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Challenges in the Global Footwear Market

5th January 2016 | David B. Grant, John Fernie

In this article, David B. Grant discusses CSR issues in the fashion shoe market, illustrated by real cases from around the world.

Challenges in the Global Footwear Market

The turn of the millennium saw the publication of fellow-Canadian Naomi Klein’s book No Logo. Her treatise explored issues of corporate social responsibility (CSR) following from the international outsourcing boom of previous decades, particularly foreign factories producing goods and fashion items in ‘sweat shop’ conditions with long hours, low pay and even child labour. Among the fashion items that she cited were fashion sneakers or shoes, many for large, multinational brands that are considered by consumers as fashion or statement items, particularly sneakers that are endorsed by athletes or celebrities.

However, the issues she identified continue to this day, one example being the Rana Plaza factory collapse in 2013, and thus one might be forgiven for wondering what has really changed. Fashion Logistics, co-authored with John Fernie, explores some of these CSR issues in chapters 2 and 4 that have resulted from the globalisation of fashion supply chains and increasing demand for fashion items.

There are also CSR issues in developed markets, such as the high price of sneakers of US $200 per pair (or about £135 at current exchange rates), that result in ‘sneaker crime’ in many areas of the US, particularly in low-income neighbourhoods where such shoes are unaffordable. While local US authorities do not keep statistics on shoe-related crime, the BBC recently listed a few poignant examples. Last February, an Ohio teen was killed while attempting to steal a new pair of ‘Air Jordans’ from a man in a car park. In April 2014, a 15-year-old boy shot a 14-year-old after he was accused of jumping a queue to buy new ‘Kanye West’ branded shoes. Finally, 15 men were caught on CCTV in 2013 stealing sneakers from a FootLocker store in Georgia after ramming a truck into the front window.

Former National Basketball Association player Stephon Marbury, now plying his trade in China, believes that one solution to this problem is to produce an inexpensive but stylish sneaker that is affordable for all consumers, especially lower-income groups. He is launching his own branded sneaker line, Starburys, intended to sell at $15 (or less than £10) that not only offer value for money but should also reduce sneaker-related crime. However, the problem is not that easy to solve. As the BBC rightly points out, the cost of a pair of sneakers is not just related to manufacturing in low labour-cost foreign markets.

All activities that go into creating a product such as shoes and sneakers, including design, manufacturing, shipping, branding and retailing, form part of the product’s value chain. According to the America Apparel & Footwear Association, 70 percent of the value of shoes sold in the US comes from work done in the US. This includes design, choosing the materials, hiring sponsors, spending on advertising, and retail. In the case of sneakers, companies have to spend a lot to get celebrities like Michael Jordan or Kanye West to endorse or even help design them, and it is commonly accepted that consumers are likely to pay a lot for shoes worn by their idols.

Another issue related to shoes is what to do with them at the end of their usable or fashion lifecycle. A paper presented at the recent International Conference on Logistics and Transport in Lyon, France, discussed the recycling of shoes in Thailand. The authors, Jureerut Somboon and Korrakot Tippayawong, investigated whether what they termed ‘the post-consumer shoe market’ could benefit from lean production techniques, which are discussed in chapters 3 and 5 of our book. In this reverse logistics supply chain, used shoes are imported from markets across Southeast Asia through the Laemchabang port located in Bangkok, and are delivered to the Rong Kluea market for refurbishment or remanufacture and then resale in that and other Thai markets. Purchasers of these shoes include Thai or local citizens as well as tourists.

The reverse process flow here has several steps. Middlemen import used shoes for about $0.55 per pair and then sell them to merchants in the market for an average of $3.50. These merchants are classified into four groups according to the grade and price of products they select. Used shoes are separated, selected for the appropriate process, washed, repaired and ornamented, and finally re-coloured by painting. Subsequently, the shoes are resold at both retail and wholesale prices ranging from $1.15 per pair in group 4 to $15 in group 1.

The authors conducted a value stream mapping exercise to find where the largest activity times were in operations. The total process takes 512 hours from middlemen orders to repackaging for sale. The largest activity times that were considered necessary but non-value adding were drying the shoes after washing (27 hours) and transportation to wholesalers and merchants in other Thai provinces (25 hours).

In the question and answer session after the presentation, I suggested to Dr Tippayawong that the drying process time might be reduced if fan-assisted drying could took place – Thailand is hot but also humid. Clever readers would argue that the power needed for the fans is not necessarily environmentally-friendly and also adds cost. However, I also suggested that a solar panel might provide sufficient power for the fans and reduce operating costs, while recognising that there is an initial investment in the hardware. This is just one of the sustainability versus trade-offs that we discuss in chapter 9.

A common theme in both examples is cost or price as it relates to lower-income groups either in the US or developing nations. A recent journal article by Raja Khalid and colleagues argues for a stronger link between sustainable supply chain management (SSCM) and related social issues at the ‘bottom of the pyramid’ (BOP), a phrase that refers to the four billion people in the bottom income tier of the world, living on less than $9.05 per day. The authors suggest several SSCM techniques that are applicable to BOP research as well as their call for more integration between these concepts, which represent two elements of the triple bottom line framework for social, economic and environmental management. Again, these sustainability notions are discussed in chapter 9 of Fashion Logistics, as well as in Sustainable Logistics and Supply Chain Management co-authored with Alexander Trautrims and Chee Wong.

If society seriously addresses these issues in a meaningful and lasting manner, we may finally be able to overcome the barriers that Naomi Klein identified over fifteen years ago.

Logistics, Operations & Supply Chain Management

Kogan Page publishes groundbreaking books on logistics and transport, operations, supply chain management, and procurement. Our authors are leading thinkers in the field, sharing their insights from academia and industry. Follow us on Twitter @KPLogistics.

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