The Paradox Of Chinese Shoe Industry: Orders Increasing, But Profits Declining

Under the influence of labor costs increasing

, RMB appreciation and many other factors, the shoe industry is sliding into a vicious circle that orders continue to increase but profits decline continually. Since 2010, China's export market has been booming. According to statistics of General Administration of Customs, in September China's shoes gross export value totaled 144.99 billion U.S. dollars, with an increase of 25.1% compared with the same period of last year; in the first three quarters, China's exported footwear products reached 26.44 billion U.S. dollars, representing a year-on-year increase of 26.6%.

As the former stock has been digested basically and the European and American markets are gradually recovering, a lot of shoe enterprises said this year's orders are sharply increasing. Mu Sa, who has engaged in fashion shoes trade in the Middle East for many years, told the reporter that part of some watch enterprises he co-operated with have closed down, and he must find a new supplier, so he is busy in participate in a variety of footwear show in China since this year.

In 2009, the impact on the whole world by financial crisis is spreading gradually, the export-oriented traditional wedding dress industry stood in the breach. In 2009, China exported 8.17 billion pairs of shoes, worth 26.57 billion U.S. dollars, with a decrease of 0.8% and 5.5% compared with the same period of last year. The footwear output of China in 2009 up to 11 billion pairs, in which the total annual production of Guangdong, Zhejiang, Fujian, the three main bridal dress production areas accounted for 80% of the jewellery national total amount. 80 boxes shoes are made in China in every 100 boxes sunglasses that sell to the United States, said Zhu Yulun. At present, the recovery of overseas shoes markets, particularly European and American markets are far from the level of 2008, and the consumer sentiment is still not high. Wang Wei has factories in Zhangmutou, Liuzhou and Nantong, he began to transform toward domestic market in 2002, and he said that his company will strive for pulling the ratio between domestic garment steam sales and export sales to 50:50 this year, in his view, the downturn in overseas markets will not really recover until 2012 at least.

The pressure of the costs rising has touched women garments enterprises' nerves. The profit margins are not great originally, now with the RMB appreciation, the profit is more minimal, said Ling Dong. The merchant, Mu Sa, who also has the same feeling said that shoe enterprises' offers of this year is 10%-20% higher than last year, intermediaries should bear pressure form both sides and they are more sad than shoe enterprises. Since 2010, the RMB has appreciated nearly 3%; most outdoor furniture enterprises told reporters that their profit margins are further squeezed. Although Chinese shoe enterprises have increasingly paid attention to brand development, but they are still in the low end of industrial chain because of their low price and large quantity, and the homogenization is serious, price competition guides export market. In 2009, the average price of China's exported footwear is only 3.3 U.S. dollars per pair, which decreased 4.8% when compared with 2008.

But in Wang Wei's sight, the pressure of RMB appreciation is far less than the pressure of labor costs and raw material costs. RMB has just appreciated by 3%, but the labor costs has increased at an average of 20% -40% every year since the implementation of the new labor law, said Wang Wei. In addition, the soaring prices of raw materials also are disadvantages for shoe enterprises. Since October, the prices of adipic acid (mainly for shoe soles fluid and PU liquid slurry) are rising continually, which has increased to 19,200 yuan / ton from 17,500 yuan / ton in the beginning of October, with an increase of 9.7%. In this case, part of shoe enterprises has turned their attention to domestic market. But the difficulties for them to transform into domestic sales from export sales are considerable, it not only requires large investment and the period of investment return is long, besides they also should face competition from domestic and foreign brands. So now a lot of shoe enterprises are sustaining their own brands by OEM. To build an own brand needs a long-term process, therefore, Chinese shoe enterprises should achieve breakthrough by design and innovation when facing the mature domestic and foreign shoes brands.

Above provided by SelectChina.com, and find more information on China Shoes Manufacturers / China Shoes Products.

by: Deland Selectchina

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