Guangdong factories drop cheap for chic

PUBLISHED : Monday, 17 March, 2008, 12:00am
UPDATED : Monday, 17 March, 2008, 12:00am

Personalised products help halt margin erosion

Low-cost mass production built Guangdong. Now style may take over the task of keeping the economy growing.

For decades the mainland, particularly Guangdong province, has churned out cheap products like toys, shoes and clothing for export. But rising raw material and labour costs and changes in government policy are changing all that.

Statistics from the Asia Footwear Association show that last year 1,000 low-cost, high-volume shoe factories in Guangdong closed down - accounting for a sixth of the total number of shoemakers in the province.

Many of the survivors are said to be considering moving or at least diversifying to lower-cost countries such as Vietnam, Laos and Indonesia to stop margins from disappearing.

But some are choosing to stay. For them, Guangdong still makes sense because it has existing developed facilities and apart from being the quickest place from which to deliver products to the mainland, it is a significant marketplace itself.

And so the innovators are moving up the value chain to make higher-end customised products with better supply chain management.

In Gaobu town in Dongguan city, 294 workers employed by Yue Yuen Industrial Holdings, the world's biggest contract shoemaker for brands like Nike and Adidas, are stitching and assembling sneakers - but in an untraditional way because every pair is different.

They are working at a special workshop for Nike's personalised products called Nike iD, which offers buyers an option of placing internet orders that can be personalised with a choice of colours, textures and symbols.

Orders are delivered within two weeks and to secure the service all a buyer needs to do is pay a 10 per cent to 30 per cent premium on conventionally priced sneakers and an extra US$10 for delivery. Although still in a developmental phase, the small workshop can make between 14,000 and 15,500 pairs of sneakers every month. Seven out of 10 Nike iD footwear workshops are in the country.

And in another workshop downstairs, workers are making US$125 Air Jordan XX3s, Nike's newly launched sneakers branded by basketball star player Michael Jordan. The workshop is the only source in the world for the new sneakers. 'We celebrate the fact that China is making the most advanced shoes for Nike,' said Hannah Jones, Nike's vice-president in charge of corporate responsibility. 'For us, stability [of production], time to market, innovation and customisation are the most important issues.'

The country is expected to become Nike's second largest market outside the US this year with revenues projected at US$1 billion, representing 6.25 per cent of global sales.

The mainland produced 35 per cent of Nike's footwear last year and Nike's 180 contract manufacturers on the mainland employ more than 210,000 workers.

Meanwhile Hong Kong-listed Yue Yuen, which is spinning off its retail business, aims to make 255.42 million pairs of shoes from its factories on the mainland, Vietnam and Indonesia by year end.

Yue Yuen managing director David Tsai said output at its mainland plants, which account for more than 50 per cent of total output, would be mainly trendy sports shoes.

Facilities in Vietnam and Indonesia will make goods for exports, but will not replace China as the shoemaker's production base. Yue Yuen set up plants in the two counties a decade ago to diversify and now employs 180,000 workers there.

Albert Cheng, a production manager at Yue Yuen who has spent a year in Vietnam, said language was the biggest obstacle to opening production facilities in Vietnam. 'Another problem is that the Vietnamese are not as hardworking as the Chinese.'


Send to a friend

To forward this article using your default email client (e.g. Outlook), click here.

Enter multiple addresses separated by commas(,)