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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » DSI considering major overseas expansion

DSI considering major overseas expansion

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1DSI considering major overseas expansion Empty DSI considering major overseas expansion Tue Aug 21, 2012 3:55 pm

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
By Saminda Uswatta

Sri Lanka’s leading footwear brand DSI is considering major expansion overseas, revealed its affable General Manager – Sales and Marketing Rohan Somawansa in an exclusive interview with Ceylon FT recently.

Somawansa, who recently accomplished the rare feat of becoming the first Sri Lankan to be appointed as the Vice President of the prestigious Asia Marketing Federation (AMF), elaborated on the future aspirations of DSI.

“The footwear sector is growing; especially the ladies footwear sector, has recorded considerable growth. The per capita consumption of footwear by ladies internationally is approximately eight. In Sri Lanka it is 2.2, an increase from the level of around 1.2 which prevailed until fairly recently. The market for gents’ footwear is also changing and the per capita consumption by men appears to be on the rise. Through methods such as the promotion of seasonal concepts, per capita consumption can be increased even further.”

“DSI has performed very well. Since 1998 the company has been the leader in Sri Lanka’s footwear sector and currently commands a market share of approximately 44%. It should be noted that in Sri Lanka the market structure for footwear is very distinct and cobblers and small to medium scale producers account for around 35% of market share,” he said

According to Somawansa, brand loyalty is non-existent in some areas as consumers do not perceive the differences between brands.

“The prominent fashion at the particular point of time is a significant determinant in the choice of footwear.”

DSI is the largest footwear retailer in the country at present with 200 outlets. There are around 350 footwear retail outlets in the country overall. In addition to its own retail outlets DSI has a strong network of dealers.

Commenting on the level of competition in the footwear sector, he said that due to the low level of brand loyalty there is strong competition in the industry and consumers in some segments are very price sensitive.

“DSI is leading the market due to its strong capabilities in brand management and leadership in the sphere of technology. The company is exporting products to 40 countries.”

In accordance with the 50th anniversary vision — ‘from local to global’ — DSI intends to further expand its international operations, cater more to countries in the region and finally become a fully-fledged global entity.

“This target is bound to take time to achieve but it is possible to reach this goal. We are currently exporting to around 40 countries. Products like fashionable thongs, boots, and fashionable canvas shoes are exported to the EU (European Union), the Middle East, India, Malaysia and some countries in Africa. Flat-heeled shoes for ladies are now coming into fashion. Fashionable thongs have also become quite popular.”

“We are evaluating the potential in several markets. Africa is a region with huge potential and has the capability to record strong growth comparable to that of Asia, due to its strong resource base. It is also of strategic importance due to its proximity to important markets. Therefore, Africa should be looked at more carefully. In Asia, countries such as Myanmar are important due to strong resource base.”

“Nevertheless, it must be acknowledged that costs are a vital factor in manufacturing. In some market segments such as the market for fashionable thongs, the main consideration of the buyer is often the fashion and the appearance, not the price. In those kinds of market segments Sri Lankan producers do have potential.”

However, it should be noted that due to the availability of a huge workforce, countries like China, Bangladesh and India have a significant advantage in terms of costs, he added.

“By putting greater emphasis on design and quality and paying greater attention to market trends Sri Lankan footwear manufacturers can enhance competitiveness of their products.”

When asked whether closer bilateral relations being envisaged between India and Sri Lanka could be perceived as a threat to the local footwear manufacturers his answer was that the ‘the world is flat’.

“This situation can be viewed in two ways. If Indian products penetrate the market local producers must find a competitive edge and must improve fashion and quality of footwear to continue to be competitive. However, I believe that Sri Lankan consumers are loyal to local footwear manufacturers.”

When asked as to whether DSI considered exporting from Sri Lanka or intended to locate manufacturing facilities overseas, he said that the Company was considering a range of options.

“At the moment we do not have fully-owned manufacturing facilities overseas, but have tie-ups with footwear manufacturers in several countries.”

It is my belief that JVs (Joint Ventures) are the best method of expansion for us since local expertise of the market is provided by the Joint Venture partner.
http://www.ceylontoday.lk/22-11181-news-detail-dsi-considering-major-overseas-expansion.html

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