The 25th International Footwear Conference was held in China for the first time on the day before the opening of the ACLE leather fair in Shanghai. This year’s event was organised by the China Leather Industries Association (CLIA), represented by Madam Zhang Shu Hua. The event provides a forum for representatives of the Asian shoe producing sector to meet, exchange data and better understand the trends in the marketplace.
The VIP guest speakers were Ferenc Schmel (Unido), Peter T Mangione (president of the Footwear Distributors and Retailers of America) and Mattias Bodin (H and M Chemist) who provided an overview of the restricted substances issue. While some of the materials are restricted by law, by far and away the biggest driver in ensuring product does not contain harmful chemicals is the marketplace.
The first two speakers were in agreement on pretty much everything and provided a view from the EU and USA respectively. The data presented showed the dominance of the Chinese producers ahead of all others; producing some 6.63 billion pairs of shoes and representing 53% of the world’s production.
China is now also a major consumer of shoes with 21% of the world’s consumption. This point was made several times during the day by different speakers: ‘Don’t overlook the consuming power of China (and increasingly India).’ This growth in consumerism is based on sheer size of population and increasing wealth of the citizens.
While the trend in growth of production in Asia might be slowing, the dominance of China is here to stay for the foreseeable future. Defining a larger factory as being able to produce five million pairs per year, there are two hundred in China! The next closest countries are Vietnam and Indonesia with twenty apiece.
Even if China decided to move out of footwear production, there is no other location capable of immediately taking up the business. It was also pointed out that once Taiwan and Korea were important shoe producers but they have moved away from uncompetitive production as costs increased. Is this the future for China? Probably not in the short term but medium term maybe. The hot tip for growth in production seemed to be Vietnam.
The current labour costs of different Asian producers provided some interesting data, with Vietnam and India at the lower end of the scale (under 50 cents per hour) to Japan at nearly $22. The point was made that China is becoming more expensive but this seems such a lame excuse to allow such a large production capacity to move to another country over time.
The costs in China were certainly quoted as higher (in the $0.50+ range) but the key issue is surely productivity. The current estimate of productivity is 10-20% of best practice. Even if these data are incorrect by, say, a factor of two, there is huge scope for China to improve productivity.
Productivity improvements will far outweigh the current labour cost differentials. The point was made that if there is a problem, then five more people are thrown at the problem to resolve it, rather than identifying the issue and solving it. This approach might even reduce the labour content!! The challenge is there for the China industry. They have the base but should now focus on productivity.
During the afternoon sessions, an interesting point was made concerning the Indian market. The sector scored very highly for financial stability (banking/currency etc), had an English speaking workforce and had 20% of the planet’s raw materials within its borders! The message was ‘watch this space.’
Sadly, the percentage of shoes being made from leather was generally declining; as little as 20-25% of the current world production utilised leather. However let’s leave the last words to the main player; our China hosts indicated that the Chinese businesses needed to focus on three things, home market (especially building brands for the future), maintaining a vision and being tolerant.
