The Sports Goods Sector in Pakistan - TRTA i

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WholesalerIs an importer/stockist who imports, completes all the import and custom formalities in his/herimporting country and sells to various retailers, retail organisations, independent retailer or aretail chain in his own country. A wholesaler may be a contact through the sales agent or canalso be a direct customer of the factoryBuying agentA buying agent is like a buying house and is usually based in the country or in the region of theexporter. He/she represents the buyer’s interest and takes commission from the buyer forrepresenting the buyer. The function of a buying agent is to introduce the buyer to variousfactories for a kind of product and get the best product at the best price for the buyer. In mostof the cases, the buying agent administers the shipment and gives all the logistic informationabout shipments to the buyer.Sales agentThe sales agent is an independent intermediary between the (foreign) producer and the retaileror retail organisation, receiving a commission from the former. The agent (or salesrepresentative) covers a limited geographical area. The level of commission depends on anumber of factors, including the turnover rate of the product concerned, but it averages anestimated 6-10% of turnover. Most agents represent more than one producer, althoughcompetition is avoided. More and more agents are starting to sell from stock, to meet theirclients' short-term demands. Stock is often held on a consignment basis. If the agent builds uphis own stock, he is in fact functioning as a wholesaler. The role of agents as described above,they are often used as selling agents. They operate mainly in the segments of high price/qualityand in the middle/high price, classical and branded fashion footwear. Another type of agent isthe so-called buying agent located in the supplying country, settles business on the instructionsof his principals, mainly retail organisations and works on a commission basis too.Contacts with sales intermediaries can be made in several ways, such as consulting traderepresentatives' associations, chambers of commerce, fashion centres, trade publications, tradedirectories, etc.2.1.2 Availability, quality and price of raw materialsIn the last two to three years, the price of leather has gone up and there is a persistent shortageas well. During the October 2005 earthquake, the footwear sector suffered a loss of livestockand cattle, which was not reported, but the following season experienced a further raw materialshortage and pressure on prices. Likewise, in the case of finished shoe production, the costs ofinputs for all raw materials are going up, e.g. electricity, wages, local tariffs and federalgovernment’s taxes, while the quality available is of medium grade. However, our qualitystandards meet international specifications, but the feel of finished product lacks far behind. Asthere exists an upward pressure on raw material, the end consumer is always pressurising forprice discounts. Therefore, profitability is under a constant pressure.Furthermore, it must be noted that petrochemical prices have increased very steeply in the lastfew years, i.e. all chemicals and soling material have also become very expensive.16 International Trade Centre
Generally, leather of certain types is available but footwear manufacturing remains highlyimport-based. All the soling material/soles, chemicals and other important raw materials usedin footwear manufacturing have to be predominantly imported.2.1.3 Other production inputsLocal and imported technologyFor shoe manufacturing, a lot of machinery is involved at all stages of the production process.In the cutting stage, mostly imported machinery is used. In the stitching stage, cut componentsare stitched to make uppers. Local machines are used but most companies use imported ones.For the lasting process, at times local machinery is used. The lasting procedure of assemblingupper and sole is the most expensive area for using machines. For bottom component making,local machinery is used.Cutting and stitching account for 20% of the technology cost, lasting 45-60% and sole making,moulds and bottom component making 20-35% of the cost.Very basic technology, i.e. only 5-7%, is available locally in satisfactory quality. Theremaining technology has to be imported. Quality-wise this technology is excellent.Table 2.3 Technology costs and sourceProcess Cost of machinery Origin of machineryCutting 10% lowStitching 10% lowLasting 60% highSole andbottomcomponentmakingSource: PFMA20% medium to highMost footwear manufacturing technology isimport-based. Italian manufacturers are thelargest suppliers. Due to an upsurge inChinese footwear manufacturing, one can nowsource shoes from the far East, e.g. China,Taiwan, Korea, etc. With a lot of closedowns inEurope, goods bargains are available forsecond hand machines. Some basicfabricated machines are available which attimes can be adapted.Packaging materialGood quality packaging material is available locally at a reasonable price. Part of packagingmaterial is labelling which is very important, i.e. bar codes, pricing, customer’s brands,security chip label (imported), etc. Mostly, the client sends these things or asks the factory tocontact its recommended supplier to get the labels made.Labour force and salariesSkilled labour is not available locally. There are no training institutes to train the talentedworkforce. On average, monthly salary in the organised footwear sector is approximatelyUS$100. However, the minimum wage fixed by the Government is PKR 4,000/month(ca. US$70). The US$100 paid to the employer includes benefits like EOBI and SocialSecurity. Most companies also additionally pay provident fund or gratuity, and sometimesInternational Trade Centre 17
Page 1: The Footwear Sector in Pakistan—
Page 7: Table of contentsAcknowledgementsAb
Page 10 and 11: the interest of buyers has dropped
Page 12 and 13: 4 International Trade Centre
Page 14 and 15: • Recommendations aimed at indivi
Page 16 and 17: Production capacitySince the data a
Page 18 and 19: Figure 2.1 Footwear manufacturing p
Page 20 and 21: No. Activity Information Input requ
Page 22 and 23: Table 2.2 Price trade structureRaw
Page 26 and 27: oth. The employees also enjoy 14 da
Page 28 and 29: Duty drawback rates at 9/11 in 2001
Page 30 and 31: equirements for the components of f
Page 32 and 33: It is becoming increasingly difficu
Page 34 and 35: Table 2.6 Product classifications r
Page 36 and 37: HS codeProduct categoryValueUS$’0
Page 38 and 39: Table 2.10 Pakistan’s major impor
Page 40 and 41: setting design niches. China’s ma
Page 42 and 43: 640320 - Leather slippersLeather sl
Page 44 and 45: Table 2.12 United States tariffs ap
Page 46 and 47: Table 2.14 Japan tariffs applied to
Page 48 and 49: Much of the rubber is sourced from
Page 50 and 51: One needs to keep in mind, of cours
Page 52 and 53: were of Italian origin in 2005. Thi
Page 54 and 55: since the Chinese footwear exports
Page 56 and 57: • To endeavour with other recogni
Page 58 and 59: 3.1.3 Functional scopeThe functiona
Page 60 and 61: correctly in a state of suspended a
Page 62 and 63: Ministerial Decision on Notificatio
Page 64 and 65: Demand for proactive supportive rol
Page 66 and 67: Figure 3.3 Relevance intensity of t
Page 68 and 69: However, all these exceptions are a
Page 70 and 71: Relevance for the footwear sectorTr
Page 72 and 73: include the Ministry of Commerce, M
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Agreement on Trade-Related Investme
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Agreement on safeguardsThis agreeme
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and removal of import quotas, impor
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Table 3.2: Top 10 buyers of Pakista
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GermanyGermany is the fifth export
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4 Obstacles and shortcomings to exp
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Training institute/ human resources
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• The European Union should give
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Marketing• Market research• Fai
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Bilateral trade committeesA large n
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• Sponsors trade delegates to des
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6 Conclusion and recommendations6.1
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6.2 The way forward - if we had a m
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Most of the members do not have an
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SimilarprojectsFDDI: Footwear Desig
Page 104 and 105:
• The upper now needs to be given
Page 106 and 107:
98 International Trade Centre
Page 108:
M/s Five Star Marketing LtdM/s Foot
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