Mexico, dressed to compete on international runways
Mexico’s apparel and footwear industries continue garnering recognition for innovation in the areas of industrial processes, design, style and quality, while value-added strategies are helping position the country on international runways as a competitive force.
Mexico’s apparel and footwear industries have a long tradition of innovation dating back to Pre-Colombian and Colonial times. Today, these two sectors have adopted added-value strategies to give them a competitive edge on international markets, despite obstacles such as unfair trade practices.
The domestic footwear industry produces 300 million pairs of shoes a year (2.6 pairs per capita on average), while the apparel industry is valued at an annual 21 billion USD, according to their respective business chambers. But the potential of these two sectors isn’t limited to the domestic market: many multinationals have found in Mexico the ideal host for their manufacturing operations and an increasing number of Mexican companies are gaining a larger share of foreign markets.
Total foreign trade (imports and exports) in textile products was valued at 16.7 billion USD in 2013, which translates into growth of 3.6% compared to 2012, while exports alone grew at an average annual rate of 6% between 2009 and 2013. The US represented the bulk of exports in this sector (64%), followed by China (11%), India (2%), Canada (2%) and Colombia (2%).
In the leather and footwear industries, total foreign trade increased 6.6% between 2013 and 2014 to 4.1 billion USD. The US accounted for 40% of exports in the period, with China (19%), Vietnam (7%), Brazil (7%), Italy (5%) and other countries making up the remainder.
In the 2012-2013 period, total foreign trade in textiles, leather products and footwear as a whole grew 4.2% to 20.8 billion USD, with exports increasing 4.6% to account for 8.2 billion USD of this figure.
In 2013, Mexico exported 6.9 billion USD in textile products, which translates into growth of 2.4% compared to 2012. Suits, tailored suits, overcoat sets, T-shirts and undershirts, sweaters, pullovers, stockings, pantyhose, cloth and net curtains, sacks and duffle bags, cotton and synthetic and artificial yarns were among the most popular products.
Apparel companies faced a difficult scenario in 2013 and 2014, especially those focused on the domestic market. According to Sergio López de la Cerda, president of the National Apparel Industry Chamber (Canaive), a slower economy, compounded by cheap imports that threaten to displace Mexican-made products, have taken their toll on the sector. This, he says, is why the industry has registered low growth in the last two years.
Notwithstanding, the sector continued to create jobs –330,000 in the period–and its outlook is promising in terms of future growth. López de la Cerda attributes this to the fact that “exporters continue expanding and investing in Mexico because its export market is becoming increasingly competitive. Mexico’s apparel industry is highly esteemed abroad for its value-added products, its skilled labor and the swiftness with which it is able to meet the demands of markets like the US. Companies operating on the domestic market have come under a great deal of pressure, but this hasn’t resulted in layoffs.”
Exports stand at approximately 5.5 billion USD, while imports are valued at 3.8 billion USD. “As a sector, we have a trade surplus of over 1 billion USD. We are one of the industrial sectors with the largest trade balance surpluses, which represents a wonderful opportunity for growth, because to the extent that markets like the US recover, Mexico’s exports will benefit,” he says.
However, rather than wait for the impetus to come from abroad, Canaive is cooperating with the Mexican government on strategies to get back on the path to growth. “We’ve been working closely with the ministries of Finance (SHCP) and Economy (SE), and the Tax Administration Service (SAT) on strategies to combat the sale of illegal, undervalued products on the domestic market.”
The apparel industry is also forging alliances with businesses with a view to bringing more homegrown suppliers on board. “Right now the situation is complicated, but we’ve had a positive response from certain business chains that understand we need to transform this downward spiral into an upward one. It’s important they support the country’s economy by giving preference to Mexican-made products and attracting more consumers,” says López de la Cerda.
Another of the sector’s strategies, he says, has been to promote Mexican brands. “Certain brands have a large market share, but more companies need to develop their own brands to cater, first to the domestic market and then to international ones. The goal is to strengthen Mexican brands so they stand a better chance of penetrating other markets.”
And when it comes to brand development, innovation is essential to an industrial sector like the apparel industry. Canaive seeks to promote “innovation in product processes and business systems. The term innovation is transversal. We need to draw up strategies that meet the consumers’ needs and surpass their expectations,” says López de la Cerda.
Reason why the industry is working on the creative design of garments and business systems. “It’s about instilling a business philosophy, identifying market niches and target consumers, and familiarizing ourselves with their needs so we can create brands and design businesses that target these specific markets.”
To this end, Canaive has promoted the creation of the National Center for Innovation in the central state of Pachuca, Hidalgo. Its offices are already functional and “when the infrastructure is in place, market research and design companies will begin to interact, pinpointing in real time the innovations that will enable companies to be more competitive and providing platforms that will afford businesses of all sizes access to information that facilitates the development of their products and brands,” says López de la Cerda.
“The industry is also seeking to collaborate with universities with a view to strengthening middle and upper management, whose executives need to refresh and improve their knowledge of strategies and processes for the development of their companies.”
