Bright opportunities for subcontracting in the shoemaking industry
The local shoe making industry has suffered losses as a result of import liberalization which opened the doors to hard-to-beat competition from China.
Jose Marquez of CatMar Shoes in Marikina City recounts the story of how he survived the crisis that befell the industry through mutually advantageous subcontracting deals with other companies.
“In the beginning, Chinese manufacturers produced items that were cheap, but poorly designed and made. In time, however, with experience, international exposure and technological innovation, they were able to mass produce cheaper and better-looking footwear.
In contrast to Marikina, Chinese enterprises have access to high-quality and competitively priced raw materials. The international subcontracting experience allowed the Chinese shoe industry to export highly competitive products to the Philippines and the local shoe industry has been adversely affected by the influx of imported shoes. Right now, majority of raw materials used by the industry come from China and even large department stores have accommodated these cheap competitors in their shelves.
“There are local importers who aggressively market these cheap products and even Baclaran has become a viable market for them. The quality is comparable to Marikina except that the total cost to produce one pair amounts to just my production cost, without mark-up. The craftsmanship is suspect but these are tough times, so I can’t fault people for preferring the cheaper imports.
Fortunately, there are still large local buyers/exporters who continue to subcontract orders to small firms like CatMar Shoes. Jose has been one of the main independent suppliers to Rusty Lopez for many years.
Jose believes that subcontracting benefited his business by sharpening the skills of his workers and honing his own enterprising capability in meeting the strict quality and delivery demands of foreign importers.
During its most difficult times, CatMar Shoes’ strength caught the attention of the owners of Rusty Lopez, who are Marikina-born shoe entrepreneurs themselves. They have since maintained a rewarding business and personal relationship with the Marquez couple.
“We had the opportunity to go to Hong Kong with the Rusty Lopez owners at their expense, and we saw some of the new designs that were coming out then. We hope to go back and visit places in China where the raw materials and machines for shoemaking are sourced. That way, we will be able to see the shape of the competition and be able to meet them on their terms.
A decade of mutually beneficial partnership is a long-time in any business. Strictly speaking, the ties that bind both companies must be a very secure one. Marquez says his margins are down compared to those during the peak times in the 80s, but it comes from a steady stream of income from placement of regular orders.
In any contracting relationship, producing to order is a prime source of security in the partnership. The understanding that the contracting parties play up their respective competitive advantages in the contractual arrangement – financial and marketing support as well as raw materials supply from Rusty Lopez; highly-skilled labor, quality production and on-time delivery from CatMar – strengthens the basis for the engagement. The designing ability of the CatMar owners also assures Rusty Lopez that his local partner can adjust quickly to constantly changing fashion trends.
Over a decade, the partnership has also blossomed into friendship.
From Dreamers, Doers, Risk takers, Vol. 2: Couples in business published by SERDEF and UP ISSI.