When India’s exports were on a decline over the last couple of years, one product category that did not lose its shine is leather boots. On the contrary, its exports from India surpassed that of traditional leaders like Germany and Netherlands. The Dollar Business analyses what makes this product a bestseller overseas.

By Niladri S. Nath | June Issue 2017 | The Dollar Business

Heard the phrase: “you can’t buy happiness, but you can buy shoes, and that’s kind of the same thing”? Well, if not men, womenfolk will definitely relate to this statement. And why not? There are studies that prove, “when a woman shops, especially for a pair of shoes, the neurotransmitter dopamine is released in large quantity, providing a feel-good high, similar to taking a drug.”

And it’s not just dopamine at work. Martin Lindstrom, a branding expert for Fortune 100 companies and author of ‘Buyology: Truth and Lies About Why We Buy’, states, in his book, that “the mood-altering traits of shoes also come from another brain reaction. Buying new footwear stimulates an area of the brain’s pre-frontal cortex termed the collecting spot. As a result, collecting each type provides a mini-adrenaline rush similar to the satisfaction a stamp collector gets when he acquires a rare find.” Now that’s some science! And that’s also the reason why footwear aficionados would never compromise when it comes to buying a new pair, particularly of leather boots (a collector’s item, as they call it)!

What makes this story of fascination with leather boots satisfying for Indian exporters is that the obsession for leather boots is becoming even more ubiquitous with each passing day. Be it ankle boots, knee-high boots, mid-calf boots, or biker boots – for men, women or children – ‘Made in India’ tag is fast gaining popularity across the globe. The reason is simple – Indian exporters offer high quality boots at lowest possible prices.

 

NUMBERS Talk

In CY2016, India emerged as the fourth largest exporter of leather boots in the world – surpassing traditional leaders like Germany and Netherlands. Data also reveals that India’s share in world exports increased to 6.72% in CY2016, from 5.44% in CY2015. In fact, in FY2017, till February, India had exported leather boots worth $254.49 million against a total of $264.18 million in FY2016 – a trend that suggests that numbers for FY2017 will surpass that of FY2016.

Profit Perfect

There seems to be no dearth of opportunities, but is the business generating enough profits? “The margins are as high as 8-10% as leather boots are expensive than other shoe variants,” says Rajiv Wasan, Partner, A. T. Exports, a Agra-based exporter of leather boots. While a pair of long leather boots can fetch an exporter anywhere between $25 and $35, a pair of ankle leather boot is priced around $15-20. On the other hand, leather sandals and shoes are priced between $8 and $15. Hence, leather boots become the obvious choice when it comes to exports.

Having said that, it’s not that easy for an exporter of leather boots to keep those export orders flowing. While he needs to keep up with global fashion trends – and that means visiting the most fashionable cities in the world and attending the best of footwear exhibitions – ensuring high quality products at competitive price is a big challenge that an exporter needs to overcome. Further, the order size too varies with client, and could range between 1,200 pairs to 20,000 pairs per colour. And not to say, the size of the order plays a huge role in deciding the profit in any business deal. For, big order means one can take advantage of economies of scale and generate higher profits.

WINDs OF CHANGE

An issue exporters have been facing for long is stiff competition in international markets from China and Vietnam – the two dominant forces when it comes to exports of leather boots. However, things are now changing in India’s favour – that too fast! China seems to be losing its cost advantage in manufacturing, a factor that has been of paramount significance in allowing it to capture various export markets. According to Euromonitor, hourly wages in China hit $3.60 in CY2016, reporting a 64% increase from CY2011 hourly wages. Interestingly, that’s nearly five times the hourly wage in India. Result: Chinese exporters of leather boots are slowly losing out to their Indian counterparts.

Another factor that is working in India’s favour is the change in business dynamics. The business of leather boots is becoming more customised. Customers are becoming more individualistic and they find more pleasure in owning unique products rather than purchasing something that has been mass-produced. “China has always excelled in the volume game. But the emerging trend is such that you must manufacture a varied range of products in limited quantities. And exporters in India have the flexibility to cater to this trend,” says Wasan.

Portfolio Matters

While Indian exporters are playing up the flexibility card, it is not that they have stopped worrying about the competition from China. And they have their reasons. It’s a known fact that the Chinese government subsidises its industries – while this is in contravention of WTO norms, it’s helping Chinese exporters in dumping their products across markets including India. And not to say, Indian exporters want the government to address this issue on an urgent basis.

Having said that, exporters believe that it’s not China but Mother Nature who is posing the biggest challenge. Rajesh Sehgal, Vice President of Agra Footwear Manufacturers & Exporters Chamber (AFMEC), explains, “In Europe, our key exports destination, winter has been arriving quite late and this errant weather pattern has thrown the product cycle out of gear and the demand for high leather boots has declined.”

This has forced Indian manufacturers and exporters to diversify their product portfolio as well as explore new markets. Instead of full-length leather boots, they are now focusing on ankle boots and mid-length boots. Also, exporters are exploring opportunities in Latin America and Asia to compensate for the loss of business they have suffered in US & EU.

Of infra & labour

Further, exporters also face obstacles such as lack of good connectivity to ports, high power tariffs and archaic labour laws. Lalit Arora, Managing Director of Leather Linkers, an Agra-based leather boots exporter, says, “Poor infrastructure is the biggest challenge faced by the industry. If the government can improve infrastructure, half the battle is won.” A lack of trained manpower and unavailability of superior quality leather are also pulling back the exports business. “We require skilled manpower to do the upper stitching of the leather boots, but there are not many who can execute the job,” says Wasan.

Irshad Ahmed Mecca, Managing Director, Farida Group, an exporter based out of Chennai echos somewhat similar sentiments when he says that “the lack of quality leather puts the industry at a disadvantage. And because of this, it’s difficult for the industry to get repeat orders.”

Nevertheless, help is just around the corner! Footwear Design & Development Institute (FDDI) and Central Footwear Training Institute (CFTI) are jointly working towards supplying skilled workforce to the industry. This is bound to help the industry in the long run.

 

PERFECT TIMING

Just like in any business, there are opportunities and there are obstacles in exports of leather boots. But since opportunities outweigh obstacles, exporters believe it’s a risk worth taking. Further, ease of doing business has improved in India over the last few years. It is now easier to get a license to set up a factory and loans are being sanctioned faster. “The government has become quite proactive in urging the National Small Industries Corporation (NSIC) to offer financial assistance to entrepreneurs” adds Wasan. Raw materials too are available easily throughout the country as India has an abundance of livestock.

With the government’s support, India’s leather boots exports is soon expected to scale new heights. More so, as China slowly loses its sheen as an attractive destination for buyers, Indian leather boot manufacturers and exporters would surely benefit the most. In fact, experts feel that India should intensify its manufacturing infrastructure to enhance its stature in global market. If Indian exporters can add some more value to their leather footwear and promise consistent quality, this could be a great time to seize a share from Chinese exporters.

And if you are planning to make the most of this opportunity, we must tell you that the Milan Fashion Week is around the corner – you may want to boot up for the show!