Market distribution

Three main brands dominate the Taiwanese sports market: Nike, Adidas and Reebok. There are
also local brand suppliers that are increasing market share by offering much lower cost.
Specialist sports shops are the main outlets for sports purchases, although new chain stores are
now gaining ground.

Manufacturing and sourcing

Taiwan has high labour and land acquisition costs. This has meant that a number of
manufacturers have moved production to China and other parts of Asia offering lower costs due
to lower wage economies. However, quality of fabric and material offshore can be uncertain,
consequently many firms ship materials to contract manufacturers, who make the garments and
then send them back. This has resulted in long lead times, low levels of flexibility, poor response
and many hidden costs, including transportation. Retailers in Taiwan will usually source goods
by using one or more of the following
purchasing strategies:
1) Forward purchase offshore, low cost. Chinese or other Asian suppliers are used. Orders
are placed in advance of any season (612 months in advance). Fabric and trims are sent
to the manufacturers who construct the garments/shoes etc., to specification. Normally
the finished goods are then shipped back to Taiwan in the agreed quantity needed for the
whole of the sale season prior to the start of that selling season. Purchasing decisions are
made considerably in advance of the sale season and before any demand indication is
known. Quality is reasonable, and the price of the finished goods is low (although there
may be hidden costs). Reorders are not usually possible during the sales season as
response is very slow. Relationships with these suppliers are at a distance and formal;
there is no real flexibility for returns or exchanges at the end of the season.
2) Domestic, responsive and flexible. A Taiwanese manufacturer provides a proportion (for
instance 40 per cent) of the goods needed prior to the start of the selling season.
Thereafter, in season manufacturing is based upon a re-estimation of actual demand using
PoS data provided by the retailer and reorder using Electronic Data Interchange (EDI).
This provides for quick turnaround manufacturing and shipment of products that are in
demand. The retailer can more accurately stock reflecting demand, increasing consumer
service, and suppliers do not have a high inventory burden. Production and distribution
costs are higher, however, and volumes are deliberately small. Such a strategy does rely
upon a close, almost symbiotic, relationship between supplier and retailer.
3) Combined. An Asian offshore manufacturer ships a large proportion of the goods needed
prior to the start of the season. During the season, the retailer then makes weekly
replenishment orders using Taiwanese suppliers for small top-up amounts. However,
Point of Sale (PoS) data and derived information are not widely shared with this domestic
supplier. Thus supply is often shipped from his stock holding built as a buffer against
uncertainty. Here, quality can be controlled although prices will be higher. There is a
faster response and some degree of flexibility due to smaller batch sizes, but there will be
increased labour and transportation costs and suppliers bear the inventory burden.

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