Sooner Or Later, Adidas Will Have To Leave.

Sooner or later this day will come.

Adidas is no longer willing to endure the high cost of China's footwear industry. Recently, it has proposed to gradually shift its production base in China to more competitive Vietnam, Kampuchea and India.

At the same time, Nike, Puma and other international footwear giants also increased procurement in Southeast Asia.

Adidas's pursuit of global sourcing is cost advantage, and the low cost era of China's footwear industry has been fading away.

The cost is rising more than ADI's expectation. "The company is discussing the phasing out of production bases from China in phases, and has sent people to Southeast Asia to investigate, mainly because of rising manufacturing costs in China and tightening policies."

A Adidas Chinese confirmed to reporters.

At present, nearly 50% of Adidas products are made in China, and there are 264 factories throughout the country.

But in recent years, the cost of China's footwear industry has been rising, exceeding Adidas's expectations, so they are considering shifting.

Li Peng, secretary-general of the Asian Footwear Association, told reporters that the overall cost of China's footwear industry has risen by 25% to 30% in recent years, while the average profit margin of the footwear industry is 5% to 8%.

In particular, the instability of the RMB exchange rate may engulf the order profit or even make the company lose money.

It is understood that Adidas is very concerned about the appreciation of the renminbi, the new policy of government processing trade and the impact of the labor contract law on the investment environment in the mainland, and has discussed it with its large foundry enterprise, Guangdong Wan Bang shoe company.

Adidas has made a compromise on the cost raising requirements of the next generation factory.

Guo Weiwen, spokesman of Wan Bang shoe industry, said that Adidas will adjust its price this year according to the rising cost of the factory.

But Adidas is not going to accept the factory's continued increase in price requirements.

"If factories repeatedly raise prices, customers may find more competitive factories or pfer orders to Southeast Asia.

Compared with other Asian countries and regions, Chinese factories are not competitive in terms of cost. "

Guo Weiwen told reporters that in order to reduce production costs, the WAN Bang shoe industry has pferred all of Guangzhou's production lines to Qingyuan, North Guangdong.

In addition, the shuffling of China's shoe industry has also made Adidas difficult for orders on hand.

"Now is the game between factories and buyers."

An original WAL-MART shoe buyer analyzed that at present, nearly half of the enterprises in the Pearl River Delta and the subsidiary enterprises have been closed down or shrinking. The bargaining power of large factories has increased. Many buyers in the hands have many orders because they do not want to increase their prices, so buyers and factories are in a stalemate.

"In this game process, Chinese enterprises lost 10% to 15% of their orders, mainly to Southeast Asia."

Adidas's global procurement strategy supports its global sourcing strategy.

For cost reasons, Adidas outsourced more than 95% of its production to independent third party factories.

Like Nike and other international shoe giants, it mostly adopts brand operation mode, focusing on the design field itself, without its own factory, looking for foundry and selling globally.

Its factories are mainly in Asia.

Besides China, it already has a foundry in India, Vietnam and Indonesia.

So when placing orders, Adidas will consider the cost of factories around the country.

Adidas said that a major reason for the pfer of production bases was the continuous increase in labor costs in China.

According to Wu Zhenchang, chairman of Guangzhou Chuangxin footwear industry, which has recently visited many Southeast Asian countries, the labor costs of Southeast Asian countries are rising under inflation, but the Pearl River Delta is rising faster than these places.

"Plus RMB appreciation, in dollar terms, the average monthly salary of workers in the PRD (plus social security) is 230~250 dollars, while Indonesia is 100~120 dollars and Vietnam is 70~90 dollars."

Chuangxin shoe industry has been a foundry for Nike.

Wu Zhenchang said that at present, Nike's orders have not changed. "But Nike has always been a global purchaser in order to diversify risks. There are many factories in various places, and then after considering various factors such as cost, we decide where to place the order."

So if China's costs continue to rise, the order will not be excluded.

Adidas's global sourcing strategy is pursuing cost advantage, which is consistent with the world's shoe industry's migration path. The global sourcing of these international shoe giants has promoted industrial pfer to a certain extent.

For example, in the 70s of last century, production bases such as Adidas and Nike pferred from Europe and America to Japan and Korea, and entered China's Taiwan region in 80s. In 90s, due to the appreciation of new Taiwan dollar and the rise in labor costs, they began to pfer to mainland China.

These giants are now turning their attention to Southeast Asia, including Vietnam, Kampuchea, India and Laos. They are looking at the low cost advantages of these areas compared with the mainland of China.

"It is estimated that the more complex products will be produced in China, but the labor-intensive and low cost products will gradually turn out."

According to one industry insider.

Adidas has not expressed concern about the delivery date, technology and labor efficiency problems in Southeast Asia. This shows its determination to pfer.

In fact, Adidas's foundry has been expanding its production line in Southeast Asia under its "requirements".

Wan Bang shoe industry is currently only a brand of Adidas.

Its production line in Qingyuan, Guangdong produces 1 million 200 thousand pairs of shoes per month and more than 15000 workers.

But at the request of Adidas, it went to India to open factories, and the production capacity of India factories is expanding. The monthly production of shoes has increased from 100 thousand pairs in 2007 to 300 thousand pairs now.

"In order to diversify risks and reduce procurement costs, these multinational companies require us to have the capability of multinational production to cooperate with them."

Guo Weiwen told reporters that the company hopes to maintain stable production in China's factories. The expansion of the India plant will not cause conflicts between the two factories.

But how to order the initiative is in the hands of Adidas.

In addition, 0551.HK, Adidas, Nike and Puma, is also expanding its production line in Southeast Asia, which is part of Baocheng group in Taiwan.

In addition to the factory in China, Yuyuan Industrial 2007 annual report shows that in order to meet customer procurement requirements, capacity expansion plans are being implemented in China, Vietnam and Indonesia. At present, there are 210, 117 and 71 production lines in China, Vietnam and Indonesia respectively.

A Taiwanese company believes that it is just like when the Taiwanese merchants moved the factory from Taiwan to the PRD with the order, and now they need to pfer their orders to Southeast Asia, otherwise they may lose their orders.

At the same time, a number of shoe industry supporting enterprises also follow the big shoe-making enterprises out of China.

"The pfer of the production base of the international shoe giant may be leading a new round of shoemaking industry pfer, and their destination is Southeast Asia."

The industry believes that, of course, this is a gradual process of turning out slowly, but it is enough to arouse the attention of domestic shoe manufacturers.