Rising Prices Of Raw Materials And Sharp Reduction In Exports Of Shoes In Jinjiang

Core tip: affected by many factors, such as RMB appreciation, raw material price increase, tight macroeconomic regulation and control, rising labor costs and recruitment difficulties, Jinjiang, the largest footwear base in China, which produces 1 billion pairs of sports shoes annually and accounts for 40% of the total market share and 20% of the world's total market share, has closed hundreds of small and medium-sized export shoe enterprises in 2007, and this year's life is even more difficult.

"There are a lot of peers who want to change careers, but they haven't found any direction yet."

Ding Siyuan said, "now many companies dare not take orders, if they are also losing money, just to keep the old customers."

The real hard times have arrived. Fujian, Jinjiang, China's shoe capital, is changing in a dilemma.

The Tenth China (Jinjiang) International Footwear exposition, which opened in April 19th and lasted for 4 days, has not been much more lively because of its 10 year old birthday. On the contrary, although 1500 professional buyers from more than 60 countries and regions around the world have been invited to attend the meeting, the number of exhibitors or the number of people visiting the industry has dropped sharply.

Influenced by many factors, such as RMB appreciation, raw material price increase, tight macroeconomic regulation and control, rising labor costs and recruitment difficulties, Jinjiang, the largest footwear base in China, which produces 1 billion pairs of sports shoes annually, accounts for 40% of the total market share and 20% of the world's total market. In 2007, hundreds of small and medium-sized export footwear enterprises were closed down, and this year's life is even more difficult.

However, it is obvious that Jinjiang has been changing in the predicament, and its unique interaction between government and enterprises has been intensified. The government is further creating a larger platform to guide the development of footwear industry, and enterprises are actively strengthening R & D, establishing brand and enhancing management in a pragmatic way, focusing on the business direction to the domestic market.

The new round of industrial integration and upgrading has been opened.

"I think this is a good time to do a big shuffle!"

As Zhao Yong, director of the Jinjiang inspection and Quarantine Bureau, told reporters.

There are still more than 3000 sports shoe companies in Jinjiang, but over 80% of them are export oriented enterprises.

For most export oriented shoe companies, who is going to win until the end?

As a shoe manufacturer who sells nearly 90% shoes to the European Union and has an annual output value of about 20 million yuan, Ding Siyuan, chairman of Kang Tai Ke sporting goods Co., Ltd. is worried.

"There are a lot of peers who want to change careers, but they haven't found any direction yet."

Ding Siyuan said, "now many companies dare not take orders, if they are also losing money, just to keep the old customers."

According to its introduction, some raw materials increased significantly last year, packaging fees rose 30% to 50%, soles rose 30%, wages for miscellaneous workers increased from 950 yuan to 1150 yuan, up 21%, and skilled workers even reached 30%, and recruitment difficulties were difficult.

"The biggest expectation now is the improvement of the environment."

Ding Siyuan said.

Auspicious bird (China) Co., Ltd., which accounts for half of the export and domestic sales, has suffered less impact due to providing OEM services for world-class brands.

Xiao Zuofa, director of marketing, told reporters that the cost of each pair of shoes is affected by 10%~15%, which is dominated by relatively high-end overseas customers and has a certain brand advantage. For most small and medium enterprises (market shares), the highest impact cost can reach more than 30%.

Xiao Zuofa was impressed by the fact that at least 200 shoe companies were closed down in Jinjiang last year, while thousands of them went bankrupt in Guangdong, and more than 50 suppliers of auspicious birds in Guangdong went bankrupt more than 10%.

In the view of Xiao's hair, the number of Jinjiang shoe enterprises has failed significantly, which is related to the strong support of the Jinjiang municipal government, because Jinjiang shoe industry is still in the stage of capital accumulation.

"Last week, shoe companies failed every week in Jinjiang, and more are going to go bankrupt this year."

As a local professional guidance shoe company, the boss Management Consulting Co., Ltd. is very aware of this. Shen Chengying, its project manager, said that about 80% of the total number of shoe enterprises in Jinjiang will continue to be severely tested by foreign trade shoes enterprises, which account for about a total of about 50% of the total number of shoe enterprises in Jinjiang.

Zhao Yong disclosed that in 2007, the export volume of Jinjiang shoes amounted to 2 billion US dollars, but the appreciation of RMB had great impact on the psychology of enterprises, and the number of enterprises reduced sharply. The export profits of enterprises in the first quarter were reduced by 10%.

Data from the Bureau showed that, in the first quarter of this year, a total of 12832 batches and 106 million 850 thousand pairs of export footwear products were inspected by the RMB appreciation, rising raw materials and the relocation of small and medium sized shoemaking enterprises to the mainland. They fell 12.12% and 0.42% respectively from the same period last year. However, due to the increase in average manufacturing costs and the rise in the unit price of exports, the total amount of Jinjiang's exports continued to grow, reaching 333 million US dollars, an increase of 9.14% over the same period last year.

