The Australian footwear manufacturing has done it tough in the past and is doing it tough now, but some companies are standing firm. Kate McDonald spoke to J Robins’ Phil Butt, who is putting his and the industry’s best foot forward.
J Robins & Sons is one of the grand old ladies of Australian footwear manufacturing, having been in the business for over a century and still going strong with its popular Sandler and Easy Step brands.
However, it is one of the few local manufacturers still standing amid the ruins of what was once a thriving industry in this country.
For the Sydney-based company’s managing director Phil Butt, the key to survival is diversification. It’s not as if the industry didn’t know this day was coming: tariff reductions have been slowly rolling out over the past two decades and government assistance schemes have been reduced accordingly, so only the tough – and innovative – have survived.
This is news to no one, of course. In the distant past, footwear manufacturing was quite a substantial part of the Australian economy, according to IBISWorld retail analyst Raghu Rajakumar. Nowadays, it is much reduced. “The overall footwear manufacturing industry in Australia declined by about 5.6 per cent over the last year,” Rajakumar says.
“The year-by-year decline has been around four per cent, so it is a shrinking industry and a declining industry. We expect it to turn over around $142 million (at the manufacturing level) this year.”
Manufacturing as a whole in Australia has been hit hard over those past two decades and footwear has certainly felt it. Unfortunately, there have been few options for footwear manufacturers in the free trade era, Rajakumar says.
“One was outsource production, which a lot of them did, or close down, which a lot of them did also. They could convert into wholesalers and retailers of imports, but then there are some others, the few that have been able to efficiently produce footwear or even fashion labels. They were able to survive.”
With the triple whammy of tariffs reducing even further – to five per cent from January 1, 2010 – a less than spectacular assistance package in the May 2009 budget and the horrendous economic crisis, things are a bit grim for this struggling industry. There is hope on the horizon, however.
“The trends are working against them but the ones that are left, that are able to see it through to next year, they are expected to do reasonably well,” Rajakumar says. “If they are able to correctly channel government funding and secure funding in the correct areas, and are able to perhaps develop export markets in the more lucrative sectors, then there are some opportunities. But they are small windows.”
Be nimble
For Phil Butt, the key was to recognise what was coming many years ago and to diversify accordingly. “We knew this day was coming where we couldn’t rely on tariffs and that we’d be on our own, so our manufacturing business has needed to diversify outside of our traditional brands,” he says.
“Certainly we still produce domestically a proportion of our Sandler and Easy Step brands, but our factory has offered its skills to the broader industry, so we now manufacture for a lot of other brands as well.
“We’ve moved into new product areas that we haven’t done in the past – we are now the largest supplier of components to the rest of the footwear industry, so we make soles and insoles and all of the different componentry that you need.”
The company has also diversified its sales channels as well. While the company supplies most of the major retail outlets, J Robins has also looked for alternatives. One of its wholesalers, for example, is a party plan group that markets the Laura Benini brand.
“They have a wide range of styles, perhaps 100 in their range, and they have a selection of 150 different leathers,” Butt says. “They sell that range through a party plan arrangement, so the customer goes to a party, selects a style with a colour, and then we make that particular customer’s order and deliver it in two weeks.
“We are trying to help the Laura Benini brand grow because we see that this is one of the advantages of being local.”
The company also assists small designers such as Adelaide’s Lauren Whiting (see page 40), who designs a brand called Bless My Sole, aimed at the larger footed lady. J Robins is helping Whiting build up her range and her capacity, even though she is only doing very small volumes at the moment, Butt says.
“That’s the sort of business that we can help, because we’ve got all the technical skills in the world and the access to the machinery that you need to make footwear, and to source the raw materials.”
For up and coming Australian designers, it all depends on the price point and the strength of the brand, Butt says. “It is particularly hard for new, young designers who might have a great range but don’t have a brand. And it’s very hard because of the quantities that they are talking about – they have to start off small and from a manufacturing point of view, it’s very difficult to get small quantities at a reasonable price point.
“We are working with a couple of designers who are very good, and they will be able to charge more of a premium price because of the exclusive nature of what they are doing.”
Poor package
While it’s not quite true that TCF went completely ballistic over the innovation strategy announced in the May federal budget, it was a bitter disappointment to many in the industry, particularly the footwear and technical textile sectors.
“The problem that the footwear industry has is that we have been excluded from the new SIP scheme, but clothing and finished textiles haven’t,” Butt, also president of the Footwear Manufacturers’ Association of Australia, says.
“Footwear is very upset about that. We believe that if clothing receives something from the new scheme – which is still an entitlement-based scheme – because they are labour-intensive, why not footwear? Footwear, if anything, is more labour-intensive than clothing. I’ve posed that question to the minister.
“It’s important to point out that all the industry associations don’t really have a problem with tariff reductions. Sometimes we get accused of just wanting tariffs but that’s not true. All of the industries – carpets, clothing, textiles and footwear – all concede that the tariff reduction due in 2010 was fair and reasonable.
“But what we did say was that the assistance package was not large enough and it wasn’t directed in the right way.”
Major government contracts, such as supplying footwear to the Australian Defense Forces, is also another area of dispute, he says. There are a couple of industrial footwear manufacturers still in Australia who do both safety shoes and combat boots, and the industry as a whole had hoped the new government would show an unashamed bias towards Australian manufacturers. J. Robbins itself tendered for a contract to make dress shoes for the ADF, but lost out to Vietnam.
Rajakumar says manufacturers should look to funding sources outside direct industry assistance. There is funding for innovation and intellectual property, and there will probably be more in the future to help produce “green” products, under the sustainable manufacturing mantra. “The green thing is a broad trend and there is scope for new markets,” he says.
Exporting Australian-made shoes has always been difficult, as we can’t compete with low-cost producers like China and have difficulty against the high-end producers of the traditional powerhouses Italy and France. The majority of Australian exports go to New Zealand, but Rajakumar says there scope to grow the market. “Footwear exports grew in 2007/2008 by six per cent, so the restructure of the industry may be working.
“We are expecting exports to start growing. And there is that other trend of rapid growth in wealth in emerging markets as well as a return to regular levels for developed markets, so while there has been and is still a lot of change going on, those manufacturers who capitalise on Australia’s strengths have got more of a chance.”
For Butt, one bright light for the industry is the industrial market, which is still relatively strong, he says. “It’s tough, very tough, but so is the industry.”