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Fortune And Fortune Brought To Chinese Shoe Enterprises

2008/7/25 15:30:00 5

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Under the pressure of rising costs, the "made in China" price increase has become inevitable.

But this is doomed to be a brutal and protracted war. The reality of full competition determines that a number of enterprises must be killed and withdraw from the market. After the change of supply and demand relations, the surviving enterprises will be able to obtain bargaining space.

Surprisingly, for "Chinese shoes", the campaign has already won the first half of this year.

"You don't have to threaten me.

If you leave Huajian today, you must be sorry. "

After throwing this sentence, Zhang Hua Rong didn't go back to the door.

Behind him, the German Mike was stunned.

He could not understand how this gentle Chinese man, who had worked with him for more than five years, became so tough in just two or three seconds.

Their conflict stems from a large shoe purchase order.

The order comes from Marco Polo, Germany, and is one of the largest women shoe manufacturers in Dongguan.

Before October 2007, they worked happily together, but this time, Huajian decided to raise their price by 20%.

Mike did not work. He threatened, "if you insist, I have to pfer orders."

Mike really did.

Two months later, as Zhang Huarong said, Mike had to go back to Huajian.

Elsewhere, he met tough Chinese rivals like Zhang.

This completely disrupted Mike's consistent impression of "made in China". Over the past 20 years, all kinds of articles affixed with the "MADEINCHINA" label have been circulating in every corner of the globe, relying on the "cheap and fine" pass.

For Mike, "China price" is just like a magic box that no one else can guess. No matter how the external market is changing, "made in China" can always digest any cost rise to what they can't see.

Why do we fail this time?

Rising prices are not easy.

Zhang Huarong, chairman of Huajian group, decided to raise the price.

Since the second half of last year, the four heavy clouds of raw material prices have continued to rise, manpower costs have risen substantially, export tax rebates have decreased and RMB appreciation has accelerated. The clouds are heavily enveloped in the "MIC" (made in China), and the Huajian, which is mainly exported to finished products, is also in "low pressure".

Shoemaking has never been a profiteering business. If the price is not going up, tens of thousands of people will not only work in white, but they will start their own way.

But the price does not mean that inflation will rise.

Zhang Huarong simply calculated the accounts. "If the cost of manufacturing links is increased by 5%, the cost of retailers will increase by about 20%.

In other words, we increase the price by US $1, and the cost of the retailer will increase by US $4.

Increased costs are often passed on, and consumers are always the last ones to pay.

However, the orders of foreign buyers are generally six months ahead of schedule, and the adjustment of retail price requires a cycle.

And the world is in a period of economic adjustment. Western consumers' purse is also tighter than before. Whether they can accept the price increase is unknown.

But this is not the reason why prices are not rising. Chinese manufacturers should not "suicide" in order to make retailers and consumers better off.

But Zhang Huarong knows that it is not only determination but also wisdom to deal with those international businessmen who are spoiled by cheap "made in China".

In his view, China's market policy is quite different from that of foreign countries. It is not feasible to increase the unit price according to the actual cost increase. Manufacturers need to face the reality of rising costs. Retailers also need to "lift the unit price step by step slowly".

"For example, at the end of last year, we raised the unit price plus 0.5 dollars, the customer only agreed to add 0.25 dollars, we said OK; after half a year, we asked for another $0.5, and the customer said OK."

It is a matter of greeting before the matter, to concession in the matter, and to talk about progress afterwards.

In May of this year, orders returned, and Zhang Huarong won the bet.

Fortune And Misfortune

In a sense, China's manufacturing grew up in the "price war". However, before this year, the term used to refer to the cruel slaughter between manufacturers competing for price cuts. Nowadays, the party who has made the decision in war has become an international purchaser.

Huajian won a game.

In July 19th, Premier Wen Jiabao studied the economic situation in Guangdong, and Huajian became one of the 9 enterprises he visited.

Not every manufacturer can be so lucky.

In the morning of July 9th, a large textile company in Dongguan saw that only two or three workers in the more than 300 square meter warehouse were carelessly measuring the cloth they were about to deliver.

