Dongguan shoe company struggles in life and death

The Dongguan shoe company, which has a reputation of "One in every 10 pairs of shoes in the world" from Dongguan, occupies an important position in the world footwear industry. Any report on local shoe companies will cause strong concern: On August 30th, a report of CCTV’s “Economic Information Network” spread rapidly in the media and in the industry. However, the bad news from Dongguan has frequently been heard recently.

According to the report, the footwear industry in Dongguan is undergoing a period of transformation. Some small shoe factories with poor performance are in a semi-business state. Large shoe companies have stable orders and good operating conditions.

OEM processing is the crux of the problem

For the news on CCTV Financial Channel on the evening of August 30th, well-informed Liu Daosong already knew the relevant content. Liu Daosong is the general manager of Dongguan Lekai Anji Leather Co., Ltd. He said, “Dongguan shoe companies do very little of their own brands, and many shoe companies are doing OEM (OEM processing) and rely on external orders to survive. The main problem is the shoe market's dilemma."

Zhang Zhonghai, owner of Wenzhou, a subsidiary of Wenzhou City, which serves as an accessory material for Guangzhou Zhongda Yangtze City, is also concerned about the situation in Dongguan.

He believes that at present, Dongguan shoe companies face at least four major tests. First, the number of foreign trade orders decreased. Due to the economic slump in Europe and America this year, coupled with the influence of Libya and other factors, shoe companies that depend on OEMs for their livelihood either have insufficient orders or are afraid to take orders. Second, due to the impact of exchange rates, export profits have fallen. Third, because the small and medium shoe enterprises do not have any collateral, nor have they obtained credit from banks, the cost of financing is high. Fourth, labor costs and raw material prices have soared.

Liu Daosong said that the current monthly salary of Dongguan shoe factories is generally between 1,500 and 2,000 yuan, and they eat and stay. "But it's still a bit difficult to recruit people."

A pair of shoes earn only 20 cents

The following is a set of data from the Ministry of Commerce: Leather shoes on the US market. In 1976, 53 pairs were produced in the United States for every 100 pairs. In 2006, the United States produced only 1.5 pairs, and most of them have already depended on processing in other countries and regions. It can be said that it was precisely this pattern that created the outward-oriented Dongguan shoe-making industry.

Li Liangyi, general manager of Dongguan Yikabu Footwear Co., Ltd., said that the current decline in shoe orders is a very important reason is the current debt crisis in the United States, Europe, due to concerns about the 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. Because the footwear industry is a labor-intensive industry, the labor price in Southeast Asia is now low, and the comparative advantage of the Chinese labor force no longer exists. Some Taiwan-funded shoe enterprises have relocated to Vietnam, Cambodia and other places. These enterprises also diverted some orders.

Liangliang Li said that in China, it is possible to hire a master chef for three or four thousand yuan, or even 5,000 yuan, and in Vietnam and Cambodia, there are only four or five hundred yuan.

On the one hand, orders are shrinking. On the other hand, shoe companies are also facing huge cost pressures. It is understood that from last year to now, the price of leather has risen by 10% to 20%, the average labor cost has increased by about 15% annually, and the appreciation of RMB since the exchange rate reform has accumulated over 26%.

Zhang Huarong, chairman of Huajian Group and chairman of the Asian Footwear Association, said that during the previous year, labor costs could be controlled at 18%, about 20% last year, and 23% this year.

According to a person in charge of a shoe company, the footwear industry is very sensitive to cost because of its small profits. Three years ago, a pair of leather shoes from their factory earned about $1. Now, there is only about 20 cents profit.

Wan Wen business management in the road

On the 1st of each month, it is the day when Dongguan Sanli Hardware Products Co., Ltd. fixed off. At noon of this day, the chairman of the company, Wenzhou Yongjia Ye Xinjin ran away to manage a hair.

He told reporters that in peacetime, he and a group of Wenzhou bosses in Dongguan set up mahjong mahjong. "But we have played less recently. Everyone is busy with the company's business." He said Wenzhou's business in Dongguan, Due to the large scale, and generally taking into account both OEM and domestic sales, "the business conditions are good."

For example, Ye Xinjin said that in the past few years, Lao Xu, from the bridgehead unit of Yongjia County to the shoe factory in Dongguan, used to be an “activist” for mahjong, but recently he has been busy with brands such as Aokang, Cardi Crocodile, and Scarecrow. OEM, "I haven't played mahjong for a long time."

The reporter called Wenzhou Wencheng Shoes Co., Ltd., Kony Leather Products, Silver Eagle Buckle, Welch Quick Leather Products, Baotu Clothing and other enterprises in Dongguan. The responsible person all said that the company is in good condition.

