Two Different Development Strategies For Shoe Companies

Chuang Xin and AOKANG A heavy manufacturing, a brand creation.

As a shoemaking tycoon, Guangzhou Chuangxin Shoes Co., Ltd. (hereinafter referred to as Chuangxin) and Wenzhou AOKANG group (hereinafter referred to as AOKANG) are located in the Pearl River Delta and the Yangtze River Delta respectively. They are also trapped in the rapid rise of labor and raw material costs, and are actively running the EU anti-dumping lawsuit against Chinese leather shoes.

However, because of the different geographical conditions, the two shoe companies have brought about different growth trajectories and business development strategies, and have brought different results.

Chuang Xin seeks the path of transformation

Wu Zhenchang, chairman of Guangzhou Chuangxin, came to Guangzhou from Taiwan in 1990. It was one of the first shoe manufacturers to move the production line to the mainland in Taiwan. He used his former overseas network and Guangdong's cheap labor force to work for a large number of large customers such as Nike. With the rapid development of the Guangzhou factory, he turned off the Taiwan factory and transferred all the orders to the mainland, with a peak of nearly 20 thousand employees at the peak, with an annual export of $more than 100 million.

However, in recent years, influenced by many factors, such as the rapid increase of labor costs in the Pearl River Delta, the appreciation of the renminbi, the macroeconomic regulation and control of the state, the international trade friction and the low consumption of the international market, Wu Zhenchang's enterprises have begun to go downhill. Especially since the outbreak of the financial crisis, the credit order of Guangzhou has dropped by three or four, and the number of workers has been reduced from 1.3 to six thousand or seven thousand.

Some time ago, Wu Zhenchang was said to have moved the factory to other places. Wu Zhenchang recently denied the interview with the first financial daily. He talked about the pick-up in orders this year, but the cost pressure is still very large. He dare not rush to expand the scale of production again. In the current tense situation of employment in the PRD, he will not dig in to other shoe factories with high salary. He can only abandon some cheap orders, maintain the existing scale, and consider new strategies.

However, Wu Zhenchang was difficult to deal with whether he moved to brand management or moved to Southeast Asia. Because both have risks, he also needs to consider carefully, after all, this is related to the future development direction of enterprises.

Wu Zhenchang has visited Zhanjiang and Southeast Asia's Vietnam and Indonesia in recent years. The labor cost in these areas has relative advantages. Especially in Vietnam, the wage of shoemaker workers is only 1/3 of that in Guangzhou, which is very attractive to the processing trade enterprises. In addition, this year, the China ASEAN Free Trade area has been launched in an all-round way, which has created better conditions for bilateral investment and trade. This is also the case in. However, the production facilities in Southeast Asia are far from mature in the mainland, and more importantly, after the relocation, it is likely to miss the huge market opportunity of the mainland.

If it moves inland, it will also face some problems in transportation and production matching, especially for the 90% products exporting enterprises.

A few years ago, Wu Zhenchang also began to represent some brands to expand domestic sales, but the progress was not smooth. At present, it still did not account for 10% of the company's sales. Wu Zhenchang admitted that he and he would focus more on export orders production, but he was very optimistic about the prospects of the domestic market, only from manufacturing to commerce, there was greater risk, and the preparatory market research should be well prepared.

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　　 AOKANG Decompression by brand expansion

AOKANG group is a local private enterprise in Wenzhou, Zhejiang. It was founded in 1988. At present, there are more than 6000 shoemaking workers in Wenzhou factory, and there are 2000~3000 people in Chongqing.

Like many leather shoes export enterprises in Jiangsu and Zhejiang provinces, AOKANG first started from the domestic market and then gradually opened up the export market. At present, domestic sales account for 80% and exports account for 20%. Last year, both domestic and foreign sales increased by more than 20%. It is estimated that this year will maintain a good growth rate.

"At present, the export market is relatively stable, mainly for some European high-end customer OEM, the growth rate is far from domestic sales so fast, AOKANG's four independent brands plus the newly acquired Italy brand Wanli Wei Greater China operation power, multi brand operation attracted different levels of consumers. Walking on two legs, we form scale purchase and production, and develop the same set of standard and standard production processes, improve efficiency and control waste with strict management, and continuously enhance R & D and design. These measures can offset the rising cost at present. The rapid growth of domestic sales can, to a certain extent, reduce pressure on export orders, "said Wang Hailong, spokesman for AOKANG group." in addition, AOKANG started investing in Bishan County in 2003. The cost of shoemaking here is about 20% less than that in Wenzhou. Austrian Kang is interested in increasing production in the West. However, the shoe products produced in Chongqing are mainly supplied to the western market. Considering the transportation and other issues, the export products are basically in Wenzhou. "

Zhou Shijian, executive director of the China International Trade Association, said that the Yangtze River Delta enterprises are more aware of their brand building and independent research and development than the PRD enterprises, and many export enterprises are mainly based on general trade and have closer ties with the domestic economy. Relying largely on local enterprises and local migrant workers, the Yangtze River Delta's foreign trade is stronger than that of the Pearl River Delta. The Pearl River Delta's foreign trade mainly depends on foreign investment and foreign labor in Hong Kong, Macao and Taiwan. At present, foreign businessmen still account for 60% of Guangdong's total foreign trade. With the rising cost of labor in the Pearl River Delta, some foreign businessmen will once again migrate to low labor areas. In addition, the number of self owned brands and working environment and salaries in Jiangsu and Zhejiang provinces will also attract some skilled migrant workers in Guangdong.