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US Footwear Imports Shifting Away From China

Footwear imports from Vietnam will begin to eat into China’s market share, rising from 7% to 13% of production by volume by 2016, according to a recent publication by the Footwear Distributors and Retailers of America. The total market is expected to grow from $22.7 billion to $25.2 billion, and Chinese imports are expected to fall from 85% to 80% of US footwear imports by that year. In real dollar terms, this means China can expect to see growth from $19.3 billion in 2011 to $20.2 billion in 2016. However, they will fail to capture the majority of the growth within the US import market. Vietnam will capture a large portion of the growth, with its dollar values rising from $1.6 billion to $3.3 billion, calculated based on volume. The Vietnamese market will need to almost double its capacity in order to fulfill these predictions. However, with wages rising in China and the footwear industry potentially relocating to the interior, ample capital should be available to fuel that growth.

Production in China is expected to increase substantially however, despite the relative stagnation in exports. Growth will be driven by strong increases in domestic consumption, which (according to a November 2011 report by market research company RNCOS) should average 7% growth per year for the next several years. At this point, the average Chinese person is consuming approximately 2.4 pairs of shoes per year, substantially less than the US average of 6.7 pairs. If Chinese shoe consumption increased to US levels, based on US pricing, their market could be as large as $190 billion, versus a US market of $47 billion in 2009.

The same trend that is driving export production to Vietnam will facilitate the growth of a higher end Chinese domestic market, as wages rise and consumers develop familiarity with western and Chinese brands. Considering the potential size of the Chinese market, savvy players can be expected to increase their manufacturing bases in China, while at the same time diversifying export production to lower cost countries.

Beyond Vietnam, which is expected to pick up slightly less than half the increase in US footwear imports, Indonesia and India are expected to grab market share of 2 percentage points each. Rising stars in the industry include Nicaragua, Cambodia, and Bangladesh. Those nations have seen double-digit growth in exports in the last few years, but still command less than 1 percentage point of total US imports, combined.