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Sunglasses: Countermeasures to spur trade

Makers prepare for possible price competition, labor shortage and rising material costs.

Facing decreasing exports, China suppliers of sunglasses are adjusting business strategies to address prevalent industry challenges and boost sales.

In 2009, overall shipment volume declined more than 10 percent YoY to reach just over 800 million pairs, according to customs data. The value of outbound orders fell 10 percent, amounting to $714 million.

  This pair of fashion sunglasses from Sino adopts a PC or TR-90 frame with polarized AC, PC or cellulose triacetate lenses. Clear rhinestones are placed on the temples.
With these reductions, heightened price competition is imminent as makers decrease quotes to attract more buyers. This is especially difficult for businesses focusing on the low end, the majority of which are pushed into working with marginal profits to retain existing clients and skilled employees.

Manufacturers also struggle with the labor shortage, as many have not yet recovered fully from last year's mass layoffs. After downsizing operations in early 2009, companies lacked the needed manpower once orders started to pour in. The situation was compounded by the recent Chinese New Year break as rural workers went back home for the holiday, lessening the number of available personnel.

For this reason, suppliers are being cautious when undertaking orders as lead time is still affected in certain cases. To keep the labor force stable and minimize the effect on production, factories give bonuses to employees who stay and report back promptly to the plants. Moreover, those who recruit their relatives can receive additional incentives.

Makers are dealing with rising material costs as well. Apart from the depreciation of the US dollar and increasing crude oil rates, previous measures to counter the economic slump are now affecting spending for manufacturing inputs. During the financial crisis, component providers maintained lower supply stocks and smaller groups of personnel to minimize losses. Consequently, similar to the labor situation, resource producers were caught unprepared when demand surged. Many were forced to pay overtime or hire more employees to process requirements, heightening the increments in operating costs.

As a result, sunglasses factories saw overall manufacturing expenses rise 5 percent. Rates soared 10 percent if the materials and components were imported.

Nevertheless, companies have managed to keep quotes relatively stable in past months. One reason for this is businesses often shoulder the added costs despite lower profit margins to attract clients and ensure viability.

Moreover, makers procure materials all at once rather than by batch to monitor the supply chain and avoid paying future rate adjustments.

Alternatively, when sensing price increases, some factories inform buyers of the latest cost fluctuation to help justify any needed augmentations and ease transactions.

To stimulate sales, plants are tapping domestic and emerging destinations after orders to the US and the EU shrank 15 to 70 percent overall in 2009. Efforts center on South America, the Middle East, non-EU countries and Southeast Asia, where the average annual growth rate is at least 5 percent.

The main challenge in entering developing markets, however, is the unfamiliarity with import and export policies. To cope with this, suppliers hire trade staff who know the locations or are proficient in the native languages. To keep abreast of local trends and provide better customer service, makers attend international trade shows or set up sales branches in target countries, including Brazil, Russia, Iran and Turkey. This way, businesses can communicate with clients easily.

In addition, some tier 1 companies boost competitiveness and profitability by assessing buyers beforehand, gauging whether customers will provide reasonable profit margins or pay promptly. Those procuring OBM designs are also preferred.

Through this process, sunglasses suppliers utilize their manufacturing and R&D capability efficiently.

Clients benefit as well, receiving specialized products and services.

Further, suppliers said there are some opportunities stemming from recent challenges. For instance, factories are more likely to gain favorable policies or subsidies from the government. Moreover, the situation is weeding out companies that are unable to cope, resulting in a more concentrated industry.

Operations, R&D upgrades
Products & prices
Production hubs

  Xiamen Gensun's pair of sports sunglasses adopts injection-molded TR-90 frames and temples, and polarized TAC lenses.
Operations, R&D upgrades

China makers of sunglasses are improving production to maximize raw materials and lower defect rates.

In line with this, suppliers are installing computerized management systems such as ERP to reduce overhead, control workflow and enhance efficiency. The program also eliminates dependence on individual workers.

Moreover, factories are outfitted with new equipment, including plastic-injection and lens-coating machines.

To strengthen R&D, companies put up design centers together with well-known science and technology institutes, including Zhejiang University.

Plants also get specialists and skilled workers to speed up the release of new models.

Many leverage CAD, CAM or PDM software as well.

As a result, more makers are turning out original styles, which command higher profits than OEM versions.

But despite efforts to innovate, product imitation is becoming a major concern among suppliers. Specifically, there are cases where manufacturers report missing samples of original designs, and find later on that other companies have released styles similar to that.

