Is Nike Shoes Made In Vietnam?

Recently, it is reported that in the 2010 fiscal year, Vietnam produced 37% of Nike sports shoes, ranking the first place, ending the 10 consecutive years of China's top position.

It is normal for Nike shoes to spin off to Vietnam, and its impact on domestic employment is also limited.

For the sake of cost advantage, Nike shoes have been pferring production base for 30 years.

Nike's sports shoes are all outsourced.

According to the introduction of Nike website, sports shoes are more sensitive to labor costs. Enterprises must control labor costs within 24%, so that they can be competitive.

In accordance with this cost control principle, over the past 30 years, Nike's production base has been complying with the changes in the cost of all parts of the country, and has been moving continuously.

Nike website introduced the earliest Nike factory in Japan. With the increase of labor costs in Japan and the appreciation of the Japanese yen, the production base moved to Korea and Taiwan, China.

Later, the cost of Korea and Taiwan came up, and Nike began to shift its production base to Philippines, Thailand, Malaysia and Hongkong of China. At the same time, it looked into the future long-term production base, and chose China after comparing China and India.

In 1981, Nike began to produce sports shoes in China.

In the next 30 years, China quickly became the largest producer of Nike sports shoes until Vietnam was over Vietnam in 2010.

The cost of manufacturing in China is rising, but some OEM shifts have limited impact on employment.

With China's manufacturing industry

According to the annual report data of Nike, in 2001, China produced 40% of its shoes ranked first in the world, while Vietnam accounted for only 13% of the total. In 2005, China's share dropped to 36%, ranking first, Vietnam rose to 26%, second, in 2009, China and Vietnam ranked first, 36%, and in 2010, Vietnam exceeded China, accounting for 37%, and China retreated second, accounting for 34%.

However, from the above data, we can see that Nike's foundry business is only part of the pfer to Vietnam, China still occupies 34% of the proportion.

Especially when the "labor shortage" is becoming more and more intense in China, the partial shift of this kind of cheap OEM business has limited impact on domestic employment.

Nike shoes can only earn small profits by doing foundry, but the "sweatshop" model is not sustainable.

For Nike and other international brands to do foundry, Chinese enterprises usually earn only meager profits.

What Nike praises the industry is its "light asset operation" mode, that is, outsourcing the product manufacturing and retail distribution business (OEM), and concentrating itself on the business of design development and marketing.

This "light asset operation" mode can reduce the company's capital investment, especially the large number of fixed assets in the production field, so as to increase the rate of return on capital.

Under such a "light asset operation" mode, even China's local foundry enterprises, the profits from Nike shoes production are also very limited.

Earlier, media reports said that a pair of Nike shoes in the United States retail price of 100 dollars, the material cost of only 15.67 dollars, the factory price in China is only 24.71 dollars, including 2.58 dollars in direct labor costs, 4.56 dollars in management costs and about 1.9 U.S. dollars in factory profits.

When the $24.71 Nike shoes were shipped to the United States, Nike set the wholesale price of these shoes to 52.03 dollars, when the shoes reached the consumers' hands, the price was already up to 100 dollars.

It is estimated that in this value chain, the brand premium and sales channel cost and revenue of Nike shoes account for 70% of the total price, while the value added of Chinese factories that produce Nike shoes (including direct labor costs, management costs and factory profits) account for about 9% of the total price.

"Sweatshop" model is not sustainable, at the expense of labor rights and environment, {page_break}

In fact, it is precisely because the domestic enterprises make international manufacturing enterprises, including Nike, that they can only earn meager profits, so that enterprises do not have enough profit space to digest the cost pressure of any wage increase.

On the contrary, to maintain survival, the foundry enterprises must lower labor remuneration and sacrifice the rights and interests of laborers.

Another cost is environmental costs.

In the foundry trade, there exists a virtual pfer of pollutants. The virtual form of pollutants comes from the waste water, waste gas and solid waste generated and produced in the process of foundry products, that is, industrial wastes.

The importing countries of these pollutants have been pferred to the exporting countries of manufactured goods, which has become a hidden cost behind China's OEM trade.

Some scholars pointed out that the low wages and environmental costs of laborers cost them.

Vietnam is only a foundry base for Nike shoes, and Chinese enterprises have gone to their own brand stage.

Although Vietnam has become the largest production base of Nike shoes, it has nothing to do with "Vietnam made" itself.

According to media reports, Nike's global sports shoe contract factory has more than 100 factories, including Baocheng, Fengtai, Qing Lu, Guang Rong and other Taiwanese businessmen. Korean businessmen have T2, SANYO and so on. These factories are scattered in China, Vietnam, Indonesia and other places in Asia.

Since 2005, Fengtai group, which controls Nike 5.5%, has pferred many Chinese orders to Vietnam. At the same time, it has expanded the production line of 4 processing plants in Vietnam and invested about ten million US dollars to build a new factory in Vietnam.

In 2005, Nike's world's largest OEM plant Baocheng group's capacity in Vietnam is also rapidly improving.

In the next few years, Feng Tai and Baocheng have increased their investment.

It can be seen that the so-called Nike shoes made in Vietnam are just Nike's OEM enterprises that pfer their capacity to Vietnam, which costs less. It is not necessarily related to the upgrading of Vietnam's own manufacturing capability.

Chinese enterprises have gone from imitation to local brands, and the gap with international brands such as Nike is narrowing.

However, China is different. In the process of learning Nike and other international brands, China's local manufacturing enterprises have gone beyond the stage of foundry and imitation, and are moving towards the stage of creating brands.

In the 90s of last century, most Chinese sporting goods manufacturers were only an important foundry partner in Nike's "light assets operation" mode. In Jinjiang, Fujian, there were nearly 3000 footwear production enterprises, employing over 300 thousand employees and producing 650 million pairs of shoes annually.

But now, brands like Anta, PEAK, 361 degrees, Hyde, del Hui, Jordan, and golden lake from Jinjiang have developed rapidly into an important competitor in China's local sporting goods market by emulate Nike.

For example, PEAK, once Nike's "Dove" based on OEM, has become the leader of the domestic basketball brand.

In 2009, the ranking of China's regional sports brand sales showed that Nike still ranked first, but Chinese local brand Lining surpassed Adidas in the second place (in 2009, Lining ranked sixth in the world sports brand sales ranking). Similarly, the local brand Anta (ranked eighth in the world) also ranked the fourth place after becoming Adidas.

Conclusion: it is very normal for Nike shoes to shift part of its foundry business to Vietnam, and its impact on domestic employment is also limited.

In the field of sports shoes, Chinese enterprises have gone beyond the subprime stage of small profit subsistence, and have successfully moved to the stage of independent brands. From this perspective, Vietnam's replacement of China as the largest foundry base for Nike shoes is not good news, but it is also not bad news.