Faced With Huge Cost Pressures, Shoe Companies Voluntarily Reduce Costs And Increase Profits.

On the 02 th of November, on the one hand, the high pressure of RMB appreciation and the pressure of international public opinion continued.

The continued appreciation of the renminbi has already caused tremendous pressure on domestic related industries.

October 29th, Dongguan Houjie Town International Convention and Exhibition Center, the twelfth China in three days.

"Three days, it's good to pull a customer."

The chairman of Dongguan Seashell shoes found out to reporters.

And many exhibitors

According to the data of the China foreign exchange trading center, in the early morning of October 29th, the median price of US dollar to RMB was 6.6908 yuan, which was almost 2% higher than that of June when it was restarted.

The industry has estimated that the appreciation of RMB will increase in the short term. The appreciation rate of RMB against the US dollar is likely to exceed 3% in the year. Other experts expect that the appreciation of RMB will reach 5% in the year.

The Pearl River Delta foreign trade dependent processing trade enterprise has ushered in an arduous battle of survival.

Mirror image of seashell shoes

At 13:30 on October 29th, workers in the Haibei shoe production workshop of houbian Industrial Zone in Houjie town of Dongguan city began to be busy in the afternoon.

"The two production lines, originally more than 100 people, have recently left more than 40 people."

The director said firmly.

The products of seashell shoes are all exported to foreign markets. Although the overall orders are adequate, some of the orders for the products are scheduled for next February, but the reporters still saw at the workshop that there was not enough staff, and a production line had been suspended for more than a half.

The reporter told reporters that the shortage of workers on the one hand is related to the lack of workers, and it is also related to the RMB appreciation and squeezing profits.

"We are making orders now, making orders that are too low or not profitable, and we will not accept them."

Zhang Jie, vice president of finance, said: "at present, seashells are high-end footwear products, and the profits are generally around 10%.

In the past 3 months, the appreciation of RMB has reached 3%, which is a great pressure on corporate profits.

Although the seashore shoe industry has taken various measures to control cost mining profits as much as possible, the total domestic cost of raw materials such as leather and hardware has generally risen by 20%, and the final gross revenue will still decrease by 3%. "

The rise in raw material prices and labor costs has also created a "magic spell" for the profit margins of the seashore footwear industry.

Seashell shoes are made from genuine leather materials imported from South America and other regions. At present, the price has risen from $7.5 per square foot to $10.5, up 40%, while seashore's product price has risen by only about 7%.

The rise in labor costs is also a major factor.

Factory director Ren firmly revealed that at present, the per capita wages of seashore footwear industry has risen from 1000 yuan to 2000 yuan.

Since June of this year, the wages of enterprises in Dongguan have increased by about three or four times, with an average increase of about 200 yuan.

"All kinds of pressures are coming."

Find out, sigh.

Because of the appreciation of the exchange rate, the export trade enterprises such as Seashell shoes have already settled accounts with customers for 30 days.

During the validity period of 30 days, the exchange loss caused by the appreciation of the renminbi is borne by the seashore footwear industry. The exchange rate losses after 30 days are shared by both sides.

In addition to high-end shoe enterprises, the middle and low end foreign trade enterprises are even more worried.

According to the introduction, the profits of low and medium shoe enterprises are generally around 3%-4%.

A business friend identified, running a low-grade shoe manufacturer, relies on meager profits and big production to survive.

At the lowest time, a pair of shoes can only earn 7 cents, but the annual production is as high as 140 million pairs.

Just last month, the shoemaking enterprise, which had many orders, suddenly went bankrupt.

Profit reduction

The same predicament is also happening to other enterprises.

"How many orders can we take? We have no idea. When will the renminbi rise?"

Many shoe companies at Dongguan international shoe show said so.

According to Zheng Bin, the owner of sandal slippers in Chaozhou, Guangdong, the boss of the company in August, they received a production order of 60 thousand pairs of leather shoes in South America, and the letter of credit was 60 days' credit.

In recent months, the Yuan's rise has made the company lose 80 thousand yuan profit.

A local shoe company in Houjie has two production lines and produces 1 million 500 thousand pairs of children's shoes annually, but now it only opens a production line.

Because of overproduction of leather shoes and increasing competition, enterprises want to increase their quotas with the appreciation of Renminbi.

Many enterprises are afraid to raise prices or raise prices because they are worried about the loss of foreign businessmen.

Guangzhou's BM company's orders for hundreds of thousands of shoes, because of the appreciation of the renminbi, makes each pair of shoes fall by 1 yuan, and hundreds of thousands of dollars in profits are blunted.

At the end of June and early July, the Shenzhen processing trade association made a questionnaire survey on the impact of RMB appreciation on export enterprises to more than 70 enterprises.

Zheng Jianguo, Deputy Secretary General of the association, told reporters that the situation was not optimistic.

The survey shows that 90% of the enterprises in electronics, clothing, footwear, machinery and other industries believe that the appreciation of the renminbi is more harmful than profits, while the import processing, processing and processing trade enterprises are greatly affected.

On the impact of exchange rate on the export profits of enterprises, 30% of the profits of enterprises are reduced by less than 500 thousand yuan, 10% of enterprises have reduced by 500 thousand -100 million, 40% of enterprises have reduced 1 million -500 million, and 20% of the profits of enterprises have been reduced by more than 5 million.

"Large enterprises have larger scale, brand names, dispersed market and strong compression capability.

SMEs are the most stressed. "

Zheng Jianguo said.

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Dealing with others

Under the pressure of RMB appreciation, enterprises in the Pearl River Delta want to reduce costs and enhance profits by strengthening management.

In the survey conducted by the Shenzhen processing trade association, 40% of enterprises chose to reduce costs voluntarily.

"If the business is well managed, there is still room for profit to be made."

Said Zhang Jie, deputy general manager of Haibei shoes industry.

She said frankly that raw material waste, workers' slow down, poor production organization and low efficiency resulted in waste of company's cost and artificial production capacity.

In order to gain more profit space, the seashore shoe industry has changed the system of salary assessment and payment for workers, changed the original timing system into piecework system, standardized staff management system and strengthened supervision; in exchange rate risk, agreed with foreign merchants and banks on exchange loss sharing, and tried to hedge futures pactions; and suppliers in consultation with efforts to reduce costs, at least not to increase costs.

In addition, since August, the seashore footwear industry has also agreed with some European and Australian merchants that the settlement from the previous US dollar settlement to euro and Australian dollar settlement.

"Merchants are unwilling to settle in Renminbi and can only settle accounts in local currencies to reduce losses."

Find out.

Besides, export oriented enterprises avoid exchange rate risks through domestic sales.

A shoe manufacturer in Dongguan said that since this year, it has changed from completely export to partial domestic sales, and the domestic consumer market is becoming stronger and stronger.

The profit of domestic sales is also higher than that of export, which is about 2-3 times the gap, but domestic marketing will raise higher requirements for enterprise brand.

An official from Dongguan's foreign trade and Economic Cooperation Bureau told reporters that the government is also encouraging export enterprises to sell domestically and help enterprises to connect with domestic customers.

It is suggested that enterprises should be cautious in dealing with long lists and large orders and prevent exchange risks.

In raw material procurement, reduce domestic procurement.

Compared with some enterprises practicing "internal strength", more enterprises are hedging part of their losses by raising prices.

Reporters interviewed a number of exhibitors to understand that this autumn Dongguan shoes exhibition most enterprises quoted price higher than this spring shoe exhibition in May this year by one to 20%.

However, due to the hidden worries of customer loss, it is hard to predict when the export enterprises will be able to hold up when prices are carefully raised.