According to López de la Cerda, “the apparel industry requires made-to-measure financial instruments. Although bank credit is available, due to the nature of our industries –95% are small and medium companies– , we need financial assistance to raise working capital and purchase equipment […] We need more hi-tech equipment so we can be more competitive and we need to capitalize our companies so they can offer more competitive prices.”
ProMéxico is working with representatives of the apparel industry to get more companies participating in international expos and trade fairs. “There are specific niches for small and medium companies and others for those that handle large volumes. It’s a question of analyzing the capacities of small and medium companies and training them so they can successfully participate in international events and close business deals and sales,” says López de la Cerda.
Growth estimates for the sector are based largely on the expected results of these strategies and the advantages Mexico enjoys over the apparel industries of other countries. “Mexico has enormous experience in industrial manufacturing and operating aspects. There’s versatility, innate creative capacity and high standards as regards quality and product development,” says López de la Cerda.
Furthermore, the recent shift in focus has proven to be an ace up the sector’s sleeve. “In 2004, many companies were still producing low-added-value commodities aimed at the mass market. Today, more and more are manufacturing specialized, added-value products for a higher income target group, making it less likely Mexican-made products will be substituted with foreign ones.”
Specialization is another plus Mexico has to offer. “For example, in the state of Jalisco, highly developed small and medium companies geared toward innovation predominate, whereas Southeast Mexico concentrates on high-volume manufacturing. There are production facilities all over the country, each with clear-cut areas of specialization,” says López de la Cerda.
Add to this the creative reserves of the industry, where product design and development take their inspiration from the colorful traditional textiles of Mexico’s indigenous cultures.
And while there have been international scandals relating to working conditions in the clothing industry in other countries, López de la Cerda says that in Mexico “Canaive encourages companies in the sector to get certified in social responsibility practices and labor culture.”
In light of these strategies and the advantages Mexico enjoys, its apparel industry looks set to become increasingly competitive. “We’re working closely with the government on actions for the domestic market in years to come and are confident that implementing these will result in growth (…) The sector aims to work in a more coordinated fashion in the interests of consolidation,” says López de la Cerda.
A well-marked-out path
Mexico’s footwear industry is concentrated in the western state of Jalisco and the central state of Guanajuato. In the 2012-2013 period, exports of leather goods and footwear increased 4.5% to 1.3 billion USD. These were comprised mainly of rubber-soled shoes, leather further prepared after tanning, regenerated leather, tanned cow hides and skins, trunks and suitcases and natural leather goods.
In November 2014, Guanajuato hosted the Fifth World Footwear Congress. Here, State Governor Miguel Márquez Márquez told an audience of 500 people from 27 countries that Guanajuato is the country’s top footwear exporter, with sales of 12 million pairs of shoes valued at 315 million USD in the first three quarters of 2014. Guanajuato, he added, manufactures 60% of the footwear Mexico exports.
“Guanajuato is home to Mexico’s largest leather goods and footwear cluster. The industry has consolidated itself as a mainstay of the state economy. Within a radius of 300 kilometers, you can find hundreds of companies that manufacture, distribute, market and supply inputs for the production chain,” said Márquez.
“It’s a sector,” he said, “that creates thousands of jobs and provides an income for over 130,000 families. We’re talking about over 4,700 economic units, including manufacturers of footwear and leather goods, tanneries and suppliers whose economies depend directly on the leather goods-footwear supply-marketing chain.”
It was at this same congress that the Guanajuato State Footwear Industry Chamber (CICEG) and the industrial chambers of seven other countries decided to standardize shoe size labeling and share technology for the creation of new designs.
According to CICEG President Ysmael López García, as a result of the agreement and to make life easier for the consumer, the labels of products from Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Uruguay will bear the same information.
As in the apparel sector, innovation is key to the footwear industry. One of the many initiatives implemented in this respect is the Mexico-European Union Competitiveness and Innovation Program (PROCEI), which has benefited over 88 companies in the fashion industry.
“Mexican-made footwear is renowned worldwide for its quality and design and the industry is known for its capacity to deliver. Because we are so close to the US market, which is the world’s largest consumer (almost 2.3 billion pairs of shoes a year), we can meet delivery deadlines Asian companies can’t. This has enabled us to make greater inroads on the US market,” says López García, adding that “Mexico doesn’t compete with its Asian counterparts in terms of price, but with value-added products. We’re not competing with poor quality products, but fashionable, top quality ones.”
Guanajuato’s footwear industry is following the path marked out by “Vision 2030”, a study published by CICEG in 2013 that sets growth targets based on three strategic pillars of competitiveness: coordination of the productive chain, sustainable development and fair competition.
On a national scale, the Mexican Fashion Committee is an integrated strategy promoted by companies in the sector and the government whose members include representatives of the jewelry, apparel, textile, footwear and footwear supply sectors. “The idea is to produce matching outfits. If one company makes a line of shoes, the apparel industry will design garments to go with that style of footwear,” says López García.
And so the apparel and footwear industries look to the future with optimism as they walk down the runway together, cheered on by creative strategies guaranteed to keep them at the forefront of their sectors in terms of industrial processes, design, style and quality.