Shoe Capital Jinjiang: Expecting More Changes In China

Li Jianhui, mayor of Jinjiang Municipal People's government, told reporters that if we seize the opportunity to reintegrate and expand enterprises, we should guide enterprises to take the joint road and jointly resist risks. Since April 1, 2007, the municipal government has adopted preferential measures such as government leaseback and low price subleasing to merchants, tax and other new pavements for "Jinjiang shoe industry city of China". Besides that, Jinjiang is still trying to expand new ways.

Today, we continue to focus on the difficulties faced by China's manufacturing industry.

Chinese shoes may be the most famous Chinese products in the international market. China is the largest footwear producing country and exporter in the world. According to the statistics of the United Nations Industrial Development Organization, our country's shoe production accounts for 63% of the world's total. If the average is calculated, everyone in the world can wear a pair of Chinese made shoes every year.

However, since last year, Chinese shoes have encountered an unprecedented cold wave in overseas markets. First, the export of leather shoes has declined for the first time in more than ten years, and exports 1 billion 300 million pairs, down 6% compared with the same period last year. Then, in the first quarter of this year, the export volume of the whole footwear industry decreased by 5.3% compared with the same period. What kind of threshold did it bring to Chinese shoes?

First, let's take a look at the experience of a shoemaking enterprise in Jinjiang, Fujian.

Footwear exports overall decline, what is the threshold that has caught the foot of China's footwear industry?

As an export company for overseas famous brand foundries, Cheng an footwear exports all over Europe, and boss Xu Zhen - Chun has gone through many waves in the shoemaking industry. However, just in the past week, he was clearly informed that a Italy customer who had cooperated for nearly ten years did not intend to continue to place orders for his company. Only fourth months before less than half a year, this is the fourth important customer who lost continuously.

When the shoe industry in Jinjiang was just beginning, Xu Zhenkun entered the industry. He kept on climbing all the way, with a steady and calm businessman on his face. But when he asked about the future development of his business, he seemed more worried than ever.

Xu Zhenkun told reporters that the appreciation of RMB is increasing faster and the price level is rising. He feels unprecedented pressure.

On the other hand, orders are becoming less and less, while the other side is a straight up cost, which has led to a sharp decline in the profit margins of enterprises.

Xu Zhenkun told reporters that if the profit margin of the industry is maintained at 10%, it is already a good level, and now it has dropped to the possibility of losing money.

Anxious, of course, is not just Xu Zhenkun. When the whole export situation is more serious, the snowstorm during the Spring Festival has increased the tension of the employment of enterprises. When the Spring Festival is over, many shoe factories have actively raised the wages of the workers, and the momentum of raw materials has been more vigorous than ever. In the town of Chen Dai, Jinjiang, there is the largest shoe material market in the country. When the reporters visited here, the dealers complained about the sad days, and the sales volume was reduced by about 30%.

Dealer Mr. Xu has been making shoes material business in Jinjiang for nearly ten years. He told reporters that the price rise of shoe making raw materials and accessories this year is obviously higher than before.

In the face of this reality, the shoemaking enterprises that can't carry the past have ceased to produce or fail in 2007, and to the Spring Festival in 2008, the shoe factory is one of the main production bases in Jinjiang. The output value of the shoe industry accounts for 64.2% of the total value of the total value of the shoe industry in the city of Chen Tai.

In Chen Dai town chamber of Commerce, reporters learned that there were about more than 20 small and medium enterprises that went bankrupt before and after the Spring Festival in this town. According to the official statistics of Jinjiang, in the first quarter of 2008, 309 of the 712 taxpayers of the shoemaking enterprises in the city had 309 National tax warehouses declining or zero warehousing, down 32 million 770 thousand yuan compared to the same period last year, down 40%. Ding Ronghua told reporters that Jinjiang's shoemaking enterprises generally reflected that a variety of factors were playing a central role, and the enterprises had reached the most difficult juncture in history.

Ding Ronghua, vice president of Jinjiang chamber of Commerce, said: "including the depreciation of the US dollar, the increase in the price of petrochemical industry, the increase in the wages of workers, and the tightening of funds from banks. This is a lot of things that are concentrated together. If it is simply a thing, it will be easier to handle, and now it will be concentrated together."

Anta: expanding its own brand, Jinjiang, Fujian, is one of the five largest footwear industry bases in China. When the overall export volume of footwear decreased and the cost increased, the reporter noticed that not only the enterprises here were not very good, but also the shoe making enterprises in other parts of the world were very difficult. The Asian Footwear Association concluded last year that only more than 1000 of the more than 5000 shoemaking enterprises in Guangdong last year went bankrupt, and the rest of the enterprises moved to Southeast Asia to set up factories. About 50% of them moved to the inland provinces to set up factories. However, when the shoe industry suffered the cost shock wave, some enterprises in Jinjiang found new opportunities, and which way did they take?

When the reporter saw Xu Yang, the brand director of Anta shoe industry, his face did not reveal the worries of most shoe makers. When he saw reporters, he was busy displaying their latest research products.

Xu Yang, director of brand management center of Anta Co., Ltd.: "these shoes are 54 yards, bigger than Yao Ming wears, and then this is the shoes Scola will wear at this year's Olympic Games."

Xu Yang told reporters that ten years ago, when exports were very successful, Anta began to focus on the domestic market, expanding its own brand, and avoiding the impact of the appreciation of the renminbi compared with other OEM based enterprises. The impact of the rising raw materials is also relatively relaxed.

Xu Yang: "with many of our suppliers of raw materials is a long-term cooperation, is a long-term mass purchase, so in this regard, the rise in raw material costs, we will be relatively less affected."