In the Alibaba Market Department of Shensi, Fujian, the size of this year's Jinjiang Shoe Fair has become smaller, and some enterprises are afraid to take orders, but there are still many enterprises that purchase shoes making machinery.

Faced with the current predicament in the predicament, small and medium-sized enterprises in Jinjiang are working hard to break through.

Ding Siyuan told reporters that the next step is to adjust the proportion of exports up to nearly 90%, and require foreign trade companies to settle in Renminbi.

At the same time, products will be adjusted to high-end outdoor mountaineering shoes and beach shoes.

But Ding Siyuan still has concerns about whether to turn to the domestic market.

He believes that as Jinjiang shoe enterprises have been actively concerned about the domestic market, domestic sales saturation is high, and the risk is also increasing.

Xiao Zuofa also believes that since China's overall sales environment and credit environment still have big problems, if the Jinjiang shoe enterprises turn to the domestic market, if the market conditions change, the risk of accounts receivable will be generated, and the overseas capital recovery rate of the division can reach 100%.

Shen Chengying said that since last year, the Department's Jinjiang shoe enterprises consulting customers increased from 4 in 2006 to 15, and 6 new products were added in the first quarter of this year. Most shoe companies listened to the recommendation of the division to increase their R & D and management input, while 70% of their customers were recommended by old customers, showing that Jinjiang shoe enterprises attach importance to R & D and management.

Quanzhou Juli Trading Co., Ltd. is a foreign trade company entrusted by nearly 20 Jinjiang shoe enterprises. Its business director, Mr. Wan said, Jinjiang shoe manufacturers have improved their technology in recent years, but there is no obvious improvement in technology, especially materials. Last year, many enterprises were hit by claims, which has attracted the attention of the industry.

But for shoe companies with heavy brands, they are still somewhat confident.

Jinjiang shoe company's "head big brother" Anta management recently said that the company has completed the first three quarter of 2008 order activities, orders up to 50%.

Ding Shizhong, chairman of the board of directors, also said that in view of the rising cost of raw materials, the company would consider raising the unit price by no more than 10%.

Ding Shizhong said that the current cost increase is within its expectations and is acceptable.

The recent order is ideal and has been allocated to the fourth quarter of this year.

In response to the expanding demand for products, the company plans to add 1000 new outlets this year, and at the same time, it will spend 700 million yuan to build shoe material city in Fujian and add eight production lines, which is expected to be put into operation in 2010.

Xu Yang, director of Anta brand, told reporters that the environmental impact has made Chinese manufacturers suffer. But private brand enterprises have not been greatly affected. Anta will continue to increase its brand value and gradually enhance its core competitiveness from the original manufacturing costs and channel advantages to R & D and brand equity.

Zhou Yingli, planning manager of the sixth Jordan company, said that because of the substantial increase in brand cost, many small and medium sized shoe enterprises in Jinjiang have turned from enthusiastic to brand oriented since last year.

Jordan also did not plan to invest heavily in Olympic publicity. He recently focused on the design of talents.

Under the background of big reshuffle, the industry is turning to "the domestic demand market is right."

Lin Zhaojie, chairman of the Taiwan footwear industry association, told reporters that the mainland footwear market is in the growth stage, and the overseas market has begun to shrink due to the appreciation of the renminbi and other factors. If Jinjiang shoe enterprises are mainly domestic demand, there will be no foreign trade problems.

Lin Zhaojie pointed out that the problems encountered by the footwear industry in Jinjiang are the same as those in Taiwan. Taiwan businessmen knew what direction the footwear industry should take.

First of all, it should be the direction of green energy, with new technology and new technology to fight against rising oil prices, which can reduce 10%~20% energy consumption.

He believes that this year the mainland market changes the most powerful, the rapid growth of the market, consumers demand high, pay more attention to brand, high value-added and brand value of enterprises will be favored.

But Zhao Yong believes that the shoe industry in Jinjiang can take the opportunity to reshuffle the cards and highlight the big brands. The government can further strengthen and overcome the weakness. If no effective measures are taken, the industry will face a threat.

"We should cultivate large brands and occupy the international market. Many enterprises still entrust foreign trade exports, earn only processing fees, and lack of initiative in foreign countries. In fact, foreign profits are larger than domestic ones."

In addition, Jinjiang has a unique geographical advantage close to Taiwan. After the end of 2007, it became a state-level sports industry base. The Jinjiang municipal government quickly organized a capable team to do 5 aspects, including the research of the whole development mode and the system arrangement and the production planning.

Jinjiang has invited experts from the development research center of the State Council to position its sports industry. It invited the relevant departments, project centers and international sporting events advisory bodies of the State Sports General Administration to plan the top events that Jinjiang should arrange. It also chose Singapore's Temasek company and several top city planning agencies in the United States and Britain to plan for urban planning.