A Turkish entrepreneur, Bilal Dogan, is starting up a large new factory to make sports and casual shoes in his native country, supplementing the product development and sourcing activities that he has built up in China over the past nine years. The $20 million investment, which he says is not backed by any subsidies, is mainly intended to give a better service to the Ziylan Group, the largest shoe retailer and distributor in Turkey with almost 400 stores in the country, because of many years of fruitful cooperation.
The other important factor that made him decide to set up this factory in Turkey rather than in China, as in his initial plans, is its proximity to the European market, which will allow faster deliveries to local customers, while offsetting labor shortages and rising labor costs in China. It's part of a re-shoring process that has been emerging lately in global footwear trade, as indicated at the recent Manufacturers Forums organized by the World Federation of the Sporting Goods Industry.
While Dogan began to work on this project already a couple of years ago, it can also be regarded as a response to additional duties of up to 50 percent that were unexpectedly imposed by the Turkish government last August on shoes and apparel imported from China, Vietnam and any other countries outside the European Union and the European Free Trade Area. The duties, which are opposed by the European sporting goods industry federation, Fesi, replaced safeguard measures introduced in 2006, and they came on top of the regular import duties charged by the European Union.
The construction of Dogan's new factory is scheduled to be finished at the end of May. It should start operations with two production lines in August. Dogan is negotiating orders with both local and international brands. While some prospective customers are putting pressure on him for urgent deliveries, the Ziylan Group will have priority.
At full capacity, the plant is set to employ about 1,000 workers on a total of 15 production lines, 12 for cold-mounted shoes and three others for vulcanized shoes, using high-tech machinery developed in Taiwan. Run by a new Turkish company fully owned by Dogan, called LSY Shoes Industry & Trade, the new shoe factory will be located in Çorum, an ancient city in the northern part of Anatolia that is also home to some leather workshops and other footwear-related companies.
The project will consist of four modern buildings covering a total of 23,000 square meters, including the administrative offices and a modern warehouse, on 45 acres of land. In three years' time, the whole facility will run on solar energy. Modern logistics will allow LYS to deliver the goods directly to the customers' retail shops in Turkey from the main warehouse.
The shoe uppers will initially come from China, but some of their production will be gradually transferred to Turkey. The soles will come from a Turkish company, Egemen Rubber Sole Industry, in which Dogan has a 40 percent share. Its factory is located in Bartin, but it will be moving to a location closer to Çorum.
Dogan, who is now 41 years old, started his career in the shoe business in Taiwan just after his university education, accumulating a lot of valuable experience in R&D and production while working for many international brands in Taiwan, China and Vietnam. Nine years ago, he set up his own company in China, BSG (Xiamen) Import & Export Co., specializing in the development and sourcing of mostly synthetic sports shoes, sneakers and other types of casual footwear.
Based at Jinjiang, in Fujian province, BSG employs 55 people in R&D and the production of prototypes and small runs for brands such as Kangaroos, Kappa or Steve Madden. The 900-odd models developed by BSG each year are then manufactured at a variety of Chinese factories under BSG's supervision, with a total annual output of between five and six million pairs. It has been using facilities in inland China lately.
More than 50 percent of the production goes to Turkey. Only about 20 percent goes to clients in the rest of Europe and the balance mostly to the U.S. The new factory in Turkey should boost the share of the output going to clients in other European countries. It may also help to diversify the range of products offered, possibly adding leather shoes at a later stage.
The Turkish shoe industry has been facing problems such as the lack of integrated plants. With a production of up to 34,000 pairs per day in its completely integrated facilities, LSY is expected to supply higher-quality goods at competitive prices and with faster delivery times, including servicing of reorders.
