
activities. Policy measures could aim at fostering faster and wider
implementation of standards, in particular concerning the integration
with distribution. In this context, a study to
analyse the effectiveness and potential benefits of the
various standardisation and interoperability activities undertaken
so far for this sector would also be opportune.
e-business skills, especially among SMEs, by promoting activities
which aim at improving the entrepreneurial and managerial understanding
of e-business applications; providing information about e-business and
support to decision-makers; improving the skills which are related to
the reorganisation of working processes. Relevant policy measures may
include ‘peer-to-peer’ demonstrations
of successful ICT implementations, training courses in ICT and e-business management,
as well as the establishment of platforms and fora where footwear companies
would meet ICT and e-business solutions’ providers
a favourable environment for innovation. Footwear companies
need to pursue innovation strategies based on creativity, quality and
differentiation of products in a very competitive environment. The e-Business [email protected] 2006
survey results indicate that there is still considerable potential for
footwear firms, notably the smaller amongst them, to exploit ICT-enabled
innovative processes. In this effort, continuous investments and an improved
governance of knowledge are critical. e-Business policies could, therefore,
stimulate the diffusion of new technologies (e.g. RFID) that may help
footwear companies in the EU to protect their Intellectual Property Rights
(IPRs) and fight counterfeiting.
with ICT service providers. e-Business uptake in this
sector would benefit from an improved dialogue and cooperation
between footwear industry and software providers, with the aim
to enhance the development and diffusion of sector-specific,
scalable and affordable solutions.
industry associations. To increase the effectiveness of support
actions for this sector, the footwear industry’s associations (at
different levels: regional, national and European) should be actively
involved. They can leverage actions by promoting the issues at stake
among their members.
Reference to earlier sector studies
The sector was covered as part of the "Textile, clothing
and footwear" in sector studies of 2004
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