Though scaling back on China sourcing years ahead of the trade war meant less pain from the present day tensions, footwear brands and retailers are finding new challenges as they restructure their sourcing.
For Steve Madden, which is largely driven by what its customers want to do as they’re often the importer of record, the desire to retreat from China is strong—at least for a portion of the production.
“What we’re seeing from most of our customers is that they want to move 20 to 30 percent of their production outside of China,” Cherie Blum, COO of Adesso-Madden of Steve Madden, said speaking at the recent Footwear Distributors and Retailers of America Sourcing and Sustainability Summit in New York City.
Steve Madden had already begun to pull back on its China manufacturing, so while it hasn’t quite been a scramble to make the sourcing shifts, it’s something the company is facing head on as the trade uncertainty has kept tensions running high.
“We had a little bit of a head start because we do have a very viable option in Mexico that’s producing shoes for us and our brand. We have production in Brazil, we have some production in Vietnam, so it’s just a matter of us looking at our business and looking at what product types make the most sense to move,” Blum said.
At Michael Kors, the downsizing of its footwear manufacturing in China began four years back, so the company largely has gone unscathed in President Donald Trump’s trade war with China.
“Ultimately, the trade war really had no effect on our sourcing strategy,” said Nathan Serphos, SVP of accessories and footwear for Michael Kors. Four years ago, Serphos said, roughly 70 percent of the company’s accessories were still produced in China and 30 percent offshore, and today that’s shifted to 99 percent out of China. “On the footwear side, four years ago we were about 80 percent China, 20 percent non-China. By year end, we’ll probably be 80 percent non-China and 20 percent China. So in that sense, I think we’re quite there already in mitigating the risk.”
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Twelve other countries make up Michael Kors’ footwear sourcing map, though some experiences with the diversified manufacturing have been better than others.
“We’re in Vietnam, Cambodia, a little bit in Indonesia. We’re getting started in India,” Serphos said, noting the company’s primary sources for footwear manufacturing.
Tests in Ethiopia and Nicaragua haven’t served the business as well.
“We ventured in Ethiopia, and as quickly as we went there, we moved out,” Serphos said. “We were there for about two seasons and we realy, really tried. Ultimately…they really let us down on the quality expectation.”
In Nicaragua, it was the political climate.
“We did a little bit in Nicaragua, but again on the political side, it just became a little iffy, so we opted to stop,” he said. “Moving out of China isn’t easy.”
Now, Michael Kors is working with “a lot more” raw materials suppliers setting up shop at the source, Serphos said.
“Most of the samples and development is still done in China,” he added. “Offshore isn’t really capable of managing the amount of complexity and design our customer expects every season.”
Wolverine has also been diversifying its sourcing out of China for the past seven years, and while Mike Jeppesen, president of global operations for Wolverine Worldwide, thinks Vietnam will be the temporary fix for footwear manufacturers before prices skyrocket and the labor shortage plagues the sector, he says China won’t fall out of favor completely.
“We’ll still be somewhere between 15 and 20 percent China-based over the long haul,” he said.
If you look at scale, he said, athletic houses like Nike have been divesting their sourcing in China over the past 25 years—Pou Chen, one of Nike’s major suppliers, is headquartered in Taiwan—and are less than 50 percent China-based, according to Jeppesen. “I think the athletic houses have diversified a lot earlier.”
On the other end, he said, there’s women’s fashion, which is struggling for where to source, and the brown shoe industry, which has found itself somewhere between the athletic houses and women’s shoe brands and retailers.
“Whether this trade war here manifests itself and increases duties on China or not, you’ve got to diversify,” Jeppesen said.