Tricky steps lie ahead for Vietnam's footwear export market

Vietnam maintained its position as the world's second largest exporter of shoes in 2017 for the third consecutive year, according to data from Vietnam Customs.

The country exported over 1 billion pairs of shoes last year, accounting for 7.4 percent of the global market and second only to China, according to World Footwear Magazine.

However, 80.4 percent of the country’s footwear export value was accounted for by Foreign Direct Investment (FDI) businesses.

A zero import tax that came into effect on January 1 this year under the EU-Vietnam Free Trade Agreement, so FDI shoe companies are expanding their current factories and opening new ones, according to Vietnam’s National Institute for Finance.

While opportunities lie ahead for foreign footwear companies, local firms are struggling to develop due to lack of capital and market access, the institute commented.

Other challenges for local footwear businesses include rising labor costs and strong competition from international exporters, particularly China and Thailand, which account for 50 percent of Vietnam’s local market, said Diep Thank Kiet, vice president of the Vietnam Leather, Footwear and Handbag Association.

As the world enters the Fourth Industrial Revolution, Vietnam’s shoe businesses need to have a new vision and management style, while focusing on research and development to increase profitability, said Nguyen Duc Thuan, head of footwear association.

The application of artificial intelligence in manufacturing remains something new in Vietnam. The country has recently been named one of the least ready for the 4.0 Revolution by the World Economic Forum, behind regional peers Singapore, Malaysia, Indonesia and Thailand.