Footwear makes inroad into US market

(VOV) - Sales to the US market is the aim of the Trans Pacific Partnership (TPP) agreement as Vietnam has already signed bilateral or multilateral free trade pacts with most of the other parties involved in the negotiations.

Matt Priest, a leading economist from the Footwear Distributors and Retailers of America (FDRA), recently affirmed that Vietnam footwear exporters could expect to enjoy a boom once the TPP agreement comes into effect.

TPP brings new opportunities

In the nine months leading up to October, footwear exports to the US market tallied in at US$2.4 billion, making Vietnam one of the leading footwear suppliers to the American market, according to official statistics.

Footwear sales to the leading US retailers have experienced continuous incremental growth for the past 13 consecutive years and now account for 10% of the US market share, Priest said.

By 2018 Priest has forecast exports to the US market to continue their upward trek and hit an all time record high of 12%.

The sector would certainly enjoy more chances to make inroads into the US market when the trans-Pacific Partnership (TPP) agreement comes into effect as most kinds of footwear would be tariff free allowing for increased price competitiveness.

The preferential tariffs under the framework of the TPP have not been finalised but in general if the TPP were to come into effect as of January 1, 2016 about 90% of all products would immediately be duty free.

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The duties on the remaining line items would then be phased out over a 10 year period, Priest said.

Both domestic and foreign experts have reported that due to an abundant supply of highly skilled workers and lower labour costs, Vietnam has been selected as the premiere destination for relocating their production facilities.

Oliver Ng, a representative of the Ever Rite Group, revealed the group has accelerated its investment into Vietnam. As of the end of 2013, it had relocated all three of its factories from China to Vietnam.

More investment in the footwear sector

According to the Vietnam Leather and Footwear Association (Lefaso) the number of orders shifting from China to Vietnam has jumped significantly.

Scott Thomas from Wolverine Worldwide Company said the company has changed its strategy, to one in which it would place more orders in Vietnam from now to 2020, in lieu of China.

Currently, Vietnam produces 14.7% of the company’s demand.

More and more opportunities would open to the footwear sector upon the TPP coming into effect, however, whether local businesses would grasp them or not remains to be seen, said Lefaso President Nguyen Duc Thuan.

Footwear exports surged 14% on-year and fetched US$8.3 billion in the first 10 months of the year, reaching 85.1% of the set target and target of US$9.75 billion.

This year targeted obtaining an annual growth of 15-20% on footwear exports.

Phan Chi Dung, Head of the Heavy Industry Department said the sector would have a bright future brought about by major free trade agreements (FTA), including the TPP.

However, the sector also faces a number of obstacles, he said including shortages of material supplies and low labour productivity.

To take full advantage brought about by global integration, it is essential to establish a supply stable chain for materials and raise productivity to improve competitiveness, Dung said.

Scott Thomas in turn said the US applies strict regulations on origin of products and chemicals used in production, especially for protective and children shoes should not be overlooked.

Local businesses should make thorough preparations before changing their trading method, however, to insure they meet market requirements, Thomas concluded.