“Lifesaver” for footwear sector

In the face of world economic slump, Vietnam’s export turnover in 2009 fell by 11 percent against 2008, posing a great challenge for the export-oriented country.

Light at the end of the tunnel

The global economic and financial crisis has seriously affected the footwear sector as 90 percent of its products are made for export.

Nguyen Thi Tong, the Vietnam Footwear Association’s general secretary said that due to a sharp drop in world demand and the EU decision to impose an anti-dumping tax of 10 percent, in the footwear sector, the numbers of orders declined by 15-40 percent against the previous year. Exports only reached more than US$4 billion, far below the projected target of US$5.1 billion, Mrs Tong said.

Under these circumstances it is urgent to maintain production and ensure steady jobs for 650,00 workers. The Government has encouraged the garment and footwear sectors to focus on the domestic market to compensate for losses. However, it is not easy to exploit the long-forgotten domestic market. The industries are used to doing outwork for export orders while most basic things from materials to samples and designs have been done by foreign companies, making domestic footwear businesses weaker and unable to corner the domestic market.

Mrs Tong argued that if they focus on the domestic market, they must be active in all business aspects, ranging from materials to samples, designs, and outlet markets. Furthermore as a result of focusing on export orders, the domestic market has become dependent on foreign companies and only small market shares were owned by traditional businesses such as Thuong Dinh, Bitis and T&T companies.

Mrs Tong said that domestic products cannot compete with those from China which are imported illegally. Currently, each person uses 1.5 pairs a year and the whole country consumes nearly 130 million pairs of shoes but domestic businesses account for only one-third of market shares.

Fertile ground for business investment

Despite facing a number of difficulties, the sector gradually entered the domestic market. Businesses stood firm and some even achieved high growth thanks to this “lifesaver”.

An outstanding example is the Thuong Dinh Footwear Company. While other companies remained dependent on export orders, Thuong Dinh trademark became popular with domestic customers in both urban and rural areas. The company had reduced prices and raised domestic materials to 95 percent. It built a distribution network of 250 agents across the country. Therefore, despite the export volume falling by 25 percent, its turnover from the domestic market increased by 20 percent against the previous year.

Thuong Dinh Footwear Company’s deputy general director, Nguyen Thuc Oanh attributed the company’s success to its investment in developing the retail network to sell products at reasonable prices, instead of paying more attention to whole sale services.

In later 2008, managers of the Hanoi Rubber Company also decided to focus on the domestic market. The company then had to compete fiercely with imported products which were flooding the market. By constantly changing models to meet young consumer taste the company gradually gained ground to make profits and maintain jobs for more than 500 workers.

Company representative Nguyen Thanh Thuy said that although in 2009 the company’s export orders dropped by 30 percent, its fourth-quarter revenue increased by 150 percent.

Mrs Tong said in order to stand firm on their home turf, in the near future businesses must build reputable trademarks, develop a nation-wide distribution network, regularly change models, take consumer feedback and restructure production chains by using new technology.

It is no easy task but the domestic market is still a fertile ground for businesses to grow and flourish in the long run.

Tags: Vietnam Footwear, Vietnam Footwear Exports