Vietnamese footwear industry: big turnover, small profits
Footwear is a big industry of Vietnam, considered a ‘foreign currency earner’ thanks to high exports every year.
Duong Hong Nhung, secretary of the Vietnam Leather, Footwear and Handbag Association (Lefaso), said at the 18th international footwear exhibition held in mid-July that the production cost in Vietnam was high because Vietnamese shoemakers had to import most of the materials they need.
They also find it hard to access capital sources at reasonable costs.
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Le Dinh Dang, sales & marketing director of Viet Khanh Phu, a handbag, wallet and belt maker, confirmed that Vietnamese producers could not control input material supply sources and this was a serious problem of the leather & footwear industry.
Dang believes that most Vietnamese footwear companies have to import 90% of input materials, mostly from China, Taiwan, the Republic of Korea and Italy.
Vietnamese companies are also weak at design, which is a hindrance for them to export their products. “Foreign partners always require updated designs and styles,” he said.
It is difficult to penetrate large markets. Viet Khanh Phu, a subsidiary of Khatoco, has been exporting products to Canada, Japan, Australia and China. It also exports US$2 million worth of products to South Africa.
However, the company’s products can only be exported to markets after a lot of trial and great efforts. “Our specimen products we refused by Japanese, Canadian and Australian partners many times before they are accepted,” he said, explaining that every market sets its specific requirements.
Nguyen Thi Phuong Mai, deputy CEO of Vitaco, when asked about the challenges Vitaco is facing, also said the lack of materials was a big hurdle.
“The domestic material sources are still not diverse enough. The more import materials we have to import, the higher production costs we will have to pay,” she said.
An official report showed that footwear is one of the biggest export items with export turnover of US$10.3 billion in 2014, accounting for 7% of total export turnover.
In the first nine months of 2015, export turnover increased by 18% in comparison with the same period last year to US$8.8 billion. With such growth, the total footwear export turnover of US$12 billion is within reach.
However, it is not Vietnamese but Taiwanese and South Korean enterprises which pocket the biggest sums of money from export.
Korean Tae Kwang Vina alone reported turnover of VND9.7 trillion in 2014, while Chang Shin VND9.3 trillion and Hwaseung Vina was over VND5 trillion.
