Does China'S Shoe Industry Need Profit Or Survival Under Heavy Cost Pressure?

The annual Western China International Footwear Expo was held in Bishan, Chongqing as scheduled. This year, compared with previous years, it is larger, higher grade and more popular. However, it was found that the entrepreneurs attending the Expo were obviously divided into "two schools": entrepreneurs from the central and western regions were happy, smiling and relaxed; Entrepreneurs in the east are worried. "In the global context of industrial transfer, today, the eastern region with supersaturated manufacturing industry is suffering from multiple problems, such as rising costs of raw materials and labor, RMB appreciation, processing trade and export tax rebate policy adjustment." Zhang Shuhua, president of China Leather Association, said what worries the eastern shoe owners. "Today, when enterprises talk about costs, it is no longer a question of how much profit they can make, but whether they can continue to live." A shoe company boss said in his heart that the eastern shoe companies are facing the ordeal of life and death. Profit? Life or death? The word "cost revolution" is very popular in Wenzhou shoe industry this year. When we walked into the headquarters of Aokang Group, the largest private shoemaking enterprise in China, located in Wenzhou Oubei Qianshi Industrial Park, we saw a banner: 2008 Cost Activity Month was launched ceremoniously, hanging above the entrance channel of the factory where employees commuted to and from work. "The overall cost of shoemaking this year has increased by 20% compared with that of last year. Without the rise in the retail price of leather shoes, the cost pressure of enterprises is growing." Fan Manru, the production manager of Aokang Shoes Manufacturing Co., Ltd., told reporters. For this reason, Aokang has specially set up a cost team this year and set up full-time posts to further refine the cost control work. In the cost activity month, measures such as quantitative use of raw materials, further integration of human resources and energy conservation in office and living quarters are mainly taken to make the concept of saving one kilowatt hour of electricity and one drop of water penetrate into every employee's heart. During an interview in Ouhai Industrial Zone, Wenzhou, the shoes capital of China, I found that the busy production scene at this time of the past year seemed much more deserted this year. "In fact, enterprises do not have orders, but they dare not accept orders. Because of factors such as the instability of the RMB exchange rate, some orders in July and August cannot be accepted. If it is not possible, they will have to accept some recent orders." Wu Laoban, who has a shoe manufacturing scale of 500 people, told reporters the reason. "The overall cost of the enterprise has increased by about 26% over the previous year. After the implementation of the new labor contract law, the salary of employees alone has increased by about 2 million. Most of the other costs are raw materials, export tax rebates, RMB exchange rate, etc. Now the enterprise is basically operating at a break even point, facing a dilemma." The rise in cost has made the enterprise very weak in its ability to resist risks, It is possible to fall into a hopeless situation, so enterprises are cautious in making orders. According to interviews and surveys from associations, nearly 1/3 of small and medium-sized shoe enterprises in Ouhai District alone have closed down or operated miserably; Another 1/3 of shoe enterprises operate with capital guaranteed, and the other 1/3 only have a small profit. "It came too fast, and we were unprepared. It was like a disaster." A shoe company owner who has operated the shoe industry for more than 30 years and has strong feelings for shoe making, unwilling to face the glorious shoe industry in the past, is heading for decline in the east today. In the same situation, the Pearl River Delta seems to be more serious: according to the statistical report of the Asian Footwear Chamber of Commerce in November 2007, there are five or six thousand shoe factories in Guangdong, and more than 1000 large and medium-sized shoe factories have been closed. In two or three months, four or five hundred small and medium-sized shoe factories out of more than 3000 in Huidong have closed down. In addition to policy factors, the factors of the industry itself also make enterprises doomed to today's fate from the day they came into being. At present, more than 70% of the enterprises in the Pearl River Delta still rely on the processing trade model of "low cost and low profit", always at the low end of the price chain, with profits only between 5% and 10%. This labor-intensive enterprise has no core competitiveness. Once the low-cost advantage is lost, it will directly face the choice of life and death. The cost potential of the west is not only a joyful vision, but also a painful struggle and loss. The magic