Chinese Shoe Companies Struggle On The Line Of Life And Death

China's shoes products are experiencing unprecedented challenges. Order Sharp decline, huge inventory pressure, rising labor costs, RMB Revaluation, raw material price fluctuation, loan interest rate increase, all kinds of unfavorable factors superimposed, causing many enterprises to be forced to cut production or even stop production.

　　 Reduction of foreign trade orders

　　 Nike Data released recently showed that Vietnam will continue to play a leading role in the 2011 fiscal year after the first replacement of China as Nike's largest producer in 2010.

Over the past 30 years, Nike's production base has been migrating - first in Japan, then moved to Korea and Taiwan, China, and then moved to Philippines, Thailand, Malaysia and Hongkong, China. In 1981, Nike weighed between Mainland China and India, and chose to produce sports shoes in China until the mainland of China was over Vietnam in 2010.

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 26%, ranking second; in 2009, China and Vietnam ranked first in the same 36% share; in 2010, Vietnam's share rose to 37%, more than that of China's 34%.

The export situation of China's shoe products is grim and faces challenges from various unfavorable factors at home and abroad.

According to Wu Wen, the head of a Fujian business, told reporters, "since last June, the company's orders have basically been shrinking, and orders received in October and November have fallen by 30% to 40%."

There are two main reasons for the decline in orders: first, the economic downturn in Europe and the United States, and the prevailing debt crisis in the United States and Europe. According to statistics from the Asian Footwear Association, conservative estimates of global shoe orders will shrink by 10% this year.

The two reason is that the comparative advantage of China's labor force is no longer in existence. The labor costs of Vietnam, Kampuchea and Malaysia are becoming more and more prominent. Some foreign shoe companies are moving to Vietnam and Kampuchea.

　 Decline in corporate profits

On the one hand is the shrinking of orders, on the one hand is enormous cost pressure.

Although not yet to the Spring Festival, but a shoe manufacturer in Fujian, Mr. Lin, general distributor of Beijing, returned to Fujian's hometown on vacation. He told reporters that the shoemaking industry is very sensitive to costs because of its small profits. Before that, a pair of leather shoes of their factories could make about $1, and now only about 20 cents. At present, the average profit of Quanzhou shoe enterprises is only about 5%.

"Even if successful exports can't make much money." Mr. Lin said that in his case, the export volume was 15 million yuan in 2010 and 2011, but the net profit in 2011 was much lower. Domestic foundry enterprises, affected by factors such as increased labor costs and rising raw materials, generally increased the cost of OEM by 5% to 10% in 2011, while the European and American quotations were the same as those in 2010. The most generous price was 3%, which would reduce profits by 2% to 8% in 2011. Only by constantly producing, can enterprises survive in meager profits.

For the export enterprises, under the influence of comprehensive factors such as RMB appreciation, the price advantage of the original product is gradually lost, and the order is transferred in large quantities. Data show that in 2011, the appreciation rate of RMB against the US dollar increased by more than 5.1% throughout the year. For example, since the first exchange rate reform in 2005, the cumulative appreciation of the RMB against the US dollar has exceeded 30%. The RMB exchange rate continues to rise, further increasing the exchange losses of enterprises. An analyst at the head office of the Bank of China told reporters not to be named.

In recent years, wages have risen as prices rise. "In 2011, wages rose by about 15%." Wu Wen manager said. In the first two years, labor costs can be controlled at 18%. Last year to 23%, this year is likely to be even higher. It is understood that the Chinese shoe companies hire a mechanic master monthly salary of 4000 yuan to 5000 yuan, while in Vietnam and Kampuchea only about 500 yuan. As a result, foreign companies have moved to Southeast Asia, such as Vietnam or Burma.

The cost of raw materials is also rising, eroding the profits of enterprises. It is understood that since last year, the price of domestic pig skin has risen from 40 yuan to 50 yuan to 80 yuan to 90 yuan, and has now exceeded 100 yuan mark. Other raw materials have also risen.

"Under the influence of multiple factors, enterprises can not raise prices on the one hand in order to keep orders; on the other hand, in recent years, rising wage costs and so on have made a loss for enterprises whose profits are thin." Wu Wen manager said that more and more shoe companies are struggling to break even. It is reported that 30% to 40% of shoe factories are in a state of shutdown and semi shutdown.

Excavating domestic demand market

In order to survive the debt crisis in Europe and the United States, many export shoe companies began to use "two legs to walk" - to expand domestic sales. Jinjiang, Fujian, a former export oriented shoe business owner told reporters that they have done a lot of market research in order to enter the domestic market. But he admitted that because of the lack of its own marketing channels, it is not easy to take the road of "domestic sales".

According to statistics, at present, China's footwear industry produces 13 billion pairs of shoes annually, accounting for six or seven of the world's total output, of which nearly 10 billion are exported. More than 70% of Guangdong's shoe enterprises are organizing and producing products in the form of processing trade. It is estimated that the overcapacity of the footwear industry in Guangdong is over 30%.

Such a large output will inevitably cause greater pressure on the domestic market. However, China has a large space in the domestic market. Europe and the United States consume 7 to 8 pairs of shoes per person per year, while China has only 2.8 to 2.9 pairs. If 1 per capita increases by 1 pairs, it will increase at least 1 billion 300 million pairs. Although it is difficult for small and medium-sized enterprises to expand domestic sales channels, it is very important for enterprises to take this step.

In an interview with reporters, the head of China Leather Industry Association said that the export shoe factories had competitive advantages in production and manufacture, independent design, research and development, but they were weak in brand and channel. The docking process needs a process. There are differences in styles, marketing methods and prices at home and abroad. These export-oriented shoe companies need to identify brand positioning and their own advantages, and clarify their own sales channel development strategies. The mode of export and domestic sales is totally different. The road of enterprise transformation is bound to not be smooth sailing. It needs to break through its own bottleneck and cross many barriers.