We first interviewed Taslima Miji in 2013. Miji, who was trained in Sociology from Dhaka University and a former journalist, was already a successful entrepreneur, running her computer hardware retail company Techmania. While Techmania was doing well, Miji was passionate about craftsmanship, wanted to be in the manufacturing industry, and create her own products. Years later, that passion would lead to the creation of Leatherina, a Dhaka-based leather goods manufacturer with a focus on sustainability and fair trade practices.
In that sense, Leatherina's story begins not in a tannery, but in the world of media and technology. Techmania was a successful business. But computer hardware retail was becoming a challenging space for smaller players by 2015/16 with growing competition, shrinking margins, and unhealthy industry practices. While Techmania had a market reputation and a loyal customer base, Miji eventually decided to exit the business, owing to growing challenges in the sector. The experience provided her invaluable education in business management and resilience, which came in handy when she finally launched Leatherina in 2016.
In business and life, our most important lessons often come from our most difficult experiences.
Leatherina was born out of Miji's fascination with the manufacturing process and her desire to create artisanal lifestyle products. Leather was not an industry that Miji was familiar with. It was far removed from her previous venture and experiences. But she decided to move ahead because she was fascinated by making and designing her own products. She also saw that Bangladesh has a raw material and labor advantage in leather, which she could leverage to build both a local and an export business.
When you enter an industry as an outsider, you face many limitations. In the initial days, you might struggle with basic industry knowledge and insights. Industry gatekeepers might make your journey difficult with arbitrary roadblocks. But you also come with certain advantages. You can see things from a fresh perspective and are open to seeing possibilities where industry insiders see only limitations. In a beginner's mind, there are many possibilities.
Being an outsider has eventually become a huge advantage for Miji. She could make bold decisions and think outside the common industry norms. This much is evident in how Leatherina operates as a business. The company has made a good name for its culture of empowering employees and fair business practices in an industry where these practices are not common. It has also quickly gained market attention for its unique products.
Leather is one of the most important industries in Bangladesh. It is the second largest export earner after RMG. Bangladesh has a raw material advantage in the sector. Similar to RMG, labor can be an advantage for the sector as well. Despite these upsides, Bangladesh has struggled to make a mark in the sector globally with stagnant growth for many years. In this context, companies like Leatherina have a unique opportunity to break this stagnation.
In this article, we look into Leatherina's business model, its competitive advantages, its future prospects and what we can learn from Leatherina's journey over the years.
Starting a business is never easy no matter how passionate or experienced you are. If it is in an industry you have no prior experience of, with all the outsider advantages, it can still be very challenging. For Miji, founding and eventually establishing Leatherina on a strong footing was not an easy journey. In Leatherina's introduction page, Miji describes her journey of launching the business in the following way:
"The story of Leatherina follows a long and difficult road that twisted and turned with the main events of my life. [...] My first business was in retailing finished goods, mostly supplying computer hardware, to the local market. It was a successful business that ran for several years, but I was constantly chased by the urge to begin my own production-oriented capacity business. I looked for another opportunity to find something where I could make a difference. [...] I deeply respect the multitude of skills and the tireless efforts that make a good manufacturer, who can make the final product look seamless. I craved to enter the world of sophisticated and technically challenging production to make my own mark there as an independent manufacturer, exploring materials, learning processes, and researching techniques while setting a standard in workmanship that was of the highest quality. I always knew that anything I would produce would have to blend in our local culture, with the best of our human capacity and skills of our local artisans and elevate our potential for creating fine consumer goods."
That passion for workmanship, design, and creating something local for the world eventually led to the founding of Leatherina. Again from Leatherina's about page:
"As the dream persuaded me on, I looked at local raw materials and production capacities in the leather industry over a long period of time, both in Bangladesh and abroad and finally one day settled on leather goods as my products of choice."
Leatherina started small, "with a limited number of designs each season," and a Facebook page as its only marketing channel.
Miji registered the business as Leatherina, "deliberately using feminine terminology as I am conscious about women's challenges in the workforce and in this country and wanted each stage of my business to work towards making the playing field a bit more even for women."
After the launch, Leatherina got selected for training by the Netherlands Enterprise Agency (RVO), an opportunity that allowed the company to get training and hands-on coaching on bag-making and an exposure to global standards of sustainability and export-oriented production. The following year, Leatherina shipped its first international order to the Netherlands.