wand of cost makes the East and West shoe industry a scene of ice and fire. Different from the eastern shoe enterprises facing the struggle of life and death, the machines in the western shoe capital of Bishan, Chongqing, roared and presented a busy scene. More than 60 million pairs of leather shoes are sold around the world every year. According to Jiang Yuanwu, general manager of Chongqing Aokang Real Estate Co., Ltd., since May 2003, the construction of Western China Shoes Capital Industrial Park invested by Aokang Group has begun. The park base with a total area of 2600 mu, the first phase project of 1000 mu, has built the largest shoe material trading center in western China, and the Aokang Group production base - Chongqing Red Firebird Shoes Co., Ltd. with an area of 137 mu. At present, Red Firebird men's and women's leather shoes have won national inspection exemption and Chongqing famous brand products. The second phase covers an area of 1600 mu. On the basis of improving the first phase, a shoe products trading center and a quality inspection center will be built. 50 shoe manufacturing enterprises, including Fortune Global 500 enterprises, Brazil and Cairo, will be completed and put into operation within one year; The preliminary planning of the third phase project has been completed, covering an area of 2500 mu. The production and processing bases for leather goods, leather and shoe brand enterprises will be built, and a number of well-known shoe manufacturers will be introduced. Now, five years later, the first phase of the project has been successfully completed. The second phase project is in full swing. Jiang Yuanwu, the general manager of Chongqing Aokang Real Estate Co., Ltd., pointed out when summing up the experience of building the shoes city that Aokang Group and the People's Government of Bishan County have explored a successful path of "interaction and cooperative development between the east and the west; complementary advantages, joint building; enriching people and businesses, and achieving multi win" in the process of building the shoes city in the west. Due to the exemplary significance of the successful operation of the Western Shoes City, it has been fully recognized by the Western Office of the State Council and is known as a model of "East West interaction and cooperative development". At the same time, Chongqing is deeply implementing the "314" overall deployment made by General Secretary Hu Jintao for Chongqing, and fully promoting the comprehensive reform of urban and rural coordination of provincial units nationwide. The once desolate countryside now presents a prosperous urban scene. It is estimated that by 2012, the existing planning and construction of the Western China Shoes Capital Industrial Park will be basically completed. By then, the output of footwear products in the Western China Shoes Capital will exceed 100 million pairs and the annual output value will exceed 10 billion yuan. "The most important reason for the successful operation of the Western China Shoes Capital and the prosperity and development of the western shoe industry is the cost advantage of the western region," Wang Zhentao, president of Aokang Group, said. For China's shoe industry, which only relies on cost to survive at present, the west has absolute advantages in land, energy, transportation, labor and so on. It is estimated that every pair of shoes produced in Bishan, Chongqing can save 20% of the cost compared with those in the eastern coast. At the same time, Chongqing has a unique port and low-cost logistics advantages of the Yangtze River Golden Waterway. Li Kun, the head of Sichuan Jiahui Logistics Company, who has been engaged in the export freight business from the west to Shanghai for many years, told the reporter that the export logistics cost of western enterprises accounted for about 20% of the total product cost, while the cost of waterway transportation was only half of that of roads and 1/3 of that of railways. Recently, good news has just come that Chongqing Cuntan Bonded Port Zone has passed the review of the General Administration of Customs of the People's Republic of China. After the establishment of the bonded zone, foreign trade export products will no longer have to go to Shanghai for export declaration, and will go directly from Chongqing by water, greatly reducing logistics costs. In addition, the animal husbandry in the western region is developed, providing more than half of the country's cattle, sheep, pigs and other raw hides. For a long time, these hides have been transported to the eastern coastal areas for processing into leather, and then sent to the eastern leather shoe manufacturers. This situation of "leather in the west and shoes in the east" does not meet the requirements of rational allocation of resources in the market economy, which increases the production costs for shoemaking enterprises. "Moving shoes from east to west" can effectively reduce production costs.