Editor's note: China's shoe products are experiencing unprecedented challenges, orders fell sharply, inventory pressure is huge, labor costs rise, *** appreciation, raw material price fluctuations, ** interest rate increases, the superposition of various unfavorable factors, making many companies Forced to cut production or even stop production.
China's shoe products are experiencing unprecedented challenges. Orders have fallen sharply, inventory pressure is huge, labor costs have risen, *** appreciation, raw material price fluctuations, ** interest rate increases, and the superposition of various unfavorable factors has forced many companies to cut production. Even stop production.
The reduction of foreign trade orders According to data released by Nike, Vietnam will continue to maintain its leading position in fiscal year 2011 after it replaced China for the first time in 2010 as Nike’s largest producer.
Over the past 30 years, Nike’s production bases have been continuously relocated—first in Japan, later in Korea and Taiwan, and later in the Philippines, Thailand, Malaysia, and Hong Kong. In 1981, Nike weighed between China and India and chose to produce sports shoes in China until the Chinese mainland was overtaken by Vietnam in 2010.
In 2001, China produced 40% of its shoes, ranked first in the world, and Vietnam only accounted for 13%. By 2005, China’s share fell to 36%, and Vietnam rose to 26%, ranking second; 2009, China The first is tied for the same share of 36%. In 2010, Vietnam’s share rose to 37%, which is more than China’s 34%.
The export situation of China's footwear products is severe, and it is facing challenges from various unfavorable factors at home and abroad.
According to Wu Wen, a person in charge of a business in Fujian, the reporter said, "Since last June, the company's orders have basically contracted, and orders received in October and November fell by 30% to 40%."
There are two main reasons for the decline of orders: First, the economic recession in Europe and the United States, the current debt crisis in the United States and Europe, due to concerns about market prospects, some customers are very cautious. According to the statistics of the Asian Footwear Association, conservative estimates of global shoe orders will shrink by 10% this year.
Second, because the comparative advantages of the Chinese labor force no longer existed, labor costs in Vietnam, Cambodia, and Malaysia were becoming increasingly prominent. Some foreign shoe companies relocated to Vietnam, Cambodia, and other places. These enterprises also diverted some orders.
On the one hand, the decline in corporate profits is the shrinking of orders, on the one hand is a huge cost pressure.
Although not yet in the Spring Festival, but Mr. Lin, a general shoe dealer in Fujian, returned to his hometown in Fujian. He revealed to reporters that the footwear industry is very sensitive to costs because of its small profits. In the past, a pair of leather shoes from their factory earned about US$1. Now, there are only about 20 cents left. At present, the average profit of shoe enterprises in Quanzhou is only about 5%. The management is slightly careless, and the company is almost unprofitable.
"Even if you successfully export, you can't make much money." Mr. Lin said that taking his company as an example, both 2010 and 2011 were 15 million yuan worth of exports, but the 2011 net profit was much lower. Domestic OEMs are affected by factors such as increased labor costs and rising raw materials. In 2011, the cost of general OEMs increased by 5% to 10%; while the price quotation for European and American quotas was the same as in 2010, the most generous price was only 3%. After all, the 2011 profit will be reduced by 2% to 8%. Only when companies continue to produce, can they survive at a meager profit.
For foreign trade export companies, under the influence of comprehensive factors such as the appreciation of the renminbi, the price advantage of the originally owned products has been gradually lost and orders have largely shifted. According to the data, in 2011, the exchange rate of the *** against the U.S. dollar rose over 5.1% throughout the year. As from the first exchange reform in 2005, the cumulative appreciation of *** against the US dollar has exceeded 30%. *** Exchange rates have continued to rise, further increasing the company’s exchange losses. An analyst at the Bank of China’s head office, who declined to be named, told reporters.
In recent years, as prices have risen, the wages of employees have also risen. "Wage increase in 2011 reached about 15%." Wu Wen said the manager. In the first two years, labor costs could be controlled at 18%. Last year, it was 23%, and it may be even higher this year. It is understood that Chinese shoe companies are asking a technician to pay 4,000 yuan to 5,000 yuan a month, while in Vietnam and Cambodia it is only 500 yuan. Therefore, foreign companies have turned to Southeast Asia such as Vietnam or Burma.
