Well grounded

City's shoe companies taking more steps to expand global presence

Wenzhou is the shoe capital of China.

As of September this year, the city in Zhejiang province exported 517 million pairs of shoes worth $2.92 billion (2.2 billion euros), up 5 percent from the total export volume of last year, figures from the Wenzhou entry-exit inspection and quarantine bureau show.

With a six-month continuous export increase from this March, the city seems to have weathered the financial crisis well.

Millions of pairs of shoes from Wenzhou are shipped overseas, but foreign footwear companies still lead the international market.

"Wenzhou is a big base of the footwear industry, but not a strong one. Wenzhou companies need to transfer from being original equipment manufacturers (OEM) into brands with a global impact," says Xie Rongfang, secretary-general of the Wenzhou shoes and leather industry association.

The "internationalization" of local footwear brands has already been written into Wenzhou's 12th Five-Year Plan (2011-2015).

About 3,000 shoes companies are registered in Wenzhou, but only a few of them have won the industry's Chinese "Well-known Trademark" accolade.

"More than 60 percent of the shoes in the world are made in China, but our high-end shoe market is dominated by foreign brands," says Zheng Kangxiu, chairman of Kangnai Group.

Kangnai used to be the OEM for Italian shoe companies. Zheng saw how a pair of shoes from Kangnai was bought by Italian fashion companies for $50 and sold back in China with a foreign label for 3,000 yuan (340 euros).

"We started our business from the bottom of the industry, but we should not stay there forever," Zheng says. He believes that a "first-class corporation" should have its own brands and marketing channels.

From the first overseas shop in Paris, the fashion center of the world in 2001, Kangnai has set up more than 200 exclusive shops in 20 countries and regions in the past decade.

The average price for Kangnai leather shoes sells for 70 euros and they are popular among European consumers for its reasonable price. Zheng believes advertising also plays a part.

In light of Kangnai's overseas success, a few of local shoe brands have also started establishing themselves in the international market. Aokang opened its first overseas exclusive shop in the Indian capital New Delhi in 2008, and Red Dragonfly built a 400-sq-m image store in the Westfield Shopping Center in Los Angeles.

"Second-tier companies should keep up with major brands such as Kangnai and Red Dragonfly to establish their labels, and leading Chinese shoes brands can try to achieve an even bigger international market," Xie Rongfang says.

Building international brands requires marketing channels on top of excellent quality and design, analysts say.

The Gold Emperor brand, which has maintained a 30-percent year-on-year increase in business since 2005, recorded $8.30 million of export volume till the end of November this year. Its rapid growth benefited from its ISO 9000 quality certification in 2005.

To stand out from hundreds of shoe companies in Wenzhou, the label set quality as the most crucial factor in its manufacturing process since it started in 1993. By 2005, it gained the first ISO 9000 certification in Wenzhou.

"The ISO 9000 certification gave us a higher reputation for our shoes among overseas clients and shortened the application time for customs procedures," says Zheng Shili, the company's vice-general manager. The certificate also helped the company save about 2 million yuan in customs inspection fees every year.

The company also recruits numerous graduates who majored in chemistry for its inspection center every year.

"We make sure our shoes don't contain any chemical compositions considered toxic by the European Union," Zheng says. "We have an even higher standard for our products to make sure our business won't be hampered by trade requirements."

Gold Emperor's design group helps the company satisfy its clients, particularly Deichmann, the biggest shoe retailer in Europe and the second-largest one in the world, Zheng says.

The company's research and development department offers more than 2,000 new designs every year and 300 of them can be found in shops.

"We have more than 300 employees in our design group and all the designers are familiar with Western fashion trends," Zheng says. "Our clients often feel quite satisfied with our designers' work, which attracts more international clients for us."

Aokang, another leading shoe brand, recently announced its joint research and development center with Valleverde, the Italian leading footwear company in Rimini, Italy, two months ago. It was also the first time for a Wenzhou brand to move its design center overseas.

"The higher level of cooperation makes Wenzhou an important participant in overseas markets," says Xie Rongfang. The Wenzhou Shoes and Leather Industry Association arranged a delegation in October and Italian government officials accompanied the group during the entire journey.

Still, the European business environment is the chairman's bigger concern. The European Union expanded anti-dumping duties against Chinese and Vietnamese footwear companies for 15 months last December, and constantly raises the requirements for importing shoes.

These barriers could dampen Chinese businessmen's confidence in the European market even though they see great demand in it, Xie says.