China'S Shoe Making Industry Will Change Globally.

In May this year, the US brand COACH announced that China's labor costs will rise from China.

Since 2000, COACH has been closed to factories in Europe and the United States. More than 90% of the factories have been pferred to low labor countries, such as Indonesia, Thailand and Vietnam.

According to the financial report, in 2001, the gross profit margin of COACH reached 63.5%, and it soared to 77.7% in 2006. Although the financial crisis has gone through, the gross profit margin of COACH is no less than 70%.

The gross profit margin of LV is only 62%, and the gross margin of GUCCI is around 70%.

"We are being affected by the rapid rise in wages in China's manufacturing sector."

Chairman and CEOLewFrankfort said.

Frankfort said it will reduce COACH's capacity in China from 85% of its global capacity to 40-50% in the next five years and shift its production capacity to low wage countries such as India, Vietnam and Philippines.

Meanwhile, COACH plans to raise sales to 500 million US dollars in 3 years.

While China is catching up with Japan as the second largest luxury consumer market, COACH is looking to China.

In order to enhance its popularity in China and Asia, COACH also announced that it would complete the two listing in Hong Kong by the end of this year.

At present, COACH has 9 stores and 44 stores in Hongkong and the mainland, with sales volume of 100 million US dollars in 2010.

COACH, which is always associated with LV, leaves consumers with the same impression as LV.

"COACH is not a luxury brand, but this mode of operation makes the luxury COACH popular among Chinese consumers."

Cui Hongbo, senior partner of the brand strategy management joint venture group, said.

Lu Qiang, Fawkes holding chairman of luxury brand, pointed out that beside LV, GUCCI and other big brands, there is a brand with a price tag of only 1/3 and a fashionable brand. COACH is easy to attract young white-collar workers.

"The European complex of luxury goods is extremely serious."

Dr Zhou Ting, deputy director of the Daxiang Qi luxury Research Center, pointed out that once the industrial line extends to Asia and other places, although the cost reduction, "but the brand will face the risk of weakening core values."

"Even if some of the processes or accessories are completed in China, the leaders of these luxury goods will never declare that products are made in Asia, and most of the sensitive topics are silent."

Zhou Ting told reporters that COACH will further shift the production line to the surrounding countries with lower production costs, which will bring greater risks to the brand's value.

In addition, Nike's 2011 fourth quarter earnings report has not yet disclosed the share of the global production base, but the media has made a prediction. After the first time that China replaced Nike as the largest producer of Nike in 2010, Vietnam will continue to maintain its leading position in the 2011 fiscal year.

With the gradual increase of labor costs in China, more and more manufacturing enterprises turn their production bases to relatively low labor cost countries such as Southeast Asia. Meanwhile, the huge potential Chinese market attracts more and more foreign-funded enterprises to pfer research centers to China.

What is the current situation of China's economy?

Since 2010, the word "Vietnam" has appeared more and more on the Nike shoe counter in China.

Nike sports shoes are all outsourced.

Before 2010, China was its largest producer, but since 2010, Vietnam was "superordinate", replacing China's "old" position.

Nike's annual report shows that in 2001, China produced 40% of its shoes, ranking first in the world, Vietnam only 13%; by 2005, China's share dropped to 36%, Vietnam rose to second of 26%; in 2009, China and Vietnam ranked first in the same 36% share; in 2010, Vietnam's share rose to 37%, more than China's 34%.

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

Over the past 30 years, Nike's production base, like migratory birds, has been migrating continuously in response to the changes in the cost of various places. It was first located in Japan, and later moved to Korea and Taiwan, China. After that, it moved to Philippines, Thailand, Malaysia and Hongkong of China. In 1981, Nike weighed between China and India and chose to produce sports shoes in China until Vietnam was over Vietnam in 2010.

"For a long time, cheap is synonymous with Chinese made products. However, in recent years, with the appreciation of RMB and inflationary pressure, the advantages of cheap labor in China have been gradually lost, and many enterprises have begun to shift production plants to cheaper labor."

Song Songxing, a professor at Nanjing University business school, thinks that this trend will become more obvious in the future.

It is not only European and American brands that are turning out of China from OEM.

According to media reports, due to the huge increase in labor costs in China, Japan's clothing and grocery enterprises are preparing to lower their production ratio in China and pfer part of their production links to Southeast Asia.

Following the Vietnam, Burma and Kampuchea business, Qingshan will start commissioning production in Indonesia this year.

Southeast Asian factories mainly undertake sewing processes, and the fabrics needed are still purchased from Italy and China.

3 years from now, the quality plan will reduce the number of Chinese cooperation factories from 229 to 86, and the proportion of procurement from China will be reduced by 60% from 60%.

Furniture, groceries and other wood products began to increase procurement from Southeast Asia.

The FastRetailing company, which is owned by UNIQLO, plans to increase the production ratio of 20-30% outside China to 50% from the low price clothing brand G.U. to Bangladesh and Indonesia factory.

In addition to the pfer of commissioned production, some companies have also set up new factories outside China.

TSI holdings, Tokyo's STYLE, invested 1 billion yen and began building new factories in Vietnam since August of this year.

Women's clothing brand Honeys will also start production in the new factory in Burma this fall.

At present, China's labor cost is about 5 times that of Bangladesh.

The sewing process began to gradually shift beyond China because it relied mainly on the latest equipment and did not need too many skilled workers.

Of course, the countries with the ability to undertake sewing and weaving processes around Japan are only China. Therefore, the production outside the sewing process will continue to be mainly carried out in China.

Professionals say that with the rise of global protectionism and the appreciation of the renminbi "made in China", the situation that "made in China" is "thriving" in the past ten years is bound to change, but this does not mean that China has lost the advantage of the world factory.

"Enterprise production is moving out of China, but this is also an inevitable labor pains in the process of China's industrial upgrading and pformation."

Song Songxing suggested that China should step by step in the pformation process, postpone the pformation process to prepare for high-tech competition, otherwise it will repeat the mistakes of Japan. "One of the most important reasons for Japan's economic stagnation in the past 20 years is that the industry has been pformed too fast, and has entered the dilemma of" high, low and low "with high technology, low labor costs and insufficient cost advantages.