Economy, Business And Markets

Shoe Industry Forsaken,Underdeveloped

Shoe Industry Forsaken,UnderdevelopedShoe Industry Forsaken,Underdeveloped

The shoe industry in Iran is one of the most neglected sectors of the economy, to the extent that official data about the sector are hard to come by.

The dominance of small-and medium-sized enterprises in the sector makes collection of data on production and sales difficult. Moreover, the available official statistics do not present a realistic picture of the market due to high level of smuggling in the sector.

According to chairman of the Association of Managers and Experts of Iranian Shoe Industry, Ali Lashkari, about 95% of Iranian shoes are manufactured by small-and medium-sized enterprises with less than 100 employees, while large enterprises are currently working at only 30-60% capacity.

As per official statistics, Iran’s footwear exports in the 12 months ending on March 20, 2015 (which marks the end of the past Iranian year) stood at about $110 million, 5% below the previous year’s figure and the lowest in the past six years, Persian economic weekly Tejarat-e Farda quoted Lashakri as saying.

On the other hand, while official data suggest that the country imported only about $6 million worth of footwear last year, the actual figure is believed to be much bigger. The domestic footwear market, particularly for sports shoes, is largely dominated by illegal imports from China and other Asian countries, which do not appear in the statistical data.

Experts believe a missing link in the Iranian footwear industry is the lack of well-known brands. Even local shoemakers often replicate foreign designs to attract the customers, pushing the domestic products further into anonymity.

 Forgotten Names

Domestic brands such as Melli, Bella, Wien and Nahrein came into being in the 1950s. They were successful in capturing the domestic market through establishing a strong distribution network across the country and ensuring high quality of products and services at reasonable prices. They also created a vast number of jobs and were exported to multiple countries.  

However, much as they had managed to win the loyalty of many customers both inside and outside Iran, these brands suffered greatly after the factories were nationalized and put under government control following the Islamic Revolution of 1979. Today, these companies have either considerably shrunk in size or stopped production.

Melli shoe factory, founded by Rahim Mottaghi Iravani in 1951, was handed over to the Civil Servants Pension Organization as part of the government’s debts to the organization. The company has stopped production and its large staff of 10,000 has reduced to only 700 personnel managing the brand’s outlets across the country by distributing other domestic shoe brands. Bella shoe had a more or less similar fate and currently remains under control of the Central Bank of Iran which runs the existing showrooms across the country.

Currently, Tabriz, the capital of East Azarbaijan Province, remains the main hub for production of leather shoes, accounting for about 60% of domestic leather shoe production.

Qom is another major producer and exporter of shoes, accounting for the majority of Iran’s shoe exports to neighboring countries such as Iraq and Afghanistan.

 Iraq: Biggest Market

Iraq is the biggest importer of Iranian shoes, accounting for 60% of exports in the previous year. Afghanistan, Azerbaijan, Uzbekistan and Georgia are other buyers of Iranian footwear.

But a recent decision by the Iraqi government to increase import tariffs on different types of shoes from the previous 5% to 15-25% threatens to have a negative impact on Iran’s shoe exports. The recent unrest in Iraq has also added to the difficulties of exporting to the country.

 What’s Missing?

Jafar Naderpour, the manager of Nader shoes chain stores, believes increasing the domestic footwear industry’s capacity is only possible through improvements in the distribution network, which requires the establishment of large-scale outlets across the country and moving away from the current traditional markets.

He also believes another shortcoming in the sector is lack of accurate data on the domestic footwear market, which he says arises from the lack of a well-defined authority to supervise the sector. A number of bodies and organizations, including the ministry of industry, mine and trade; the union of handmade shoemakers; and the union of machine-made shoemakers currently supervise the sector.

“The footwear industry in Iran is scattered among many small-and medium-sized enterprises and in the absence of reliable data on annual production and consumption, it is difficult for the manufacturers to arrive at production plans,” he told Tejarat-e Farda.

According to Naderpour, it is estimated that globally about 18 billion pairs of shoes were sold in 2013. “Given that Iran’s population is about a hundredth of the world’s population, annual shoe consumption in the country is estimated at about 180 million pairs. But since Iran is located in an arid and semi-arid region, shoe consumption in Iran is slightly higher than the global average and stands at about 230 million pair per year,” he concluded, adding that of the total footwear demand in Iran, about 20-25 million pairs are imported, mostly though illegal channels.

It is evident that a lot needs to be done for the domestic shoe industry to achieve its true potential. Increasing the number of domestic brands that can gain the Iranian consumers’ trust, improving the designs rather than replicating foreign brands, improving the distribution network and collecting precise data on the domestic footwear market are primary steps that should be taken in this regard.