Slippers Report — Industry Overview — Sample Pages: Sourcing Slippers from China

Industry Overview: Slippers

Increasing production costs coupled with keen competition are thinning the profit margins of slipper makers in China, pushing many to raise export prices in coming months — prices were expected to rise by about 10 percent in the next 12 months. Raw materials account for as much as 50 percent of a slipper's price and have risen continuously: PU resin, a main sole material, climbed from about US$1,100 per ton in February 2004 to more than US$1,800 by year-end. The labor shortage across the coastal industrial provinces forced higher wages, more training spending and better factory and dormitory conditions, adding at least 10 percent to most companies' operating costs in a year, and electricity shortages pushed many suppliers to buy generators to keep production running through frequent power cuts.

Even with those costs, many companies could not raise prices in 2004. Growing overseas demand keeps attracting new entrants — slipper production needs no high-technology investment — and domestic-market makers moved into export after the government lowered the registered capital required for an export licence in 2004. Competition is severest at the low end, where most suppliers sit and where prices have dropped by up to 30 percent in five years. The response traced in the overview is a move upmarket by suppliers that can invest in research and development: better materials and stronger design in midrange and high-end lines, where few suppliers compete and prices can rise to cover costs, and a shift by some makers from plastic to genuine leather slippers as European Union demand for leather models grows. The industry snapshot counts 875 exporters, 2004 exports of 3.6 billion pairs worth US$5.14 billion, growth of 22 percent and OEM/ODM work at 90 percent of business.

How to Read This Overview as a Buyer

Read the overview for decisions, not background. The cost figures tell you how much room a supplier has to negotiate: a maker absorbing most of a cost increase will either raise prices soon or cut somewhere you cannot see, and both possibilities belong in your order planning. The competition analysis tells you where your enquiry has leverage — crowded, standardised segments compete on price, while design-led segments compete on capability — and the supplier survey turns the industry's own expectations about prices, sales, research focus and capacity into a planning horizon for the year ahead. In this report, the eastern province of Jiangxi is emerging as a major hub for slippers, especially leather models, a fact the full overview develops with production and survey detail.

The overview also frames the 69 profiles that follow it. A profile's prices mean little until they are set against the overview's price trends; a factory's expansion plan means more when two-thirds of its competitors are expanding too. Buyers who read the overview first consistently shortlist better, because they know which claims to test when they reach the profiles and the product gallery.