The Footwear Industry covers a range of products that includes sports shoes, dress or casual shoes, slippers and sandals. Materials range from leather, rubber and plastic to textile and other components. The sector targets buyers of all ages and offers products for men, women and children.
Leather footwear is normally used as dress shoes. Non-leather footwear with outer soles of rubber or other materials such as plastic, wood, textile is commonly used as casual footwear. Sandals and slippers are mostly made of textile or plastic material and are used both indoors and outdoors. Sports footwear entails high standards of production and most sport shoes facilities in the Philippines involve some direct foreign investments.
Production of footwear in the country is concentrated in Metro Manila, where about 43% of all shoe manufacturers are situated. Within the area, City of Marikina is the center of the footwear business wherein almost three fourths of all shoe producers. Moreover, most of manufacturers in the industry are micro to small in size. Firms usually have their own shop facilities, although a small number rely on subcontractors for production work.
The Footwear companies market and distribute their products thru own boutique stores while other rent space in large department stores and malls. The specific market segments for the sector are defined according to the price and quality of the product. These range from cheap, low-end footwear made from synthetic materials to high-end and well-crafted leather shoes based on European or American designs or brands.
The majority of shoe producers utilize manual and semi-automated processes in their manufacturing operations. The United States is the largest market for footwear products, while China is the world’s largest suppliers.
Local shoe producers face still competition in the market mainly from low-priced products coming from China and other Asian countries. The industry also has difficulties regarding raw materials supply. Local leather, as well as other shoe components, are not desired quality and price. Producers generally have to rely on imports for their materials and suppliers.
The Footwear industry production is absorbed by the domestic market. Though manufacturers have various distribution channels, department stores are still the best market. Big manufacturers are capable of having their own domestic retail stores and direct concessionaires in big department stores. Traders can go from low end retail markets to high end national and provincial department stores. Some manufacturers who are also traders also concentrate on foreign markets by contacting retail outlets by direct selling to Overseas Filipino Workers and foreign buyers.
Footwear product lines vary according to fashion and cater to specific market segment, the market segmentation for this sub-sector follows the same pattern as that of garments in that it is based on the income levels and the lifestyle of the end consumer. There are basically three distinct market segments for footwear based on quality and price.
The high end market represents the upper echelon of the market segment. Buyers in this category can afford luxury items and indulge in extravagant lifestyles. This group normally buys imported shoes ranging from US$100 a pair to US$500 a pair in the local retail market. Preference leans towards Italian, French and American branded shoes. While customers from this sector purchase mostly imported branded ones, they occasionally also purchase the locally made, branded footwear of select local boutiques. Normally, local boutiques brands are made from imported materials. The average price point of the locally manufactured high-end footwear ranges from US$100-US$150 a pair.
Price and comfort are the major concerns for the middle-end market consumers. This group belongs to the low-middle to middle-high end in the economic scale and is normally composed of the working and professional groups, for whom value for money is a primary consideration. Shoes produced for this market are normally of good quality , and prices range from US$20 to US$50 a pair for ladies’ and men’s leather shoes. This group normally purchase from locally famous boutique shops that have carved themselves a niche in the market.
At the low end of the footwear market, products basically cater to the mass market made up of a relatively large low to middle income groups, who may opt to forego quality for price. Taking price into account, this group usually invests in a few pairs of dress, formal shoes. The price points of these products would be around US$10 to US$15 a pair. The majority of the shoes would be of the casual and simple kind.
The local footwear industry is a labor-intensive operation, with most of the firms small and micro in size. Production is seasonal work, with peak periods before Christmas season and school opening. Workers are hired on a piece-rate basis, as most manufacturers cannot afford to employ workers the whole year.
A major area of concern for the footwear is the sourcing of raw materials. The country does not have a competitive tanning infrastructure that processes semi-finished or finished leather hides. Therefore, procurement of leather and shoe-related components such as shoe lasts, heels, counters and top lift are sourced abroad. Almost 80% of these items are not locally available and are generally imported by the manufacturers.
