Characteristics of the Mexican and Chinese footwear industry
In the footwear industry there are numerous factors that make some countries more competitive than others. However, China far exceeds its competitors by different factors. So we decided to investigate the main differences between the Chinese and Mexican footwear industry.
Among the aspects we compare are: the marketing channels; productivity; supply chain; location and logistics; maturity of the footwear industry; shoe quality; business ecosystem; labor regulation; taxes and regulations as well as the exchange rate.
Next, let's analyze one by one to learn more about the subject.
Marketing channels
Electronic Commerce is perhaps one of the key factors par excellence, in the penetration of Chinese footwear in the world. For example, with the emergence of Alibaba in China, the world's largest wholesale platform, many Chinese products have been made available to anyone with low prices. In the footwear market, 84% of total revenue is generated through online sales and is expected to be 87% by 2023. Chinese footwear is a product in high demand due to its low prices. Chinese entrepreneurs know how to take the benefits of online markets very well to reach local and international clients.
On the contrary, Mexico still uses very traditional means of marketing for the sale of footwear wholesale, with face-to-face negotiation processes to mention an example. However, in recent years Mexican businessmen have also adopted electronic means to position their brands in national and international markets.
Productivity of Mexico vs China
In matters of labor productivity Mexico is superior. The rise in Chinese wages in recent years has allowed Mexico to be more productive. The unit labor cost in the manufacture of footwear in Mexico is up to 20% lower than China. However, it is worth mentioning that the technology, together with the mass production of Chinese footwear, generally offers a more economical product. Although not always of better quality.
Supply chain
Mexico is a country with one of the most competitive tanning and leather finishing clusters in the world, led by the states of Guanajuato, Jalisco, State of Mexico, and CDMX. Footwear manufacturers can find all kinds of raw materials and products that can be delivered effectively generating greater productivity. All this, thanks to the high competition among supplier companies.
China, where appropriate, has the most complete footwear supply chain in the world. This is due to the diversification of their industries in almost all areas, as they supply all kinds of materials and technology to their shoe industry.
Today, China has four major groups in the footwear industry in the country, predominantly located in the southeastern coastal regions. The base of the Guangdong footwear industry in the center, are Guangzhou and Dongguan. Here, it focuses on mid-to-high-end shoes, while Zhejiang, with its footwear sector focused on Wenzhou and Taizhou, mainly produces mid-to-low-end men's shoes. The footwear industry in the western region is headed by Chengdu and Chongqing, and women's shoes of medium to low level represent most of their production. Led by Quanzhou and Jinjiang, meanwhile, Fujian footwear industry specializes in sports shoes.
Location and Logistics
The main trading partner, and also considering the 3rd largest shoe consumer country in the world, is the United States. In this sense, Mexico, because of its location has great advantage against China.
Due to the distance, shipping costs are drastically higher for China. In 2018, shipping a 12-meter container from China to the United States cost about $ 5,000. The same container from the border to the northern neighbor costs about $ 1300 dollars.
Logistics from Mexico to the United States and Canada far exceeds China. While delivery times from China may take 3 weeks, Mexico offers a few days.
Maturity in the Footwear Industry in Mexico and China
Maturity and Mexican productive talent is carried through generations. A good history of footwear manufacturing dating back to the 17th century offers well-qualified and certified labor. The quality of the products and designs of Mexican footwear is proven worldwide. Well-consolidated international events such as Sapica, an event held in the city of León, Gto., Keep the authority of the footwear industry in Latin America latent.
China, meanwhile, in the 1980s the government opened 14 coastal cities as manufacturing centers and allowed foreign investment. The main reason why the Chinese footwear industry developed so quickly thanks to the transfer of technology and production from countries such as Hong Kong, Taiwan and South Korea. In those days, this industry did not produce footwear of the same quality as available in China today. However, they brought large quantities of well-established production using fully developed technology and with well-adapted and defined markets.
