Guangdong's leather shoe industry's profit rate fell by 60%

However, after the financial crisis of 2008, the "Made in Guangdong" model has been greatly challenged. According to its disclosure, the annual export volume of leather shoes in Guangdong was as high as 1.1 billion pairs, but now there are only 700 million pairs, and the industry's profits have also greatly contracted, and the profit rate has also dropped from 20% at the peak to only 5%. In this context, local enterprises in Guangdong have quietly changed their brand transformation from the past in stealth. However, in the context of the number of brands on the table, the Jinjiang faction, and the Wenzhou faction, which have long been on the road to branding, the transformation process of local enterprises in Guangdong appears to be rather difficult.

Guangdong shoe industry relies heavily on the international market Guangdong's status in the footwear industry is unmatched. At the 13th Anniversary Award Ceremony of Heshan City Footwear Chamber of Commerce, Wang Jianxin introduced that there are more than 8,000 shoe factories in Guangdong, producing 4.5 billion pairs each year, accounting for nearly 50% of the national market share. There are 3.5 billion pairs of shoes exported each year, accounting for 70% of the country's total exports.

In Wang Jianxin’s opinion, such a huge industry is mainly concentrated in the Pearl River Delta, Guangzhou, Dongguan, Shenzhen, Huizhou East, Hezhou, Jieyang and Chaozhou. "Heshan is dominated by high-grade leather men's shoes. There are more than 1,000 shoe factories in the area, and the annual output is 80 million pairs. The unit price is relatively high. The output value is nearly 10 billion yuan per year, which accounts for 15% of the total production value of Hezhou. Huidong takes women's shoes as Lord, although there are 600 million pairs of production each year, the unit price is lower, said Wang Jianxin.

"Fashion, good quality and perfect industrial chain." In Wang Jianxin's opinion, this is the advantage of Guangdong footwear industry. If it is not the arrival of the global financial crisis in 2008, or the Guangdong footwear industry is still a land of growth, but since the beginning of 4 years ago, this once-existing foreign trade advantage has become a burden.

"Guangdong shoe industry relies heavily on the international market." Wang Jianxin said that although Guangdong footwear industry has developed steadily this year, exports have declined. "The international consumer market is down, orders have dropped by 20%-30%." Wang Jianxin said that at the best time, Guangdong exported as many as 1.1 billion pairs of leather shoes each year, but now there are only 700 million pairs left.

Shi Zhijian, chairman of the Heshan Footwear Chamber of Commerce and chairman of Hualida Footwear Co., Ltd., deeply feels the current difficulties of the Guangdong footwear industry in the international market. "The appreciation of the *** makes the footwear industry in Guangdong's export competitiveness is being weakened." Vietnam and India's cost advantage highlights, the same 100 US dollars, apparently in Vietnam and India procurement will have advantages over the procurement from the Chinese market.

Profit shrinking industry is not showing signs of recovery. On the one hand, the export market of Guangdong footwear industry has been hit hard. On the other hand, the industry is also facing another challenge – rising costs. “When the market was good, the net profit of a pair of shoes was once as high as 30 yuan, but now with the continuous increase in staff costs and raw material costs, the profit margin has been greatly reduced.” An industry person familiar with the Guangdong footwear market This shows that in the past two years, due to the difficulty of recruiting, the salary increase of personnel has been as high as 20% or more. Although the increase rate has dropped to about 10%, the overall personnel costs will continue to rise.

In response, Wang Jianxin admits that after the promulgation of the new "Labor Law," labor costs have risen. Before the company's profits may have 20%, and now the industry average is only about 5%.

With regard to such a decline in profits, the above-mentioned industry officials admit that at present, there are no indications that the industry is picking up, and even some companies have reported that it is more difficult than last year. "On the one hand, the European and American markets have not yet improved fundamentally. On the other hand, the cost of enterprises is still rising."

The shrinking of this kind of profit is not only reflected in the local enterprises that rely on exports, but also the local companies that have taken the brand road. As the leader of the footwear industry, Belle is not spared. The reporter reviewed Belle's 2012 annual report and learned that in 2012, Belle's annual sales were HK$32.86 billion, a year-on-year increase of 13.5%. This is the first time Belle has exceeded the RMB30 billion mark since its listing. However, its operating profit only slightly increased by 2.6% to RMB 5,403 million, the slowest growth rate for the past five years. In 2012, the sales volume of footwear business was 21.045 billion yuan, a year-on-year increase of 13.6%. Compared with the previous two years, the growth rate was significantly slowed by about 25%. Performance profit margin has fallen by more than 1 percentage point. In the first half of this year, although Belle's sales revenue increased by 11.1% again, net profit did not increase but decreased, falling by 1.9%. “The market environment is generally lower than expected, consumer confidence is sluggish, abnormal cold weather in April, bird flu epidemic in some areas in spring has further aggravated pressure on retailers.” This is Belle's description of the current footwear industry environment.

Foshan brand footwear on Saturday, despite the first half of the year revenue growth of up to 20.86% to 897 million yuan, but the net profit fell by 34.78% to only 31 million yuan. Although the main brand's Saturday revenue increased by 10.64% year-on-year to 483 million yuan, the revenues of its brands such as Sophia and Fibriel fell by 4.71% and 2.08%, respectively, to only 138 million yuan and 99.58 million yuan. The net profit rate is only 3.46%. On Saturday, the footwear industry reported in the semi-annual report that the sales price for female domestic leather shoes has dropped by 1.47% due to the increase in discount rate at the stores. The unit cost has increased by 2.12% due to the increase in labor costs and raw material costs under strict control.