Orders drop, market is difficult
Producing sports shoes for a famous brand, a representative of Thien Loc Shoe Joint Stock Company (Ho Chi Minh City) said that if the company used to produce 300,000 pairs of shoes per month, it now only produces 187,000 pairs per month. The product has decreased by 40% due to partners reducing orders. It is forecasted that in June and July, the situation may be even worse.
In the first months of the year, a series of leather and footwear enterprises had to cut their workforce. Recently, in April, PouYuen Vietnam Co., Ltd. (Binh Tan District, Ho Chi Minh City) announced the termination of labor contracts with a large number of 5,744 employees. Previously, in February 2023, this company also terminated labor contracts with 2,358 people. The number of employees cut is in the group that has been waiting for work, rotating since the end of last year due to a shoe brand withdrawing orders.
PouYuen is not the only one facing difficulties and having to cut down on labor, but this situation is also happening to many leather and footwear enterprises due to the decrease in orders. Many smaller enterprises also have to cut down and restructure, at least reducing working hours and working days, and at worst, cutting direct labor.
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| Export market facing difficulties, footwear enterprises seek new directions |
In fact, in the first 5 months of 2023, leather and footwear exports continued to face many difficulties due to the unstable world economic situation. High inflation in European countries and the US, and decreased total demand caused orders to decline. Data from the Vietnam Leather, Footwear and Handbag Association (LEFASO) shows that in the first 5 months of the year, the total export turnover of the whole industry only reached about 10 billion USD, down 14.5% over the same period.
Mr. Nguyen Van Khanh, Vice President of the Ho Chi Minh City Leather and Footwear Association, said that leather and footwear businesses are in a state of “up and down” because there are no export orders. Currently, export orders have decreased by 60-70%. According to Mr. Khanh, if many years ago, businesses had orders until July and September at this time, now there are almost none. Some businesses are operating at a low level, some have even closed but have not announced it.
“Previously, we predicted that orders would increase again by the end of the second quarter of 2023. However, many 'giants' in the footwear industry have recently withdrawn, so it is impossible to predict orders at this time,” said Mr. Nguyen Van Khanh.
Businesses seek to adapt
In the context of export difficulties, many footwear enterprises are trying to find new directions. Ms. Vu Le Quyen, CEO of Binh Tien Consumer Goods Production Company Limited (Biti's) said that to overcome difficulties, the enterprise is currently focusing on the youth segment, expanding distribution channels in the domestic market. In addition, the company is also striving towards sustainable development by researching and recycling surplus materials, contributing to greening production. Biti's is also proactively looking for more partners to supply raw materials and expand output to continue to recover production, business, and diversify product types.
For Nam Binh Minh Joint Stock Company, changing the product structure and market structure is also the solution that the company is aiming for to overcome difficulties. Mr. Nguyen Quang Vu, Chairman of the Board of Directors of the company, said that in addition to focusing on products to meet the increasingly diverse needs in the mid-range segment, the company is calculating to open a subsidiary specializing in manufacturing and supplying molds and sole molds for the footwear industry.
Forecasting the market situation in the coming months, Ms. Phan Thi Thanh Xuan, Vice President of the Vietnam Leather, Footwear and Handbag Association (Lefaso), said that major economies that are Vietnam's export partners such as the US and EU have reduced spending on purchasing common and luxury products, causing the volume of orders to decrease. Meanwhile, domestic industrial production sectors are mainly export-oriented, heavily dependent on the global market because domestic production output far exceeds domestic market demand.
Forecasting the export market situation in the coming months, Ms. Xuan commented: “The difficulties will last until the end of the second quarter. It is possible that from the third quarter, the market will gradually recover.”
However, this growth is only better than in the first and second quarters of 2023, and it is difficult to achieve the same growth as in previous years. Accordingly, the leather and footwear industry will find it difficult to achieve the plan set at the beginning of the year.
“We encourage businesses to diversify their products and markets. Business owners must travel more, participate in fairs to find orders and partners, not in Europe anymore but in Asia, even Africa. We should not “put all our eggs in one basket” to solve the current difficulties,” said Mr. Nguyen Van Khanh, Vice President of the Ho Chi Minh City Leather and Footwear Association.
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