5 Aug 2008
Giants Steps(HKTDC Fashion - Footwear, Vol 02,2008)
Sports & Casual Shoes
Making great strides in new markets, sports and casual shoe manufacturer Jumbo Holdings Development Ltd is glad it did not drag its feet whefn taking an all-important strategic step to change course.
The moment came in 2004/2005, when the company made a hard-nosed decision to ease away from its then main market, the US, and switch to Europe, the Middle East and Australia.
"Management foresaw problems developing in the US market," relates Sales Manager Sammy Tseng. "The war in Iraq was already draining the American economy, and there were signs that the US dollar was starting to weaken. We couldn't see any growth potential."
Jumbo, however, found Europe more promising. "We were closely watching developments there as the EU was taking on new shape and the economies of countries such as France and Germany were picking up," Ms Tseng adds.
The firm's far-sighted leaders were proved right soon after, when the US economy became plagued by a weakened currency, a depressed Wall Street, rising unemployment and a sub-prime crisis. The EU, meanwhile, continued expanding, with every new member country enjoying greater prosperity and improved spending power.
"We have now re-positioned ourselves as a major supplier of sports and casual shoes to Germany, Italy and France, while getting toeholds in the main East European markets of Russia, Poland, Hungary and Bulgaria," advises Ms Tseng.
"We've also expanded to Australia, Turkey and the Middle East, including Dubai," she adds. "We're now concentrating on East European countries, too, because their economies should also pick up and we're already in on the ground floor."
Jumbo makes 180,000 pairs of sports, hiking and casual shoes for men, women and children every month, in addition to large amounts of outsoles for OEM orders.
"We have adopted a contingency plan for 2008, given the current volatilities in global currencies, which is to rely more heavily on the Chinese mainland market," Ms Tseng says. "This year, 70% of our production is sold to the mainland and the remaining 30% exported."
Boasting an annual turnover of about US$25m, Jumbo has a good grasp of coming footwear trends.
"There will be a crossover between fashion and sports shoes," Ms Tseng reckons. "More and more multinationals are allowing casual dress on Fridays when staff tend to don sports outfits and trendy footwear that is both sporty and fashionable, with a splash of eye-catching colour thrown in."
She points out that the current operating environment is fraught with challenging factors that call for prudent strategies.
"The huge surge in the price of oil, for example, is affecting just about everything," says Ms Tseng, explaining that prices for basic materials such as PU, TPR and moulded EVA are spiralling.
"We've become extra careful about contracts," she advises. "Our quotations are good for exactly one month. After that we have to adjust them. We ask for a 30% deposit when an order is placed, to cover the cost of the basic materials."
Besides, she says, freight rates are also continually rising. "That makes it even more important to meet production schedules and deliver orders to the container port - usually Yantian - precisely on time."
Furthermore, new labour regulations on the Chinese mainland have also added to production costs. "So, we will try to use yet more sophisticated shoemaking machines in preference to semi-skilled labour," Ms Tseng says.
Still, the enterprise will shortly be looking to add "several hundred" workers with the recent completion of an extension to its plant in Dongguan. "Our manufacturing facilities are fully equipped to carry out almost all procedures involved in shoemaking," she claims.
"We have a good reputation as a caring employer and don't suffer from worker churn," adds Ms Tseng, citing pleasant and well furnished quarters with recreational facilities. "Every Saturday night, the karaoke lounge on the top floor of the seven-storey quarters swings into action and everybody has a great time."
With a dedicated workforce in high spirits, Jumbo Holdings Development Ltd will certainly be able to set foot on more new markets and land even more orders in the future.
TEXT BY GEOFFREY SOMERS