Can Wenzhou Shoes Be Rescued By Pulling The Domestic Demand Car?

"1 billion 300 million feet, of course I will increase the intensity of domestic sales!"

Wang Zhentao, owner of Wenzhou AOKANG group, told reporters that the shoemaking industry is always a sunrise industry.

The global economic crisis is bottomless. The impact on Wenzhou shoes whose foreign trade depends on more than 70% is undoubtedly fatal.

According to Wenzhou customs statistics, in January, Wenzhou's foreign trade exports amounted to 1 billion 75 million US dollars, a decrease of 1.42% over the same period last year.

With the further shrinking of international trade and the increasing threat of trade protectionism, the export prospects of shoes products, one of the four most important parts of Wenzhou, are dim.

Wang Zhentao is facing greater pressure.

In February, the European Commission was responsible for the "sunset review" of leather shoes (that is, the administrative review after the completion of the anti-dumping duty on products), which is also called the expiration of the review. The officials of the anti-dumping investigation are checking AOKANG and 6 other enterprises being sampled.

In the future, Chinese shoe enterprises will face two kinds of results: one is to abolish the anti-dumping duty that has been levied for two years, and the other is to continue to levy anti-dumping duties.

For this reason, shoe makers, including Wang Zhentao, have deployed their guns to expand the domestic market and expand the 1 billion 300 million shoe market in China.

Can this round of "domestic demand" boom save Wenzhou shoes?

Wang Zhentao has two troubles: AOKANG's sales increased by 30% last year, but its profit margin dropped to freezing point. At the same time, the export proportion of its own orders dropped from 30% in 2005 to 10% now.

Wang Zhentao said that since 2006, the total cost of raw materials has increased by 20%.

For example, the PU glue, which is used as a binder for shoe soles, rises from 19 yuan per kilogram to 21 yuan, which only increases the expenditure of seven hundred thousand yuan.

After the implementation of the new labor contract law, more than 20 thousand employees' minimum wage increased from 800 yuan to 1200 yuan, which is not a small amount.

The third expense is the rental of exclusive stores.

AOKANG has more than 3000 chain stores, 50% of which are proprietary stores.

As the real estate market became hot, single store rents rose 30% last year.

Besides, 16.5% of anti-dumping duties were levied on the products exported to the European Union, and the financial crisis caused the foreign consumer market to shrink and exchange rate fluctuations, which led to an unprofitable embarrassment for enterprises.

For example, from a $15 ex factory price of $10.05 for ordinary women's shoes, from 2006 to 2008, raw materials increased from $10.05 to $10.85, and labor costs rose from $2.23 to $3.3, and the cost of hydropower and logistics rose from 0.18 US dollars to $0.23.

Excluding other comprehensive expenses, it saved us $0.32, and the export price rose to US $16.2. The gross profit of these shoes dropped from US $1.1 to US $0.7.

In addition, the continued appreciation of the RMB decreased by 0.29 US dollars, and the export tax rebate reduced by 0.3 US dollars, so the pre tax profits of the shoes dropped from 1.2 US dollars in 2006 to 0.21 US dollars in 2008.

"No orders wait for death, there are orders to die immediately", so many small and medium-sized shoe enterprises have been eliminated.

According to the survey of 371 enterprises by the Wenzhou Footwear Association, 32 enterprises have not been started, 52 have been closed, and 14 have been in debt, accounting for 34.1% of the enterprises surveyed.

"But AOKANG did not lay off workers, nor did it cut wages."

Wang Zhentao said that last year the company set up a "cost office" to set standards for the amount of leather, thread, glue and auxiliary materials.

For example, the cut is changed from direct to 0.5 yuan / double, and the shoe brush must be controlled at 20-25 grams / double, which can save glue 20%.

Wang Zhentao also reorganized AOKANG's production process and concentrated all production processes in one workshop.

