Why should sourcing footwear from Vietnam?
Sourcing shoes and footwear from Vietnam offers numerous strategic advantages, making the country a top choice for global buyers. Vietnam is the world’s second-largest footwear exporter, known for its high-quality production and competitive pricing. The country’s diverse product range, from high-performance sports shoes to premium leather and fabric shoes, meets the demands of various markets. With a well-established manufacturing infrastructure, experienced workforce, and favourable trade agreements like CPTPP and EVFTA, Vietnam provides tariff-free access to key global markets. By sourcing from Vietnam, businesses not only gain access to world-class footwear but also benefit from efficient production processes and reduced costs. Here are some main reasons you could consider sourcing footwear from Vietnam:
1. Developing Supporting Industries
Vietnam’s supporting industries have made significant strides in recent years. The country now boasts over 2,000 enterprises involved in supporting industrial production, with around 300 companies participating in the global supply chain. Binh Duong province stands out as a key hub, hosting more than 170 enterprises dedicated to supplying raw materials for the footwear sector.
Previously, raw materials for footwear production were primarily imported. However, the localisation rate of raw materials has now reached 55-60%, with fabric shoes achieving nearly 100% localisation. Sports shoes have a higher rate of domestic sourcing, around 80%. The government is focused on expanding the domestic supply of raw materials through research and development centres, with a goal to increase the domestic supply rate to 75-80% by 2025. This shift not only reduces production costs but also enhances the industry’s autonomy and competitiveness.
2. Labor Costs and Abundant Workforce
Vietnam’s labour cost advantage is another key factor in the growth of its footwear industry. The average basic salary for footwear workers is approximately 170 USD/month, with additional overtime income bringing the total monthly income to around 200-250 USD/month. Skilled workers can earn between 400-450 USD/month. Although labour wages in Vietnam are not the lowest in the region (e.g., Bangladesh offers lower wages), global businesses value the flexibility and productivity of the Vietnamese workforce. Notably, 70% of the footwear industry workforce is female, making the industry well-suited to the meticulous nature of footwear production.
3. Take Advantage of Free Trade Agreements (FTAs)
Vietnam has signed several Free Trade Agreements (FTAs) that significantly boost its footwear exports. By 2023, 37% of footwear orders benefited from FTA incentives. Agreements like the VN-EAEU FTA have been especially advantageous, offering preferential rates as high as 78%.
These FTAs have resulted in tax exemptions for footwear exports to key markets such as the EU, Canada, Japan, and South Korea. Tax rates have been drastically reduced from 3.5-57.4% to 0%, which not only cuts export costs but also improves the international competitiveness of Vietnamese footwear products.
What kind of Footwear products could be sourced from Vietnam?
Vietnam is a major hub for sourcing a variety of footwear products, with sports shoes and leather shoes being the most prominent. Sports shoes are the backbone of the industry, with an annual output ranging from 800 million to 860 million pairs, peaking in 2020. This product segment has grown 3.5 times since 2005, driven by strong global demand, especially from international sportswear brands seeking high-performance footwear.
Leather shoes have seen steady production, averaging 250 million pairs annually from 2015 to 2019, and rising to 290 million pairs by 2020. The consistent demand for leather shoes in global markets further cements Vietnam’s role as a key supplier in the international footwear supply chain. These two categories highlight Vietnam’s capacity to meet diverse footwear needs, from athletic wear to formal leather shoes.
Vietnam is also a significant producer of fabric shoes, a segment that has experienced steady growth with an annual increase of 10%. Production of fabric shoes, such as canvas shoes, rose from 61.5 million pairs in 2016 to 81.6 million pairs in 2020. This category appeals to markets that prioritize flexibility and cost-effectiveness, making it a key area for future expansion. With its stable growth outlook through 2024, fabric shoes represent a strong, long-term sourcing opportunity for buyers looking for competitively priced footwear options.
Together, sports shoes, leather shoes, and fabric shoes showcase Vietnam’s diverse and competitive offerings in the global footwear market.
Vietnam’s Capacity in the Footwear Industry
By the end of 2022, Vietnam had approximately 1,700 footwear manufacturing and exporting enterprises. These are primarily located in the Eastern and Southwestern regions. The majority (over 70%) are small and medium-sized enterprises (SMEs), while large enterprises and companies with foreign direct investment (FDI) make up the remaining less than 30%. Despite their large numbers, domestic enterprises contribute modestly to the export turnover and employ only about 40% of the total workforce in the industry.
