China suppliers exported 3.6 billion pairs of slippers worth US$5.14 billion in 2004. Export sales grew a robust 22 percent and are expected to grow further in coming months as demand from the key export markets continues to rise steadily.
The United States, Japan, United Arab Emirates and Russia are the top export destinations for China-made slippers. Together, these countries imported US$2.5 billion worth of slippers in 2004, accounting for nearly 50 percent of China's total exports of the product.
Regionally, North America is the largest market, absorbing 33 percent of total exports, followed by the European Union at 17 percent and Asia with 16 percent.
Slipper makers in China are beset with a number of challenges, led by the higher cost of key components and materials. Suppliers in the coastal provinces also continue to face electricity and labor shortages, further pushing up overhead costs.
But even with higher production and operating costs, many companies did not raise prices in 2004, opting to absorb the additional expenses to remain competitive.
The following are some of the key trends we see in China's slippers export industry:
• A large number of slipper suppliers will raise prices in coming months in response to higher raw material costs, and the labor and power shortage.
• Competition in the low-end is pushing many companies to shift their production focus to the midrange and high-end. This will make them more competitive and at the same time increase their profit margins.
• Many of those companies that will not raise prices and will continue producing low-end slippers are likely to use lower-quality material to cut costs.
• Some companies will also be producing more leather slippers in response to higher demand from the EU. But even with growing demand from the EU, the US will remain the country's top export market for slippers.
• Many suppliers are increasing their R&D focus on developing new designs. However, making slippers more comfortable is the main focus at most product development teams in China.
• The eastern province of Jiangxi is emerging as a major hub for slippers, especially for leather models, which are priced at least 20 percent lower than those made in Zhejiang.
China's 875 export makers offer rubber, plastic, genuine/synthetic leather, fabric and natural-material slippers. Almost all slipper manufacturers specialize in just one or two types, usually those that are made using similar machines such as rubber and plastic, or leather and fabric models.
In this report, only a little over 10 percent of featured suppliers produce all types of slippers and the majority offer plastic and rubber as their main lines. The Products & Prices section in this report discusses the main features of each type of slipper and their price ranges. It also explains the differences among low-end, midrange and high-end models in each product category.
Industry Overview
Increasing production costs coupled with keen competition in the industry have been thinning profit margins of slipper makers in China, pushing many of them to increase export prices in coming months. Many suppliers are also shifting their focus from low-end to midrange and high-end slipper manufacture, which yield higher profits.
Prices of China-made slippers are expected to go up by about 10 percent in the next 12 months due to a number of factors that have been increasing makers' operational expenses. Raw material costs, which account for as much as 50 percent of a slipper's price, have been continuously rising. The cost of PU resin, one of the main materials for soles, increased from about US$1,100 per ton in February 2004 to more than US$1,800 by year-end.
In addition, the labor shortage that has been affecting nearly all industrial provinces in China's coastal regions is forcing companies to offer higher wages to retain or attract skilled workers, spend more on training, and improve factory and dormitory conditions. Over the past year, these measures have added at least 10 percent to most companies' operating costs.
The shortage of electricity in industrialized parts of China is likewise presenting a challenge to suppliers. Many have had to purchase generators in order to keep production running during the frequent power cuts.
Even with higher production costs, many slipper companies could not raise prices in 2004 because of intense competition in the industry. Growing overseas demand for China-made slippers has encouraged more and more companies to join the line, especially since production does not require high-technology investments. In addition, many slipper makers that used to focus exclusively on the domestic market have ventured into overseas trade, taking advantage of the China government's decision in 2004 to lower the registered capital required in acquiring export licenses.
Competition is especially severe in the low end, the line offered by most China suppliers. Prices of low-end slippers have dropped by up to 30 percent in the past five years, resulting in extremely low profit margins for makers. Because of this, an increasing number of suppliers that can afford to invest large amounts in R&D are now moving into more upscale production. Even some of the midrange makers are following suit, though to a lesser degree.
Apart from better-quality materials, design is a major element in the production of midrange and high-end slippers. Since their manufacture requires stronger R&D capability, only a few suppliers are currently producing these types of slippers. This enables companies to raise prices of their midrange and high-end slippers to compensate for overall higher production costs, without the risk of losing potential orders.
The prospects of higher profits have also encouraged some suppliers to shift from plastic to genuine leather slipper production, especially since overseas demand for the latter is growing, particularly in the European Union.
Supplier Profile
Beijing Chaolongda New Science and Technology Co. Ltd
Beijing Chaolongda is an ISO 9001:2000-certified exporter engaged solely in the production of indoor slippers. Established in 1997, this Japan-invested company has a 10,000sqm factory in Beijing and employs 560 workers.
All of the company's output is directly exported to Japan, with OEM buyers accounting for 50 percent of shipments. Export sales reached US$5 million in 2004, up 10 percent from 2003. With growing demand from its buyers in Japan, Beijing Chaolongda expects export sales this year to surge by 20 to 50 percent.
Products
Beijing Chaolongda offers indoor slippers with rubber, plastic, fabric, genuine/synthetic leather and naturalmaterial uppers, with each type accounting for an equal share in production.
Fabric slippers can have uppers made of fleece, cotton, linen, suede, satin and printed flock. Cowhide and sheepskin are used for genuine leather models. Pigskin is also being used not just as upper material but also for the midsole.
Most of these slippers have TPR outsoles, but PU, EVA and PVC are also being used.
Slippers are priced from US$1 to US$15 per pair. Models with plastic, rubber or fabric uppers are priced US$1 to US$2.50 per pair, while those with synthetic leather uppers are US$2 to US$8. Slippers with genuine leather uppers can go for as much as US$15 per pair. Prices are likely to go up 10 percent in coming months due to higher material and labor costs.
Materials and components such as plastic, leather, fabric and beads mainly come from local suppliers. These can also be imported, but usually only on buyers' requests.
The company invests US$50,000 annually in its 15-person product development team. With readily available materials, the team can produce samples in three to five days. Some of its new designs include slippers in bright colors and with printed patterns or bead trimmings.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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