Nike Adidas's Procurement In China Is Decreasing Year By Year, How To Maintain The Fate Of OEM?

German sporting goods giant

The only factory directly under China will be closed in October this year. The factory in Suzhou has 160 workers.

A spokesman for Adidas said this is part of the restructuring of China's business.

He said that the product will be outsourced to other Chinese manufacturers, which have about 300 suppliers in China.

The release of the news triggered a heated discussion about the pformation of Chinese OEM.

Adidas's largest supplier in China, Taiwan Yong Jing group, told reporters in August 14th that Adidas's procurement in China has been decreasing year by year, and that the share of global purchases in China has dropped from 60% ten years ago to about 30%.

Coincidentally, Adidas's biggest competitor is the United States.

The company's purchases in China also showed the same curvilinear changes: in 1985, from Taiwan, China, gradually to mainland China's Guangdong and Fujian procurement, in 2005, Nike had 70% of the value of product purchases in mainland China, while in May 2011, the share of mainland China's purchases was only 34%.

Behind the figures is actually a major issue in the pformation and upgrading of China's foreign trade. When the labor price advantage is no longer available, the traditional mode of foundry is no longer sustainable.

For example, the discussion on the pformation of processing trade is not rare after 2004. Before the outbreak of the financial crisis in 2008, the discussion of processing trade in the foreign trade system reached a climax with the introduction of a series of tightening policies. In 2011, several ministries and commissions issued policies, giving the three corners of the Pearl River processing trade three years to allow them to complete the initial pformation of processing trade.

In the pformation of foreign trade, which has both market promotion and policy push, the three types of OEM enterprises, such as private capital, state capital and foreign capital, have shown different mirror images.

In China's foreign trade structure, private capital and state assets are the main body of general trade, while foreign investment represented by Hong Kong, Macao and Taiwan is the main body of processing trade.

Xiao Hefei, deputy director of the international economic and Trade Research Center of Guangdong University of Foreign Studies, said

Relocation, export to domestic sales, and extension from simple foundry to upstream are the three pformation paths in front of the foundries.

Xinyi underwear in the South China Sea is a reference sample for the pformation from the representative factory to the domestic market. The steady domestic sales expansion plan has made remarkable achievements in its pformation over the past 10 years.

The exporter who relied on European orders for twenty years started the domestic sales plan in 2000, and the proportion of domestic sales has increased from less than 5% to over 65% in ten years.

Chen Weiqiang, general manager of the company, told reporters that the increasingly small processing profit has made it difficult for the factory to survive. The export profit of 3% of the garment industry, compared with that of over 15% domestic sales, forced the enterprises to choose the market pformation.

In fact, Xinyi's domestic sales started early, but the real pformation took place after the financial turmoil swept across the world in 2008.

The sharp contraction of external orders forced Chen Weiqiang to rediscover the way to maintain the factory's operation. In 2009, he launched second domestic brands of the company, which achieved about 40000000 sales in the year, partially offset the decline in European orders.

Since then, Chen Weiqiang has begun to sharply increase the proportion of domestic sales every year.

It is not so easy for state-owned enterprises to sell their domestic products.

A senior textile and apparel export group in Guangdong province told reporters that its two domestic clothing brands have not been profitable for many years, and it is also one of China's largest exporters of clothing.

He said that the initial creation of domestic brands is also a response to local governments' demand for enterprises to create brands. The annual maintenance cost of the brand is about 30000000, and it is less than 120 million yuan.

"In the past, profits from exports have been used to offset losses in domestic sales."

He said that the shrinking of foreign demand in recent years has led to a gradual reduction in the cost of maintaining domestic brands.

Guangdong, another senior exporter of light industry products with state-owned assets, told reporters that many years ago, he had labored to open up domestic sales.

"The group's shoes, plumbing equipment and jeans are all in a mess." "the goods are sold out but not the money" is the direct cause of these failures. In order to recover the money, the company even set up a debt collection team.

In fact, if the safety factor is not considered, the profit from domestic sales is much higher than that of exports.

He said that the same notebook, if the export price is 1 yuan, sold to domestic sales may be sold to two yuan.

In simple terms, the profit is high, but this is only a "cake on paper". It is hard to say whether it will be realized.

After the financial crisis, the group has set foot in some marginal domestic businesses and is expected to participate in the circulation of domestic commodities as much as possible.

For example, they concentrated the demand for paper from some small and medium-sized enterprises. Most of them had business dealings with the group. After collecting the deposit, they concentrated on bargaining with large paper mills. This attempt not only earned the rate of fees, but also relieved the pressure of group funds, and more importantly, "let us slowly enter the domestic market in a relatively safe way".

