leather business

Why the Leather Industry?

India boasts a very robust and reputable leather production base and is sometimes referred to as the World’s Tannery. As the name suggests, India accounts for nearly 13% of the world’s leather production.  The industry employs around 4.5 million people, with a major share of the people employed being women (approximately 30%).

There is potential in both the domestic as well as the international market and indicates a healthy growth in the coming years.

Which product is right for you?

Understanding the market before stepping into it can be a crucial factor in determining success. Analysis into the structure of the market, current players in the market and future opportunities of growth is highly recommended and can determine longevity for any business. The leather industry is valued at approximately 5.6 Billion $ and most of the value in our opinion lies in the Leather footwear segment. Being the 2nd largest producer of leather footwear in the world opens a wide array of possibilities. Currently majority of the production taking place in India is focused to meet demand of leather footwear in the domestic market. However, trends show that there is a consistently growing market of leather footwear in international markets, especially in Europe and the USA.

What to sell?

Once you have decided on the right product segment it is very important to study the demand of customers to engage in products that fit. The range of products can greatly influence success in this competitive market. For example, selecting between branded or non-branded products, finished leather products or footwear components can completely change the approach required. For instance, a steady growth in the value of footwear components is an attractive indicator of the health of the leather footwear industry.

What are the costs involved in setting up a comprehensive Leather business?

A leather manufacturing business can be established for a relatively low overhead cost. The industry is labor intensive, and India has a competitive advantage when it comes to cheap effective labor. The major share of cost and capital requirement for a firm in this industry usually revolves around building inventory and stock of said product. Products are typically wholesaled and thus could have some inventory holding costs in a warehouse.

Depending on the channel of distribution, costs could greatly vary. For example, a physical store needs to be supported with staff and has fixed costs, such as rent and utilities. On the other hand, online retail portals like amazon and e-bay can help reduce those costs but add some logistical and shipping costs.

What would be an ideal location?

Location is crucial when it comes to manufacturing. The right location can greatly ease supply chain and logistical issues for the company as well as provide key tax benefits if established in the right industrial zones. In India, the major production areas include - Mumbai, Kanpur, Chennai, Jalandhar, Pune, Faridabad, Kolkata and Ernakulam to mention a few. These areas can greatly increase the ease of doing business, finding the right raw materials as well as the right labor.

Estimating demand and Matching supply accordingly.  

Comprehensive research of the current domestic and export market shows healthy indicators of a growing demand for leather products. The share of finished goods vs components of leather goods should be studied on an individual basis and the best decision for your company should be made. Production of goods to meet this demand should be accurately forecasted to get a clear idea of what position the company foresees to take in the market.

Capital (Including machinery and infrastructure like offices/stores) and labor can be accurately set to match demand. This helps keep overhead costs in check and can ease the stress on the business. Generally, it is recommended to diversify both demand (Different types of products) – and supply (Different suppliers) to ensure that the business has a good target segment as well as capable supply chains to cash in on that demand. A hands-on approach can reduce long term problems.

Funding the business?

A robust financial model is highly recommended to carefully consider both fixed and variable costs of the business. Proper research can shed clear light on the capital required to position the business in the market as well as set a clear roadmap for future funding. Investors typically prefer to invest in companies with a clear financial framework and a financially healthy company. Doing the groundwork and establishing a strong base can greatly impact the growth opportunities and availability of funding in the future. For example, given the long business cycle availability of reserves can help ease a cash shortfall in the long term.

Setting up the Business.

The type of products and the positioning in the market can influence some of the factors. A simple guide to setting up a leather business can be found below.

  • Register your business
  • Opening a current account
  • PAN Card and GST registration
  • Government approval for setting up a factory
  • NOC from the local community
  • Project schedule preparation and adhering to it
  • Setting up a website
  • Hiring the right staff at supervisory and managerial levels
  • Purchasing and installing machines
  • Hiring machine workers and giving them the necessary training
  • Setting up different departments to avoid confusion
  • Marketing your samples
  • Getting bulk orders
  • Purchasing raw materials
  • Start production
  • Quality control checks
  • Dispatching order in time
  • Setting up CRM
  • HR checks to ensure labor productivity
  • Proper maintenance of machinery from time to time
  • Defining your brand.

Developing an online presence

With the increasing shift of customer acquisition towards an online storefront, digital and e-commerce presence for a company is highly recommended. Social media can help boost the brand value of the company as well as be an effective mode of marketing. Especially in the leather industry wherein there is a growing trend of exporting products an online presence can help attract international clients.

Our Role at HBF direct.

We at HBF are aware of the difficulties of managing so many aspects of setting up a business. We pride ourselves in easing the stress of starting a business by providing valuable insights on the market through thorough market research. Our team of highly accomplished consultants can help create an effective road map to grow your business as well as create a sustainable financial framework. We provide all services necessary to support your dream including, Legal compliances, HR management, IT and website services as well as funding and seeding requirements. Having all these expertise under one roof reduces the time and allows you as an entrepreneur to dream bigger.

October 28, 2020

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October 28, 2020

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