The Argentine Footwear Market

Introduction 

The Argentine footwear market is one of the most important in South America. With more than forty-three million citizens, the country presents a large market for shoes and other wearable products. According to Statistica (2019), Argentina is one of the frontier markets for footwear in the South American region with both local and international companies seeking to establish operations in the country. An American country to enter the market, several factors have to be considered for successful entry. By considering the past, current and projected conditions in the Argentine footwear market, the company will make crucial decisions on entry strategy. 

Neighboring Chile, Brazil, Paraguay, Uruguay and Bolivia, Argentina is a country located in the south most of South America. As the eight most significant country in the world by land size, Argentina boast of having plenty of resources and a pretty good economy (Fanelli, 2015) . The Agriculture industry that produces leather for shoes is among the most thriving and essential part of the economy. Moreover, incentives are in place to create opportunities for the continuous growth of the leather industry including. However, despite all the efforts to increase the use of leather by promoting local industries, different shoe producers have also taken a significant portion of the footwear market. 

There is a large variety of both international and local brands of shoes in the Argentine footwear market. Both global and domestic brands of shoes are currently performing relatively well. Moreover, the proceeds from the footwear industry are expected to improve with additional revenues. Consequently, I recommend that the company enter the Argentine market to share the profits of the footwear industry. 

Findings 

General Outlook 

The general nature of the footwear market in the Argentine market has been on the growing trend. According to the market researcher, Statistica, the Argentine footwear market amounts to $ 188m in the year 2019 (Statistica, 2019). Also, there is an expected growth of the market shortly. The anticipated growth of the revenue is expected to be 11% up to 2023 which will result in $ 286 m by the end of this growth period. Moreover, the researcher expects an increase in penetration among users with average footwear consumer using approximately $12.34 on shoes (Statistica, 2019). This means that the shoe market in the country is on a growth trend. 

Average Revenue Growth (Statistica, 2019) 

The footwear market in Argentina includes sports-specific brands for running, tennis, soccer, hiking, baseball and golf shoes among others. There is also non-athletic footwear such as military boots, outdoor sandals, evening footwear and casual shoes (Statistica, 2019). All leading footwear specialists in the Argentine market focus on discounts, promotions, and consumer credit strategies to revive the industry that has stagnated for some time. This is mainly attributed to the tendency of consumers to conduct extensive research. 

The main distribution channels for footwear in the country are hypermarkets, convenience stores, supermarkets, furniture and furnishing stores, clothing and footwear retailers, health and beauty retailers, leisure and personal goods retailers and mixed retailers (Ullberg, 2017) . Most high fashion stores are located in major shopping malls including Galleries Pacifico, Patio Bullrich, Buenos Aires Design and Tortugas Open Mall in the city of Buenos Aires. 

Argentine Consumers Behavior 

The general consumer of apparel and footwear in Argentina is wise and does a lot of research before purchasing an item. According to Gracia et al., (2015) shoppers mainly buy at stores that offer promotions and discounts which prompts most players in the market to offer discounts throughout the year. The consumers tend to wait for discount offering brands due to their unwillingness to move on these brands. This trend impacts the ability of most organizations to make profits. 

Also, most Argentine consumers conduct significant research through the internet to identify footwear that fits their needs. Argentine footwear consumers are value driven and seek to get the most benefit from spending ( Gracia et al., 2015) . Use to the presence of internet connection in most parts of the country. It is relatively easy to look for items on the internet and make purchases. Brand loyalty is not common among members of the Argentine society with only a few prosperous persons concentrating on certain brands ( Gracia et al., 2015) . The average consumer buys what is convenient rather than for pleasure. 

Economic Conditions 

The Argentine economy has been somewhat unstable especially in the past two years. For example, while at the beginning of 2018 the economy was promising as shown by the arrival of many brands and opening of several independent stores, the country plunged into an economic crisis in April of the same year. Depression caused a significant devaluation of exchange rates causing a number of companies to postpone their operations in the Argentine Market (Bendit & Miranda, 2015) . Other leading footwear producers and brands including Alpargatas has also continued to decline. The producer of casual footwear registered a decline in revenue due to an increase in the importation of footwear from Brazil and Chile. 

Due to extreme competition from foreign brands, the Ministry of Industry in Argentina have imposed protectionist measures for domestic footwear. However, it is notable that the main products that the government seeks to protect in these measures are those involving leather industries. Since most Argentine produced shoes are those made of leather, the government aims to protect them against foreign competition. However, shoes made of other types of material remain relatively essential imports. These include sports shoes and sneakers made of other products. 

Import regulations 

The government of Crisina Kircher imposes high restrictions on imported merchandise in the Argentine market. While some restrictions have been eased since 2015, there are several hurdles that importers must grapple with while making importations in the Argentine market. Chapter 64 of the government regulations of importations requires products to undergo a Non-Automatic License Process that takes up to 60 days for approval. Apparel products have the highest import tariffs rate among other products in Argentina. This is due to the government's move to protect local industries, especially in leather-based products. This makes it hard for imported shoes to compete with locally produced primarily in the middle and low-income market segments. However, with limited capacity to produce and high demand for imported shoes, some foreign brands have been doing well in the market. 

