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Why Neither Ethiopia Nor US Will be Key Players in Footwear Manufacturing’s Recovery

Footwear manufacturing, as much as it might want to, may not be able to divorce itself from China.

Still, companies are scoping out other fish in the sea when it comes to sourcing, despite a knowledge that entanglements may persist on the component side.

It’s a conundrum the industry has long been in and one it has been grappling with since new and punitive tariffs in recent years further squeezed already tight margins. Now, after having seen their supply tied up at the hands of a pandemic that gripped China first, many footwear companies are looking to diversify further, but that poses its own new risk.

Namely, onboarding a new factory isn’t easy when you can’t travel to vet it. And beyond that, a still very-much-around COVID-19 only adds insult to the supply chain’s injuries.

“Until we get some kind of a vaccine or pandemic solution, the more you diversify today has also got more risk…because you just don’t know the scale of infection level in the countries,” Clay Jenkins, principal consultant for CJC–Clay Jenkins Collective, said during the Footwear Distributors and Retailers of America’s (FDRA) Global Shoe Sourcing Digital Series on Monday.

That may largely leave footwear brands and retailers right beside the partners they’ve already been doing business with, many of whom are still in China. And depending on the type of footwear in question, diversifying away from China may not be much of an option anyway.

“If you’re making synthetic footwear, to me, you’re going to need to stay in China and potentially Vietnam,” Jenkins said. For polyurethane (PU) footwear, most hopes of spreading beyond those borders seem to rest with Myanmar. “I think it’s several years away, but if you ask me 10 years from now where will PU shoes be made for the American market, I would say Myanmar…potentially could be an opportunity.”

For manufacturers of leather footwear, that’s where opportunities outside of Asia lie. That’s where India and Bangladesh, and potentially Ethiopia over the longer term, all places with an indigenous leather supply, become options for evading China.

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“That is a critical part of the success of those sourcing countries in terms of [availability of] cattle and sheep and goat,” Jenkins said.

But the success of those countries, beyond their own abilities and the availability of livestock for leather, is still linked to China.

“All of those countries today, though, are still dependent on a Chinese component infrastructure,” Jenkins said, adding that companies keen to diversify should prioritize verticality as they seek out new partners. And some countries, like Ethiopia, may still be a way off when it comes to viability, even though the potential is there. The East African nation was much discussed as an up-and-comer for footwear manufacturing in recent years, but the buzz surrounding it has somewhat waned—and the pandemic hasn’t helped.

“Ethiopia—I think Africa as a total—is a 10-year play. But in the short term, they’re going to go through their own risks with COVID. Their infrastructure is nothing like Vietnam or Brazil or anything to be able to deal with this,” Jenkins said. “Africa is not for the faint of heart and I would say most people today will diversify away from that in the short term. But long term, because of what the shoe industry needs—leather, hands—it’s got potential, but I would say for a sourcing leader in the next two years, it’s probably not in the wheelhouse of a place to go.”

Neither, really, is the U.S. in any major way.

Companies can invest in new stateside factories, benefit from government incentives to bring manufacturing home and craft niche collections, but footwear production may never get much bigger than that domestically.

“I think if companies wanted to be what I call injection footwear, like an Okabashi brand, things like that where it is more of a science in terms of molds and it’s not labor intensive…it’s more about your operations…I think that’s got a chance. But that consumer base is a very slim consumer base,” Jenkins said. “As far as making high-heel ladies dress shoes in the United States, the component infrastructure is just not there for it and, frankly, one of the challenges, too, is workers. There’s not a lot of people today that want to work in a factory of any type.”