Leatherina has since experienced excellent growth, with a growing client base both in Bangladesh and international markets like Canada, Germany, Netherlands, USA, and UAE. The company's focus as a sustainable leather goods manufacturer has put it in a favorable position, helping it to carve out a niche in the global leather goods market.
Leatherina also has a growing B2C business with its own label Gootipa. In 2022, it launched its first Gootipa branded outlet in Dhaka's Dhanmondi. The brand has experienced consistent growth with its quirky marketing efforts and excellent design.
Leatherina's business can be divided into two segments:
1. B2B: The company has a business-to-business (B2B) business where it manufactures goods for other brands, companies, and corporate partners. The company says it has successfully worked with partners from across markets.
2. B2C: The company has a growing B2C business under its own label, Gootipa.
Expertise: The company says its production expertise includes "leather handbags, work bags, leather goods, home décor items, cushions, wallets, organizers, small leather goods, light travel bags, and more."
Market diversification: Like its revenue streams, Leatherina has also been diversifying its markets, serving customers across the US, Europe and the Middle East. The diversification of both revenue streams as well as the market indicate the strategic depth of the company.
Culture: Leatherina has a strong sustainability and fair trade orientation that has proved advantageous for its growth in the international markets. We think the model should also aid the company in building a healthy organizational culture and motivated team.
The working environment in industries like leather and RMG remain some of the most difficult for blue-collar workers in Bangladesh and many other markets. Since Leatherina aims to focus on craftsmanship, people are and will be an important component for its success. Healthy and fair workplace practices should allow the company to attract and retain skilled professionals and build lasting competitive advantage.
Similarly, the company has built a strong expertise in quality and design, allowing it to meaningfully differentiate and attract customers. Leatherina rightly highlights some of these strategic advantages on its website:
Let's take a deeper look into these aspects of Leatherina's business.
B2B business: Leatherina operates primarily as a white-label manufacturer, producing leather goods for export and local partners under various labels. The company's products are distinguished not just by their craftsmanship, but by the ethical and sustainable practices embedded in their creation. The company's approach to manufacturing is holistic, encompassing responsible sourcing, waste reduction, and social impact.
Leatherina says it sources leather from certified tanneries that prioritize environmentally friendly practices. The manufacturing process emphasizes natural and eco-conscious materials, with a focus on optimizing material usage and exploring recycling and upcycling opportunities.
B2C business: Leatherina's own label, Gootipa, for the local market, has been seeing growing interest from local customers as well as from Bangladeshi expatriates, hinting at untapped potential for future expansion. Part of the reason can be attributed to the company's focus on product design and unique marketing efforts.
While Bangladesh enjoys an excellent raw material advantage in leather, design remains a key challenge for Bangladeshi manufacturers and brands. Miji and her team have focused on design and quality from day one. While the company has a long way to go, it has already started making a name for its unique design and excellent quality.
Sustainability as a Competitive Advantage: Leatherina's business model is built on the premise that sustainability can be a powerful differentiator in the competitive world of fashion manufacturing.
By prioritizing ethical supply chain and positive social impact alongside quality craftsmanship, the company has positioned itself as a partner of choice for brands looking to bolster their sustainability credentials.
"As a member of the WFTO, gender equality, social inclusion, ethical environmental production, and climate change mitigation are at the forefront of our mission," the company writes in its introduction. "With each bag sold, together, we are empowering peaceful progress."
The company says its commitment to sustainability and fair trade is not merely a marketing ploy but a core part of its operational strategy. "As the creators of handmade goods, we appreciate the critical ways in which commerce and industry affect our lives and this world and we aim to ensure a production process in support of a more harmonious world," writes the company.
This approach has resonated with conscious consumers and brands in North American and European markets, driving the company's export success.
Leatherina's journey offers valuable insights for both established players and startups in the sector that sustainability can be integrated into a company's core strategy.
Moreover, Leatherina's success challenges the notion that developing countries can only compete on price in global manufacturing. By focusing on quality, sustainability, and social impact, the company has created a differentiated offering that commands premium positioning in developed markets. The company's emphasis on gender equity and social inclusion also provides a model for addressing broader societal challenges through business.
From a small operation and Facebook based business in 2016, Leatherina is today a company of over 60 people. The company runs out of a 5500 sq ft manufacturing unit with a monthly production capacity of 7000 products and works with a number of subcontractors. Its B2C label Gootipa says it has over 500 different products in offering, five sales points, and has served over 5000 customers.
