Everything that happened as Barcelona, Inter shared a 3-3 Champions League semi-final first-leg thriller - The Athletic
Trump Tariff War: Nike, Adidas, Puma Sports Shoe Supply Chain From Vietnam A Pain Point - Financial Review
The Vomero 18 running shoe on display at a Nike store in New York features thick soles, a $US150 ($248) price tag and tongue labels woven with the message "Made in Vietnam".
That last fact is a big problem for Nike's plans for a turnaround under chief executive Elliott Hill, who this year launched the Vomero 18 to win back runners who have switched to other brands.
Loading...
Financial Times
Sports Shoes' Supply Chain Is Pain Point In Trump's Tariff War - Financial Times
The Vomero 18 running shoe on display at a Nike store in New York features thick soles, a $150 price tag and tongue labels woven with the message "Made in Vietnam".
That last fact is a big problem for Nike's plans for a turnaround under chief executive Elliott Hill, who this year launched the Vomero 18 to win back runners who have switched to other brands. Vietnam has become the global centre of athletic shoe manufacturing — and it is subject to some of the most punishing US tariffs imposed by US President Donald Trump this week.
Trump has said he wants to bring manufacturing back to US shores. Analysts say the more likely effect will be higher prices for trainers, as the US lacks factories with the specialised equipment to make running shoes and workers with the know-how to operate them.
US-based Nike began manufacturing in Vietnam in 1995, through five contract footwear factories, becoming one of the country's earliest foreign investors and contributing to its exports and economic growth. The company expanded its supplier base rapidly in the following years and created thousands of jobs, attracted by the cheaper labour force.
Nike now has 130 supplier-factories in Vietnam producing shoes, clothing and equipment, and the country accounts for half of its footwear production.
Adidas, its Germany-based rival, gets 39 per cent of its shoes from the south-east Asian country.
Trump's new 46 per cent tariff will be layered on top of 20 per cent duties already paid on US imports of athletic shoes with textile uppers, according to the American Apparel & Footwear Association.
Some content could not load. Check your internet connection or browser settings.
Manufacturers could open trainer factories in new countries, but relocating footwear supply chains typically takes about two years, said Chris Rogers, head of supply chain research at S&P Global Market Intelligence. Companies typically plan such changes on a five-year cycle.
Adam Cochrane, a Deutsche Bank analyst, suggested that Mexico, Brazil, Turkey, and Egypt could be alternatives to Vietnam as manufacturing hubs. However, due to the length of order contracts with suppliers, it would take 18 to 24 months for any decision to result in tangible changes on the ground.
As well, Trump has imposed so-called reciprocal tariffs at a minimum rate of 10 per cent on virtually every trading partner. For major footwear hubs such as China and Indonesia, the new rates are more than triple that.
"Finding a cheaper market without leaving the planet is going to be tough," said David Marcotte, senior vice-president of retail at consultancy Kantar.
Nike did not respond to a request for comment. In a quarterly report filed on Thursday, the company said: "We are navigating through several external factors that create uncertainty and volatility in the operating environment, including, but not limited to, geopolitical dynamics, new tariffs, tax regulation and fluctuating foreign exchange rates."
Some content could not load. Check your internet connection or browser settings.
The company last year appointed Hill as CEO after falling into a sales slump as running shoes from smaller competing brands such as On and Hoka grabbed market share.
Its shares plummeted to a nearly eight-year low this week as investors took fright at the costs associated with Trump's new tariffs.
For a footwear brand, "You've got three primary avenues here from a cost mitigation standpoint," said Dylan Carden, analyst at William Blair. "You can push back to get your suppliers [to] charge you less. You can try to push price on consumers, and charge more. Or you can eat it."
Cochrane estimated that Adidas and Puma, another Germany-based brand with extensive manufacturing operations in Vietnam, would need to increase prices in the US by around 20 per cent to maintain gross profit margins following the tariffs, though price rises might spread out over time to curtail damage to market share and operating profits. Both companies could be better off than Nike though, as they sell less in the US, he said.
Felix Dennl, an analyst at Metzler bank, said that Adidas was "well positioned" for price increases due to its "broad-based brand momentum in both lifestyle and performance segments".
Puma, on the other hand, would find it "significantly harder to pass on increased costs", as its efforts to rebrand as a premium shoemaker have so far failed to gain momentum — one of the reasons for the replacement of Puma chief executive Arne Freundt on Thursday.
Overall, sporting goods manufacturers would "scrutinise their product range in the US", Dennl said, phasing out less profitable products.
Adidas declined to comment. Puma said it had "a multi-country-of-origin strategy and many of the long-term partners in our supplier base can produce in several different countries".
Vietnam received a new wave of manufacturing investments during Trump's first term in office, when he started a trade war with Beijing that prompted companies to shift production away from China. Suppliers to footwear manufacturers in Vietnam are not only local companies, but also South Korean and Taiwanese groups operating there.
Some content could not load. Check your internet connection or browser settings.
The migration to Vietnam led its trade surplus with the US to balloon to $123.5bn last year, the third largest after China and Mexico. The White House used trade balance figures to calculate each country's "reciprocal" tariff rates.