Major firms in the industry normally produce their own brands and may manufacture a name brand. Some firms use sub contractors for various stages of production process. These companies undertake direct or in-house production but may also use subcontractors to manufacture footwear that are labeled with their own brand. Another type of manufacturer engages in contract manufacturing of a foreign brand for export.
Some producers are known as manufacturer/suppliers, whose production facilities are contracted by another manufacturer. Other players in the industry are traders with their own brand names. The latter group does not engage in any direct production but contracts with either a manufacturer/exporter or a manufacturer/subcontractor to produce the goods.
Production of footwear starts with the sourcing of leather, accessories and components from accessible suppliers. In the footwear industry, the suppliers include leather tanners, shoe-last manufacturers, shoe-component manufacturers and accessories manufacturers/suppliers. Leather footwear use either genuine or synthetic leather. The type of hide and finishing or tanning determines the value of leather. Surface skin has a higher value than the section taken from the middle of the hide. Other shoe components procured include insoles and outsoles made of different materials such as rubber, pvc-plastic and polyurethane. Soles can be purchased in molded sole form, pre-trim sole and sheet sole.
Shoe lasts are obtained from both local suppliers and importers. About 70% of the shoe manufacturers use wooden lasts. Only 30% use plastic shoe lasts due to its higher cost. Materials such as chemicals, buckles, threads, foam, etc., are sourced from various shoe supply stores.
Samples of materials for product development are initially obtained by the shoe manufacturer. Development of samples does not usually involve creating an entirely different design concept, but is merely a revision of existing designs sourced from magazines, retail stores and other sources. After an order is confirmed, procurement of materials begin.
Production is either in-house or through subcontractors. Patterns and lasts are made before the materials arrive to save time. The initial steps include pattern-making for the uppers, covering all required sizes; then, materials are cut according to the pattern. All of the work is done manually by most manufacturers, except in cases where orders are large. The process is labor-intensive, involving local craftsmanship aided by machines at certain stages such as skiving and sewing. The next step is the assembly process, which puts all the parts together. Then the shoe is taken for roughing and finishing. At the end of the production, another person conducts quality control and remedies any perceived defects.
Complete production one pair of shoes normally takes two days. A typical footwear firm using manual production produces an average of 1,000 pairs per week. This volume can increase to 3,000-5,000 pairs per week with semi-automated processes.
Philippine imports of Sport Shoes which include basketball, tennis, gym and training shoes which totaled to US$12.623 million in 2009 an increased of 16.45% compared in 2008’s US$10.547. Major exporting countries include China, Vietnam, Indonesia, Hongkong and Thailand. Hence, footwear of leather valued at US$2.153 million a decrease of 6.83% from 2008’s US$2.300 million, countries that exported were Spain, china, Hongkong, Brazil and Austria. Other Footwear with outer soles of leather or composition leather or rubber valued US$2.130 million in 2009 an increased of 2.11% from 2008’s US$0.920 million. Exporting countries include China, Hongkong, Vietnam, Spain and Indonesia.
On the other hand, the Philippine imported Other Tanned or crust hides and skins of bovine (including buffalo) or equine animals, without hair on, whether or not split, but not further prepared in the dry state (crust) amounting to US$9.119 million in 2009 and US$10.959 million a decreased of 20.18%. Exporting countries include Taiwan, Japan, United States, Pakistan and Korea. The country also imported Other Tanned or crust hides and skins of bovine (including buffalo) or equine animals, without hair on, whether or not split, but not further prepared in the wet state (including wet-blue) valued at US$0.567 million a fall of 1,094.35% as compared from US$6.722 million in 2008. Tanned or crust hides and skins of bovine (including buffalo) or equine animals, without hair on, whether or not split, but not further prepared, in the wet state (including wet-blue) full grains, upsplit, grain splits valued at US$0.447 million an increased of 85.46% from US$0.065 million in 2008. Other Tanned or crust hides and skins of bovine (including buffalo) or equine animals, without hair on, whether or not split, but not further prepared in the dry state (crust) full grains, upsplit, grain splits totaled to US$ 0.245 million a decreased of 163.67% compared in 2008’s US$0.646 million.