At the same time, cancel the night shift after 6 p.m., Wang said, "this avoids the peak period of power consumption in the evening, and the electricity price at this time period is 1.5 times normal."

Now, the production of a pair of shoes can save 1% of the cost and is expected to save 10 million yuan a year.

Wang Zhentao believes that even if there is no financial crisis, the shoe industry crisis in Wenzhou will happen.

For these enterprises, the scale is small, the industry is overcapacity, the volume of export growth is mainly quantity, the overall profit margin is low, the export market is too concentrated, and it is easy to cause trade friction; the private enterprises with irregular domestic market and backward marketing methods, Wang believes that the pformation and upgrading should be speeded up.

1, "Industrial Park", "with the increase of various pressures, there will be a trend of further intensification of the enterprises that switch to production and collapse."

As early as last July, the Wenzhou shoe and Leather Association warned the government departments that with the sharp increase in production costs, more than 1000 enterprises have moved out.

The case of AOKANG migration has become a benchmark.

In January 2003, Wang Zhentao invested 1 billion yuan in Bishan, Chongqing, and set up an industrial park of "West shoe capital" covering an area of 2600 mu, attracting more than 90 supporting manufacturers to enter, and the output value was 4 billion 570 million yuan.

"Bishan's industrial land is only 30 thousand -4 yuan per mu, and Wenzhou needs about 3000000 yuan. Why don't I go?"

A Wenzhou boss said that the cost of shoemaking in Bishan was 20% less than that in Wenzhou.

Among them, the industrial electricity price is 0.15 yuan per time, the staff salary is two hundred or three hundred, and the raw material is 50% cheaper.

In Bishan, regardless of shoe eye, clasp or computer proofing, enterprises can maintain low cost and low price management mode.

At present, other Wenzhou people in Xinjiang Yining, Hubei Jingmen and other places have also copied this cluster mode as a whole.

It is foreseeable that they will also face the difficulties of Wenzhou in a few years, but this is not a pressing matter of the moment.

In 2006, Wang Zhentao was famous for the EU anti-dumping case against Chinese footwear, but it did not make any profit.

Last October, the EU extended anti-dumping measures to Chinese leather shoes in disguise, and extended the anti-dumping duty of 16.5% years to 12 to 15 months, which seriously affected the export of Wenzhou shoes. Wenzhou exported 175 million pairs of EU shoes to 4%.

At the end of last year, GEOX, the second largest shoe manufacturer in the world, terminated AOKANG's sole agency in China and moved to cooperate with BELLE.

This has caused AOKANG's international business to shrink rapidly, and profits from orders and export rebates have been sharply reduced.

"At that time, the marriage of GEOX reduced the cost of capital backlog objectively."

Wang Zhentao said that before 2000, domestic industry profits (30%) were higher than the international market (10%), but "receivables" often became bad debts, while OEM profits were stable, which was also conducive to improving product quality and management level. AOKANG immediately turned to the international market and jointly launched a dual brand strategy with GEOX, sharing resources between the two sides.

Wang Zhentao is also worried that he is now turning to the domestic market.

A pair of leather shoes, from the factory, has experienced lengthy procedures such as agent procurement, channel logistics and terminal maintenance, loss and replacement, etc., if settlement is not easy within 6 months.

Moreover, as many small and medium enterprises have similar products and marketing ideas, coupled with the competition of other shoe bases, it is inevitable that people will experience "market saturation".

In addition, the game between production and marketing is still serious. Most agents and retailers rely on manufacturers to invest in channels to maintain and brand marketing expenses. Instead, they turn their earned money elsewhere, leading to many contradictions such as "releasing accounts" and "pressing goods".

Recently, AOKANG has taken the lead in setting up a small loan company with a registered capital of one hundred million yuan to ease its manufacturing pressure.

"If everyone disregards rules and profits, the market will eventually collapse."

Wang Zhentao said.

More clothing investment information, click here to enter the responsibility editor: Wang Xiaonan