Between China’s contracting manufacturing sector and the ongoing trade war between Beijing and Washington, it’s no surprise the shoe industry is speculating about the future of footwear production and whether it will eventually return to the United States.
Shoes are among the most largely imported products in the fashion industry, with about 98 percent of all footwear sold in the U.S. created abroad, according to the American Apparel & Footwear Association. Nearly three-quarters of those imports hail from China, partly due to a significantly lower cost of labor and less labor-intensive production methods in countries other than America.
“The cost of production in the U.S. generally remains higher than in other regions, and that makes it tough for companies to move a lot of production to the U.S. without consumer willingness to pay up for domestic-made merchandise,” said B. Riley FBR retail analyst Jeff Van Sinderen. “Outside of high-price, bespoke product, it is simply not feasible for most companies to hit targeted margins by manufacturing high-volume footwear product in the U.S.”
Back on U.S. Soil
That’s not to say big-name shoe businesses haven’t set up work in the States. Last spring, Adidas introduced its futuristic Speedfactory in Cherokee County, Ga. The fully automated digital manufacturing site aims to produce 1 million pairs of shoes each year by 2020, in conjunction with the sportswear giant’s first Speedfactory in Ansbach, Germany.
“For years, our industry has been playing by the same rules — manufacturing product remotely in Asia,” Eric Liedtke, Adidas Group executive board member for global brands, said in a statement. “[The Speedfactory] allows us to make product for the consumer, with the consumer, where the consumer lives in real time.”
Rival Under Armour also unveiled in 2016 its ambitious vision to bring production back to the U.S. through an initiative dubbed “Project Glory.” (A majority of the company’s manufacturing partners are located in China, Vietnam and Indonesia.) That same year, Nike revealed its plan to reshore production by building a regional supply chain to improve local manufacturing capabilities, hasten delivery of customized products to shoppers and encourage sustainability.
Another example is New Balance, which has long invested in bringing home its manufacturing business. The Boston-based athletic footwear company maintains that it assembles more than 4 million pairs of shoes in the U.S. every year. (New Balance shoes that are made with more than 70 percent of domestic components are labeled “Made in the USA.”) The retailer also employs workers at its five facilities in Maine and Massachusetts and purchases materials from domestic suppliers who employ upwards of 7,000 workers locally.
Man vs. Machine
Should manufacturers consider relocating to the U.S., they would have to consider the high costs of labor. A manufacturing renaissance in the West wouldn’t necessarily mean a resurgence in jobs; as companies increasingly turn to automation, the industry will likely see a reduced need for workers.
According to the Bureau of Labor Statistics, employment in the U.S. footwear manufacturing sector reached an estimated 260,000 in the early 1940s, plummeted in the 1970s and eventually petered out at around 14,000 in the 2010s.
“As brands develop shoes that require less labor, we may see shoes made in this hemisphere, but I do not ever expect a material portion of shoes to be made on U.S. soil,” added Matt Powell, VP and senior industry adviser for The NPD Group Inc.
Casualties of the Trade War
Rising wages in China, combined with the Trump Administration’s heated trade dispute with that country (that has seen tariffs introduced on $250 billion worth of Chinese imports), continues to prompt more exploration among companies about investing in U.S. factories, observed van Sinderen.
“If shoe production is going to come back to the U.S., now seems like a more likely time for that to happen versus recent history,” he added. “However, with the exception of a few, so far the trend seems to be moving production to other non-U.S. regions outside of China.”
A growing number of companies have been looking beyond China toward neighboring countries including Vietnam, which ranks second among the U.S.’s biggest sources of footwear. (The country’s Ministry of Industry & Trade said in October that Vietnam exported nearly $11.8 billion worth of footwear between January and September last year.)
Adidas, for example, said in May that Vietnam had overtaken China as its top footwear supplier, creating 44 percent of its shoes by volume in 2017 versus the latter’s 19 percent. The balance could help shield the company — as well as those like it — from potential disruptions in its supply chain should President Donald Trump’s trade war escalate.
Adidas Speedfactory Unveils Its First High-Performance Running Shoe Made With Recycled Plastic Off the West Coast
Nike’s Next Earnings Report Could Show Impact of Tariffs on Production