The company's receipt of the SME Small Entrepreneur (Female) of the Year 2023 award from the SME Foundation suggests that the company has achieved significant growth. Its membership in the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh further indicates its established position in the industry.
Looking ahead, Leatherina has excellent opportunities both in the local market and the global market.
The growing global demand for sustainable fashion presents a clear growth opportunity, particularly in developed markets where consumers are increasingly conscious of the environmental and social impact of their purchases.
As we noted earlier, leather is the second-largest contributor to Bangladesh's export earnings after the RMG. Bangladesh accounts for a 3% share in the global leather and leather products market. The country became the 8th largest global footwear producer in the world in 2020. The Government of Bangladesh (GoB) has declared leather as a priority sector.
Additionally, Bangladesh has a growing local market, with rising demand for quality products. Per BIDA, the domestic leather products market is worth $2 billion. With a growing middle class and increasing consumerism, the local consumer market is predicted to grow manifolds in the coming years.
All these offer incredible opportunities for a company like Leatherina. Given Leatherina's history of excellent execution prowess, the company is well positioned to take the opportunity.
That being said, Leatherina has significant challenges ahead of it. Some of these challenges come from the changing nature of the market.
For instance, the local market has increasingly become competitive over the last several years. Artificial leather and other non-leather products are eating into the market share of the leather products.
In the global market, we are going through a period of geopolitical and economic uncertainties which can create meaningful challenges for the company in the export market.
However, we think the main challenge for the company will be strategic. More specifically, escaping the innovator's dilemma to ensure both of its businesses reach their full potential.
As we discussed earlier, Leatherina is basically two separate businesses: a B2B business that works with other brands and companies and a B2C business under its own label Gootipa.
In our estimation, its B2B business brings the largest share of Leatherina's revenue. The company already has a significant export business and has the opportunity to expand it further. It should have similarly large business in the segment in the local market. More importantly, this business has excellent long term opportunities. The export market, which has faced some challenges in recent years, should offer meaningful long term opportunities for the company with Bangladesh's advantageous position in raw materials and labor.
The second business of Leatherina is its B2C business under its own label Gootipa. Gootipa currently has one outlet in Dhaka and sells directly to customers via digital commerce channels. Gootipa also has an excellent market opportunity. There is a growing demand for high quality and better designed products in Bangladesh. If successful, Gootipa can also expand to other markets as a brand. However, our estimate is that Gootipa is not the biggest business of Leatherina at this point in time.
While Gootipa offers long-term opportunity, B2C is even more competitive than B2B and building a brand usually takes years of investment.
This creates an innovator's dilemma for Leatherina.
Naturally, the company management should prioritize investment in its high growth vertical now, which is its B2B and export business and deprioritize investment in Gootipa. It means Gootipa will remain a small business despite having meaningful opportunities to grow.
We have seen a similar scenario playing out in small and medium size leather manufacturing companies in Dhaka.
On the other hand, trying to do both without a clear strategic direction can jeopardize the growth of both businesses. Trying to catch two rabbits at once is a bad strategy.
Figuring out this strategic dilemma and setting up priorities in the right way will be a huge long-term growth challenge for Leatherina.
One common escape from the Innovator's dilemma in situations like this is to cut the cake in the middle and eat it. Leatherina should separate both businesses with separate finance, operations and decision making.
Since Leatherina owns the both businesses, they can share resources, learnings, and other common things for ensuring efficiency and strategic alignment but strategic, financial and operational decisions and responsibilities should be separate so that both businesses can run independently and pursue their full potential.
It means management will no longer view Gootipa with the lens of Leatherina's B2B business and make decisions and vice versa. It will help both businesses to grow or fail independently. It also expands the opportunities for both businesses. This might sound like an easy solution to a complex strategic dilemma. Only that it is not. It appears easy but making this decision and executing it will not be easy for any business.
More importantly, it is a complex challenge because it might appear that this is not an existential challenge for the company. If it continues to do what it is doing now, it should be alright. This is more about growth and long term scale. But if you think critically, this can be a challenge in the long run. If you don't grow, you eventually become irrelevant. And the right growth strategy can make or break a company. To that end, how Leatherina navigates this challenge will eventually determine its long-term growth and scale.
In less than eight years, Leatherina has gone from an obscure leather products manufacturer in Dhaka to a growing player in the sector. It has shown that it can overcome challenges, find opportunities where it is difficult to find, and build a differentiated market position. The company has all the strategic imperatives to make the leap to the next level and given its history, it should be able to make the leap. We will be closely following what the company does next.
