Sales of footwear products (shoes) in Indonesia fell 10 percent year-on-year in the first quarter of 2017. This bleak performance is attributed to Indonesians' weak (consumer) purchasing power. Meanwhile, domestic footwear manufacturers only saw modestly rising demand from abroad compared to one year ago. Therefore, Indonesia's footwear exports have remained rather stagnant.
Eddy Widjanarko, Chairman of the Indonesian Footwear Association (Aprisindo), said it is remarkable that domestic demand for footwear has not shown an improvement ahead of the Ramadan month. He explained demand for shoes and other footwear products usually rises significantly in the two months ahead of the holy Islamic fasting month. However, with the Ramadan starting in two weeks, there was no impact whatsoever this year. During the past seven years, sales would sometimes rise five-fold in the month prior to the Ramadan.
Although Widjanarko said he still needs to collect all available data to come to a balanced conclusion about declining footwear sales in Indonesia in Q1-2017, he did say the lower utilization of domestic footwear production capacity is a factor. While the Industry Ministry of Indonesia targets a utilization figure of 85 percent, in reality the figure has fallen below 80 percent.
The footwear industry is an important industry for Indonesia because it is labor-intensive and therefore creates plenty of employment opportunities for Indonesian workers. Indonesia is ranked among the world's top six largest footwear exporters and therefore this sector is an important asset to Indonesia's manufacturing industry (generating foreign exchange earnings). The globe's largest players, including Nike Inc as well as several companies from China and South Korea, all have production facilities in Indonesia as its labor costs are relatively low.
Indonesian Footwear/Shoe Exports 2010-2017:
Source: Indonesian Trade Ministry
Investment in Indonesia's Leather & Footwear Industry 2012-2016:
(in IDR trillion)
Source: Bisnis Indonesia