With the holidays quickly approaching and the ongoing trade war between the U.S. and China taking on new complexities with every passing presidential tweet, footwear brands’ hopes for a tidy resolution are fading fast.
Many began diversifying their sourcing months, or years, ago, looking to countries like Vietnam, Cambodia and Bangladesh for a respite from the turmoil. But a neighbor south of the border has been largely overlooked as a prospect.
Mexico’s share of U.S. footwear sourcing is small, making up just one percent of overall imports, said FDRA president Matt Priest. And despite a handful of obvious benefits—shared time zones, proximity and the glaring absence of tariffs—the relationship between Mexican manufacturers and brands selling in America has failed to find that necessary spark.
“On paper it makes sense—they’re duty free, they’re in our backyard, and we’re very culturally aligned,” Priest explained, adding that Leon, Mexico’s capital for footwear production, is just a two-hour flight from Dallas.
Still, he said, while some of FDRA’s members do source from the country, Mexico has been largely unable to find its footing as a major player with shoe brands that serve the U.S. market.
Part of the issue stems from the country’s limited capacity. Most countries don’t have the population or the factories in place to truly divert sourcing from China, with its massive workforce and established infrastructure. Mexico is no exception, Priest said, especially in Leon, which isn’t densely populated.
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China’s government has also subsidized the industry’s growth over the years, in an attempt to keep the ballooning population employed. “There’s so much pressure because of the population growth in China to create jobs for people. There’s so much subsidization and centrally planned policy,” Priest said.
Manufacturing sectors in Mexico and even the U.S. haven’t enjoyed the same support, he said, adding that World Trade Organization commitments have also limited both countries’ abilities to promote the national expansion of footwear production.
There are also issues stemming from American appetites for footwear, which skew heavily toward sport and athleisure styles. Mexico is known for its leather sandals, dress shoes and boots, and in order to produce other types of footwear, necessary components would have to be imported into the country for assembly.
“NAFTA’s rule of origin is pretty stringent,” Priest said, explaining that there’s a 55 percent regional value content requirement, which includes a shoe’s entire upper. “It’s not like you could assemble Chinese components in Mexico and ship those finished products into the U.S. duty-free,” he said.
Priest said that though Mexico originally agreed with the rule of origin set forth by NAFTA, the country’s government now sees that “they would have a lot more flexibility if they were able to make shoes from componentry that’s imported from outside of the agreement.”
There’s always a possibility for a shift in the future, but Priest argued against the likelihood that it would happen any time soon.
Despite the challenges, Priest believes that Mexico has substantial long-term potential. “For one, we are moving away from China for production, and it will become more regionalized with technology and consumer changes,” he said, adding that Mexico is starting to make more economic sense the longer the trade discussions with China wear on.
For some international brands, Mexico’s unique strengths and relatively small population of artisans have proven a benefit.
Footwear brand Cano was founded by Philipp Mayer and Lukas Punder, two former students who traveled from their home in Germany to study abroad in Mexico. At the heart of the brand was the huarache sandal, a traditional Mexican silhouette that the two men thought could take off in Europe—and beyond.
“Since this specific product is a traditional Mexican shoe, it was clear for us that we wanted to keep the production where it has its roots, and support the artisans and communities that have been specialized in the production for generations,” Mayer told Sourcing Journal.
Cano’s huarache sandals are produced in Sahuayo, in the state of Michoacán—an area known for sandals, hats and other leather products. Boots are made in Leon, Guanajuato, which is where most shoe manufacturers, tanneries and other industry suppliers are located, Mayer said.
“Luckily the infrastructure was already there,” Mayer explained, adding that it was “fairly easy to find the right suppliers that share the same values regarding sustainability and ethical manufacturing.”
Though they don’t share a border, Mayer said that the free trade agreement between the E.U. and Mexico has been a great boon to the brand. “We can import all goods produced in Mexico without paying any import duties,” he noted.
Mayer also believes that Mexico is making great strides in eco-friendly manufacturing processes, and it might be hard for the company to find production in other countries that aligns with Cano’s standards.
The overseas working relationship hasn’t been without its challenges, though. Mayer cited “cultural differences” as a primary pitfall when it comes to ensuring that operations run smoothly.
“In Mexico, ways of working are a bit more informal than in Germany. A delivery date is usually just an estimate, which in many cases is missed by weeks or even months,” Mayer explained. The company’s roster of small manufacturers and suppliers isn’t as well oiled as a massive Chinese factory might be, and that’s a factor that needs to be taken into consideration when planning production runs, he added.
And because of its manufacturing partners’ limited capacity, a down payment is necessary to initiate production. “In other countries, you usually have payment terms that are 30 days after delivery,” he said.
Mayer also recognizes that Cano is in a unique position, having built its brand around the specific aesthetics of Mexican footwear and the strengths and capabilities of the country’s artisans. He said that he could see how U.S. brands might be deterred by Mexico’s “lack of skilled labor for specific product categories” outside of boots and other heritage styles.
For Nashville-based brand Nisolo, a sustainably-minded brand specializing in just such styles, the Mexican production that plays a supporting role to the brand’s Peru-based operations has been advantageous.
“Having partners that are in the same or similar time zones, and close enough to visit for a day or a short trip, makes coordination a lot easier,” said Daryl Edwards, Nisolo’s vice president of operations, adding that proximity helps move product development forward at a quicker pace.
Ricky Lupp, Nisolo’s product development manager, added that geographical closeness has also played an integral role in reducing the brand’s carbon footprint.
Like Cano, Nisolo gravitated to the region because of Leon’s leather expertise—sometimes in the form of family-owned factories that have been in operation for generations. And while Edwards said that the quality and consistency of those factories is beyond what he’s seen in other countries, he couldn’t vouch that Nisolo’s suppliers represent a country-wide standard.
Lupp echoed Mayers’ insight that cultural distinctions can sometimes present challenges in bringing products from “concept to commercialization.” But the country’s expertise in leather and manufacturing has also given Nisolo access to a “wealth of knowledge” about the process behind the creation of its shoes.
Mexico’s manufacturing sector is also deeply advanced when it comes to environmental standards and social ethics, Lupp argued. “After time spent working with suppliers in many different countries, I can say that one of the biggest points of difference in Mexico is that they align much better with our brand values at Nisolo,” he said.
Despite those advantages and the positive impressions that the country’s manufacturing has generated, Lupp recognizes that Mexico isn’t a one-size-fits-all solution for brands looking for a China alternative.
“The tariff-related drama is a big headline currently—you can see the impact it is having. But people aren’t leaving China to produce in Mexico, they’re leaving China and going the next closest place for their costing needs,” he said, adding that the scale and expertise of Asian manufacturers is hard for many brands to ignore.
Edwards agreed that Mexico sourcing might not be in the cards for brands who can’t afford to risk lowering margins.
“If you want the lowest cost, Mexico isn’t the place for you,” he said. But, he added, there’s been a “major race to the bottom to increase margins,” and brands could be overlooking some other major pain points that stem from staying put in China.
“A lot of the incidentals related to quality, lead time, and easier coordination aren’t factored into that decision,” he said.