Although its footwear exports have fallen more than 18 percent over the last four years and may hit a decade-low in 2019, China isn’t being upended as the world’s top footwear producer any time soon, according to new sourcing research from the Footwear Distributors and Retailers of America and comments by some attendees at the trade group’s annual Sourcing & Sustainability Summit on Wall Street last week.
Nonetheless, with ongoing trade and tariff issues between the U.S. and China, other countries around the world, but largely in Southeast Asia, are strategizing on how best to peel away some of China’s production as footwear companies continue diversifying their supply chains. Some, including representatives from Mexico and the Dominican Republic were in New York last week to gather information and network with attending footwear vendors.
Wolverine Worldwide, whose portfolio of brands includes Saucony, Merrell, Keds and Sperry, began its migration out of China in 2012 and will end 2019 with 25-30 percent of its production volume in the country and approximately 45 percent in Vietnam, according to Mike Jeppesen, president of global operations. The Rockford, MI company, which created a supply chain strategy in 2012 and now sources product in seven countries, currently utilizes 19 factory partners worldwide for about 85 percent of its volume.
Cherie Blum, who heads up the private label division of Steve Madden, says most customers want to relocate 25-30 percent of their volumes outside of China. “We have a little bit of a head start as we have a viable operation in León, Mexico, some production in Brazil and some in Vietnam. It’s a matter of us looking at our total business and determining what product types make sense to move.”
Mexico is hopeful that its geographic proximity to the U.S. and improving footwear-making knowledge, helped by a new development and innovation center created by the company’s footwear trade organization, will enable it to capture more production volume in the years ahead. “With us as your partner, you can have very low inventories as we can ship in one week door-to-door,” says Luis Humberto Vela, the former vice president of foreign trade for the Mexican Footwear Chamber.
Jeppesen believes China, which exported 9.7 billion pairs of footwear valued at $45.9 billion in 2018, will remain the sourcing leader for the next five years given so many suppliers are located in the country. Wolverine, which entered Bangladesh some 6-7 years ago, now produces three million pairs annually in the market. And Jeppesen is also witnessing some sourcing migration to the Philippines due to the country’s competitive pricing.
Meanwhile, Vietnam, which produced more than 18 percent of all footwear imported into the U.S. and is garnering more interest as a viable sourcing option, is facing some challenges. Among them: factory capacity over 90 percent, rising wages and a limited workforce. The average landed cost of Vietnam-produced footwear into the U.S. is $13.25 a pair, according to the FDRA, above the average global cost of $10.57 a pair and China’s $8.09 a pair.
“This is the greatest time in the history of sourcing for China,” says industry veteran and contrarian Matt Brown, currently VP for Richlife Footwear in Hong Kong. “We have factories we have dealt with for years who are calling us up and begging us not to lose the customer. Factory owners are lowering prices, saying customers can pay 15 days after the products are put in the warehouse. In my opinion, if (vendors) you’re not taking advantage of the weakness in the Chinese factory operations right now, you’re leaving money on the table.”