Background
With annual economic growth in China running at 10% and living standards in the major cities rising, the world's most populous country is now ready to accept well crafted and well designed footwear from Latin America.

With a total population of 1.325 billion inhabitants in 2007 and still growing, China consists of 22 provinces, five autonomous regions, two Special Administrative Regions and three municipalities. Some of the provinces have populations as large as Brazil and France and there is a burgeoning middle class the length and breadth of the country with disposable income for western consumer goods and fashion, especially in the huge conurbations such as Shanghai and Beijing.

The global marketing and reach of Chinese footwear created the perception that China was the main threat to western shoe manufacturers that could not compete either in price or volume with Chinese production, even though, some said that in terms of quality, Chinese manufactured shoes could simply not match up to western workmanship, fashion and technology. Thus, the solution of the stylish Italian and Spanish manufacturers was to exploit market niches in China itself, selling quality and fashion to the emerging middle classes. 

However, now China is in the WTO and was obliged to lower import tariffs on imported footwear from 25% to 10% as from the beginning of 2005. This, and other bureaucratic changes have opened the door to Latin American footwear manufacturers to target specific groups in China with disposable income and western tastes.

Niche marketing is the key to enter the Chinese marketplace with a clearly defined middle class target - remember, due to the size of the population, even 'niches' are huge when compared to niche markets elsewhere.   In fact, the Brazilian Footwear Association (Abicalçados) has reached the same conclusion. In an interview with BBC Brazil senior Abicalçados consultant, Enio Klein, stated that Brazil intends to export high quality fashion shoes to China by air freight.      This is in order to market Brazilian flair and styles to the 370 million women in China who spend 2% of their disposable income on footwear and consume 4.5 pairs per year. Yearly income for this target group, according to Mr. Klein, is 17,000 Yuan or US$2,300. A survey in Shanghai by China Shoeexpo provided solid evidence that locally manufactured footwear does not satisfy the demands of the new female middle classes which means that a gap in the market is there to be exploited.

Footwear Consumption in China Itself

In 2002, China consumed 2.767 billion pairs of shoes or 22.2% of the world total, or just over 2 pairs per inhabitant with this figure due to rise to over 3 billion pairs in 2008, according to SATRA. Bearing in mind that shoe consumption in the United States is approximately 6.5 pairs per person/year, it is reasonable to assume that middle class Chinese with western tastes and disposable income will buy at least 4 pairs per year which can de extrapolated to mean almost 800 million pairs of shoes, assuming that ONLY 15% of China is inhabited by the "new middle classes" in the cities. Even this conservative estimate of the world's largest "niche market" should make all western manufacturers aware of the enormous potential in China itself  - even without mentioning the rest of Asia.

Another important factor is the gradual revaluation of the Yuan, which was pegged at 8.28 Yuan to the US dollar until July 2005. Since then the exchange rate is has risen to 7.51, which is a 9.3% revaluation in just over two years, thus making imports cheaper for Chinese importers and exports easier for foreign manufacturers wishing to enter the Chinese market.

Footwear Consumption in Five Major Chinese Cities

In order to arrive at a realistic yet conservative estimate of potential footwear demand by middle classes with disposable income in major Chinese cities, the following methodology was applied:

- Per capita consumption of 4.5 pairs per person per year, applied to the Chinese middle classes, which may well be an underestimate but this is better than being overoptimistic. In the United States, for example, per capita consumption is 6.5pairs/year - thus 4.5 pairs for middle class consumers in China is reasonable and realistic.

- A percentage of potential consumers from the middle class applied to the total population of the major cities listed below, multiplied by the constant of 4.5 pairs/person/year, giving a good idea of the market potential. 

Potential Footwear Sales to Middle Class in Five Largest Cities in China

Population Source: www.world-gazetteer.com

Starting Off
The best way to get started is in Hong Kong, which is still the commercial gateway to China and South East Asia. The Fashion Access, which takes place in March/April and October every year in Hong Kong, is the show par excellence: an exceptional opportunity to meet new customers and contacts, as well as potential specialist distributors of western consumer goods in China.

Contact: sales@aplf.com