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TBS Group has become the first 100 per cent domestic owned firm, and the fifth fashion handbag manufacturer in Vietnam, to make the products for US-based Coach Inc.
Four months to realize a dream
"With fashion handbags, Coach Inc always requires the providers to handle a specific stage of product development,” said TBS chairman Nguyen Duc Thuan.
“If TBS performs well in this stage, we could not only raise more added value for our own products, but would also be more active in the choice of materials, thus creating better conditions for the development of domestic supporting industries," he added.
Before manufacturing for Coach, TBS Group had 20 years of experience in making shoes for famous brands like Decathlon, Skecher, and DC for export to the EU and US markets; but it had never made luxury handbags.
Coach knew this, but after considering the scale, system and working style of the TBS Group, the American corporation asked whether the TBS Group could produce fashion handbags for it.
"I started to dream about the future of the Vietnamese handbag industry, when it can reach the world market,” Thuan said.
“I worried about what we could gain and what may be lost were TBS to jump into this new industry, but the instinct of an entrepreneur with two decades of experience working in the footwear industry forced me to make the final decision to strike the deal with Coach,” he added.
While the Vietnam has annual revenues of $1 billion in handbag exports, domestic firms receive only a small proportion of this sum, while the rest is paid to foreign-invested firms, said Thuan.
It took TBS four months last year to repeatedly prove to Coach’s inspectors that it is capable of manufacturing handbags with the TBS brand reputation and expertise in production.
In early April, TBS Group convinced Coach by presenting a project to build a brand new handbag plant in accordance with Coach’s global guidelines with 3,000 workers, including departments for designing and making samples. Unlike leather shoes or apparel production, all equipment and technology used for the plant must be new and, of course, very expensive.
One month later, work on the factory and the trial contract of 20,000 bags to be delivered in October 2011 was started.
As planned, Coach will buy millions of products according to the production capacity of the TBS Group in the coming years, with expected capacity of up to 5 million units a year.
With an average export price of $40-50 for a product, in terms of value producing a handbag brings higher revenue than the production of shoes or textiles/apparel products.
Representatives of TBS Group said revenues per capita from making such handbags will be 30-50 per cent higher than that earned from the production of shoes.
Seizing the opportunity
In looking at the long-term expectations that Coach placed in the TBS Group with the plan to build an additional manufacturing plant in mid-2012 to bring total capacity to 7 million units a year, the opportunity is not only available for TBS Group.
"The problem facing Vietnamese enterprises is how to seize the same opportunity and be well-prepared in every area, from financing to human resources," Thuan said.
To be able to confidently become a partner of Coach and enhance its participation in the global supply chain, Thuan said TBS Group has spent a lot of effort in improving and restructuring the entire system of business, the most important aspect of which is restructuring its resources.
On the other hand, to compete with other manufacturers, according to Thuan, investment in technological equipment is very important, especially investment in modern programmed sewing machines priced from $14,000-36,000 each for clean and exact stitches.
Moreover, the material for high-end handbags in general is mainly high-grade leather, which is very expensive and vulnerable to scratches and degeneration in the production process.
Diep Thanh Kiet, deputy chairman of Vietnam Leather and Footwear Association, said that in fact there are not many businesses that can seize the same opportunities as TBS Group.
"With an investment for a plant costing over $10 million, it is clear that only businesses with strong administration skills and strong financial willingness dare to join the game," Kiet said.