BANGLADESH FOOTWEAR INDUSTRY AT CROSS ROADS
angladesh footwear industry is at an X crossroads and the next 2 years will define if Bangladesh can taste the same success from its footwear sector as it did from its Textile Sector. Last Year a pandemic bought things in perspective and existing problems to forefront while the data still is to be out if the first half is a bench mark then the leather footwear in the red declining by > 16% compared to the previous year while Exports of other footwear increased by >20%.
Bangladesh in the Footwear World
In order to bring this into perspective lets understand where Bangladesh is and the opportunity in front of it in the footwear sector.
As we can garner from table Bangladesh is in the Top 10 footwear production countries in the world but not even in the Top 10 in the Export market for Footwear (18th) mainly due to its manufacturing for domestic consumption and historical dependence on Leather footwear exports to Europe.
This aggravated by the Pandemic has put the industry in crossroads as the global demand for the leather footwear continues to decline and the Athleisure start is multi year dominance. We can see this with the growth and rise of footwear industry in Vietnam. There are only a few athleisure brands that source footwear from Bangladesh and there are several reasons for it which we will delve in to at a later stage.
The Bangladeshi footwear industry is one of the fastest growing in the world. The industry has benefited from a number of political support initiatives including the Leather and Leather Products Development Policy of 2019 which aims at promoting the industry and attracting foreign investment. Bangladesh’s limited imports in 2019 came almost exclusively from China.
I have personally been lucky to have visited Bangladesh every year since 2005 and witness the growth and rise of the footwear industry while the growth has been amazing with the above tables. I think it would be clear to any one the huge opportunity that lies ahead of Bangladesh footwear Industry
Strengths:
1. Worldwide demand for good quality & cheaper
Footwear products
2. The flexible labour market for continuous improve-
ment & growth
3. Local tannery supplier for leather needs
4. Having export relation with > 150 countries
5. Socially & environmentally compliant factories
Weaknesses:
1. Lack of technology-oriented types of machinery &
production system in the footwear industry
2. Unable to go with the flow of product diversification
& short lead time (Dependent on Leather footwear)
3. Lack of forecasting & hypothetical analysis of order
taking.
4. Dependency on some very specific buyer order leads
to the low FOB price
5. Higher bank interest & insurance policy
Why Bangladesh government needs to focus on the footwear Sector?
As per industry estimates the sector has the capacity to generate 250 jobs for every investment of BDT 10 Million & for every 1000 pairs produced and sold a potential to create 425 jobs spanning manufacturing, allied industries, and retail.
So now let’s imagine the potential millions of pairs = 425000 people employed and this has a snowball e ect on the Economy and people’s lives. Like there has been a success in Bangladesh in the textile sector and deeper approach in promoting and attracting investment would uplif and support the economic development of Bangladesh.
The Demand Drivers
1. The rise of Athleisure With the pandemic changing consumer lifestyle alongside increasing consciousness towards fitness is pushing the demand for athleisure footwear to new heights. The global athleisure footwear market is valued at USD 114.8 Bn by 2022, growing at a CAGR of 2.1 per cent during the forecast period
Infrastructure and Scale:
One of the biggest challenges faced by the sector is the small size of production units and fragmented nature of manufacturing. This makes it difficult for the domestic industry to reap the benefits that large economies of scale have to o er. The bigger size of companies would also allow for investment in technologies which would allow them to tap into higher value-added items. There is a need for robust infrastructure development which can be done through the development of leather and footwear products complex with plug and play facilities ready for factories to move in.
It would be the key to improve the lead times which would allow Bangladesh to be globally more competitive. This would also involve investments in improvement of inland logistics through infrastructural development in roads and ports. Furthermore, there are very few ‘Very Large Capacity Containers’ (VLCC) that come to Bangladesh ports to load cargo and thus, exports must be trans-shipped through Colombo which increases costs.
Skilling the Skilled:
One of the youngest countries in the world, Bangladesh has the advantage of a productive workforce owing to its promising demographic profit. Bangladesh’s footwear industry has the lowest cost structure in terms of labour in the world, making it highly competitive in this segment. However, entry-level operators, cutters, stitchers, skivers, finishers have limited knowledge on machine handling and troubleshooting aspects, directly affecting productivity since training provided to process line workers is time consuming and eats into the production time. There is a need to extend financial support formulate skilling of shop floor workers. A separate scheme for training qualified industrial engineers with defined minimum qualifications for implementing modern industrial engineering techniques on shop floors may be introduced.
