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FDRA 2015 Factory Survey Analysis: China’s Loss Is Vietnam’s Gain

Evidence that Vietnam continues to benefit from China’s declining footwear manufacturing industry continues to build. The Footwear Distributors and Retailers of America’s (FDRA) 2015 Factory Survey Analysis, presented by FDRA President Matt Priest at the organization’s Footwear Sourcing Summit in New York City (July 22-23), showed that Vietnam is gaining business due to a larger and younger workforce and lower costs.

The survey, conducted in partnership with Elevate, included participation with key manufacturing countries in Southeast Asia and the Americas for the first time. The results confirmed that Chinese factories are facing mounting competition from emerging producing countries and are struggling with challenges spurred on by labor shortages and increasing costs. Though China’s production volume grew from 300 million to 470 million in 2014, the country’s market share dipped three percent from 2013 to 2014. Meanwhile, Vietnam has maintained a double-digit percentage increase two years in a row.

The survey also revealed that factories in China are supplementing its labor shortage by hiring retired or juvenile workers. Of the Chinese manufacturers surveyed, 38 percent employ workers between the ages of 16-18, which is seven percent more than in 2013. Chinese factories said they perceive improvements in the labor shortage in 2014, however Priest said that this is more of a shift in perspective than an actual improvement. “My take on this is that it’s just become a common issue where people have accepted it, understand it. It’s the new reality, the new norm,” he explained.

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When pressed about the most significant business issues factories are facing, 56 percent identified raw material cost, closely followed by wage and compensation at 52.8%. The survey showed that the average increase of minimum wage in China was 14 percent, while the average increase of monthly wages paid was only 10 percent.

Full-time staffs dedicated to CSR are growing at a faster rate in Vietnam than in China. Of the surveyed Chinese factories, 60 percent have a full-time CSR staff, up from 45 percent in 2014. In comparison, 73 percent of factories have a full-time staff in Vietnam, up from 33 percent. Across the board, the number of existing procedures to evaluate health and safety risks from events such as fires, chemicals and building collapses is down only two years following the Rana Plaza disaster.

For the survey, FDRA collected a total of 123 responses from March 18-April 22, 2015. The majority of responses came from China (87 percent), followed by Vietnam (9.8%). Almost all of the factories surveyed produce women’s shoes (92 percent), and the largest production type is cement shoes (65.9%).