Liu Daosong said frankly that although the company’s OEM orders have been reduced this year, he has ensured that the company’s annual output value and profit will not fall through increasing domestic sales and expanding online sales.

Aokang Purchasing Management Center Planning Purchasing Manager Jin Guojun and others told reporters that Dongguan shoe OEMs are mostly foreign orders, in recent years, Wenzhou brand shoe companies to Dongguan purchase a small number of leather shoes.
Independent branding is king

The current situation facing labor-intensive enterprises, such as financing difficulties, labor difficulties, difficulties in using electricity, and rising raw material prices, exists in the “World Factory” in Dongguan, and also in “China Shoes Capital” Wenzhou.

However, comparing the footwear industry in the two places, a significant difference is: Dongguan shoe companies rely on OEM orders to survive; and nearly 60% of Wenzhou shoe enterprises to sell mainly, have their own sales network.

Statistics of the Asian Footwear Association show that in 2010, there were more than 1600 shoe companies in Dongguan with an annual output value of 63 billion yuan. According to data released by the Wenzhou City Leather Shoe Association recently, in 2010, 2,573 shoe companies in Wenzhou had an output value of 78 billion yuan, and 60% of the footwear industry was mainly sold domestically. In the first half of this year, Wenzhou shoe exports accounted for 1.99 billion US dollars, an increase of 30% year-on-year. At present, Wenzhou's key shoe companies are still moving forward steadily.

Xie Yufang, executive president and secretary general of the Wenzhou City Shoe Leather Association, said that although there are more than 100 shoe companies discontinued in Wenzhou this year and there are more than 100 closed, “but most of these are micro-enterprises that are naturally eliminated by the competition. On the possession of half of the country, 'China's top ten leather shoes leader' Wenzhou shoes accounted for six seats, China has a well-known trademark of 75. In addition, Wenzhou shoe companies are good at Baotuan combat, which is worth learning Dongguan shoe."

In the Shanghai and Shenzhen stock markets, we also see that there are many listed companies in the footwear industry and listed companies that have footwear in their main business, with a total of 22 companies. Most of them are large-scale production and processing companies with their own brands. They are not simply export-oriented footwear. Therefore, most enterprises have a good level of profitability.

Take Caesars shares listed on small and medium-sized boards for the production of whole shoes as an example. Last year's earnings per share was 0.67 yuan. This year's half-year earnings per share was 0.154 yuan, but this company's sales margin in 2008, 2009 and 2010 The figures are 43%, 45% and 48% respectively, showing that the profits are still very good.

The company's gross profit margin for soles production in the last three years is 20%, 22% and 23%, respectively. The comparison between the two shows that if there is no brand profit in the footwear industry, it will be greatly reduced.

Shoe companies seek to upgrade for survival

In Dongguan, many shoe companies are also seeking transformation and upgrading.

Li Liangzheng, the boss of Icaho Footwear, has been busy for the past four years in researching its own market for high-end brands of fashion shoes and selling her own brand. This is his next development strategy.

Li Liangzheng said that he found that China does not lack shoes, especially the lack of middle and low shoes, the lack of high-end brand shoes, lack of Italy, Spain, some of the high-end, fine, strong handicrafts shoes.

There are many shoe business owners who share the same ideas as Li Liangyi. They simply rely on the export market and they cannot survive and develop. When they completely abandon the export market, they generally begin to test the domestic market.

Shen Hong, deputy general manager of Dongguan Xin Rui Da Footwear Co., Ltd., said: “We will turn domestic sales, domestic sales and domestic sales together, and domestic sales will grow. Good brands like Daphne and Qianbaidu are growing, adding some stores in China, so The amount needed is relatively large."

According to experts, from the perspective of the history of the world's shoe industry, the shift in the world's footwear industry is tending towards low labor prices, but the previous shoe base will not completely decline. 30 years ago in Italy, similar to today's Dongguan, is the world's footwear industry center, a large scale, although the shoe base was transferred to China, but its status has not declined. Although the comparative advantage of the Dongguan labor force no longer exists, the developed industrial chain and the associated modern service industry are temporarily unable to surpass the low labor cost countries. In addition, China's vast domestic market has not been fully tapped. These advantages have brought great development space to the Dongguan footwear industry.

Huarong Group Chairman Zhang Huarong said that 80% of the world's footwear traders are in Dongguan, perhaps after 35%, 60% to 79% of designers will come to Dongguan, Dongguan is very dynamic, the footwear industry is very promising .