Kolkata | New Delhi: Armani Exchange, Superdry, Calvin Klein, Tommy Hilfiger and US Polo Assn are said to be running out of local shoe stocks as the government wants factories they are made in to be certified by the Bureau of Indian Standards (BIS). These plants are mostly based in China, Vietnam, Thailand and Malaysia, and BIS has not certified any overseas footwear factories. India‘s regulatory environment has affected the industry since production capacities are limited in India, Skechers global CFO John Vandemore said during the company’s earnings call on April 26.
Many of the brands have been forced to take footwear off the shelf – online and offline – or are selling a much smaller range with old stock, industry executives said. The BIS Quality Control Order (QCO) mandates compulsory certification for factories making the final product and some specified key components, such as rubber, PVC or polyurethane soles and heels. The QCO was implemented in July last year for leather shoes, while for sports shoes, sandals, clogs and slippers, it was to come into effect from January this year.
That deadline was subsequently extended in March to August but the companies say such piecemeal extensions hamper supply chain planning. They also fear the goods may not reach their stores on time since it takes 5-6 months from production to custom clearance, experts said.
Reliance Brands, which operates Armani Exchange and Superdry in India, and Arvind Fashions, which sells Calvin Klein, Tommy Hilfiger and US Polo Assn, did not respond to emailed queries.
The regulation will push companies to set up production facilities in India, according to executives.
There will always be challenges in the initial phase of implementation because the supply chain gets disturbed, said Anupam Bansal, director of retail at Liberty Shoes, adding that these issues will get resolved.”The negatives are very temporary in nature,” he said. “The positive is that the Indian footwear industry will get developed, people will have more effective production in India, in fact it will reduce their supply chain cost.”
Abhishek Ganguly, CEO of homegrown footwear manufacturer Agilitas Sports, said global brands need to have a distinct supply chain strategy for India in the present environment or they will not be able to operate.
“The large global sports shoe brands have already crafted a make-in-India strategy with India now having the capability to manufacture even the expensive range,” he said. “Only those brands for whom shoes are a small part of the business are suffering.”
BIS officials will have to visit overseas factories to give approvals but these might not be too forthcoming in the case of plants in China or Chinese-owned units as the government wants to reduce imports from that country owing to border tensions, according to analysts.
“We have lost business and continue to lose. Footwear sales have come down year-on-year last fiscal when it was one of the fastest-growing categories,” said the chief of a leading fashion company. “We are not able to import from our factories in China and Vietnam as they are yet to be certified.”
While India ranks as one of the “bigger international markets” for Skechers, the recent deadline extension is “not long-term, so it continues to be an issue,” said Vandemore. “We have objectives to continue to manufacture more and more products in India. The issue in the short term is simply the capacity of that market to bear it. And, that’s not a Skechers issue in all honesty. That’s an industrywide issue, and that’s something we continue to work on with our manufacturing partners.”
Vandermore said the company is “cautiously optimistic” regarding business in India this year. He said the “regulatory scheme is ultimately going to need to be resolved for the benefit of Skechers and the broader community of footwear (companies).”
Woodland said it has slowed imports to 10% of what it usually gets since it first wants BIS to certify factories fearing the stock might get stuck in ports if it doesn’t reach by the deadline.
