With wages in South China escalating rapidly and product quality at times comprised, footwear importers increasingly are looking to western China, Vietnam, India and even the U.S. as alternative sourcing options.
The move away from South China applies not only to footwear but to a number of product areas which China’s manufacturers have dominated for many years, said Jim Toms, vice president of sourcing at Paccess Packaging, which advises companies on overseas sourcing.
“That’s the world of sourcing today,” Toms told the Footwear Traffic Distribution and Customs Conference Tuesday in Huntington Beach, Calif.
China accounts for more than 90 percent of U.S. footwear imports and is expected to dominate in that product for years to come. Most of China’s footwear manufacturers, vendors and suppliers are located in the southern provinces.
However, wages in the region are rising rapidly. The average wage of $214 per month, while low by U.S. standards, is higher than pay in other emerging economies. Toms said companies he deals with in South China are budgeting for wage increases of 20 percent a year. Also, South China’s aging work force generally does not work as fast as younger workers in other regions.
China is seeing its production shift to lower cost provinces in the west and north.
Although wages in those regions are lower, transportation infrastructure is still lagging, so in some cases increased transportation costs will negate any savings from lower wages, Toms said. Also, the numerous footwear component manufacturers and other vendors have not moved to western and northern China as rapidly as the factories have.
Footwear factories also are popping up in Vietnam, which has a talented workforce, but the country’s infrastructure development is far behind that of South China, Toms said.
Indonesia also offers promise for footwear sourcing, as do Bangladesh and India. Although India boasts the world’s second largest population, its infrastructure development “is 20 years behind China’s,” Toms said.
Some footwear manufacturing is returning to the U.S. as the cost differential with China decreases, but the niche for U.S. products will be in higher-end, more precisely manufactured products, he said.
Contact Bill Mongelluzzo at firstname.lastname@example.org