- Large Enterprises: Representing just 6% of the total workforce in the footwear industry, these enterprises play a significant role in high-value production but account for a small portion of the labour force.
- FDI Enterprises: Foreign-invested companies, though comprising more than 20% of the total number of businesses, employ 60% of the workforce and contribute a substantial 78% to the total export turnover of Vietnam’s footwear industry. These companies dominate high-value-added processes such as research, design, and distribution, whereas domestic companies focus mainly on manufacturing and processing.
Growth and Transformation
In recent years, the domestic footwear industry in Vietnam has undergone a notable transformation. This is largely due to technological advancements and enhanced design capabilities, which have led to a significant boost in domestic footwear exports. Between 2015 and 2022, exports from domestic enterprises grew at an average rate of 16%. Furthermore, the contribution of domestic enterprises to overall export turnover has increased, reaching as high as 25% at times.
Competitiveness and Localization
While the industry remains dependent on processing and imported raw materials, it has increasingly demonstrated strong international competitiveness. Domestic enterprises have made considerable strides in adding value to their products and increasing the localization rate, aided by technological innovation and creative design. These developments have positioned Vietnam’s footwear industry to better capitalize on growing global market opportunities.
Overall Vietnam Shoes & Footwear Market
Footwear has become a crucial pillar of Vietnam’s economy, significantly contributing to export revenue. In 2019, footwear export turnover reached 18.1 billion USD, with expectations to reach 24 billion USD by 2024. With major brands like Nike and Adidas shifting production to Vietnam, the country has solidified its position as a global footwear manufacturing hub, playing a key role in the international footwear supply chain.
Vietnam plays a pivotal role in the global footwear supply chain, being a major manufacturing hub for renowned brands like Nike and Adidas. As of 2020, Adidas reported that Vietnam accounts for 40% of its footwear production in Asia, and Nike manufactures up to 50% of its total footwear output in Vietnam. This reflects the country’s significant production capacity and the high level of trust placed in it by international brands.
See detail Vietnam Footwear Export Value 2011 – 2023
Development History
Vietnam’s footwear industry has gone through three key development phases:
- Market Formation and Expansion (1990-1995): Initially producing for Eastern Europe, the industry shifted to Western markets like the U.S. and Europe after the collapse of the Soviet Union. This laid the foundation for sustainable growth and helped Vietnam transition into a competitive global footwear producer.
- Initial Growth (2000-2008): Export turnover surged to 4.767 billion USD by 2008, driven by government policies attracting foreign investment, particularly from South Korea and Taiwan. This period marked the industry’s rise as one of Vietnam’s economic pillars.
- Strong Growth (2011-2019): The industry grew at an average annual rate of 13%, reaching 18.1 billion USD in 2019. Key drivers included the removal of anti-dumping taxes, major brands like Nike and Adidas moving production to Vietnam, and free trade agreements (FTAs) providing tariff-free access to global markets.
Despite the COVID-19 pandemic, Vietnam maintained its position as the second-largest footwear exporter globally and is expected to reach 27 billion USD in export turnover by 2024.
Main market
The United States is the largest market for Vietnam footwear, accounting for 31-35% of total exports. In 2022, exports to the U.S. reached a record high of 9.6 billion USD but declined in 2023 due to global inflation. However, in the first seven months of 2024, exports to the U.S. increased by 14.3%.
China is Vietnam’s second-largest footwear export market, primarily importing fabric shoes. Exports to China peaked in 2020 at 2 billion USD but have since declined. Factors driving growth include FDI companies and shifts in global supply chains.
The European Union is another key market for Vietnamese footwear, with steady growth from 2015 to 2019. Exports declined in 2020 due to COVID-19 but rebounded strongly in 2022. Belgium and Germany are the largest EU importers of Vietnamese footwear, primarily sports shoes, synthetic leather shoes, fabric shoes, and other footwear.
Conclusion
With its strategic advantages, Vietnam is poised to further strengthen its role in the global footwear market. Sourcing footwear products from Vietnam is a smart choice for an international company. But Footwear production demands meticulous oversight and adherence to internationally recognized quality control standards to ensure defect-free products. Moreover, selecting the right partner from thousands of suppliers can be a complex and opaque process for many businesses.
If you have the demand to look for the footwear manufacturers, let VnCommEx help you. Contact us today for more information about our sourcing services and market insights
See more: Sourcing Textile & Garment Products from Vietnam: A Complete Guide
