As the primary raw materials for sports shoes, the rising costs of international crude oil and rubber, along with increasing labor expenses, are putting growing pressure on shoe manufacturers. Recent financial reports and trade fair data from major brands such as Anta, 361 Degrees, and Peak indicate that many companies are planning to raise their product prices by approximately 5% to 10% due to rising production costs.
The sharp increase in the prices of key raw materials like oil, rubber, and cotton has become a significant concern. According to the deputy director of the Sinopec Group, the era of high oil prices is here to stay. Natural rubber, in particular, has reached historically high levels. In 2010, domestic natural rubber prices started at 25,000 yuan per ton and surged to a record high of 39,800 yuan per ton in November of that year. Analysts from Guolian Securities predict that natural rubber prices will continue to rise in 2011.
This surge in material costs has forced many sports shoe companies to adjust their pricing strategies. Anta, 361 Degrees, and others have announced plans to increase their selling prices as a primary response to cost pressures. An industry insider from the Sichuan shoe sector told the Chengdu Commercial Daily that the average cost increase for manufacturers could be around 10%.
Anta reported that its average selling price for footwear and apparel increased by 4% and 8.8%, respectively, in early February. The company also stated that it would continue to raise prices in 2011 to offset rising production costs, with an expected average margin of about 10%. Similarly, 361 Degrees announced in its February 22 financial report that the average selling price of its shoes rose by approximately 5.5% in the second half of the previous year, with further increases expected this year. Xtep and Peak also confirmed that their sneaker prices would rise in 2011 due to higher raw material and labor costs. Xtep said it would not increase prices by more than 10%, while Peak projected a 5% to 10% price hike.
Taiya Footwear, a supplier for several major brands including Anta and 361 Degrees, also announced in its 2010 annual report that it had raised the sales prices of soles and related products due to the impact of rising raw material costs.
With raw material prices continuing to climb in secondary and tertiary markets, competition in first-tier cities remains intense. To adapt, branded sports shoe manufacturers are shifting their focus toward expanding into these emerging markets. Data from Xtep’s third-quarter 2011 trade fairs showed that the company plans to open 800 to 1,000 new stores in secondary and tertiary cities, particularly in Sichuan, Hunan, Anhui, and Shandong. Anta added 968 new stores last year, mostly in these regions, and plans to expand its retail network to over 10,000 outlets this year. Even global giants like Nike and Adidas have announced plans to increase their presence in second- and third-tier cities over the next five years.
According to Lai Yijun, an analyst at Guoyuan Securities, the challenges facing sneaker brands are just beginning. Meanwhile, the Sichuan Women's Shoes "Twelfth Five-Year" Development Plan (Draft) is set to be released soon, aiming to grow the industry’s production value to over 100 billion yuan by 2015 and create 3 to 5 well-known domestic brands. A recent seminar on the plan was held in Wuhou District, known as the "Chinese Women’s Shoes Capital." The development plan, compiled by the Western Footwear Industry Operations Co., Ltd. and the Sichuan Academy of Social Sciences, is currently undergoing review and is expected to be submitted to the Provincial Economic Commission by mid-March.
Shaoxing Harbour Textile&Garments Co., Ltd , https://www.sxharbour.com