Orders flourished
According to data from General Statistics Office, footwear exports of all kinds in March recovered very strongly, earning 1.7 billion USD, an increase of more than 600 million USD compared to the previous month. This figure brings total footwear export turnover in the first quarter of the year to 4.85 billion USD, an increase of 11.7% over the same period last year.
Including handbag export turnover of 866 million USD (up 5.2% over the same period), in the first quarter of 2024, entire leather and footwear industry brought in a turnover of more than 5.7 billion USD.
Reason leather and footwear industry's exports accelerated in March 2024 was because orders increased sharply. According to Mr. Nguyen Chi Trung - Chairman of Board of Directors of Gia Dinh Group Joint Stock Company, the enterprises has received a series of orders from major partners around the world and has orders until end of June 2024. To keep up with export orders, at the company's factories, workers are being mobilized to work overtime 5 days/week, adding 2 - 2.5 hours each day.
Increased orders cause some enterprises to recruit more workers to boost production and increase output. For example, Hwaseung Vina Co., Ltd. has recruited more than 1,000 workers since the beginning of the year and is continuing to recruit 1,000 more unskilled workers with salaries ranging from 6.7-10 million VND/month. Enterprises offer policies to support new workers with 2 million VND/person and experienced and skilled workers with additional support of 500,000 VND.
The fact that leather and footwear enterprises can "breathe easier" in terms of orders has been recognized by experts since the beginning of the year based on recovery of consumption in the industry's major export markets such as the US, EU, Japan, and Korea, China... Even international customers ordering garments and footwear from Vietnam have informed manufacturing units to prepare for a larger number of orders this year.
There are still many worries
Growth rate of footwear and handbag exports in the first quarter of this year is good but does not reflect complete recovery of the world footwear market, because last year leather and footwear industry lost billions of dollars in export turnover. Typically, footwear decreased by nearly 15%, handbags decreased by 9%, with revenue of 20.37 billion USD and 3.76 billion USD respectively.
On other hand, Vietnam's major import markets for leather and footwear products have not really recovered, consumers are still "reserved" with consumer goods and prioritize essential goods groups. Vietnamese enterprises still have to closely monitor market information to have appropriate production and business plans, taking full advantage of opportunities from markets with free trade agreements (FTAs) to increase tax incentives.
In addition, manufacturing units also said that customers place small orders and deliver more urgently instead of planning to import goods for 6-12 months as before.
Not to mention, a series of regulations on ecological products, extended manufacturer responsibility, supply chain traceability, carbon emission reduction requirements for manufactured products... are accepted by importers. EU's proposed imports are creating big challenges for links in the supply chain, including Vietnam.
In particular, tensions in the Red Sea region have pushed up shipping costs, which is also a big worry for export enterprises in general and leather and footwear enterprises in particular. Before the Red Sea conflict, shipping rates from Vietnam to Europe were about 2,100 USD/container, which has now increased to 4,000-5,000 USD/container.
Rising freight rates are affecting cost of goods, especially low-value items and affecting Vietnamese enterprises. Scope of influence extends to businesses that do not sign ship booking contracts. In many cases, enterprises do not accept to share part of their finances, which can cause buyers to cancel orders or even not maintain long-term commercial relationships.
It can be seen that although export turnover in the first quarter of 2024 increased, challenges awaiting leather and footwear enterprises in the second quarter of 2024 are not gentle. Accordingly, Vietnam Leather, Footwear and Handbag Association recommends that domestic businesses actively take advantage of incentives from Vietnamese markets with FTAs; continue to expand and diversify markets, while focusing on maintaining traditional markets such as the US and EU because of their large purchasing power and market capacity.
Regarding product segment, Vietnam is assessed to be able to produce footwear products of average quality or higher and products of high difficulty. In coming time, the industry will not aim to produce low-value products due to low profits and waste of resources, but will continue to focus on the mid- and high-end product segments.
In addition, to limit risks from tensions in the Red Sea, advice of trade experts is to pay attention to export orders to nearby, populous markets such as China and India and at the same time exploit maximize space in ASEAN region as well as Korea and Japan. Look for new transportation methods to minimize impact.

Source: Vitic/ congthuong.vn