Shoe industry hopes to kick-start nation’s brands

In 2010 it was revealed that Vietnam became the primary supplier of Nike-branded footwear, one of the world’s premier shoemakers best known for its inspirational advertising trademark – Just Do It – that led to record breaking sales growth in the US market.

According to official statistics, Vietnam now ranks among the globe’s top four largest footwear manufacturers in terms of volume of shoes produced trailing China, India and Brazil, which success has been highly dependent on lower labour costs.

However, Vietnam’s growth in the industry has been limited to that of a manufacturing supplier for the major brands and it has not developed any international brands of its own, which has led many to wonder whether it will ever be in a position to do so.

However, the question is really twofold as one must first consider whether Vietnam can continue to hold on to (or build upon) the market share it currently occupies and its position as a manufacturing source for the major brands and secondly whether it could conceivably develop its own domestic brands internationally.

Trade news reports show that though Vietnam has proven to be quite capable of producing labour-intensive products like footwear and is now starting to win over major technology companies for significant investments in other manufacturing industries, serious roadblocks exist to future development of the footwear industry.

Innumerable reports in the US trade industry, for example, routinely express concern about the skillset and overall reliability of Vietnamese manufactured products and their ability to consistently deliver a quality product in a timely manner according to a set production schedule.

Poor infrastructure and heavy bureaucracy lead the list of concerns US businesses have. Select large companies like Nike may have been able to overcome the associated problems but smaller companies don’t have these same capabilities and would have to rely on Vietnamese partners to do so.

Vietnam’s fragmented manufacturing industry makes it harder to identify suitable suppliers, especially for those new to Vietnam, they have said, adding that lack of basic infrastructure is a main cause of this fragmentation.

Most reports say that capabilities and confidence in Vietnamese manufacturing are growing, but China still maintains a significant competitive advantage and US businesses really need to consider whether their supply chain can withstand the negative shock of bringing Vietnam into the mix.

In China a US business can find just about anything it wants – and usually more than a handful of viable options that aren’t too far away from where they need them, said one leading US business.

With well-paved roads, seven of the globe’s 10 busiest shipping ports, and a massive network of high-speed and commercial rail lines, infrastructure in China is extremely well established and can be easily maneuvered.

Thousands of businesses have already set up shop and blazed the path in China for every type of business from mega corporations to small-time entrepreneurs alike, they have said, adding that potential foreign buyers and business owners of all sizes will have a relatively easier time in China than Vietnam.

Online portals like Alibaba or Made in China used for identifying suppliers are overwhelmingly dominated by Chinese suppliers. For example, if one searches for ‘plastic bags’  the potential suppliers exceed 8.9 million in China compared to only 59,000 in Vietnam.

While certainly true that a ‘supplier’ is not necessarily a manufacturer, China still has a significant edge over Vietnam when it comes to selection.

When it comes to raw materials, shipping, and other logistical issues, those looking to relocate production to Vietnam may find that geography and available service options prove to be significant limiting factors – and represent significant costs.

Vietnam isn’t ready for prime time, so put careful consideration into what you can reasonably expect to produce there, they have said as the lower cost of labour might obscure equally important concerns like lower quality and reduced reliability.

In short, Vietnam has not solidly integrated into the global footwear (or other) industry and has not firmly established itself as a nation that can produce quality footwear on a consistent basis in a timely manner in the eyes of the world.

The important first step is to secure a firm foothold in the domestic market and then seek opportunities to export footwear products abroad and elevate the nation’s brands within the industry as a supplier, said Director Tran Van Tac, of Tuan Viet Footwear Co, Ltd.  

“Over the past three years, we have begun to get involved in nurturing the image of brands in the domestic market,” said Tac adding that at present, our products have been gaining in reputation throughout the country for high quality at a reasonable price.

The Tuan Viet Ltd Company with its Tuvi footwear brand has been one of the most successful domestic brands to date.  The company is currently preparing to begin shipping footwear under its own brand name to the Russian market.

Vu Cham, president of the Management Board of Giay Viet Joint Stock Company in turn said the four domestic brands – Vu Cham, Vina Giay, Giay Viet and Vinagico – have experienced solid growth in the domestic market over recent years.

Cham stressed with more than 90 million people, the domestic market has great potential for businesses to establish themselves and heighten their reputations for quality to strengthen their chances for future global development.

For their part, leaders of Ho Chi Minh City’s Leather Association said it will take dozens of years to build famous brand names like Biti’s, Bita’s and Vina Giay in the domestic market and even longer for them to establish themselves in the global arena.

Outsourcing for the major brands such as Nike is profitable and its importance to the nation’s economy and good paying jobs that increase the standard of living for citizens should not be discounted for any reason.

Neither is anyone suggesting that Vietnam could develop national brands that might compete with the likes of Nike, Reebok, New Balance as such a suggestion would be faceitious on its face.

Clearly, however, it is within the realm of possibility that with much hard work and innovation, someday years down the road Vietnam footwear brands could dominate the shelves of budget shoe stores around the globe.