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BUSINESS

Providing shoes for the Asian giant

Spanish footwear industry looks to large Chinese market to save it from flagging sales at home

A visitor to the shoe fair held in Shanghai last month. Spanish firms are looking to increase sales in China.
A visitor to the shoe fair held in Shanghai last month. Spanish firms are looking to increase sales in China. Zigor Aldama

Two billion, eight-hundred million feet are a lot of feet, particularly when they move with increasingly fatter wallets. It is no surprise, therefore, that shoe manufacturers across the globe are looking hopefully at China, but not as a production base.

The Asian giant makes about 60 percent of the footwear manufactured globally - almost 13 billion pairs - of which it exports 80 percent. However, the new interest in China is its vast market, which producers in developed countries hope can help save them.

"It's indicative that China is the market to which we export the most expensive shoes at an average of 47.80 euros a pair, while in the rest of the 150 countries where we sell the price is 18 euros," says Javier García Lillo, the secretary general of the Federation of Spanish Footwear Industries (FICE), at a trade fair in Shanghai.

Although only 1.55 percent, or 41 million pairs, of the shoes sold in China are imported - a market equivalent to that of Portugal - the business brought in 1.388 billion euros for foreign manufacturers last year. This trend reflects the pattern that has developed in the Chinese market for imported shoes over the past four years, with sales volumes falling but the value of what was sold increasing.

Size and lack of credit limit Spanish firms' ability to make inroads in China

"This means that sales of higher-quality shoes at higher prices are increasing," Pablo Ballesteros says in a detailed report on the sector carried out for the Economic and Trade Office of the Spanish Embassy in China. FICE forecasts that the retail market will grow by around 20 percent annually through to 2015.

"The upper and middle classes are growing rapidly; they demand quality and rate European products highly and are willing to pay for them," García Lillo says.

"Price here is not a problem. In the crisis we are going through, you have to keep China very much in mind in order to avoid the closure of Spanish businesses and create jobs in Spain."

This is reflected in the fact that 22 Spanish brands attended the MICAM footwear trade show organized by the Milan Fair and the Italian Association of Footwear Manufacturers held in Shanghai in April to coincide with Fashion Week in China's leading commercial and financial city.

Taking hte long-term view

Z.A.

"Our strength is the Made in Spain brand. That's why it is important to reconvert the footwear market and look for new markets," Panama Jack's head of sales José Antonio Ruiz says. "We're not forgetting about Latin America, but the big potential now is in Asia."

Taking advantage of that potential is not easy. "Establishing commercial ties with the Chinese and making them work is more difficult and laborious than with partners in other countries, such as those in Europe, because they have a different way of working. They take their time when it comes to negotiating. But when they close out a deal, they stick to it," Ruiz says.

"Since the figure of the representative does not exist here, our strategy is based on opening our own brand-name stores and outlets in commercial centers, which account for 27 percent of footwear stores in China," says Javier García Lillo of the Federation of Spanish Footwear Industries (FICE). "What we're looking to do is position ourselves for the future and you do that with partners that have sales points. However, with the limited resources we have, we will have to wait some time to see results."

"We're looking for new markets and China is very big," says José Antonio Ruiz, the head of sales for Panama Jack, a Spanish brand that competes with Timberland and Caterpillar and is looking for the best way to distribute its products in China.

"We already have customers here and we need to increase our sales. The only way to do this is to enhance our brand recognition, which we haven't been able to achieve so far," Ruiz adds.

"We've noticed that the Chinese consumer likes what is made in Spain more than in competitor countries such as Portugal but there is still a lot to do," he continues.

"We haven't managed to achieve the same level of recognition for Spanish products as enjoyed by Italian products, for example, despite the fact that in terms of quality and characteristics there aren't big differences."

The figures back up what Ruiz says. While Italy is the indisputable leader in imported shoes in China with a market share of 26.5 percent after a 10-point gain in only five years, Spain is in seventh position with a market share of 2.6 percent in 2012, according to figures from the Spanish Institute of Foreign Trade (ICEX).

Although, according to FICE, Spanish exports to China increased by 18.2 percent last year to 32 million euros, Spain's share of the market fell slightly.

The problem in many cases is the impact of the economic crisis in Spain on the internationalization of small- and medium-sized enterprises (SMEs).

"It is difficult to reach markets such as China because of the size of Spanish companies, the lack of international support, the crisis and, above all, the lack of lines of credit," FICE's García Lillo says.

"Although China is important in the short- and medium-term, you cannot lose sight of the fact that the effort made by businessmen is in keeping with the position of their products and brands in different markets. Europe is our main customer and 70 percent of our exports go there, and it makes sense for our efforts to be concentrated in that market," he adds.

However, Spanish companies recognize that any delay in trying to expand in China could pose a major obstacle in the future.

Sales of high-quality shoes are incrasing but Spain's market share is stagnating 

"I don't think we've got there too late, but we can't afford to waste time," says Alberto Ros, the head of marketing for Estefanía Marco, which was established in 1980 and is headquartered in Elche in Alicante province. "We're taking the first steps, which are never easy, but there are opportunities.

"The key lies in getting Chinese consumers to try the products, that they give it a chance. They're looking for something different and curiously enough it's not made in China. In terms of footwear, they want European, especially Italian products. Italians believe a lot more in their products and their country's brand, but Spaniards still lack faith in what we do. However, our product is convincing," Ros adds.

It is perhaps for that reason that those taking part in the MICAM in Shanghai are optimistic about the future of Spanish footwear manufacturing.

"During these four years of crisis, we have increased the number of pairs we sell by 10 percent, while the value of sales is up 12 percent," says FICE's García Lillo.

"Spain used to produce footwear that was attractive because of the price, but that is no longer the case. Now the emphasis is on quality and innovation. We will emerge stronger from the crisis because companies continue to work to make themselves more competitive. The current situation has forced them to change their mindset," he continues.

The problem lies in restoring the industrial fabric in Spain, particularly in Alicante, the hub of the sector. "With the crisis, it could be more attractive to manufacture in Spain where production costs have fallen at the same time as they have jumped in China and Vietnam," Estefanía Marco's Ros says.

"But in order for this to be the case, you need to conserve current production, because otherwise no recovery will be possible. There is a lack of help, and at times those just managing to survive give up," he adds.

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