According to the company owner, under normal circumstances, they need to provide shoes for the more than 400 shoe factories in the Pearl River Delta and the Yangtze River Delta. But this year, many old customers suddenly "evaporated". "Especially those small shoe factories, basically no longer purchase."

The order fell by nearly 1/3.

The boss is very cautious now. He could only lift the goods in a single sentence. He must see cash before he can send it, and the stock in the warehouse is too afraid to store too much. He usually takes orders to purchase.

No one dares to take risks at all levels of risk.

According to the data of Guangzhou customs, there were 2428 footwear export enterprises in the Pearl River Delta from 1 to May this year, a sharp decrease of 2331 compared with the same period last year. That is to say, nearly half of the shoe enterprises in the Pearl River Delta were killed in the war which only saw casualties and no smoke.

"Of course, this does not include small shops that are not registered at all."

One industry believes that the actual situation may be far more serious than official data shows.

Supply and demand determine prices. This basic economic law is acting coldly in reality.

Without the withdrawal of those enterprises, it is hard to imagine that the demand for raising prices of existing enterprises will be answered.

The 2331 families still do not have a good family life, and the merger has begun.

Customs statistics show that there are 4 enterprises with an export volume exceeding US $100 million, 2 more than the same period last year. Customs officials believe that the "Pearl River Delta footwear export enterprises have a tendency to concentrate on large enterprises."

This trend is confirmed by a detail.

In the three day's interview, at the gate of Huajian group headquarters, we could see the same scene: in the drizzling rain, the people who came to apply for an endless stream, they grew up in front of the factory gate, or squatted or stood, some were carrying their luggage, and some were empty handed.

Most of the staff come from the shoe factories that close down, "some employees of the entire production line turn around," he said.

Who won?

According to the data of Changan customs in Dongguan, in May of this year, the biggest shoe making base in Dongguan, the Pearl River Delta, exported 250 million pairs of shoes, with an average price of 4.1 US dollars / pairs, up 27.3% over the same period last year.

Since the beginning of this year, the price adjustment rate of shoe enterprises in the PRD has reached or even exceeded this level.

But this did not bring excess profits to manufacturers.

Zhang Huarong introduced Huajian's price increase of nearly 20% this year, but its export profit was 2% lower than that of 2006.

"Under normal circumstances, the profit of shoe companies should be between 5% and 8%. At present, we are far from this goal."

Nevertheless, people are worried that the "made in China", which has been regarded as "the mark of global manufacturers" by European and American agents and retailers, will lose the favor of international buyers because it becomes expensive.

"In the present situation, basically not."

Sun Lei and Wang Lin almost replied with one voice.

They are executive directors of Dongguan Peng Li Da Shoes Co., Ltd. and the director of operations of Skech Dongguan limited. They are two famous traders in the Pearl River Delta. They are all first-rate brands in Europe and America.

"China's labor force may not be the cheapest, but it must be the most cost-effective.

In Southeast Asia or Africa, it is impossible to find such a large number of skilled craftsmen in China.

The cost performance of labor is the same, and the price performance of products is the same. "

Sun Lei, who has been swaying around the world for a long time, said.

But the growing cost of "made in China" does make Sun Lei unhappy.

As a middle trader, since the second half of last year, they have had a headache between the local manufacturers and international buyers in the inevitable price game.

Those "international buyers" who walk around various factories in China (the common name of international buyers) is more direct.

In the face of rising prices, they have no "discretion". They can only report the changes in prices to headquarters at the first time, and then organize negotiations.

For buyers, they are on the defensive in negotiations.

"Rising costs are global issues, and corporate headquarters are understandable, but companies will be different on the bottom line."

Zou Lin, a Chinese buyer of a large sporting goods franchise in Shanghai, said that unless the last resort is necessary, the company will not change suppliers easily.

The cost of changing a supplier from qualification audits to final orders may be higher than the cost of accepting the increase.

Customs statistics show that the price increase does not undermine the competitiveness of "Chinese shoes".

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