I have just returned from a fascinating trip to China and Hong Kong to look at sports and outdoor manufacturing and retail with Ward Robertson, joint managing director of the STAG Buying Group.
With the help of a few key partners such as Hi-Tec, Saucony, Vibram and Sport 100, we gained an insight into what is currently happening in these countries and how this will affect all of us in the near future.
At every factory we visited the owners told us how they are having to deal with rising raw material costs, the demand for higher wages from workers and a declining workforce.
IMPACT
Some factories are moving further inland because they can no longer attract the levels of migrant workers they did in the past. A large number of migrant workers are now staying put in their hometowns, where there are factory and other non-agricultural jobs that previously only existed in coastal areas. This alone has an impact on transportation costs and manufacturing lead times, as both materials and finished products need to move much greater distances.
For months footwear manufacturers have been worrying about the prospect of rising shoe production costs. Now, thanks to huge rises in raw material and labour costs, as well as unrest in several oil producing countries, these fears are economic reality. In the past pressure has been applied to manufacturers to hold prices, but the time has come where the increase will have to be shared by brands, retailers and consumers.
During our trip we were amazed at the labour intensive way that shoes are still manufactured. Something in the region of 320 people will handle one pair of shoes during the process from raw material to the boxed product. While this will come as no surprise to the brands that earn a living by travelling to see and manage this process, it is an eye opener for the less educated. Factories with more than 4,000 workers, all dedicated to producing one component in painstaking, magnificent detail, is a sight that everyone connected to the sports industry should see.
In contrast, we were also shown the state-of-the-art Ion-Mask treatment facility that has less than 25 workers and is currently used by Hi-Tec, adidas, Timberland and K-Swiss to treat footwear. The dozen or so space age looking machines are used to give the footwear hydrophobic – super water repellency – properties in a process time of approximately five minutes. To see such a modern facility surrounded by vast areas of more basic industrial processes was encouraging and demonstrates the innovation that continues to be a feature of the sports and outdoor industry.
Hi-Tec and Saucony presented their manufacturing process on key technical styles to us and left us in no doubt as to the quality of product they are producing, while Vibram gave us a fascinating tour of its China head office, which includes on-site footwear/outsole development and testing facilities.
SPORT 100 PARTNERSHIP
We also spent time with Alan Cheung, the owner of 43-megastore chain Sport 100. The tour of sports retail he gave us in Shanghai was first class. The Chinese sports market is dominated by mono-brand stores and outlets such as Sport 100 that are merchandised by brand and not category – very different to the sports retail market in the UK.
Most of the major sports brands you see in the UK are prominent in China, along with multi-million pound home-grown brands that are relatively unknown here.
Our association with Sport 100 will be an exciting one, as both of our businesses look to develop and grow. We will have an open exchange of ideas and share any opportunities that may develop in the future to benefit the whole group.
All in all, it was an extremely worthwhile trip on many fronts.
