First Luxury Vietnamese Handbags Go Global

Thai Binh Group (TBS Group) has become the fifth manufacturer to supply high fashion handbags for the well-known brand. This event is regarded as a miracle in the national handbag industry.

 

 Four months to realise the dream

 “Concerning fashionable handbags, Coach always requires suppliers to participate in product development stage. Showing a good performance in this stage, TBS Group not only increased added value for the products, but also actively selected materials, creating good conditions for the development of the national supporting industry.”

 

Prior to its cooperation with Coach, TBS has had nearly 20 years of experience of exporting shoes for famous brands such as Decathlon, Schecher and DC into EU and US markets.

 

Knowing that TBS Group had no experience in handbag manufacturing, after reviewing the scope, system and professional working style of TBS Group’s Management Board, did Coach question whether TBS can manufacture fashionable handbags or not?

 

 “I started to dream that Vietnamese handbags can penetrate international market,” said Mr Nguyen Duc Thuan, TBS Group’s President, “I couldn’t sleep for weeks, considering whether to follow or not, what TBS would gain and lose? Finally, my experience as a person working over 20 years in the industry pushed me to act.” It was reasonable for him to worry, as a larger percentage of nearly US$1 billion of handbag export turnover was from foreign funded enterprises, while national ones only accounted for very small percentage.

 

It took TBS Group only 4 months to have its contracts officially signed with Coach in the beginning of 2011. During that time, TBS had to demonstrate to Coach its brand reputation and professional production under their continuous capacity examination.

 

In early April 2011, TBS Group persuaded Coach with their project to build a new plant for manufacturing handbags, which met the global standards of Coach, with 3,000 workers, and design and sample producing shop. Unlike footwear or textile industries, the costly equipment and technologies must be newly invested.

 

The plant was officially initiated in May 2011 with a pilot contract for 20,000 handbags awarded in October 2011 to a small manufacturing factory. As scheduled, Coach will buy millions of products, depending on TBS’s production capacity in coming years, which is expected to reach 5 million products per year.

 

Given the average export price of US$40-50 per product, it is obvious that handbag production brings about higher turnover than footwear production or textile in term of value. It is estimated by TBS Group representative that turnover per product in the handbag industry is 30-50 percent above footwear production.

 

In the long term, Coach expects TBS Group to build the second fashion handbag plant in the middle of 2012, increasing total productivity to 7 million products per year, obviously, there are opportunities for not only TBS Group. “The issue is how Vietnamese businesses grasp similar opportunities and prepare their financial and human resources,” shared Mr Thuan.

 

To confidently become Coach’s partner and increase ability to join global supply value chain for internationally famed brands, Mr Thuan said that TBS Group spent much effort to reform and restructure their whole corporate organization, in which the first priority is resource reforms.

 

On the other hand, to compete with other manufacturers, according to Mr Thuan, it is crucial to invest into technology and equipment, especially programmed sewing machines, to gain precise and standard seams. A programmed sewing machine averages from US$14,000-36,000. In addition, materials for luxurious handbags are high-rank, costly leather which is easily damaged during the production process.

 

Mr Diep Thanh Kiet, Deputy Chairman of Vietnam Leather & Footwear Association, said that not all enterprises can grasp opportunities like TBS. “Given at least US$10 million for a new plant, enterprises must have not only strong management skills, but also financial capacity to join the race,” he said.