The good show that the footwear sector has been putting up in the last few years subsequent to the strong economic growth and rising purchasing power of consumers, came to a grinding halt in 2020 as Coronavirus pandemic led almost all major shoe brands in the country to count losses. However, changed consumer behaviour, also on the account of the pandemic, helped some to grow business substantially.
“The sharp fall of earnings was caused by lower sales during the April-June period as the country went through a shutdown to stop the spread of Coronavirus,” said Company Secretary of Apex Footwear Md. Omar Faruque even as reports has it that Lotto Sport Italia enjoyed increased sales in Bangladesh for the past several months following a hike in the demand for low-cost, non-leather footwear products.
Riding on strong economic growth and rising purchasing power of consumers, footwear sector in Bangladesh had been growing at around 15 per cent for the past decade or so. Steady rise in demand also brought in investments from both foreign and local businesses with at least 15-20 new leather product and footwear factories reportedly opening in Bangladesh each year.
According to a research by the Eastern Bank Limited (EBL) in 2019, the domestic market size of footwear was around Taka 17,000 crore in the fiscal year 2018-19 and domestic demand for footwear was about 200 to 250 million pairs a year.
The good show that the footwear sector has been putting up was, however, only to continue till the Coronavirus pandemic hit, to throw everything out of gear. So, despite the good run so far, COVID-19 proved to be the undoing of the footwear brands and retailers operating in Bangladesh in 2020, almost all of which suffered setbacks in varying degrees.
To start with, net profits of Apex Footwear, witnessed a sharp decline by 48.49 per cent in the fiscal year ending on June 30, 2020, with the company’s sales dropping due to COVID -19 both in domestic and export markets.
According to the financial statement for the fiscal year 2019-20, Apex Footwear, made net profits of Taka 6.32 crore, down by 48.49 per cent, which had been Taka 12.27 crore in FY ’19. The company saw a decline in earnings as it had missed sales during the last Eid-ul-Fitr, the main season for sales, due to the countrywide lockdown.
But due to the pandemic, the company missed the prime sales as well as general sales as people avoided shopping due to the pandemic.
As per the financial statement of the company, the annual turnover also dropped by 25.25 per cent to Taka 1,181 crore in FY 2019-20, which was Taka 1,580 crore in the FY ’19.
Apex Footwear is a sister concern of Apex Group, which manufactures and retails quality footwear in the country and sells footwear and leather goods through its 260 sales points across Bangladesh.
The company listed on the Dhaka Stock Exchange in 1993 and belonging to ‘A’ category also exports leather goods and footwear to 135 global clients in Europe, North America and Japan.
Next in line is Bata Shoe, which for the first time in its 58-year stay in Bangladesh reportedly suffered losses subsequent to missing out on main shopping season as people’s income was wiped out by the pandemic. The sales collapse of shoes, considered a basic item, reflected the fallouts of the pandemic on the economy and the people’s livelihoods, since Bangladesh first detected the COVID-19 positive cases in March last year.
According to reports, Bata’s sales dropped 85.37 per cent to Taka 41.24 crore in the second quarter of 2020. Sales dropped 55.37 per cent to Taka 204.92 crore in the first half of the year.
Due to the collapse in sales, Bata Shoe sank into losses in the April-June period, giving up Taka 73.51 crore, whereas it had netted a profit of Taka 21.68 crore a year earlier.
Half-yearly loss stood at Taka 70.68 crore against a profit of Taka 26.14 crore year-on-year.
“As far as I know, this was the first time we fell into losses,” underlined Company Secretary of Bata Shoe, Hashim Reza even then as the company’s financial report indicated that about 25 per cent of Bata Shoe’s business comes during the Eid festivals. So, it ramped up stock three months before Eid-ul-Fitr only to witness its hopes dashed after the Government imposed a countrywide lockdown on 26 March 2020 to contain the soaring cases of COVID-19.
And by the time, the economy was partially opened on 31 May, the shopping season was already over with Eid-ul-Fitr being celebrated on 25 May already.
Though the Government had allowed limited opening of shops ahead of Eid-ul-Fitr, the turnout was low, so were the sales, said a store manager while adding the store normally posted revenue of Taka 30 lakh in Eid-ul-Fitr during normal times but it was mere Taka 2 lakh this time around.
Somewhat similar has been the fate of other footwear makers and retailers in Bangladesh. “The leather industry is still in a vulnerable position as domestic demand has yet to rebound,” said Nasir Khan, Chairman and Managing Director, Jennys Shoes then, adding, “I closed 40 out of 65 outlets across different districts and divisional cities where operational costs exceeded revenue.”
However, even as most of the entities have been struggling on account of the pandemic, Lotto Bangladesh had a different experience altogether as it reportedly witnessed a business boom on account of change in the consumer behaviour.
According to media reports, the ongoing pandemic has been a blessing for Lotto Sport Italia as it enjoyed increased sales in Bangladesh for the past several months following a hike in the demand for low-cost, non-leather footwear products consequent to most people staying at home to avoid infection and preferring to buy casual shoes at affordable prices.
According to Managing Director of Lotto’s Bangladesh operations, Kazi Jamil Islam, the outbreak of the pandemic did force Lotto Bangladesh to shut its operations on 23 March 2020, just days ahead of a two-month nationwide lockdown. At the time, Lotto employed nearly 1,300 people at its local production facility but since then things have changed radically so much so that the MD of Lotto’s Bangladesh operations has recruited another 700 workers at a new facility to increase production so as to meet the growing demand.
When the lockdown was eventually lifted on 30 May 2020, many people took up jogging and other physical activities in an effort to improve their immune systems which led to the increased demand for low-cost washable footwear, explained Kazi as the principal reason behind the company’s sales picking up even during the pandemic.
Kazi, who is also the Managing Director of Express Leather Products, the world’s fastest growing Lotto licensee, now plans to set up another factory in Tongi, where various sportswear such as jerseys and track suits will be produced.
Seeing that washable, non-leather products were selling well, Kazi reportedly increased production but was still unable to cope with the rapidly rising demand and as such decided to open another factory of around 11,000 square foot.
“Luckily, I had the raw materials for those items on hand and was able to do good business,” he said adding with the sales going up by nearly 40 per cent year-on-year during the pandemic period, he has increased the commission paid to retailers to 35 per cent and plans to open five more outlets in different parts of the country soon.
So even as the pandemic spelled hardships and business loss for many, some were lucky enough to cash in on the changing consumer behaviour, it seems.