Big step forward
- Nepal’s footwear industry has succeeded in giving the boot to imported products
Oct 8, 2014-
It is said that when Tomas Bata, a chez shoe entrepreneur, visited India in the early 20th century, he saw an immense demand for shoes because of the millions of barefooted people, and this led him to establish the first shoe factory in Kolkata in 1931. With more than 7,000 employees it was the largest shoe factory in India at that time. There is a place called Batanagar dedicated to his memory in Kolkata.
Nepal’s situation was no different from India’s. Even till the early 1960s, the Nepali people had not cultivated the habit of wearing shoes. If you wanted to see someone wearing shoes, you had to look for somebody from an elite family or go to Tundikhel in the early morning to see people in uniform drilling. The common people just walked around barefooted.
Over the last three to four decades, things have changed upside down. Now, it will be rare to see someone going around barefooted. A research study done in 10 cities in Nepal has projected demand for 2.7 pairs of shoes and 2 pairs of slippers per person per year with an average footwear spending of Rs 2,500 annually. With a population of 30 million, one can fairly predict the scale of demand for footwear in Nepal. The figure will be something like 50 million pairs of shoes per year. In money terms, this will be like Rs 8-10 billion. Unlike other products, demand for shoes is stable and perennial, there is simply no fluctuation.
In the 1970 and 1980s, as was the case with many products, the Nepali people craved foreign shoes. Bansbari Leather and Shoe Factory, a state-owned shoe factory built with the assistance of the Chinese government in 1965, could not compete with cheap imported shoes and, after remaining sick for ages, was finally privatized in 1992. With Bansbari being dismantled, came the private sector into the market. The scenario is totally different today. Shoemakers may be at the bottom of the Hindu caste hierarchy, but not entrepreneurs. Sounds like economy and technology have cast aside social barriers. One will find many so-called high-caste entrepreneurs in the shoe making business today.
Due to the changes in the business strategies being adopted by private shoe manufacturers—branding, advertisements, industrial fairs and exhibitions, sales warranty, after sales service and media campaigns—consumer habits have changed from craving foreign shoes to Nepali brands. The situation has reversed to such an extent that if Nepali shoes used to be sold under foreign brands earlier, imported shoes are now being sold under Nepali brand names or simply with Made in Nepal labelling. Presently, 55 percent of the domestic requirement for shoes is met by local products. School footwear is now completely dominated by Nepali brands. And these students, when they grow up, are expected to loo for their favourite brands. This is where shoe entrepreneurs have literally hit a chord. More than a decade ago, Nepali products held a market share of a mere 5 to 7 percent. If in 2003, Rs 12 billion worth of shoes were imported, the figure has now plunged to Rs 2 billion. However, there is still a huge unmet demand for shoes.
Boots on the ground
Boots on the ground
The leather goods and footwear sector is basically a labour-intensive industry. It provides direct employment to around 50,000 people. With 45,000 retail outlets across Nepal, one can fairly imagine the scale of employment generated by the sector. There are about 800 factories of different scales of operations; 500 of them operating within the Kathmandu valley. Exports of leather and leather goods rank third in the list of the country’s export items. However, the downside of the sector is that 90 percent of the raw materials are imported. To produce a single pair of shoes, one needs to import 36 components. Value addition seems to have come mainly from labour.
The Leather Footwear and Goods Manufacturing Association of Nepal (LGFMAN) has established a common outlet Nepali Shoe House for Nepali manufacturers, and is now aggressively looking for the “Made in Nepal” mandatory trademark for its members. This is basically designed to compete with foreign shoes branded as Nepali products. LGFMAN President Hom Nath Upadhyaya complains, “Nepali policymakers are so short-sighted that when they introduce uniforms for public servants, they forget to think about Made in Nepal shoes.”
As an entrepreneur, where does the sector pinch in Nepal? Invariably, his or her first response would be “growing piracy and under-invoicing of imported shoes”. This is to avoid paying taxes. Labour and growing unionism is another problem. As a shield against labour agitation, manufacturers resort to “labour contractors”. They are no other persons but middlemen taking a cut out of the workers’ wages. The industry is already facing a shortage of skilled labour as Nepali labourers continue to migrate abroad for jobs. It is unbelievable how shoe manufacturing is linked with Nepali food habits. Yes, the habit of the Nepali people of eating meat with the skin has reduced the supply of the most essential raw material. Imagine how many pairs of shoes we must have eaten during the recently concluded Dashain festival!
Published: 08-10-2014 09:43
- footwear industry