Cochrane, the Deutsche Bank analyst, said that the trainer brands might have to "reduce order volumes and reroute more products to Europe, the Middle East and China", which could result in increased competition in those regions.
In the US, where 99 per cent of footwear is imported, Carden said the market might become more like the Soviet Union, when Russian residents paid foreign visitors a handsome premium for Levi's jeans.
"We're behind the Iron Curtain," he said.
Data analysis by Clara Murray
A Revolution Is Under Way In India's Trainer Industry - BBC
Priti GuptaTechnology Reporter
ShareSave
India's trainer market is attractive for overseas firms
It's likely that you have not heard of Taiwan's Hong Fu Industrial Group, but look down on a busy street and you may well see its products.
Hong Fu is the world's second-biggest maker of trainers (sneakers) supplying shoes to Nike, Converse, Adidas, Puma and many others. It makes around 200 million pairs of sports shoes a year.
So when it made a big investment in India's market, the footwear industry took note.
Hong Fu is currently building a giant plant in Panapakkam, in the state of Tamil Nadu in south eastern India. When fully operational, some time in the next three to five years, it will make 25 million pairs of shoes a year, employing as many as 25,000 workers.
The project has Indian partners, including Aqeel Panaruna, the chairman of Florence Shoe Company: "The international market is saturated and they [Hong Fu] were looking for a new market," he explains.
"There is a drastic increase in non-leather footwear in India. It has huge potential," Mr Panaruna added.
The Indian government is keen to attract such investment, hoping it will raise standards in the footwear industry and boost exports.
To spur the industry, last August the Bureau of Indian Standards (BIS) introduced new quality rules for all shoes sold in India.
Under those standards, for example, materials will have to pass tests of strength and flexibility.
"These BIS standards are really about cleaning up the market. We've had too many low-quality products flooding in, and consumers deserve better," says Sandeep Sharma a journalist and footwear industry expert.
India has a vast network of small-scale shoemakers
But many in India can't afford shoes from well-known brands.
Serving them is a huge and intricate network of small shoe makers, known as the unorganised sector.
Their affordable products are estimated to account for two-thirds of the total footwear market.
Ashok (he withheld his full name) counts himself as part of that sector, with shoe making units all across the district of Agra in northern India. He estimates that 200,0000 pairs of shoes are made everyday by operations like his across Agra.
"Many consumers, especially in rural and lower-income urban areas, opt for cheaper local footwear instead of branded options," he says.
"Many organised brands struggle to expand their retail footprint in semi-urban and rural areas because we cater to them."
So how will the new government standards affect makers like Ashok?
"It's complicated," says Mr Sharma.
"I think the government is trying to walk a tightrope here. They can't just shut down thousands of small businesses that employ millions of people - that would be economic suicide.
"What I'm seeing is more of a carrot-and-stick approach. They're pushing for standards, but also rolling out programs to help small manufacturers upgrade their processes. It's not about wiping out the unorganised sector but gradually bringing them into the fold."
Making the situation more complicated is that the unorganised sector is well-known for making counterfeit shoes of big brands.
While popular among Indian shoppers looking for a stylish bargain, other countries have long-complained about the losses caused.
Zen Barefoot is trying to popularise barefoot shoes in India
Meanwhile, a host of new Indian trainer-makers are springing up, to serve India's growing middle class.
Sabhib Agrawal is trying to get those buyers interested in barefoot footwear - shoes which, their makers say, are healthy for the foot as they encourage natural, or barefoot, movement.
Mr Agrawal says his company, Zen Barefoot, is unusual as much of the Indian footwear industry is not very innovative.
"There are very few people who are ready to take time and invest in new technologies here. Indian manufacturing is a very profit- first market, ROI [return on investment] driven.
"And in a lot of cases, even the government is not ready to enable these industries through grants or tax relief, which makes it quite difficult."
Comet is one Indian firm looking to innovate.
It claims to be the first homegrown trainer brand that owns the whole production process, from design to manufacturing.
"This level of control allows us to experiment with materials, introduce innovative silhouettes, and continuously refine comfort and fit based on real feedback," says founder Utkarsh Gupta.
He says the Comet shoes are adapted to India's climate and roads.
"Most homegrown brands rely on off-the-shelf soles from the market, but when we started Comet, we realized that these were lacking in quality, durability, and grip," he says.
Change is coming to the footwear sector he says. "The shift to high value is now happening."
"Many high value brands need to move their manufacturing to India. In 3-5 years, we should have a robust ecosystem to compete in the international sneaker market," he adds.
Comet shoes handles its own design and production
Back in Agra, Ashok hopes that the unorganised sector is not neglected amid the growth of India's footwear industry.
"The government should give us accreditation and certificates so our factories don't close down. Once we too are included in the organised sector no one can beat India in the shoe manufacturing industry."
But Mr Sharma says change is inevitable.
"The market is definitely going to shift. We'll see the bigger players getting bigger - they have the money to adapt quickly.
"But I don't think the small guys will disappear completely. The smart ones will find their niche."
More Technology of BusinessBitcoin in the bush - the crypto mine in remote Zambia
The slow but steady advance of driverless vehicles
Subsea fibre cables can 'listen out' for sabotage
Comments
Post a Comment