The Collapse Of A Adidas Foundry Enterprise

"Chang Deng is a well run enterprise, specially for Adidas and other brand OEM, the fund is quite sufficient, it will not be closed because of the capital problem. This can be seen from the payment of wages and compensation when we get through the business."

One of the nearly 4000 workers, Tai Tong Footwear Co., Ltd. is now officially closed. The company is not closed because of financial pressure, because it has also prepared sufficient financial compensation for its employees before going out of business.

This company is located in Datang Village, main mountain management area of Dongcheng, Dongguan. It was founded in October 1995 and covers an area of more than 6.6 square meters.

"First Financial Daily" reporters at the scene saw the factory gate locked, leaving only security guards.

The failure of a shoe company revealed to reporters that the company's announcement of the closing of the business showed that the company began to stop operations in December 20, 2007.

But earlier, the company has begun to terminate the contract with the employees, and has prepared more than 4000 yuan of economic compensation for the employees. There has been no arrears of wages, and now the boss has returned to Taiwan.

The factory did not give any explanation to the workers about the reason for stopping operation.

Wu Zhenchang, a Taiwanese businessman who invested in the footwear industry in Guangdong, told reporters that the implementation of the new labor contract law will increase labor costs and management difficulties, which will have some impact on the labor-intensive shoe companies. The closure of shoe companies should be related to this, but the main reason is that the profits of the footwear industry are decreasing year by year.

"Chang Deng is a well run enterprise, specially for Adidas and other brand OEM, the fund is quite sufficient, it will not be closed because of the capital problem. This can be seen from the payment of wages and compensation when we get through the business."

Wu Zhenchang said, "RMB appreciation, wages of workers, raw material prices, water and electricity charges, factory rents continue to rise, coupled with frequent policy adjustments, shoe enterprises profits are becoming increasingly diluted.

Under such circumstances, some enterprises with strong capabilities have chosen to close their business due to their existing profits failing to reach their goals and worrying about possible losses in the future, and turn to other industries or to invest in other countries and regions.

Compared with Chang Deng's footwear industry, Mr. Feng seemed somewhat helpless. He was forced to close his shoes factory in Dongguan two months ago because he could not manage it.

According to Mr Fung, the competition between the medium and low grade shoes production enterprises is becoming increasingly fierce. In addition, customers' demand for shoes products is getting higher and higher. Orders are generally handed over to large factories. The factory which has nearly 100 people has hardly been able to receive suitable orders since last year.

"Because of the instability of our customers, our business has become very difficult, and we have been losing money for several consecutive months, so we have to choose to close the door."

Mr. Feng said.

Under the slight profit, the shoe companies "fight for life and death". We raised the order price by 3% last year, but the profit dropped by 5%.

Influenced by many factors, the profit margins of almost all shoe companies are compressed.

The shoe companies with thick profits now have thin profits, thin profits and no profits.

In the increasingly fierce competition, enterprises must upgrade their products to survive and develop.

Zhang Huarong, chairman of China's largest female shoe export manufacturer, Huajian Group Chairman and chairman of the footwear association of Asia, has made an interview with reporters to sum up the current situation of China's footwear industry.

Huajian Group invested in Dongguan in 1996. After more than 10 years of rapid development, the annual export volume exceeds 300 million US dollars, mainly for NINEWEST, EASYSPIRIT, BANDOLINO, WALMART and other international brand shoes.

However, the cost continues to rise and profits decline year by year, which makes the production giant feel pressure. A few years ago, it began to find countermeasures. In addition to adjusting the layout of production to reduce costs, it continued to raise the unit price to customers through strengthening research and development and design.

Zhang Huarong told reporters that orders increased 3% to 4% in the first, second quarter of this year, and continued to rise in the third and fourth quarters.

In addition, since last year, the 100% processing and exporting enterprises began to test the domestic market, and launched COLCO, Alan Delong and other independent brands, hoping to occupy a place in China's domestic market through 3~5 years.

China's footwear industry has made relatively modest margins on OEM for foreign brands.

Huajian group mainly produces high-end women's shoes, with an export price of around $14, but it can only earn 1~2 dollars from it.

The average price of China's global export footwear products is less than US $3 / double or kilogram, and the profit of many processing enterprises is only about 5%.

Over the past two or three years, the overall cost has risen substantially. Many small and medium-sized factories do not have the ability to bargain with customers, but the processing fees and product prices can not rise. This makes many factories unsustainable.

Data from the footwear association of Asia showed that in the first three quarters of last year, 1000 shoe factories and supporting enterprises in Guangdong had been closed down by various factors or voluntarily closed down, or were sealed up by courts or moved elsewhere.

China's competitive advantage is still in Houjie Town, Dongguan City, one of the most important production bases in Guangdong. The shoe factories and related enterprises can be seen everywhere. The shoe and shoe materials market is still very busy.

Li Peng, secretary-general of the footwear association of Asia, told reporters that 200~300 of the more than 1000 shoemaking enterprises here have closed down since last year, but some shoe companies have closed down and some have taken over. The perfect shoe industry supporting Houjie is still favored by investors.

At present, China is the world's largest shoe producing country, exporting country and consumer country, occupying 68% of the world market.

There are about 6000000000 people in the world. On average, everyone has a pair of shoes made in China.

Li Peng believes that although many reasons lead to the failure or pfer of some shoe enterprises, China's footwear industry is still developing in a healthy way. At least in the next ten years, no country or region can take the place of China's shoes. Vietnam, India and other emerging footwear industries can not compete with China at the same level. These countries need to build a perfect industrial chain like China for a long time.

Li Peng said, because the threshold of shoemaking industry is low, the number of shoe enterprises has increased too fast in recent years, and the increasingly fierce competition will lead some enterprises out of the market. In the case of the market cake has not been reduced, it will help promote the pformation and upgrading of the entire industry.