Raw material costs are also rising, eroding corporate profits. It is understood that from the beginning of last year, the price of domestic pig raw hides has risen from RMB 40 to RMB 50 to RMB 80 to RMB 90, and has now exceeded the one hundred yuan mark. Other raw materials also rose.
“Under the influence of multiple factors, companies cannot raise prices in order to keep orders. On the other hand, rising wage costs in recent years have caused companies that are already thin profits to lose money without losing their prices.†said Wu Wen, the manager. More and more shoe companies are struggling on the critical line of profit and loss. It is reported that 30% to 40% of the shoe factories are in production and semi-discontinued state.
Excavating the domestic demand market In order to survive the debt crisis in Europe and the United States, many export shoe companies also began to use "two legs to walk" - to develop domestic sales. An owner of an export-oriented shoe company in Jinjiang, Fujian, told reporters that they had already done a lot of market research in order to enter the domestic market. However, he admitted that due to the lack of its own marketing channels, it is not easy to take the “domestic sales†route.
According to statistics, at present, China's footwear industry has annual production of 13 billion pairs of shoes, accounting for 67.0 percent of the world's total output, of which nearly 10 billion pairs are exported. More than 70% of Guangdong shoe companies organize production and sales in the form of processing trade. It is estimated that the footwear industry in Guangdong has overcapacity of over 30%.
Such a large output will inevitably cause greater pressure on the domestic market. However, there is a large space in the domestic and domestic market. Every year, Europe and the United States consume 7 to 8 pairs of shoes per person, while China only has 2.8 to 2.9 pairs. If one person per person increases 1 pair, it will increase at least 1.3 billion pairs. Although it is difficult for SMEs to expand their domestic sales channels, it is very important for companies to take this step.
The head of the China Leather Industry Association said in an interview with reporters that export shoe factories have competitive advantages in manufacturing, independent design, research and development, etc., but are relatively weak in terms of brands and channels. There needs to be a process in the docking of domestic and foreign markets. There are differences between domestic and foreign models, marketing methods and price points. These export-oriented shoe companies need to identify the brand positioning and their own advantages, and define their own sales channel expansion strategies. The foreign and domestic trade patterns are completely different, and the path of enterprise transformation is destined not to be easy, and it needs to break through its bottlenecks and cross many thresholds.
China's shoe products are experiencing unprecedented challenges. Orders have fallen sharply, inventory pressure is huge, labor costs have risen, *** appreciation, raw material price fluctuations, ** interest rate increases, and the superposition of various unfavorable factors has forced many companies to cut production. Even stop production.
The reduction of foreign trade orders According to data released by Nike, Vietnam will continue to maintain its leading position in fiscal year 2011 after it replaced China for the first time in 2010 as Nike’s largest producer.
Over the past 30 years, Nike’s production bases have been continuously relocated—first in Japan, later in Korea and Taiwan, and later in the Philippines, Thailand, Malaysia, and Hong Kong. In 1981, Nike weighed between China and India and chose to produce sports shoes in China until the Chinese mainland was overtaken by Vietnam in 2010.
In 2001, China produced 40% of its shoes, ranked first in the world, and Vietnam only accounted for 13%. By 2005, China’s share fell to 36%, and Vietnam rose to 26%, ranking second; 2009, China The first is tied for the same share of 36%. In 2010, Vietnam’s share rose to 37%, which is more than China’s 34%.
The export situation of China's footwear products is severe, and it is facing challenges from various unfavorable factors at home and abroad.
According to Wu Wen, a person in charge of a business in Fujian, the reporter said, "Since last June, the company's orders have basically contracted, and orders received in October and November fell by 30% to 40%."
There are two main reasons for the decline of orders: First, the economic recession in Europe and the United States, the current debt crisis in the United States and Europe, due to concerns about market prospects, some customers are very cautious. According to the statistics of the Asian Footwear Association, conservative estimates of global shoe orders will shrink by 10% this year.
Second, because the comparative advantages of the Chinese labor force no longer existed, labor costs in Vietnam, Cambodia, and Malaysia were becoming increasingly prominent. Some foreign shoe companies relocated to Vietnam, Cambodia, and other places. These enterprises also diverted some orders.
On the one hand, the decline in corporate profits is the shrinking of orders, on the one hand is a huge cost pressure.
