Vietnam – The rising footwear manufacturing capital

While China has continued its “zero-COVID” strategy, forcing factory closures and stalling production, Vietnam continued to grow exports across categories such as footwear. Vietnam is currently ranked second to China in footwear production, exporting over 1 billion pairs of leather and athletic shoes, with a value of $20.78 billion in exports in 2021. As of early this year, Vietnam had over 2,200 footwear manufacturing factories, mainly located around Ho Chi Minh city.

Through the first half of 2022, footwear exports from Vietnam reached at $ 11.79 billion, an increase of 13.3%, roughly $2 billion per month. Through August, exports were up by 29.7% relative to the same period in 2021. The largest footwear buyers are the U.S. followed by China, with Germany, Japan, Korea and Belgium all buying in the range of $750 $1 billion of footwear annually from Vietnam.

The U.S. footwear market was valued at around $105 billion in 2021, a 27% global share, while China’s footwear market is expected to grow to around $80 billion by 2026. The global footwear market is expected to grow to around $440 billion by 2026, which means Vietnam has plenty of room to expand its share, especially from China’s fast-growing domestic market.

Based on Vietnam’s stability, attractive investment climate and large pool of cheap labor, some of the largest brands, such as Adidas and Nike, have their main footwear production facilities in Vietnam. Nike has over 100 suppliers in Vietnam. The country’s labor costs around half that of China, at approximately $3 per hour versus $6.50 per hour in China.

U.S. tariffs on China and free trade agreements (FTAs) with other countries and regions, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), have helped Vietnamese exports. The EU-Vietnam FTA has also contributed to trade growth with Europe, with an increase of 18.2% in trade year-on-year. A similar FTA with the U.K. has supported a 10.9% increase in trade.

A report by Research and Markets predicts that footwear production and exports from Vietnam are expected to continue to grow by at least 8.1% through to 2031, which would value its footwear export at around $40 billion.

Going forward, Vietnam will see more competition from other ASEAN countries, with similar appeal of cheap labor and available workforce. Cambodia saw an increase in footwear exports through Q3 this year of 47.4% to 55.04 million pairs of shoes, while India saw a 51% increase to 28.24 million pairs. Malaysia and Brazil are the other fast-growing footwear manufacturing locations.

Footwear and low-cost manufacturing are not the only categories where Vietnam is seeing growth. Apple, Google, Samsung and Microsoft have all established a significant presence in Vietnam as a hedge against China. Apple is reportedly shifting some iPad production out of China to Vietnam. Samsung just built a $220 million R&D center in Hanoi, partly to support strong sales growth in Vietnam.

This article was first published in our Q4 Retail Sourcing Report. This is a quarterly initiative where we analyse trends and indicators that will incoming global sourcing and supply chains in the near term and beyond.

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