From the first, the double freight costs of sending raw wool to England and then importing manufactured woollen textiles was an incentive to the establishment of local mills in the woolgrowing colonies. Woollen tweed material was first produced from locally spun yarn at Nelson as early as 1848, but the first woollen mill proper was not established until after the Otago Provincial Council had offered a bonus for the first 5,000 yards of woollen cloth produced in the province. The mill was established at Mosgiel in 1871 and, four years later, a further mill was running at Kaiapoi, after a larger bonus had been offered by the Canterbury Provincial Council. By 1882 there were three mills in operation and, by 1886, seven. They were using 2 million lb of local wool yearly in the production of yarns, blankets, rugs, and the like, some of which were exported. The development of the woollen milling industry was no doubt aided by the fact that the mills gave employment of a kind which could be carried out by women and girls whose wages were much lower than men's. Between 1886 and 1891 the number of women employed in the mills increased twice as quickly and the number of girls three times as quickly as the number of men. These mills were also producing hosiery at that time and, before the end of the century, seven stocking-weaving factories had been established.

The first footwear factory (as distinct from the individual bootmaker making boots and shoes to measure) was established by O'Brien in Greymouth in the 1860s to sell boots to the goldminers. Others soon followed and during the 1880s there were 25 footwear factories. In 1885, from locally produced leather, they made about two-thirds of the value of all the colony's needs. In fact, the industries engaged in the manufacture and use of leather, including tanning, saddle-making, and the manufacture of portmanteaux and Gladstone bags, as well as those concerned with footwear, employed over 4,000 workers in 1885 and had about £330,000 capital invested in the fixed assets.