Collaboration between the government and Industry for Skill Development:
There should be investments in improving skills as a
2016 – 2022. Presence of prominent players such as Nike, Adidas, PUMA, Decathlon, Reebok, Asics Corporation have further fuelled the growth of the athletic footwear market size by sales expansion through online channels, innovative product launches, and attractive marketing and promotional
strategies.
2. Decrease in Leather production
Leather is being consistently replaced by non-leathers material due to increasing awareness about sustainability and leather being relatively more expensive material. Going forward, the usage in leather is going to be restricted for mostly niche products. This is where Bangladesh has historically been dependent upon in footwear exports.
3. Emergence of organize retail in Asia
The retail market in Asia has undergone a major transformation and witnessed tremendous growth in the last 10 years. Factors that make Asia so attractive include its large population, a middle-class of 2.5 Bn people, increasing urbanisation, rising household incomes, connected rural consumers and increasing consumer spending. Apparel and footwear brands in the continent are exhibiting a growing consciousness about their retail presence. The brands are looking to tap the emerging opportunities available in tier-2 and 3 Cities and Country markets. So, this rise gives Bangladesh a unique opportunity to produce for Asia and look for brands and customers in Asia instead of the tradition EU / US markets. Bangladesh itself included to cater to the growing needs.
There are others that we can look in to the above are enough to give a snapshot of why and where the footwear sector needs to be transformed now we move the most important question what needs to be done.
Lack on Supply of Footwear Components The ongoing coronavirus pandemic across the globe is severely affecting the production, import, and export of leather and non-leather footwear, which, in turn, is anticipated to negatively affect the growth of the global market. Supply of raw material imports such as laces, shoe lining, buckles, ornaments, insoles, outsoles, cellulose board, shank board, foam and packing material from China had stopped for a period.
As Bangladesh imports > 50% of its footwear components it is important to get the components localized with local investment or investment from outside. The government needs to incentivize manufacturing of raw material and
collaborative e ort between the private sector and the government. Abundant availability of trained and certified manpower should become the norm and e orts must be made to achieve per man hour, per machine output in terms of quality and quantity of the levels prevailing in competing countries. Existing skill development initiatives through educational institution should be appropriately scaled up in partnership with the industry along with putting in place a credible mechanism for assessing quality and productivity of workers to hold them more accountable.
Bangladesh has witnessed a boom in entrepreneurial spirit with fresh graduates from various institutes opting for entrepreneurship. The government needs to work with various entrepreneurship development institutes for initiating courses on entrepreneurship in footwear manufacturing and designing. This would help in creating a pool of energetic youth transforming the sector. Introduction of specific courses in various educational institutions may also hold the key to ensure that we have abundant workforce with specialised skills required for footwear manufacturing, designing, and retailing.
Building Brand BANGLADESH The nature of the footwear industry in Bangladesh is highly fragmented, comprising mainly of MSME players which are often unable to give due importance to marketing and branding activities unlike the large players such as NIKE, PUMA, ADIDAS and others, that place major emphasis on strategic branding. At a company level, low marketing budgets result in ine ective and short-term marketing campaigns which do not go beyond generating awareness. Hence, it is imperative to create a larger ‘Brand Bangladesh’ that can subsume the marketing activities of such MSME players in the footwear industry
To change the perception of quality associated with Bangladesh footwear, marketing e orts must be made to showcase India as a manufacturing destination for quality products at competitive prices. Stepping up execution of “Made in Bangladesh” branding through co-funding would expand the attributes such as sustainability, which both global as well as domestic buyers, value. Investing in “go-to-market” strategies by supporting the exporters to participate in large global trade events of a significant scale would allow Bangladesh players to create ‘Brand Bangladesh’ and collectively create a place in the Global Ecosystem.
Source Reference:
1. World Footwear Report 2020
2. Economic Suvey
About Author:
Vikash Bajargyan
Currently working as Regional Sales Director – Asia at Texon International Group Limited. Prior to join Texon, Vikash Vajargyan have worked Decathlon and worked with Bangladesh decathlon team and supplier.
