Armani Exchange, Superdry, Calvin Klein, Tommy Hilfiger, and US Polo Assn are facing dwindling supplies of local shoes due to a government mandate requiring factories to be certified by the Bureau of Indian Standards (BIS). These factories, predominantly located in China, Vietnam, Thailand, and Malaysia, have yet to receive certification from BIS. Skechers global CFO John Vandemore highlighted the impact of India’s regulatory framework on the industry, citing limited production capacities within the country during the company’s earnings call on April 26th.
Industry executives reported that many brands have had to remove footwear from both online and offline shelves or are offering a significantly reduced range with older stock. The BIS Quality Control Order (QCO) requires mandatory certification for factories producing the final product and certain specified key components like rubber, PVC, or polyurethane soles and heels. The QCO was enforced in July of last year for leather shoes, while for sports shoes, sandals, clogs, and slippers, it was slated to be implemented starting January of this year.
In March, the deadline was extended to August; however, companies argue that these incremental extensions disrupt supply chain planning. Experts also express concerns that goods may not reach stores on time, as it typically takes 5-6 months from production to customs clearance.
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Reliance Brands, overseeing Armani Exchange and Superdry in India, and Arvind Fashions, managing Calvin Klein, Tommy Hilfiger, and US Polo Assn, did not respond to emailed queries.
Executives believe that the regulation will compel companies to establish production facilities in India.
Anupam Bansal, Director of Retail at Liberty Shoes, stated that issues often develop during the initial period of deployment, since the supply chain is disrupted. However, he expressed optimism that these concerns will be remedied in time. “The negatives are only temporary,” he said. “On the plus side, the Indian footwear sector will see growth and development, with enhanced production in the country, ultimately decreasing supply chain costs.”
Abhishek Ganguly, CEO of Agilitas Sports, a domestic footwear manufacturer, emphasized the necessity for global brands to devise a unique supply chain strategy tailored for India’s current environment, highlighting that failure to do so could hinder their operations.
“The leading brands have in fact formulated a ‘make-in-India’ strategy, leveraging India’s growing potential to manufacture even high-end products,” he stated. “It’s primarily the brands for whom footwear represents a minor segment of their overall business that are facing challenges.”
Analysts suggest that BIS officials may face reluctance when visiting overseas factories for approvals, particularly concerning plants in China or those owned by Chinese entities. This hesitancy is attributed to the government’s aim to decrease imports from China amid ongoing border tensions.
“The loss in business persists, with ongoing declines. Footwear sales have decreased year-on-year compared to the previous fiscal, despite being one of the fastest-growing categories,” stated the CEO of a prominent fashion company. “We are unable to import from our factories in China and Vietnam due to pending certification.”
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Despite being one of Skechers’ “bigger international markets,” Vandemore noted that the current deadline extension is “not long-term, so it continues to be an issue.”
“Our goal is to continue producing more and more of items within the country. The short-term issue is simply that the market cannot handle it. To be honest, this is not a Skechers issue. We are still working with our suppliers to resolve this issue, which impacts the entire industry.”
Vandermore expressed cautious optimism about Skechers’ business prospects in India for the year. He emphasized the necessity of resolving the regulatory framework for the benefit of Skechers and the wider footwear industry community.
Woodland stated that it has reduced imports to only 10% of its usual volume, prioritizing BIS certification for factories. This cautious approach stems from concerns that stocks might be held up in ports if they fail to arrive before the deadline.
