Myer doubles outsourcing to China to $200 million a year

Australia’s largest department store, Myer, will be doubling its outsourcing of homewares and fashion products from China to $200 million a year by 2016, despite rising production costs in the region, according to an online report.

Myer chief executive, Bernie Brookes, told Theage.com.au’s Business Day reporter, Eli Greenblat, that the department store has already administered $70 million in outsourcing from China, including a $50 million, five-year contract with the world’s largest manufacturing-outsourcing company, Li & Fung, which is set to expire in August.

China outsourcing produces the majority of Myer’s ‘exclusive brands’, which are very popular with consumers and successful for the retail store, the report said. Last year, 17% of Myer’s sales were from its exclusive brands.

Brookes told Business Day that Myer plans to open offices in Shanghai and Hong Kong to coordinate the increased outsourcing.

Brookes also said that conditions for factory workers in China have been increasing steadily, with new laws stipulating 44-hour weeks, and requiring employers to pay overtime and increased Sunday rates.

Though this is positive news for the Chinese manufacturing industry and its workers, it means labour costs could shoot-up a massive 80% over the next five years, Brookes said. Electricity prices are also rising in the region.

Even so, this could be positive news for Australian manufacturers, who have for a long time struggled to compete with Chinese companies that can produce goods much cheaper than local manufacturing outfits. 

Do you think China’s improving factory conditions will have a positive or negative effect on Australian manufacturers? Post your comment below.