Footwear Quality
Mexico is now known for having a diverse and highly qualified workforce. Mexico's workforce is also relatively young, while China is aging and declining due to its family planning policies.
When quality problems occur in Mexican footwear, it is relatively easy to solve them. Products can be returned for repair or replacement. Quality problems in China, which may occur more frequently due to distance and communication barriers, are more difficult to solve.
Business Ecosystem
Industrial production is not carried out in isolation, but is based on networks of suppliers, manufacturers, distributors, government agencies and customers that participate in the production process through competition and cooperation. For this reason, a plan was developed in strategic areas.
1. Promotion of knowledge
2. Internationalization of Industry
3. Fair and Equitable Trade
4. Development of a Competitive Industry
5. Marketing Promotion
6. Financing
The business ecosystem in China has evolved quite a bit in the last thirty years. It has a cultivated ecosystem to support the manufacturing supply chain, which includes manufacturers, low-cost workers, a technical workforce, technology providers and customers.
Labor Regulation
Manufacturers in China are expected to comply with certain basic guidelines regarding child labor, involuntary work, health and safety standards, wage and hour laws, and environmental protection. Chinese factories are known for not following most of these laws and guidelines, even in a permissive regulatory environment.
Chinese factories employ child labor, have long shifts and workers do not have compensation insurance. Some factories even have policies in which workers are paid once a year, a strategy to prevent them from quitting before the end of the year. Environmental protection laws are routinely ignored, so Chinese factories reduce waste management costs.
Taxes and Rights
On the one hand, the Chinese government encourages its industries. The export tax refund policy established in 1985 by China is to boost the competitiveness of its exports by abolishing double taxation on exported goods, to mention an example.
On the other hand, the Chinese government does not establish adequate norms that establish a flat field for international competitiveness. China is accused of dumping practices or unfair competition. This harmful practice greatly affects the Mexican footwear industry with the deliberate sale of products at a lower price. This causes losses for Mexican entrepreneurs. In addition, piracy is another big problem for the footwear industry faces.
Exchange rate
The exchange rate represents another strategic difference in the footwear industry. Until recently, the renminbi had a fixed exchange rate system that allowed China to depreciate its currency to make exports cheaper.
In contrast, Mexico operates a floating exchange rate issue for which the currency is widely used by speculators. It is difficult to benefit exports using an overvalued currency.
Footwear industry in Mexico in numbers
National production: 260 million pairs.
Guanajuato's production: 186 million pairs.
Mexico's position in the world as a shoe producer: 9
Mexico's position in the world as an exporter of leather footwear: 26
Mexico's position in the world as a shoe consumer: 15
National consumption of annual footwear: 321 million pairs
Companies Manufacturers: 11,538
Direct and indirect jobs nationwide: 220,000
Direct and indirect jobs in Guanajuato: 176,000
Participation of the hunted sector in the national GDP: 0.10%
China Footwear Industry in numbers
National production: 12,600 million pairs are expected to grow annually by 4.2%
China's position in the world as a footwear producer: 1
China's position in the world as an exporter of leather footwear: 1
China's position in the world as a shoe consumer: 1
National annual footwear consumption: 4,110 million pairs
Companies Manufacturers: 14,400
Direct and indirect jobs nationwide: 2,600,000 people
In recent times, experts have wondered if China will lose its place as "the world's shoe factory." The availability of cheap labor is only one of the many factors that have made China a manufacturing center. It is clear that for some time, China will be "the world factory" with its low production costs, huge availability of labor, broad talent base and business ecosystem.
However, Mexico is positioned as a country ready to face China hand in hand, there are strategic factors where they still have an advantage, but Mexico has always been characterized as a country with important industrial policies, capable of developing quality products, design and not to be distinguished by low prices, but by utility and durability.
Interesante la forma en que presentas la información. Me gustaría ver a México más industrializado. Pero México enfrenta muchos obstáculos que disminuyen su potencial como centro de fabricación.
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