In 2007, the gross profit margin of Anta's sales reached 33.2%. The gross profit margin was not only much higher than the average gross margin of 10% of the OEM export enterprises, but also in 2007, the gross profit margin of Anta increased by 8.1% compared with that of 2006. In the first quarter of 2008, Anta had completed the first three quarters of 2008, and the order increased by 50%, which rose by 1.3% compared with the same period last year.

Xu Yang: "for the whole market, the enterprises with brand will become bigger and bigger, and the production oriented enterprises may face greater pressure if they are price oriented or other oriented. Their market share will gradually decrease, which will be a good opportunity for us."

In October 2007, Anta players' basketball shoes were officially launched on the NBA arena, and the marketing network of Anta expanded further overseas. Its brand management concept was followed by many shoe companies in Jinjiang. Many of Jinjiang's processing and exporting enterprises were pferred to domestic sales, and a group of enterprises that had taken the branding road were also born. The famous brands such as 360 degrees, del Hui and Jordan were born in Jinjiang. Due to their high added value and scale effect, they showed strong resistance to risks in the situation of raw materials, labor and other costs.

Xu Yang: "I will feel that China's market potential is far from being saturated. Why foreign brands are squeezing their brains to squeeze into the Chinese market?"

The average Chinese people spend only three pairs of shoes per year and only 1.2 pairs of sports shoes. The annual demand for sports shoes in the United States is seven to eight pairs, which is only the domestic market. As the largest production base of domestic sports shoes, the space for the development of shoes enterprises in Jinjiang is obviously large. However, over 3000 of the sports shoes enterprises in Jinjiang, over 80% are export oriented enterprises, unable to enter the domestic market smoothly as Anta and 31st degree. They still face a difficult breakthrough.

What kind of platform can local governments build for Jinjiang enterprises to face difficulties and constantly change?

Fujian Jinjiang gathered a number of sports shoes brands such as Anta, 31st degree, del Hui, Jordan and so on. When the cost of shoemaking increased sharply, they all turned their attention to domestic sales, and looked for the market from domestic consumers. However, most of the domestic shoemaking enterprises were still in the processing of raw materials. After so many years, they had been making export orders for overseas customers in Taiwan, Hongkong and Korea, Europe and the United States. Objectively speaking, these enterprises were accustomed to low price competition, and they all turned around to take the road of brand, far from being able to quench their thirst.

Let's take a look at the latest practices of enterprises and government in Jinjiang.

Cheng an shoe industry's Xu Zhenkun did not plan to take the road of domestic sales, and pferred to the domestic market. Now the capital and marketing team needed to surpass his current strength, but he became more and more aware that even if it was to help the foundry, it was necessary to improve the ability of product innovation so that the enterprise could survive. Xu Zhenkun showed reporters several shoes, which used the latest development technology of the company to meet the needs of customers.

Xu Zhenkun, chairman of Jinjiang Cheng an shoes industry Co., Ltd.: "it can also be called air conditioning shoes. Especially in summer, it will run away. This is a patent. You don't want to see a small pair of shoes. Now we sell it for about 12 dollars. If we are like this high end, we usually have about 15%."

Reporter: "15% profit margin?"

Xu Zhenkun: "yes."

In order to develop these new products, Xu Zhen - Chun needs to increase investment by 30% per year. Two years ago, he spent a lot of money to expand the R & D center, which is specially used for the development of new products by enterprises and foreign customers. It is precisely the patent technology of this air conditioning shoe that has retained the largest overseas customers for him, so that enterprises can carry them in this difficult time.

Xu Zhenkun: "for example, we are faced with the market in the form of impulse. We should avoid such a market turning point. We should not push this way. We must strive for high-end products."

At present, domestic sports shoes export price is about 3.6 dollars per pair, while the international second-class brand price is about 60 dollars / double, so if the product innovation ability is improved, the space for profit improvement is still huge. In fact, Xu Zhenkun's idea is also a consensus among many peers. In terms of technological innovation, in 2007, Jinjiang shoe-making enterprises invested more than 1 billion yuan in technological pformation funds.

Jinjiang's enterprises are constantly changing in the face of difficulties. What kind of platform can local governments build for them?

Li Jianhui, mayor of Jinjiang Municipal People's government, said: "we feel that as a traditional industry, especially labor-intensive industries, sooner or later, it will face a period of pformation and rehabilitation. Then the industry will also face a shuffle, but this year's form is earlier than ours, and it is also more fierce. In this pformation, the government should have greater efforts in this kind of test. It should strengthen interaction with enterprises and jointly cope with the difficulties currently facing."

Mayor Li told reporters that if we seize the opportunity, it will be an opportunity for enterprises to re integrate and expand. Therefore, Jinjiang has opened up relevant forums in this year's international footwear industry fair to guide enterprises to take the joint road and jointly resist risks.

Li Jianhui: "small and medium-sized enterprises may encounter the rise of raw material prices and financing difficulties. If it comes with leading enterprises, such as Anta, it will do some supporting work for Anta and do some foundry work, then its raw and auxiliary materials can be provided by Anta, and its sales market will be solved by Anta, which will alleviate the problem of funds for SMEs. As Anta, it also improves its production and manufacturing capabilities."

If the footwear industry chain in Jinjiang is more complete, the overall risk resistance capability of Jinjiang footwear industry will be strengthened accordingly. Therefore, since April 1, 2007, the government has adopted the preferential measures such as government leaseback and lower price subleasing to merchants, tax and other preferential measures for the new pavements of "Jinjiang shoes city" in China.