Although not yet in the Spring Festival, but Mr. Lin, a general shoe dealer in Fujian, returned to his hometown in Fujian. He revealed to reporters that the footwear industry is very sensitive to costs because of its small profits. In the past, a pair of leather shoes from their factory earned about US$1. Now, there are only about 20 cents left. At present, the average profit of shoe enterprises in Quanzhou is only about 5%. The management is slightly careless, and the company is almost unprofitable.
"Even if you successfully export, you can't make much money." Mr. Lin said that taking his company as an example, both 2010 and 2011 were 15 million yuan worth of exports, but the 2011 net profit was much lower. Domestic OEMs are affected by factors such as increased labor costs and rising raw materials. In 2011, the cost of general OEMs increased by 5% to 10%; while the price quotation for European and American quotas was the same as in 2010, the most generous price was only 3%. After all, the 2011 profit will be reduced by 2% to 8%. Only when companies continue to produce, can they survive at a meager profit.
For foreign trade export companies, under the influence of comprehensive factors such as the appreciation of the renminbi, the price advantage of the originally owned products has been gradually lost and orders have largely shifted. According to the data, in 2011, the exchange rate of the *** against the U.S. dollar rose over 5.1% throughout the year. As from the first exchange reform in 2005, the cumulative appreciation of *** against the US dollar has exceeded 30%. *** Exchange rates have continued to rise, further increasing the company’s exchange losses. An analyst at the Bank of China’s head office, who declined to be named, told reporters.
In recent years, as prices have risen, the wages of employees have also risen. "Wage increase in 2011 reached about 15%." Wu Wen said the manager. In the first two years, labor costs could be controlled at 18%. Last year, it was 23%, and it may be even higher this year. It is understood that Chinese shoe companies are asking a technician to pay 4,000 yuan to 5,000 yuan a month, while in Vietnam and Cambodia it is only 500 yuan. Therefore, foreign companies have turned to Southeast Asia such as Vietnam or Burma.
Raw material costs are also rising, eroding corporate profits. It is understood that from the beginning of last year, the price of domestic pig raw hides has risen from RMB 40 to RMB 50 to RMB 80 to RMB 90, and has now exceeded the one hundred yuan mark. Other raw materials also rose.
“Under the influence of multiple factors, companies cannot raise prices in order to keep orders. On the other hand, rising wage costs in recent years have caused companies that are already thin profits to lose money without losing their prices.†said Wu Wen, the manager. More and more shoe companies are struggling on the critical line of profit and loss. It is reported that 30% to 40% of the shoe factories are in production and semi-discontinued state.
Excavating the domestic demand market In order to survive the debt crisis in Europe and the United States, many export shoe companies also began to use "two legs to walk" - to develop domestic sales. An owner of an export-oriented shoe company in Jinjiang, Fujian, told reporters that they had already done a lot of market research in order to enter the domestic market. However, he admitted that due to the lack of its own marketing channels, it is not easy to take the “domestic sales†route.
According to statistics, at present, China's footwear industry has annual production of 13 billion pairs of shoes, accounting for 67.0 percent of the world's total output, of which nearly 10 billion pairs are exported. More than 70% of Guangdong shoe companies organize production and sales in the form of processing trade. It is estimated that the footwear industry in Guangdong has overcapacity of over 30%.
Such a large output will inevitably cause greater pressure on the domestic market. However, there is a large space in the domestic and domestic market. Every year, Europe and the United States consume 7 to 8 pairs of shoes per person, while China only has 2.8 to 2.9 pairs. If one person per person increases 1 pair, it will increase at least 1.3 billion pairs. Although it is difficult for SMEs to expand their domestic sales channels, it is very important for companies to take this step.
The head of the China Leather Industry Association said in an interview with reporters that export shoe factories have competitive advantages in manufacturing, independent design, research and development, etc., but are relatively weak in terms of brands and channels. There needs to be a process in the docking of domestic and foreign markets. There are differences between domestic and foreign models, marketing methods and price points. These export-oriented shoe companies need to identify the brand positioning and their own advantages, and define their own sales channel expansion strategies. The foreign and domestic trade patterns are completely different, and the path of enterprise transformation is destined not to be easy, and it needs to break through its bottlenecks and cross many thresholds.
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