International manufacturing of athletic shoes -- and Reebok
in particular -- is profiled in this week's U.S. NEWS, with the
report detailing how shoe companies move from one Asian site to
another in search of low-cost labor. Ten years ago nearly all of
Reebok's manufacturing took place in South Korea and Taiwan, but
as the countries become more productive, wages increased. Reebok
then "began shifting out of South Korea and Taiwan, moving its
operations to cheaper markets." Today, most of the work is being
done in China, Indonesia and Thailand, with only 9% being made in
South Korea, and none in Taiwan. Footwear companies are moving
manufacturing plants, because "fluctuations in labor costs can
have a signing impact on a sneaker maker's bottom line." A $70
pair of Reebok's cost $20 to make in East Asia, but after
operating expenses the "sneaker company's profit is just over $6.
New Balance is seen as "sneaking up on its rivals." New Balance
"clings to four of the five remaining factories in the [U.S.]
that actually cut and stitch athletic shoes" and being one of
"the nation's last domestic sneaker makers has turned into a
marketing boon." Worldwide sales jumped 25% last year to $310M
and the company will use money from what it saves in its no
endorsement and reduced ad strategy ($6M a year, compared to
Nike's $200M) to expand output (U.S. NEWS, 6/5 issue).
