China's footwear market has a lot of problems

With the emergence of various issues such as rising raw materials in the footwear industry in China, foreign shoe companies have adjusted their trade directions and shifted their direction from China to Indonesia.

Nike, the world's largest footwear brand company, has already shared production from China, Vietnam and Indonesia in the 1990s. However, in the past three years, China’s share has also declined slightly. Today, Vietnam accounts for 37% of its sales, China accounts for 34%, and Indonesia accounts for 21%.

NewBalance and Adidas also purchase millions of pairs of shoes each year from Indonesia. Such moves as CollectiveBrands can help Indonesia surpass Vietnam this year to become the world’s second largest shoemaking country after China.

It is reported that Collective Brands, an American footwear group that owns the Payless chain of shoe stores, has already started sourcing from Indonesian manufacturers in order to reduce its dependence on rising costs of China. MattRubel, the company’s chief executive, said that the company expects to steadily increase the supply of subcontractors in Indonesia and reach 12 million pairs by 2015. “China has always been a utopia for high-quality, low-cost, one-stop shopping... But Utopia will never last long,” Rubert said in an interview with the Financial Times. "Today we must make more efforts to redeploy in all possible places."

Actually, not only did the US Footwear Group have such moves, but similar foreign companies including Unilever, Nestlé, and Toyota are also entering Indonesia to target Indonesia’s growing middle class. The expansion of the scale of production in Indonesia reflects that the country’s manufacturing industry began to rebound strongly after a decade-long recession.

China’s output currently accounts for about 80% of the total, and Rubell is expected to fall to about 70% in the next two years and then drop to around 60%. Collective Brands sold nearly 170 million pairs of shoes in 2009, with a revenue of $3.3 billion.

Collective Brands operates 4,500 Payless chain stores in the United States and reached a franchise agreement with PTMitraAdiperkasa in October this year. The company secretary, Fetty Kwartati, said that the first Indonesian stores will open in Jakarta and Denpasar, Bali in the second quarter of 2011. The company also plans to open stores in Malaysia and Singapore.

Indonesia's manufacturing industry was almost completely destroyed in the Asian financial crisis of 1997-98, and now it has regained its vitality. The country’s economic growth rate reached 6%. The shoe production returned to pre-crisis levels. Gita Wirwan, chairman of Indonesia's Investment Coordinating Committee, said that Indonesia is expected to produce 300 million pairs of shoes worth $2 billion to $2.5 billion in 2010.