As part of a strategic transition to fully subcontracted production, German sporting goods company Adidas will close its only company-owned apparel factory in China at the end of October.
Following the closure of the Suzhou factory which employs 160 workers, Adidas will continue to source from more than 300 supplier factories in China.
Adidas spokesperson Sabrina Cheung, said China will remain a major source of goods and will still be the company’s “main global production site.”
Chen Qi, a spokesperson with Adidas Greater China, said the closure will allow the company to “realign its global resources” and restructure its business both in China and elsewhere, improving efficiency. The company now has few wholly owned factories anywhere.
Some analysts consider the move a response to increasing costs in China, where rising labour and raw material prices have driven some manufacturers elsewhere in Southeast Asia. Adidas’ main rival Nike closed its only fully owned shoe factory in China in 2009.
Zhu Meng, from Beijing-based Adfaith Management Consulting said: “Outsourcing manufacturing could help foreign sportswear brands increase efficiency and reduce costs,” and concluded “the move shows global clothing companies are gradually losing interest in China as a manufacturing base.”
Workers at the factory suspected rising salaries may be behind the closure, which followed wages rising by RMB400-600 from around RMB1100 (US$175) prior to 2010.
Ma Gang, a sportswear market watcher in Chengdu, said average worker salaries at a Cambodian Adidas factory were only $130 per month. Therefore “closing the factory could also help Adidas save operational costs and focus on marketing and sales in China.”
But Chen denied any direct linkage between the closure and salary increases.
Some Chinese consumers did not seem bothered by the closure. In Beijing, 28 year old sportswear fan Yang Xiaoqi said: “I care more about the product designs and prices rather than production sites. With similar prices and designs, I prefer those made in China rather than Southeast Asian countries, as I think the former ones have better quality.”
Western companies such as Gap and H&M as well as Chinese domestic brands such as Li Ning, 361 Degrees and China Dongxiang have increased competition, and with China’s economic slowdown, sportswear brands have encountered a decline in sales.
After entering the country in 1997, China is now Adidas’ second largest market with over 6000 stores. A source at the Suzhou factory said the company may move some apparel production to Myanmar. This has not been confirmed by Adidas, but would seem to be in line with current trends.
