Along with apparels, local footwear brands have also been making a rapid rise in the Bangladesh retail sector for the last few years.
A decade or so back, wearing foreign shoes was very common in Dhaka. But the trend is now changing with increasing number of locally-made branded shoes making their presence felt, thanks to the local manufacturers, who have so far been concentrating on exports only.
But for the rising income and spending power of the middle-class population, shoe manufacturers are now taking active interest in the domestic market. The footwear sector has reportedly been growing at around 15 per cent for the past decade. According to research by Eastern Bank Limited 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.
Among the popular names are Apex Footwear, Bay, Hamco, Jennys, Fortuna, Crescent, Vibrant, Leatherex, STEP, Walkar, Orion, Falcon, Zeils, Sampan, etc. Apart from these, many clothing brands like Ecstasy, Sailor, Occult, etc., are also reportedly manufacturing shoes for the domestic market.
However, despite such large numbers of players in the domestic circuit and easy and cheap availability of rawhides, the price tags have been rather high, complain many end customers.
It may be mentioned here that around 40-50 per cent of the nation’s annual rawhide supply comes during Eid-ul-Azha. However, since last few years, there has been a declining trend of rawhide prices, which belies increasing prices of footwear in the domestic market, they feel.
“Tanneries are sitting on stockpile of leather from last year – worth Taka 3,200 crore – and hide worth a few thousand crores of Taka is coming to flood the warehouses,” Md Shaheen Ahmed, President, Bangladesh Tanners Association, underlined before this Eid-ul-Azha, while anticipating that despite lesser than other years, a significant number of animals would be sacrificed this Eid as well, which means abundant availability of raw materials.
Now sample this bit of information shared by some reports, according to which, there are three stages of rawhide processing: wet blue, crust and finished, and it costs around Taka 35 to 60 to process each square foot of rawhide due to the chemicals used. Further, some 30 to 40 kinds of chemicals are used during the processing, while the cost also depends on the quality of the leather a tannery wants to produce.
And at the current price, it costs Taka 65 to 70 per square foot to make leather for the uppers of a medium quality shoe. For the normal leather used inside the shoe, each square foot costs Taka 35. Then the price is fixed including the tannery workers’ wages, administrative costs, loan interest, and other costs. However, many end consumers feel, considering the cheap price of rawhides and the profit margins that shoe makers make, they could very well provide the same at a bit more affordable rates.
However, as per a recent research carried out by Bangladesh Trade and Tariff Commission (BTTC), that low prices of rawhides will be able to keep prices of leather goods such as footwear and bags from going abnormally high in the domestic markets is not necessarily true.
According to a senior research officer at the BTTC, leather comprises less than 5 per cent of the production cost of a pair of leather shoes, while other costs — such as labour, transportation, branding, administrative and managerial works, and running establishments alongside that of bank interest rates and stock lots – tend to be higher as a result of which, the low prices of rawhides are not reflected in prices of leather goods in the domestic market.
Considering all these, a manufacturer has to increase the price of a pair of shoes by Taka 1,200 to 1,500 from the actual production cost to survive. As a result, the sales price of a pair of shoes stays fixed between Taka 4,000 and 4,500 in the local markets, according to some industry insiders.
The high cost of production and high bank interest rates are resulting in the abnormally high prices of leather shoes in the country, said Mohiuddin Ahmed Mahin, President, of the Bangladesh Finished Leather, Leather Goods and Footwear Exporters Association, who went on to add that around 2.50 to 3 square feet of leather is required to make a pair of shoes, but scores of other items are also needed to make a pair of shoes, of which only thread is available in the local market and most of the others are imported from overseas.
Of the cost incurred for making a leather shoe, 30 per cent is for leather and the remaining 70 per cent for accessories, said Md Shaheen Ahmed, adding the accessories are costlier than the leather for which the prices of shoes are high in the local market.
Although the prices of rawhides are low in the local markets, that of tanned leather is not. For instance, a square foot of tanned leather was sold between US $ 1.70 and US $ 2.50 over the past 2 years despite a reduction in rawhide prices, he said.
Nevertheless, BCC is now preparing to collect information from local markets to see whether any particular company, group, or syndicate have been cheating customers to make hefty profits from sale of rawhide and leather goods.
Primarily, if any manufacturer can produce even 10 pairs of shoes from a piece of rawhide and sells each pair for Taka 4,500, the total value stands at Taka 45,000, said BCC Chairperson Md Mofizul Islam, adding if the production costs and other costs are fixed at Taka 3,000 per pair of shoes, the profit is Taka 1,500 from a pair of shoes in the domestic market.
But the price of a piece of rawhide now in Bangladesh is not even Taka 500, he said.
“We will start collecting information soon from the market. If the BCC finds anybody responsible for abnormal price hikes of shoes and leather goods, we will serve notices to them. The BCC will also find out whether any syndicate or vested quarter is involved in turning prices of rawhides abnormally low in the country,” he said.
Meanwhile, coronavirus has added a new dimension to the domestic footwear market and the so-called higher prices of leather products after one of the biggest players in the footwear, Bata Shoe (Bangladesh) Limited declaring significant losses during the first half of the company’s financial year due to steep fall in sales.
The company incurred losses of Taka 70.68 crore in January-June compared with profits of Taka 26.14 crore reported in the same period of the previous year. Further, it reported Taka 51.67 losses per share during the first half of the financial year against Taka 19.11 earnings per share in the previous year.
The sales have also dropped sharply to Taka 204.92 crore in the period from Taka 459.19 crore in the previous year.
In its financial statement, the company said that generally, around 25 per cent of business came during Eid, and at the same time, high value products were also sold during this period which generated a high margin.
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These opportunities were washed out due to the pandemic this year, the company said.
Others are also struggling with the consequences of the pandemic. Take, for example, Jennys, which reportedly had to keep 35 out of its 45 outlets in Dhaka and other major cities in the country shut. And for those who have been able to keep their shops open, sales have been abysmally low with market players underlining sales have come down to 20 per cent of the pre-coronavirus time.
As per reports, which quoted a senior official at Apex Footwear – the largest local brand with around 220 outlets, which used to sell products worth Taka 2 crore/day locally — sales dropped more than 50 per cent in the second quarter of this year due to the pandemic.
Given the scenario at hand, survival of the local brands seems to be a matter of bigger concern in the current context rather than the increasing trend of price of leather products, which with proper intervention and monitoring in place can be regularised and brought down, but brands shutting shops on account of poor sales and economic downturn would definitely not augur well for the local market.