The Golden Age Of Shoe Industry In Hongkong Is Gone Forever?

How to go next?

Lin Guangde is trying to find answers to several factors, such as the continued appreciation of the renminbi, the reduction of export tax rebates, the adjustment of processing trade policies, the rapid rise in labor costs and the subprime mortgage crisis in the United States.

Behind him, there are many other Hong Kong funded enterprises who are investing in factories in the Pearl River Delta as well.

He is the chief executive officer of the fairy tale world (Hongkong) Limited, and has been engaged in processing trade for nearly 20 years in the mainland of China.

In the past 11 years, Lin Guangde has tried to pform from OEM (OEM) to ODM (commissioned design and production) to OBM (private brand marketing), which has almost condensed the whole historical process of Hong Kong enterprises in the mainland.

In the early 80s of last century, Guangde was set up from Hongkong to Guangdong.

This is the peak period for the large-scale pfer of Hongkong's manufacturing industry to the mainland of China.

Affected by the sharp rise in production costs, tens of thousands of labor-intensive enterprises in Hongkong gradually moved factories to the Pearl River Delta and other regions. "Three to one subsidy" enterprises springing up everywhere in the Pearl River Delta.

In Lin Guangde's memory, until the 90s of last century, he was the golden age of processing trade. He used the advantages of land, natural resources and labor in the Pearl River Delta region to make OEM (OEM) for European and American customers. At that time, orders were surging in and profits were good, making money easy at this time.

"Although" former shop and factory "has contributed to the economic development of the Pearl River Delta, this mode is relatively backward.

The deeper problem is that the upgrading of Hongkong's manufacturing industry has not been completed. The vast majority of the Hong Kong enterprises pferred to the Pearl River Delta are still labor-intensive export processing plants, and lack of independent innovation and private brands.

Li Luoli, vice-chairman of the China Economic Restructuring Research Association, accepted the interview with "First Financial Daily", and thought, "the former shop and factory mode" condoned Hongkong's manufacturing to stay in the hotbed of low value-added processing to a certain extent, and delayed industrial upgrading.

The other three countries and regions in the Asian economic "four dragons" have world-class enterprises in the manufacturing sector, and Hongkong is almost blank in this respect.

According to the data of Hongkong Federation of industry in 2007, Hong Kong businessmen have invested 57500 factories in various forms in the Pearl River Delta region, 15.5% of them belong to general trade, 34% of them are raw materials processing, 47.4% belong to raw materials processing, and 3.1% belong to other ways.

Factories engaged in processing trade still account for more than 80% of the total.

However, the golden age of processing trade has gone for ever. Especially in the past two or three years, the comparative advantages and cost advantages of the PRD are almost exhausted. Labor intensive industries have been pushed into cruel "shuffling" by various factors.

According to statistics from Guangzhou customs, there were 2428 footwear export enterprises in the Pearl River Delta region in the first half of May this year, a sharp decrease of 2331 over the same period last year. Nearly half of the PRD footwear export enterprises have no export performance this year.

In addition, clothing, toys and other industries also have a number of enterprises have failed.

The director of the Hongkong Special Administrative Region Government in charge of Guangdong Economic and Trade Office, Liang Bai Ren, told an interview with our reporter that, influenced by five factors, such as RMB appreciation, new labor laws and regulations, processing trade and other macro control policies, raw material prices and rising environmental costs, according to the preliminary reflection of some businessmen in Hong Kong, the comprehensive cost has increased by 45% this year. In Guangdong, more than 50 thousand enterprises engaged in manufacturing industry are facing cost pressures, and the situation of different enterprises is different.

It is estimated that about 20% of Hong Kong investors invested in Guangdong will not be able to sustain higher costs.

The results of last year's investigation by the Hongkong TDC show that in order to reduce costs, 37.3% of the enterprises in the Pearl River Delta have planned to move all or part of their production away from the PRD, mainly to move to Guangdong's two wings and Guangdong's Pan Pearl River Delta region.

But in the long run, most of the Hong Kong enterprises agree to pformation and upgrading. 53.1% of Hong Kong enterprises choose to develop higher quality products to upgrade their enterprises, 43.1% say they improve product design and enhance innovation, 35% consider developing their own brands.

It is a popular saying in the industry that 100 enterprises can make processing plants, and 100 of them are successful, but only 100 of the 100 enterprises are successful in brand and distribution.

For processing plants, turning to brand and domestic sales is completely different.

The famous "smile curve" theory tells enterprises that only when we master the early stage R & D design and later brand marketing and services can we occupy high profits, while the labor-intensive intermediate production link is the most unprofitable part of the whole value chain, and it can easily be replaced by a lower cost advantage.

Many processing enterprises have the desire to rush to the high value added links at the two ends of the supply chain when the export costs increase sharply and the international trade frictions increase, but the vast majority still adopt the mode of "100% export" and dare not set foot in the domestic market.

From the hardships of manufacturing across the business, Lin Guangde has a deeper understanding after his personal experience.

In 1997, when Hongkong returned to the motherland, he considered it an opportunity to expand domestic sales, and successfully obtained the right to produce and sell children's shoes in the mainland of China from the United States, and for the first time introduced the Mickey Mouse children's shoes into the mainland retail market for the first time. It became one of the earliest Hong Kong businessmen who made use of patent authorization tools to extend the brand design and retail business to Disney from the manufacturing industry.