To counter the situation, businesses require workers to protect trade secrets and other proprietary information. Molding subcontractors are also made to sign confidentiality agreements.

Products & prices

Sunglasses from China come in a variety of materials and styles.

Frames and temples are available in brass, acetate, NiAg, acrylic, PC, Monel, memory metal and resin, AlMg, stainless steel, CR-39 or titanium.

Temples are commonly in gunmetal, burgundy, white, gold or silver. R&D for these components is focused on detailing, and adopting combined materials and metal trimming in geometric or floral designs.

An increasing number of suppliers are releasing polarized lenses made of PC, acrylic or cellulose triacetate that protect the eyes from glare. The first is the most popular as it is light, durable and shock-resistant.

Lenses protected from UV rays, scratches and fog are also available. Recent releases can come in progressive or color-fading styles.

The majority of factories outsource lenses and process them in-house. To remain cost-efficient, most plants procure low-end and midrange variants from local or Taiwan-invested providers in Jiangsu, Zhejiang, Guangdong and Fujian provinces.

High-end releases use special lenses and other patented components from Italy, Japan, South Korea, Switzerland, Germany, the UK or the US.

Regardless of quality or source, the lenses adopted meet CE and FDA standards.

Suppliers focus on enhancing aesthetics and function of sunglasses. In terms of design, suppliers create versions similar to Revo and Ray-Ban styles.

Further, sports variants come with more practical 10-degree curved lenses and rubber temple tips. TPR is also used for the tip and nose pad to heighten comfort.

Prices are mainly determined by the components adopted, including frames, lenses and trimming.

Low-end sunglasses are quoted below $1.80. They have brass, NiAg, acrylic or PC frames and temples. The lenses are PC or acrylic with a mirror coating.

Locally sourced materials are used for the nose pads, hinges and temple tips.

The majority of releases are promotional items. Some offer UV400 protection.

Midrange models are $1.80 to $4.50 for plastic types and $1.80 to $7.50 for metal pairs.

Monel, memory metal, AlMg, stainless steel, CR-39 or acetate frames and temples are usually fitted with acetate temple tips.

The lenses are CR-39 with multicolor, gradated mirror or Revo copy coating. These have UV400 protection, and may be embellished with acrylic crystals.

High-end plastic and metal variants exceed $4.50 and $7.50, respectively.

Designs adopt imported stainless steel, titanium, acetate or memory resin frames and temples. The latter can be engraved or electroplated in gold.

Releases are also fitted with polarized lenses and have Revo mirror coating. Add-ons include an MP3 player, FM radio, compass and flash disk functions.

With rising operating costs, quotes increased about 10 percent YoY in 2H09.

Most suppliers plan, however, to keep rates stable in the next six months, although prices of high-end models may increase up to 10 percent due to the additional outlay.

Production hubs

Fujian, Zhejiang, Guangdong and Jiangxi provinces are the major sourcing centers of sunglasses in mainland China.

Xiamen in Fujian accounts for 50 percent of overall exports for the line. Dubbed as the Sunglasses Production Hub by the National Light Industry Council, and Optometric and Optical Association , the city ships mostly midrange and high-end models.

The area hosts more than 20 suppliers and exporters, 90 percent of which are Taiwan-invested as the two locations have long-standing relations. It boasts mature auxiliary industries as well, including those for electroplating and lenses.

Most Xiamen makers were unaffected by the gloomy economic situation. Many of those with an established presence within China increased domestic sales by 30 percent to manage turnover.

Additionally, the focus on midrange and high-end models since 2007 helped maintain reasonable profit margins despite fewer items per transaction.

Wenzhou in Zhejiang, on the other hand, emphasizes low-end and midrange releases.

The city is currently developing an electroplating industry, but most suppliers still prefer to subcontract the step. Midrange models are often processed in Guangdong, which is known for high quality.

Companies in Shenzhen continue to focus on midrange and high-end fashion sunglasses. More than 70 percent of large makers are Hong Kong-invested.

The area is expected to start construction on a new industrial development zone in 2010. It will accommodate production, sales and R&D centers.

Approximately 40 companies from Wenzhou, Shanghai and Taiwan have invested in Jiangxi to leverage favorable policies, and lower rent, power and labor costs.

Although Jiangxi is a relatively new hub, efforts are underway to create a 1.5sqkm eyewear industrial zone, incorporating R&D, assembly, electroplating, trade and logistics.

This article "Sunglasses: Countermeasures to spur trade" is originally posted in Global Sources.

Note: All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.

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