One method through which foreign brands survive in the protected Argentine market is by collaborating with local manufacturers. There are several local manufacturers in Argentina who produce for international brands on different types of agreements. For example, In mid-2018, the lead shoe producer, Adidas Argentina closed its industrial plant in the city of Buenos Aires just some years after its inauguration in 2011. The company started to employ the services of local manufacturers to produce for them. This has allowed Adidas to maintain a presence in the country commanding a good share of the market. 

Competition 

The footwear sector in Argentina is highly segmented with most of the sales done by small scale retailers. There are over 500 multinational and domestic brands of footwear in the country. However, most of these are small local brands. In 2015, small brands represented approximately 76% of retail sales in the country (KenResearch, 2018) . Large department stores are not very popular in the country as most people prefer to buy from small scale non-specialized stores. Among the significant shoe brand in the Argentine market include Aplagatas, Ciro Shoes, tarquino, Giardini, Tosone, Hush Puppies. However, the most significant source of competition in the footwear market comes from small scale producers (KenResearch, 2018) . Small scale manufacturers who are not subjected to substantial taxes and can access cheap raw materials produced in the country offer a high level of competition to major brands especially in the middle to low-income markets. 

Also, there is a competition form branded and non-branded shoes from developing countries. Most of the footwear imports in Argentina comes from China, Brazil, Vietnam, and Indonesia. Due to the relatively low costs of production of footwear in these countries, their shoes can effectively compete with those produced in the highly protected Argentine Market. 

E-commerce and Footwear Industry in Argentina 

While major footwear producers in Argentina are closing down due to competition, the footwear consumption has been on the increase. 16% of footwear consumed in Argentina is imported, mainly from Brazil. However, the most important trend in the marketing of shoes in the country is the growth of one-channel marketing (KenResearch, 2018) . Most companies and small scale producers have opted for e-commerce in retailing their boots. 

The high-level competition in production and marketing has made most organizations seek online marketing to improve their sales. This is also supported by the presence of internet connection in major cities, especially in the Capital. Also, the growth of the millennial generation who are the highest consumers of footwear is a positive attribute that promotes online shopping. More than half of Argentine Youth own and use the internet. The penetration rate of the internet is also high as indicated by the consumption rate (KenResearch, 2018) . Online marketing is especially helpful for small scale producers who rely on the channel to boost their sales. 

One major online retailer is Netshoes which is Brazilian and marketing for such huge brands as PUMA, Timberland, Addidas, Topper, Globe Esporte, and Havaianas. Another major retailer in e-commerce is Dafti which also engages in other apparel. Other online retailers include Fotter and small scale retailers (KenResearch, 2018) . The use of online marketing has allowed both foreign and local brands to reach specific customer segments in a convenient and less expensive way. 

Recommendations 

Concentrate on high-end Markets 

The government has pretty tough regulations on imported footwear in Argentina due to the protectionist measures. In a bid to protect local industries from foreign exploitations, the government has put tariffs on apparel products including footwear. Also, there is a flooding of cheaply produced shoes from Indonesia, Chile, China and Brazil in the Argentine footwear market. This makes it hard for foreign companies from developed economies of Europe and America to make substantive profits from their products. However, the high-end market remains mainly unsaturated. 

With the growth in the number of upper-middle-class citizens in Argentina, the demand for high-end footwear is growing. Moreover, with cheaply produced shoes in Argentina are leather-based, other types of shoes are not present. The company should, therefore, seek to concentrate on high-end non-leather shoes. 

Use Department stores supplemented with E-commerce 

In entering the Argentina market, the company should concentrate and leverage the power of the internet. With the target being the millennial generation who are frequent users of the internet and social media, the company must engage it using the internet market. Home delivery of products from department stores shoes make the primary method of interacting. Moreover, the company should set-up social media presence on Facebook, Instagram, Tweeter and other social media sites. Through e-commerce, the company can achieve greater levels of targeting than traditional marketing approaches. 

References 

Bendit, R., & Miranda, A. (2015). Transitions to adulthood in contexts of economic crisis and post-recession. The case of Argentina.  Journal of Youth Studies ,  18 (2), 183-196. 

Fanelli, J. M. (2015). Demographics and macroeconomics: Opportunities and risks in dividend-era Argentina.  As Time Goes By in Argentina , 305. 

Gracia, D. B., Ariño, L. V. C., & Blasco, M. G. (2015). The effect of culture in forming e-loyalty intentions: A cross-cultural analysis between Argentina and Spain.  BRQ Business Research Quarterly ,  18 (4), 275-292. 

KenResearch, (2018). Evolution of Digital Space to Drive Argentina’s Apparel Footwear Specialist Retailers. KenResearch https://www.kenresearch.com/blog/2018/03/evolution-in-digital-space-to-drive-the-argentinas-apparel-and-footwear-specialist-retailers-ken-research/ 

Statistica, (2019). Footwear Argentina. Data based on In-depth Analysis https://www.statista.com/outlook/250/114/footwear/argentina 

Ullberg, S. B. (2017). Forgetting Flooding? Post-disaster Livelihood and Embedded Remembrance in Suburban Santa Fe, Argentina.  Nature & Culture ,  12 (1).