Matt Priest, the president and CEO of the Footwear Distributors and Retailers of America, has loved sneakers ever since he snagged his first pair of Air Jordan 3s in 1987. But the 41-year-old executive knows that splurging for kicks — or any shoes, for that matter — could become much more expensive in the coming weeks as the yearlong escalating trade war between the U.S. and China goes into effect. And that could cost Americans $7 billion more a year for shoes, according to the FDRA.
The Trump administration this month imposed a tariff increase from 10% to 25% on $200 billion in Chinese imports. (That list didn’t include footwear.) After that, China said it would retaliate with tariffs on $60 billion of U.S. imports. Then the Office of the U.S. Trade Representative proposed further tariffs on all remaining imports from China, including footwear and apparel.
“We’re concerned about using the American consumer as leverage in these negotiations,” Priest told FN from his office in Washington, D.C. “There’s a fundamental misunderstanding by the Trump administration that duties are paid by foreign governments or entities, but they are actually paid by American consumers.”
In the last few weeks, large players such as Macy’s, Walmart, the Outdoor Industry Association — which represents more than 1,300 manufacturers, suppliers and retailers — and 170 shoe companies have similarly voiced their displeasure with the proposed tariffs, saying a trade war will hurt their businesses and American consumers even more.
That’s why the efforts of Priest and the FDRA, the voice and lobbying arm of the footwear arena, are more crucial than at any time in the organization’s 75-year history.
Priest said the FDRA aims to consistently rally the industry to “collectively respond to government regulations and federal policies.”
But the group’s efforts also go way beyond lobbying Capitol Hill. It offers members training and consulting on footwear design, sourcing and sustainability, advocacy and sales trend analysis.
What’s more, it has initiatives to help companies address workforce diversity and hosts a weekly podcast, “Shoe-In,” with industry insiders. The FDRA even helps members secure tickets for a White House visit. “It’s how we build relationships,” said Priest. “It’s easy for companies to write a corporate check, but when you have relationships with FDRA staffers, you’re brought into the organization.”
Here, the head of the group talks about trade regulations, alliances with overseas partners and tapping a new generation of talent.
What are the leading issues facing the footwear industry?
MP: “Since consumers have the ability to purchase product anywhere in the world from any device, retailers are trying to figure out the magic number between brick-and-mortar, what their e-commerce presence looks like and how they are delivering product. Couple that with how dramatically sourcing is changing and the seasonality issue whereby [brands] are designing smaller runs more rapidly to push fresh product. Beyond these, it’s about how companies interact with third-party platforms like Amazon and eBay.”
With FDRA’s eye on Capitol Hill, how is today’s political climate impacting the shoe industry?
MP: “Tariff codes are one of the biggest challenges, and we’re constantly trying to find how to chip away at it. This administration has used them to create leverage in negotiations with the Chinese on intellectual property theft. We absolutely support the government leaning on and engaging with the Chinese on stealing these. It’s a huge issue [compared] to counterfeit shoes. However, we’re concerned about using the American consumer as leverage in these negotiations.”
Can high tariffs encourage more companies to produce in the U.S.?
MP: “The answer is no. Everyone thinks duties are the elixir that cures all domestic production issues. The reason consumers stopped buying American shoes is, they got too expensive resulting from [issues] such as the quality of life of factory workers. While it’s not a bad thing, we priced ourselves out of the market.”
Sustainability is top of mind among companies today. How is the FDRA working with its constituency on this issue?
MP: “We have a site powered by FDRA called footwearInnovation.com, a hub for all things footwear innovation, where we post videos that critically think through material choices. We’re focused on what can we do on the back end to help eliminate waste and trash in production, particularly in China. We recently had a Working Group Call — [a conversation among FDRA executives companies can access] — on a shoe waste proposal we’re pulling together to show the return on investment for Chinese factories to recycle their waste in shoe production.”
What are some new initiatives FDRA has in place to assist companies in production?
MP: “We’re helping companies navigate issues such as digital design development with our Materials Exchange, a digital database of materials to help digitize the supply chain. Suppliers can reach their customers by importing materials via an [online] database. It’s a nominal fee of several thousand dollars a year for companies. We also offer free digitized classifications. If you have a shoe and want us to classify it, members can take a picture of the shoe, fill out a small form with information about its materials, and within a business day, we classify for tariff coding.”
In what ways is FDRA engaging with factories abroad?
MP: “We have about 40 to 50 foreign member factories, mostly in Asia. We have newsletters in Chinese, workshops and events in Asia, as well as factory training. I was in Asia a month ago speak- ing to 150 factories about what a brand’s priori- ties are today. They were keen on meeting these expectations, such as [fair labor practices]. The factories are audited four or five times a month. There are laws in China dictating these practices, but at the same time, brands are ensuring factories treat their workers properly.”
What will it take for the industry to recover from the collapse of the Trans-Pacific Partnership agreement?
MP: “I was crushed because I spent 10 years of my life on this issue. We had launched preliminary negotiations in the Bush administration and started talking about engagement with the Vietnamese and others. TPP would have meant elimination of about $6 billion over the first decade in duties a year. They would have gone down permanently, and now it’s in a holding pattern. The No. 1 way we could have boxed up China economically was to pass TPP. Since they weren’t a member, we could have engaged in free trade with every one of their neighbors, and they wouldn’t have been a part of it.”
On the issue of trade, what is the next big push for the FDRA?
MP: “The administration is engaged in a number of bilateral agreements. We’re on advisory committees that help [steer] government on what they should pursue, so we’ll be involved in that. We always beat the drum on tariff elimination, and we’re part of a coalition trying to get footwear added to the Generalized System of Preferences, a program that Congress unilaterally allows countries to ship products to the U.S. duty-free. These are lesser-developed countries such as Cambodia. Right now, apparel and footwear are prohibited, so we’re pushing to have footwear added. It won’t be a huge impact, but it’s another tool in the toolbox.”
How can the FDRA work with companies to promote more diversity in their workforce?
MP: “I’m friends with D’Wayne Edwards, founder of Pensole Design Academy. One morning, I was running by the National Museum of African American History and Culture in Washington and realized they had this amazing space where we could convene an African American footwear forum to talk about these issues. D’Wayne loved the idea. FDRA raised the funds to support the event, which will be held twice a year, while D’Wayne came up with speakers and content.”
As unemployment continues to hit an all- time low, in what ways can retailers lure employees?
MP: “For younger people, retail is a face-to-face social exercise. It’s about customer service, engagement and relationship building, particularly at the independent level. I’m not very optimistic about the social skills of those who are always looking at their phones and putting something on social media.”
What can FDRA do to get more constituents involved?
MP: “Usually it takes a crisis. I liken us to your local gym. Some people come every day and use the nutritionist, sauna, work out and shower, while a few of Trump’s China tariffs [inspired] others to participate. During the last year of the Obama administration, we were working on a timetable [regarding TPP] since candidate Trump was anti- trade and Secretary Clinton was moving toward it. We felt time was short for those of us who believe in trade liberalization. We created an online letter that individuals could send to their representatives on the Hill asking them to consider TPP and blasted it out to our full database.”
Where can the next generation of shoe talent find the most opportunities?
MP: “For me, it’s the golden era of footwear development, with more [young] people interested in that side of the business. The athletic industry doesn’t have any problem attracting people. However, I think the opportunities are becoming fewer with the issue of consolidation, so if you want to design and break in, there are less doors to knock on.”
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