Nike and Adidas Outsource to India but Prices Stay High for Indian Consumers
International brands like Nike and Adidas are moving their manufacturing to India to save costs in global markets. However, this does not mean lower prices for Indian consumers, according to a report by Nuvama.
The report states that since 2008, Nike and Adidas have been outsourcing to Apache Footwear in Hyderabad, mainly for international markets. Despite cheaper production in India, these brands have not reduced their prices globally.
On August 30, 2024, the Ministry of Commerce and Industry amended the Footwear Quality Control Order (QCO), giving manufacturers and retailers until July 31, 2026, to sell products without the Bureau of Indian Standard (BIS) mark. However, new merchandise must comply with BIS standards by July 31, 2024.
Local production in India is expected to expand the supply chain for brands like Nike and Adidas, but price differences between local and international brands will persist. The focus remains on global pricing strategies and profitability.
While local procurement for materials like PVC and PU is still developing, the increase in third-party operations offers opportunities for local raw material suppliers. Global OEMs like Shoetown, Feng Tay, Pou Chen, and Apache focus solely on manufacturing, avoiding retail operations.
The sector faces a mix of challenges and opportunities as companies improve back-end processes and manage non-core inventory.
Doubts Revealed
Nike and Adidas -: Nike and Adidas are famous companies that make sports shoes, clothes, and other sports gear.
Outsource -: Outsource means to get goods or services from an outside or foreign supplier, especially in place of an internal source.
Cost efficiency -: Cost efficiency means doing something in a way that saves money or resources.
Global markets -: Global markets refer to the international buying and selling of goods and services.
Nuvama -: Nuvama is a company that provides financial research and reports on different industries.
Ministry of Commerce and Industry -: The Ministry of Commerce and Industry is a part of the Indian government that looks after trade and business activities in the country.
BIS standards -: BIS standards are rules set by the Bureau of Indian Standards to ensure the quality and safety of products.
Footwear -: Footwear means things you wear on your feet, like shoes, sandals, and boots.
Compliance -: Compliance means following rules or standards set by an authority.
Transition period -: Transition period is the time given to switch from old rules to new rules.
Merchandise procurement -: Merchandise procurement means buying goods to sell them in stores.