Industry Categorization and Segmentation – Getting to the root cause of the problem

When one has an ailment, it helps to properly identify the problem by studying the symptoms first. Proper education is key in order to come up with a proper diagnosis and eventually a cure. The shoe industry, like manufacturing related industries, both has a mass production component and an artisanal component with a lot of hybrids in between. In order to help push our industry forward, it would help the regulators (yes government, that’s you) to actually know what programs they want to push in order to help the industry instead of consulting the “industry leaders” who represent only a small fraction of the industry although they have majority share of the income produced BUT is not the business model which the industry actually needs. I want to discuss the various industry segments/categories which are currently part of the industry. I would like to exclude sandal makers since while they are part of the footwear industry, I would like to focus on the shoe industry since the sandal industry is an entirely different animal in itself. I will use my own terminology for the meantime as there is no official name for the various industry players, please feel free to comment for inputs in order to improve this essay.

  1. Marketing Brands – big brands such as Gibi and Rusty Lopez which are considered as the industry leaders since they are the only ones to have achieved a level of commercial success which can be considered as the goal for most industry players. They are normally traders who coordinate with various local but mostly foreign suppliers. Majority of their inventory, if not all, are actually outsourced. Some in house development, but no actual in-house mass production.
  2. Manufacturing Brands – brands such as Bristol and Gibson shoes are considered as major manufacturing brands since most, if not all, their inventory are produced in-house. What makes them different from a traditional Marikina based production operation is that their production method has already mechanized or is machine assisted.
  3. Manufacturing Subcontractor – these subcontractors usually supply and manufacture for the big marketing brands. The operations are usually production line with division of labor and is mostly done traditionally (by hand). Before, they would also supply to small shops and department stores but as the retail industry has evolved, they are phased out due to their inefficiency which resulted in high wastage and slow production rates. Subcontractor size ranges from micro (less than 25 people) to medium scale (with around 100 workers). There are only a few shoe subcontractors left, with most focusing on low cost shoes going by bargain bulk rather than value.
  4. Artisanal Brands – these brands produce medium to high value shoes which are usually produced in-house. Black Wing falls under this category as while we are slow to produce, the products are usually of higher value which offers better quality than mass produced shoes. The shoes could either be handcrafted or machine crafted but the focus is more on the art of shoe making rather than the focus on quantities in order to achieve profitability.
  5. Micro Brands – these have come about fairly recently in our industry’s history. Traditionally, these are private label brands which are usually sold at small shops across the country. When the retail industry shifted from the town centers towards mall, they have all but almost vanished. Then the bazaar scene happened and micro brands started popping up, taking the place of the “shoe emporium” brands. Usually they find their niche but do not produce their own products. If you could remember brands like Manila Sole among other niche micro brands populating the bazaar markets. Nowadays, micro brands are all over the place, using the Internet as a medium to sell their products. Almost anybody can become a micro brand nowadays, but only a few will actually be able to scale properly and develop their brand identity. From bazaar to online and very recently, to pop-up stores. Micro brands are usually very entrepreneurial and can adjust to shifting trends quicker than the big marketing brands.

Each of these categories are faced with different challenges but are linked to each other. Of course, being from the same industry, the root cause of all existing problems stem from a specific source. I would like to discuss some of the issues affecting each of these industry categories in order for us to trace the problem and eventually come up with a solution.

Marketing brands, whether big or small, usually have issues with production and market reach. With the production side, it is because their subcontractors usually have problems with costing, quality control, and delivery schedules. In a very competitive market, price is normally the first battleground especially for entry level brands. Local brands, such as Gibi and Rusty Lopez, are such localized brands that they have to compete by lowering their price points to compete with mid tier (at least from our local perspective) brands such as Aldo, Pedro, etc. With mass production, quality control tends to become an issue unless there is an in-house team which will ensure the product before it gets shipped out of production. There is usually a lot of concerns with the build quality and the actual design and engineering of the shoe because of the lack of standards being applied both with local and foreign producers. For local production, funding and delivery schedules are usually a big issue. Most subcontractors cannot actually meet buyer quantity requirements as the retail environment changed and fast fashion had a boom, the modes of production still hasn’t changed. Going hand assembled shoes in a fast fashion world spells disaster since marketing brands won’t be able to adapt quickly if they stayed with local producers. The retail environment has the local brands’ supply chain as more department stores open, marketing brands which use these department stores as their primary mode of reaching to their markets are forced to keep bigger and bigger inventories. It is actually a concern for me that these big marketing brands are becoming “too big to fail”.

