Handbag exports reach $1.3b

The leather and footwear sector exceeded $1 billion in bag exports last year, leading the Ministry of Industry and Trade (MoIT) to officially prompt the industry to keep developing the product.

Vietnam earned more than $1.3 billion by exporting various kinds of bags in 2011, up 33 per cent against 2010, according to the Vietnam Leather and Footwear Association (Lefaso).

Lefaso Chairman Nguyen Duc Thuan said the handbag sector has great prospects for development now when many large global companies have shifted their production from China to Vietnam . Local demand has also increased as Vietnamese consumers move away from cheap and poor quality Chinese products.

“The task assigned to the leather and footwear industry by MoIT will open a great opportunity for companies to take advantage of the situation, raise domestic market share and bolster exports,” Thuan said.

By predicting these trends, many companies have secured high-value orders, including the Thai Duong Garment and Bag Company in HCM City , which has signed a large contract to export about 240,000 bags per month.

The company has invested more than $8 billion to expand its bag production lines.

Company represent atives said they have received larger orders but they do not have the production capacity to fulfil them, leading clients to place orders elsewhere. However, orders are still expected to increase by 20 per cent over the previous year which should help the firm “stay healthy” despite the economic crisis.

Some footwear companies said that out-sourcing contracts for bag production are easier than footwear sub-contracts.

Thai Binh Footwear Joint Stock Co has decided to invest in bag production despite more than 20 years experience in the shoe sector. To ensure success, the firm has coordinated with Coach, a famous US leather company, to tap into the new field.

To reach its agreement with Coach, Thai Binh Co had to invest in a new facility in Song Than Industrial Zone in Binh Duong province with the capacity for 3,000 workers. It also equipped the facility with professional bag production lines and trained workers. With these advances, it has produced and exported 20,000 bags to the US in just five months and is expected to make five million products in 2012.

Company leaders said that the partnership has helped them not only boost orders but also improve production capacity, gain experience and technical skills among other benefits. Other companies are pursuing the same path.

Prominent local enterprises such as Sakos, Ladoda, MITI, Mr.Vui and BlackPaw have taken a foothold in the domestic market.

To meet rising demand, the companies have planned to raise production capacity and improve product quality in order to take advantage of every opportunity.

However, Thuan said that not all opportunities could be capitalised because the firms need to satisfy essential requirements such as management capacity, financial resources, equipment, facilities and skilled labour in order to secure contracts with big brands.

The greatest weakness in the handbag sector is the significant dependence on raw material and accessory imports. The domestic market can only meet about 20 per cent of the demand for leather along with some basic accessories such as labels, laces, buttons and zips. Sophisticated accessories must be imported, he said.

At present, many producers still have to outsource orders from foreign firms so they can only use existing designs. But in the long-term, industry analysts said that the producers should manage the design process themselves in an aim to better serve the domestic market as well as build up strong brands for made-in-Vietnam handbags. – VIR