When the three respondents mentioned the attempt to pform the domestic market, they all agreed that the exporters of private capital were easier to adjust and pform, and the institutional factors should not be ignored.

The top executives of the state owned export enterprises said that the pressure of private enterprises only came from the market, and the owners of the enterprises had full autonomy. The senior executives of state owned enterprises were both pressed. They should consider the future of the market and enterprises, but also consider the short term assessment indicators and tasks of the SASAC. "For example, the pformation of domestic sales will not be conducive to the completion of the profits paid by enterprises.

There are not enough incentives for enterprises to really push forward all kinds of pformation.

He said, for example, under the current bad external demand, enterprises should take shrinkage tactics, but in fact, the higher level units still require the enterprises to focus their energies on the main business, and the target task has not been adjusted obviously.

"In the context of the spread of the European debt crisis, growth is almost empty talk," he said.

He said.

In fact, in addition to turning to domestic sales, expanding imports and business diversification is also the direction of pformation of state owned enterprises.

In a report on expanding imports of Guangdong Province, which was learned by our reporter, the trade volume of Guangdong Guang Xin holding group in 2011 was US $3 billion 60 million, and imports amounted to US $740 million. This year's import target is US $900 million, and imports have almost maintained a growth rate of about 30% in the past two years.

"Three old renovation" (old towns, old villages, old factories) has also become one of the opportunities for the pformation of state owned exporters in the Pearl River Delta region.

The special policy that Guangdong has obtained from the central government is expected to increase 2000 hectares of construction land in Guangdong.

The old factory buildings owned by large state-owned exporters are being incorporated into the category of "three old renovation".

The top executives of state owned enterprises mentioned in the interview mentioned that three of the opportunities brought about by the old pformation may increase, and the assets of enterprises are expected to increase, which may involve in the development of real estate projects and realize the diversification of business.

In fact, some large state owned export groups in Guangdong have been involved in the development of real estate, but according to our reporter, at present, they are more just financial investments.

The foreign capital in China's foreign trade mainly occupies the field of processing trade.

Take Guangdong, a heavy processing trade town, for example, processing trade accounts for about 60% of import and export volume, while processing trade accounts for more than 80% of foreign capital.

Guangdong province foreign trade system official introduced that through the two years' research, the processing trade enterprises have been roughly classified. The top of the OEM enterprises is the production links of large multinational corporations in the Pearl River Delta. The enterprises rely on China's cheap labor resources. "The characteristics of migratory birds in such factories can not talk about pformation. Only the migration of production links, our train of thought is classified guidance, striving for them to gradually put R & D links into China."

He said that the main body of Guangdong's policies and measures to promote pformation is actually the processing trade enterprises of Hong Kong, Macao and Taiwan, as well as private capital. Whether such enterprises can accomplish the pformation from low end to low and medium end products is crucial.

Since the end of 80 in the last century to the Pearl River Delta in Taiwan, the number of factories in the Guangdong area has been almost no increase in the past two years, while the output of factories in Jiangxi, Hunan, Vietnam and Indonesia has increased significantly.

The group is one of the main suppliers of Adidas and Nike in China.

Capacity migration and adjustment date back to 2004.

At that time, although buyers such as Nike had taken China as the main sourcing country, their share of the global procurement map was rising rapidly in Vietnam, Indonesia and other places where labor force was cheaper.

In the development of Xinjiang soil, purchasers found that factories, such as Southeast Asia and other places, are still inferior to factories in the Pearl River Delta, no matter in terms of production efficiency or technological level.

The idea of factory owners in the PRD to manage and manage factories in Vietnam and other places began to ferment.

After years of accumulated experience and in-depth analysis of the procurement experience, these large multinational buyers began to promote Taiwanese investment enterprises such as Yong Jing to invest and build factories in Southeast Asia.

At present, half of the monthly output of Yong Jing group comes from overseas factories.

In the face of shrinking international demand and increasingly expensive labor costs in mainland China, the top executives face three options: to open factories outside the labour force with lower cost and to open factories in inland areas such as Jiangxi and Hunan, where labor costs are low, or to directly pack up and close factories.

"In reality, most Taiwanese businessmen have chosen third ways."

Currently, labor costs in Vietnam and other places are less than half of that in mainland China.

Liu Kun, general manager of Nanhai Golden Shoe industry, a Taiwanese shoe making enterprise, said that labor cost has risen from around 1000 yuan before 2008 to nearly 3000 yuan. However, such remuneration is still difficult to retain workers.

In recent years, a number of Taiwanese businessmen gathered in the mainland.

Liu Kun himself has no additional investment in mainland China, and orders keep the factory running and let it shrink naturally.