For manufacturing brands, the issue is similar to marketing brands except that they control their production. So their concerns are more on the scaling of production to reach out to a broader market. Quality control is in house so the risk of returns is minimal. But the supply of skilled artisans are dwindling, hence their need to modernize and import machines to assist in production thereby shifting the mode of production from artisan to machine operator.

Manufacturing subcontractors have bigger problems because they have to contend with costing, design, and production issues. Most of these operations survive by offering low margins, and a small miscalculation can often lead to loss of profits and even worse, negative income. Most of our local subcontractors often have issues with adapting to fast fashion since their are many considerations such last and pattern development. If you take notice, a typical Marikina made shoe has a profile which can be found across ALL Marikina made shoes. It is only with the newer workshops where we can see slight variances to the typical commercially available lasts being sold at shoe supplies here in Marikina.

Artisanal brands are fighting for a dying craft. The problem for small artisanal brands is mainly scaling up. It is hard to find proper shoemakers nowadays. Normally, the craft has been passed down through a loose form of apprenticeship. There was never a formal apprenticeship system in place since most of the old shoemakers are very protective of their knowledge and wouldn’t pass on all their knowledge to the next generation. This has kept the growth of shoemaking craft slow since new shoemakers spend much of their time rediscovering techniques and methods already known by the older shoemakers.

Micro brands struggle in finding their niche, or finding a local producer to realize their niche product. The downside that most of these micro brands espouse is that ethical production is usually the first thing to go. They haggle to keep costs down since they have to compete and one of the first thing that their suppliers trim down is labor cost. This is why micro brands who participate in price wars are never sustainable. The cost to develop is high for suppliers and these micro brands want to get it at “competitive” rates. Imagine buying products for cheap but their mode of production is not up to scale with the cost. While the consumer and micro brand both get what they want, the supplier-producer and ultimately the craftsmen are the ones to suffer for that “bargain buy”.

Whilst each industry segment has its own share of problems, you will notice that majority of the issues that they both cause and encounter stem from the same source, and that is the mode of production. Since our mode of production is primarily labor intensive, the issues stem from the lack of modernization from our labor force. There are different ways to address this, both of which are very doable but without the cooperation of the business owners, we are doomed to perpetuate a system wherein our local artisans long have been taken advantage of by businesses for their own benefit.

The shoe industry is built upon it’s primary resource, which are the shoemakers. Shoemaking is a craft and art in itself, it takes years to master to design and make a proper pair of shoes. While there are two separate schools of thought for pushing the shoe industry forward (I will talk about this more in future essays), which are developing either mass production or artisanal shoemaking.

The glaring problem right now is that we are running out of shoemakers, both in the formal and informal sectors. We do not have master shoemakers anymore. Very few can make a shoe straight from scratch since for the longest time, local shoemakers are trained per task in order to limit their knowledge. We have to bring back the shoemaking craft by educating existing ones and training future ones in the art of shoemaking. It is the responsibility of this generation to fix this. In order to address these local issues we have to address the main source which is an inefficient and unprofessional production mode. Proper business mapping and direct consultation with the shoemakers themselves (not just the business/workshop owners) are the first steps which need to be undertaken in order to have a better grasp as to how we can address all concerns and develop strategies for inclusive growth, because that is what is needed for sustainability. Our goal right now is the make the industry more sustainable than profitable, because long term profits gained from sustainability is better then temporary high profits brought about short sighted profit taking.


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