China is still the biggest player when it comes to global footwear sourcing , but its dominance in that area will likely decrease within the next five years, according to panelists at Tuesday’s “Footwear Sourcing: Where Are We Headed?” seminar at FN Platform in Las Vegas.
“After years of growth, China’s market share is beginning to decline, and it will continue to go down,” said Matt Priest, president of the Footwear Distributors & Retailers of America. “As the rest of the world expands, [footwear companies] are looking for opportunities [outside China]. ”
Priest moderated a two-person panel that included Michael Jeppesen, president of the global operations group at Wolverine World Wide Inc.; and Clay Jenkins, SVP of global sourcing, compliance and new business at Brown Shoe Co.
The trio looked at sourcing-related challenges facing China, including increasing labor costs, shrinking numbers of young workers, unstable consumer demand and high inflation. While China held 74 percent of the market share (in dollars) for U.S footwear imports in 2011, the FDRA predicts that number will fall to 67 percent by 2016.
Jeppesen noted that, while Wolverine’s current sourcing strategies remain centered around China (75 percent of its total production volume still comes from the country, with Vietnam in second place), the company also is looking at sourcing alternatives in Central America, Indonesia, India and Africa, as well as the Dominican Republic and U.S., where it already owns factories.
Even so, Jeppesen added, “[Those areas] are not a replacement for China. The importance of China still exists.” He said that even in new sourcing areas, many raw materials will have to be imported from China. In addition, some of these emerging sourcing areas lack a strong shoemaking tradition and workers with solid skills. And cumbersome bureaucracy and closed market economies are other major obstacles when it comes to moving beyond China.
Jenkins said Brown Shoe also expects its dependence on China to decrease, but the company’s diverse business segments — from its Famous Footwear retail chain to fashion brands such as Via Spiga and Sam Edelman — add extra layers of complications. “How do you service all these different channels?” Jenkins asked, adding that the rapid growth of e-commerce, which tends to call for smaller orders, has presented another challenge.
According to Jenkins, Brown Shoe sees potential in Central America, Africa and India, but part of its strategy includes increasing productivity in China as well. He listed two particular barriers to branching out: a lack of key infrastructure in emerging markets and longer lead times, meaning it will be years before China loses its spot at the top of the sourcing heap. “We’re not going to India to start making Via Spiga or Sam Edelman tomorrow,” he said.