Industry insiders point out that Wenzhou’s shoe factories are plagued by cutthroat competition. For example, when a brand offers a production price of 100 yuan per pair of shoes, Factory A might reject the deal, but Factory B accepts it for 90 yuan. Factory A then struggles even more without the order. Brands realize they can further reduce costs, offering 90 yuan as the new standard. To secure the next order, Factory A lowers its price to 85 yuan, forcing Factory B to underbid even further. Over time, this relentless undercutting drives the production price of the same pair of shoes down to just 35 yuan within a year. At such rates, there is no profit left. Factories are forced to cut costs by laying off workers and switching to cheaper, lower-quality materials. This dynamic explains why high-quality goods are becoming rarer, replaced by low-end products commonly found on platforms like Pinduoduo. Even with extreme cost-cutting, there’s a limit, and when all factories engage in this destructive race to the bottom, the inevitable result is collective collapse.
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