China forecast to remain top US footwear source

China will remain the clear leader in U.S. footwear imports even as Vietnam and other countries nibble away at its market share, according to a new forecast by the Footwear Distributors and Retailers of America.

The association said China’s 81 percent share of U.S. imports in 2013, measured in pairs of footwear, is expected to slip to 71 percent by 2018. Second-ranked Vietnam’s 10 percent share is forecast to rise to 12 percent while smaller producers also gain market share.

Vietnam’s footwear exports to the U.S. have risen for 13 consecutive years and jumped by 20 percent last year. They could get an added boost if ongoing negotiations for the Trans-Pacific Partnership produce a free trade agreement that eliminates or reduces duties.

“The anticipation surrounding the completion of TPP negotiations cannot be overstated,” said the FDRA’s annual Global Footwear Sourcing Assessment, released at a sourcing conference the association hosted in New York.

Last year’s $2.5 billion in U.S. footwear duties included $361 million paid on imports from Vietnam. “High duties combined with increasing costs of production have a dramatic impact on where footwear is produced and the development of a global supply chain,” the report said.

Imports account for 99 percent of U.S. footwear. Only about 1.2 percent of the volume from the top 10 U.S. footwear suppliers enter the U.S. under free trade agreements. China, Vietnam and Indonesia combined accounted for 95 percent of the U.S. footwear market last year, according to statistics from the U.S. International Trade Commission.

Vietnam’s reputation as a footwear source was tarnished a bit this year when Chinese-managed factories were targeted by rioters protesting China’s energy drilling in disputed waters off Vietnam in the South China Sea.

With a population of 93 million and a transportation system that’s not fully developed, Vietnam can’t match China’s scale or efficiency. Many components of Vietnam’s footwear industry still must be imported from China and other countries.

But some of China’s advantages in footwear production are starting to erode. For years, manufacturers benefited from a stable currency and labor supply, modest wage increases, government support and incentives, and factories’ proximity to ports.

“We got a little spoiled with China,” footwear sourcing and strategy consultant Lev Gelfand said at the association’s conference.

Although companies continue to rely heavily on China, they increasingly are looking to sources such as Vietnam, Cambodia, India, Ethiopia and the Americas.

These sourcing decisions aren’t easy. Companies think long and hard before switching footwear production sources, said Matt Priest, the association’s president. “You can’t just run off when things get bad,” he said.

Footwear manufacturing is capital- and labor-intensive, and efficient production requires scale economies, transportation links, and supplier networks that can’t be developed overnight.
Although China’s share of footwear volume is shrinking, its share of the value of U.S. footwear imports is forecast to rise to 71 percent in 2018 from 69 percent last year because of expected price increases.

Last year, China exported 1.89 billion pairs of shoes to the United States. The U.S. imported a total of 2.3 billion pairs, or an average of 7.32 pairs for every U.S. man, woman and child. “Americans love shoes,” Priest said.

However, U.S. footwear imports have shown lackluster growth since the 2008-2009 recession.

Measured in pairs of shoes, import volume inched up just 1 percent. Oceanborne container imports of footwear rose 6.2 percent last year, to 425,393 20-foot-equivalent units, according to PIERS, the data division of JOC Group Inc.

Combined U.S. footwear imports from mainland China and Hong Kong were 334,120 TEUs last year, or 78.5 percent of total U.S. volume. Vietnam’s TEU volume was 49,534 TEUs, or 11.6 percent of U.S. volume.

PIERS data for the first half of 2014 show mainland China and Hong Kong with a combined 74 percent share of U.S. footwear imports, compared with a 77.8 percent a year earlier. Vietnam’s share rose to 14.2 percent from 11.8 percent.

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