The Philippine exported Sport Shoes amounting to US$8.828 million in 2009 a decreased of 94.41% from 2008’s US$17.163 million. Major importing countries include United States, Mexico, Japan, Netherlands and Turkey. Other Footwear with outer soles of leather or composition leather or rubber totaled to US$4.100 million an increased of 13.73% from 2008’s US$3.537 million. Big export markets include Japan, France, Canada, USA and Turkey. Other products of footwear include Other Footwear, incorporating a protective metal toe-cap totaled to US$1.234 million, Other footwear with outer soles of leather valued at US$0.654 million, Other Footwear with outer soles of leather or composition leather or rubber, fitted with spikes, cleats or the like amounted to US$0.233 million.
The Philippines has no exportation of raw hides and skins of Leather.
The Thai Exporters of leather and other hides have a potential in the Philippine market since the country does not produce such leather and other hides. Hence, Thai Exporters can be competitive in their quality and prices to compete with other exporting countries.
It maybe noted, that the raw materials utilized in the footwear comprises at least 90% and that all the materials are being imported from other countries.
The Footwear Industry needs for some measures and activities to enable them to compete with other countries :
1. Simplify importation procedures for raw materials — The footwear industry should adopt an integrated approach on simplifying the importation procedures for leather and footwear components. This will facilitate the entry of rawhides, skins, finished leather and accessories with the desired quality.
2. Encourage consolidation of raw materials imports- Bulk importation can reduce per unit cost and limit the amount of time and resources spent on this process.
3. Provide support to shoe-component suppliers — To augment the local supply of hides and components, there should be institutional support for producers of these items. This would include increasing their access to affordable credit and containing technical smuggling of shoe components from abroad.
4. Develop reliable sources for raw materials - Over the long term, there must be serious efforts to develop the raw materials base for leather while exploring alternative indigenous raw materials that can complement, supplement or substitute for leather.
5. Implementation of proper standardization among shoe-last producers - Standards should be set for manufacturers of shoe lasts, in order to develop a consistent level of quality for their products.
6. Encourage the use of more plastic shoe lasts - Since a plastic last is more reliable than a wooden one for setting footwear sizes, the use of plastic lasts needs to be more widely adopted in the industry.
7. Make technology transfer and facilities acquisition easier for small firms- A Government Program should be established to allow micro and small enterprises in the footwear industry to obtain modern tools and equipment at affordable financing terms.
8. Improve and upgrade skills of workforce - A consistent flow of training programs in modern skills and techniques, business values, work ethics and related concerns should be maintained for the workers.
9. Undertake entrepreneurial and management training for producers - The industry should provide adequate training programs for their supervisors, middle and top level managers. The objective of such programs should be to professionalize the management of shoe firms.
10. Develop specific market niches- Given the influx of cheap imported footwear from China and nearby Asian countries, the industry should reassess its market and focus on certain segments in which it can complete successfully.
11. Sustain the branding concept for the industry -A local brand provides a competitive advantage to producers and can eventually be used to launch a distinctly Filipino image in the export market.
12. Develop an industry price structure - A systematic pricing policy can help maintain profitability and allow more effective responses to changing market conditions.
13. Continue support for Exporters - Footwear manufacturers should be assisted and supported by the local and national Governments in their quest to promote Filipino-made shoes in the global market.
14. Strengthen institutional support for the industry- A cohesive network among the footwear industry and national government offices should be supported to facilitate the industry’s access to information and program relevant to their needs. They should develop locally available materials that could be used as alternatives to leather.
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th