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China’s Footwear Market Competition & Sales Channels

2020/02/22



Market Competition

The mainland footwear market is dominated by domestically made products. There are currently four major footwear industry clusters in the country, predominantly located in the southeast coastal regions. The Guangdong footwear industry base, with Guangzhou and Dongguan at the heart, focuses on medium to high-end shoes, while Zhejiang, with its footwear sector centred around Wenzhou and Taizhou, primarily produces medium to low-end men’s shoes. The western region’s footwear industry is headed by Chengdu and Chongqing, with medium to low-end women’s shoes accounting for the majority of its output. Led by Quanzhou and Jinjiang, meanwhile, Fujian’s footwear industry specialises in sporting shoes.


Three different kinds of businesses are targeting the mainland market. Firstly, there are imported brands, which mainly come from the US and Europe, with Italy and Spain particularly well-represented. Brands such as Santoni, the Italian handmade shoes company, tend to target the higher end of the market. Then there are Sino-foreign joint-venture enterprises. Primarily headquartered in Hong Kong or Taiwan, their financial resources and design capabilities once dominated the mid-range market. More recently, however, a number of domestic brands, most notably Belle, have made successful incursions into this particular sector. The overall picture is completed by the vast number of domestic manufacturers who primarily service the lower end of the footwear market.


Overseas shoe companies have been constantly coming up with intelligent and innovative products, intensifying the competition in the mainland footwear market. The basketball shoes with self-lacing function launched by Nike is one example. Users can pre-set a number of tightness settings through an app in advance, and the settings will be adjusted automatically to fit the foot’s changing contours during a game.


Mainland footwear companies are facing problems of becoming outdated, lacking design innovation and having a low price-performance ratio. In order to stay competitive, they are beginning to make greater use of innovative production techniques. For example, Shoe Cube set up a smart platform for tailor-made footwear which uses a 3D foot scanner to measure clients’ feet to produce shoe lasts and custom-fitted shoes. Meanwhile, the domestic brand Peak produced the first pair of 3D-printed running shoes on the mainland in 2017.


Overall, though, intensifying competition has led to further market segmentation. This has seen many of the better-known international and domestic sports shoes brands, for instance, focusing their efforts largely on the adult market. As competition continues to increase the market is expected to become still more segmented, which will give companies in the sector scope for targeting additional niches and sub-categories. As an example of this, with hiking having become widely popular across the mainland, a number of footwear companies have taken the opportunity to launch specialist hiking and walking footwear.


Many mainland manufacturers remain concerned over the renewed challenges from elsewhere in Southeast Asia, with several countries now offering considerable labour cost advantages over China, while also having improved access to better-resourced local industry chains. A number of mainland producers are adopting smart production facilities to bolster production efficiency and product quality and thus competitiveness. For instance, an automatic laser cutter is being used by a company to produce footwear materials and midsoles, doing away with the manual mould-making process. Another company uses a computer-controlled automatic template exchange machine which can operate automatically on a continual basis and stitch shoe uppers. Users need only input the required patterns, based on which the machine will complete the stitching.


Sales Channels

Retail channels for footwear in China are mainly department stores, specialty stores and e-commerce. Part of the appeal of specialty stores lies in their robust brand image, fast cash flow and prompt and effective customer feedback. In terms of their disadvantages, some customers have complained of the homogeneity of products and brands. Despite this, many companies are still opting to use specialty stores – now a common sight on the mainland – as their primary sales channels, including such high-profile businesses as Le Saunda and Aokang.


Across China, a number of footwear materials specialty centres have been built to propel the development of local footwear materials and shoe-making sectors. In Wenzhou, several trade associations have established a one-stop footwear products and services platform billed as “China’s footwear and footwear material city.” This dedicated site has signed up more than 500 tenants, all of them currently active in the sector. With a huge variety of footwear and footwear materials on offer, many from well-known brands, the platform now attracts buyers from across China and the whole of the world.


In October 2019, the Jinjiang International Shoes and Textile City Phase 1 will open for business. Some 1,500 specialised footwear auxiliary materials stores will operate there, offering one-stop service for buyers of footwear raw and auxiliary materials. Such innovative footwear materials centres serve to strengthen cohesion and sustainability of the local market.


Taking a different approach, a number of manufacturers have started to channel more of their products through hypermarkets, outlets where different types of shoes under different brands are usually grouped together and offered for sale under one roof. By doing so, they have ended their reliance on single-brand specialty stores, opting instead for the more diversified opportunities offered by the hypermarkets. Typically, many well-known brands will set lower price points when selling through hypermarkets, with middle-aged and younger consumers seen as their target purchasers.


Chain operations are also seen as having a strong competitive advantage in the footwear sector. As a consequence, large-scale chain operations are becoming ever more popular on the mainland, with both Shenzhen’s Zhengdahua and Guangzhou’s Darloro having adopted this model.


As internet penetration continues to grow, online sales have become the main retail channel for the footwear sector. Online sales mainly take two forms: one is to set up self-operated direct sales networks, as in the case of Anda Shoes; the other is to make use of large B2C e-commerce platforms like Taobao.com and Taoxie.com. Many footwear companies, such as Xtep and 361 Degrees, have started venturing into the online market.


Despite the growth in significance of online sales, footwear marts housing large numbers of manufacturers and suppliers remain important wholesale trading platforms for footwear across the mainland. Among the most popular examples are the footwear commercial district on Guangzhou’s Zhanxi Road, the Hehuachi footwear wholesale mart in Chengdu, the shoe city in Wenzhou and the Taipingyang (Pacific) shoe city in Changchun. At present, many of the specialised footwear wholesale marts in the larger cities are looking to move upmarket, while also setting out to expand their operations. This should help boost the sales of more fashionable footwear, while increasing their influence on the wider marketplace and increasing both footfall and sales within these specialist marts.


China’s wide range of footwear trade fairs, which take place in several locations across the country, are seen as one of the key means for industry players to stay informed of the latest developments within the sector.


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Source: HKTDC

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