Shoe Companies Are Caught In A Strange Cycle Of Increasing Orders And Decreasing Profits.

The October 29th hearing was affected by many factors, such as rising labor costs and appreciation of the renminbi.

"Gross profit has dropped by almost 20% compared with the beginning of the year."

In October 28th, Guangzhou Ling Lai Li Footwear Co., Ltd., head of Lingdong, told the newspaper that in order to survive, most shoe companies are now taking orders on one side while resisting the frustration of declining profits.

China's export market has been growing strongly since 2010.

According to statistics from the General Administration of customs, China's total exports amounted to US $144 billion 990 million in September, an increase of 25.1% over the same period last year. In the first three quarters, China exported 26 billion 440 million dollars of footwear products, an increase of 26.6% over the same period last year.

"Since the stock market has basically been digested, the European and American markets are also gradually warming up. Many shoe companies are reflecting the sharp increase in orders this year."

Zhu Yulun, chairman of the exhibition company limited, believes that the key to the recovery of the export market depends on whether the rebound will continue.

Orders surge: recovery or virtual fire?

Lingdong's factory has been making OEM for foreign shoe companies, and the 90% products are sold to the European barrel of the alfalfa Chow Chow tau Chow, and it's a slack. It's just like a hawk's slash. It's blowing up the quail breakwater. The dark is stirring up the R shadow. It's 2009.

He said to the newspaper that he had to find new suppliers because of the failure of some of the shoe companies that had previously co operated. He has been busy attending various footwear exhibitions in China this year.

In 2009, the global impact of the financial tsunami gradually spread, and the export oriented traditional footwear industry was the first to bear the brunt.

In 2009, China exported 8 billion 170 million pairs of shoes, valued at 26 billion 570 million US dollars, down 0.8% and 5.5% compared to the same period last year.

Chen Jinsheng, deputy general manager of Dongguan Da Ling Shan Quan Sheng shoe making machinery factory, told reporters that in 2009, the company sold only 1200 units to the mainland all year round, but this year, because of the increase in orders for shoe enterprises, everyone was in the rush production and the demand for shoemaking increased greatly. Up to now, the company has sold more than 1500 shoe machines. "It is expected that more than 2000 units will be sold this year."

In 2009, China's footwear output reached 11 billion pairs, of which the total annual output of the three major footwear producing areas in Guangdong, Zhejiang and Fujian accounted for more than 80% of the total national output.

"80 boxes per 100 boxes of shoes exported to the United States are made in China."

Zhu Yulun said.

"Before the financial crisis, we sold shoes at Martha about 22-24 pounds per pair, and now each pair falls to 10-12 pounds."

Wang Wei, head of Cordes International Limited, believes that the overseas market, especially the European and American markets, has not recovered to the level of 2008.

Wang Wei's company has factories in Zhangmutou, Liuzhou and Nantong, and began to pform into the domestic market in 2002. He said that the company must strive to increase the proportion of internal and external sales to 50:50 this year. In his view, the downturn in the overseas market will not recover until at least 2012.

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Profit circle: cost increase is the main reason.

The pressure of rising costs has touched the nerves of shoe companies.

"The profit margin is small, and now the renminbi is revalued and its profits are even smaller."

Ling Dong said.

Deeply felt the same feeling also includes traders, Mu Su told this newspaper that this year's shoe business quotations increased by 10%-20% from last year, and the two middlemen under pressure were more upset than shoe manufacturers.

Since 2010, the RMB has appreciated by nearly 3%. Most shoe companies have told reporters that the profit margins of enterprises have been further squeezed.

Although China's shoe enterprises have increasingly focused on private brand cultivation, they are still at the low end of the industrial chain, with low price, large quantity, serious homogenization, and price competition dominating the export market.

In 2009, the average export price of Chinese footwear was only $3.3 per pair, down 4.8% from 2008.

But in Wang Wei's view, the pressure of RMB appreciation is far less than the pressure brought by labor cost and raw material cost.

"The renminbi rose by 3%, but since the implementation of the new labor law, our annual labor cost has risen by an average of 20%-40%."

In addition, soaring raw material prices are also a tough job for shoe companies.

Since October, the price of adipic acid (mainly used for sole fluid and PU slurry) has been rising, rising from 17500 yuan / ton at the beginning of the month to the current 19200 yuan / ton, an increase of 9.7%.

"The more orders, the lower profits, the business is like a vicious vortex."

Ling Dong spoke of the difficulties facing the footwear industry at present.

In this case, some shoe companies are eyeing the domestic market.

"Now, for some very far, very troublesome export orders, we prefer to give up and concentrate on domestic sales and brand building."

Wang Wei said that the entry threshold of the footwear industry is low, and the competition at the price level can not go far. "There will be more shoe companies going bankrupt in the future, which is inevitable."

But Wang Wei also frankly said that there are many difficulties in the pformation of shoe enterprises from export to domestic sales. They not only invest heavily in a long period of return, but also face competition from domestic and foreign brands.

"At present, many shoe companies rely on OEM to maintain their own brand."

"Private brand building is a long-term process. In the face of mature domestic and foreign shoe brands, Chinese shoe enterprises must break through through design and innovation."

Zhu Yulun said.