"Every year, we need to pay Disney's authorized fee of US $300 thousand, and a certain percentage of the cost will be paid according to the sale."

At that time, I thought I had many years of processing experience in the mainland of China, and had the advantage of quality and technology, plus the brand effect of Mickey Mouse, it was sure to quickly open the domestic market.

Lin Guangde said.

It can be counterproductive. When Lin Guangde first approached consumers at zero distance, he turned a deaf ear to it.

The products that were first put into the domestic market were completely annihilated, and the cost of production and development plus the payment of Disney's rights and interests would cost millions of dollars.

The reason is simple: market differences.

Previously, it was mainly OEM for European and American clients. European and American customers required the bottom and heel of children's shoes to be hard, which was considered to be beneficial to protect children's feet.

Lin Guangde produced according to his previous experience. I didn't expect the consumption concept in the mainland of China to be quite different. I think the soft soles and heels make the children more comfortable.

The problem is still coming, because Disney has too many authorized varieties and is short of design approval. After the design is submitted to Disney, general approval will take three weeks, and even spend a month in the peak season, which will have some impact on the production and marketing process.

In addition, Lin Guangde also found that Disney had previously been authorized to authorize children's shoes in the mainland of China, and only 3 licensed children's shoes were found.

Because of the rapid growth of Disney's authorized business, the competition of Disney products in China is fierce, and some infringing products are at low price, which brings trouble to the authorized operators.

"International brand licensing can help manufacturers quickly open the domestic market, but at the same time there are potential business risks.

At that time, every time at Disney's regular meeting, Chinese enterprises complained a lot, like a complaint meeting.

In the past few years, we have not made any money in this business, but in the long run, it is helpful for us to move from purely subcontracting to the business sector and upgrading the level of design and understanding of the brand management system, so as to pave the way for other international brand licensing and self created brands.

Lin Guangde said.

Charles Riotto, chairman of the International Licensing Association (LIMA), told our reporter that mainland China's consumers' brand awareness is getting stronger and stronger, and the manufacturers' concept is changing.

At present, the Chinese authorized market is beginning to enter a good time. For the labor-intensive OEM enterprises such as toys and clothing, obtaining international brand authorization is a shortcut to brand operation.

When exploring the "fairy tale" peak, Lin Guangde opened more than 10 factories in mainland China. There are only two plants left. Other factories have already pferred or voluntarily closed.

He outsourced most of his orders to others' processing plants and turned to R & D and distribution channels.

Over the past few years, Lin Guangde has visited Vietnam and other Southeast Asian countries in order to reduce production costs.

However, he thought that Vietnam failed to pass the production package and gave up the idea of relocation. In 2005, some of its production was pferred from the eastern coastal area to Sichuan. Although the labor cost was reduced by 1/3, the pportation cost increased by 3 times, and the production facilities were not perfect, which made a loss of about 5000000 yuan in two or three years.

On the contrary, the situation in Dongguan factory is poor this year. Because of the high added value of children's shoes, the products can be raised smoothly and the export orders have not been reduced. As well as the early expansion of the domestic marketing brand market, the export has been promoted, and the overseas purchasers look at the establishment and brand effect of their enterprises, which make the forest Guangde more firm in promoting the belief in design and brand building.

In 2002, Disney increased the license fee by 50%, and for other reasons, Lin Guangde gave up the renewal.

After that, he authorized Hello Kitty, Transformers and other brands through exhibition and Hongkong authorized agency.

While constantly cooperating with other international brands, Lin Guangde began to try to build its own brand, an Lang fairy tale.

"Attracting consumers, not only the shoes themselves, but also the lovely designs of Hello Kitty cats. In recent years, our domestic sales are growing rapidly. At present, we sell millions of pairs in the past few years. We expect to make up about 40% of the total sales this year, but the domestic sales are basically authorized products.

As for the independent brand, it is still in the exploratory stage, and it will take some time for consumers to accept it. "

Lin long Lang, business director of ANN long fairy world (Hongkong) Co., Ltd.

For the next step of the development of the brand of "an Lang Fairy", and how to find a more suitable business mode, Lin Guangde is constantly seeking new international brand cooperation through exhibitions or authorized agency in Hongkong. It can absorb nutrients from different brands of business models. At the same time, it will cooperate with Hong Kong Polytech University and other scientific research institutions to develop nano technology to enhance the added value of children's shoes.

Despite the long and high risk of creating a long road, Lin Guangde is still confident about this.

Hongkong is very well-developed, and has gathered a number of professional service talents with international vision in design, brand, finance, law and authorization. This is backed up, and the increasingly large market in the mainland is regarded as a stage.

This time, when the storm of the fast rising cost is encountered again, he is prepared to end the nomadic life that has been constantly moving to low labor areas, and to camp and create a fairy tale of his own.

The market for children's shoes in the Pan Pearl River Delta is larger than that in the EU market. The sales volume of Lin Guangde enterprises is approaching the export volume and is likely to exceed the export market in the next two or three years. He plans to launch the flagship store in Guangzhou and Shanghai next year.

For the future, he has an idea that he owns his own brand in the store of the Lang Lang fairy tale, and also brings together all kinds of popular cartoon brand children's shoes.