Business Opportunities In High Inventory

Even if all the enterprises in China can stop selling clothes for at least three years, they can sell them in this way. From this we can see the serious overstock of clothing industry.

???　?“ Clothing enterprises If the money made is inventory, it is equivalent to no profit. The least valuable thing about clothing is inventory. " Xia Guoxin, chairman of Shenzhen gelisi garment industry Co., Ltd., pointed out the harm of inventory to garment enterprises.

Statistics show that in 2010, China's clothing inventory has reached 20% of the production, about 15 billion pieces, and the annual growth rate is still maintained at 10%. According to the forecast of 17 billion pieces of clothing in 2011.

Due to the obvious seasonality and the fast update speed of clothing products, how to deal with the increasing inventory has become one of the most headache problems for the clothing industry. If a large number of products are overstocked, it will not only occupy the company's operating capital, but also increase the management cost and profit-making cost of the company, lengthen the turnover cycle of products and reduce the overall profit of the company. And selling at a low price will damage the brand, but also hit the confidence of channel business.

In the sportswear market, many enterprises encounter the nightmare of high inventory. Sports brands such as Adidas, Meibang, Li Ning, Tebu and China trend are investing a lot of manpower and material resources to clear the inventory.

?　?? Li Ning and Meibang suffer from inventory problems

Suffer a lot stock Li Ning Company is not the only one troubled. The nightmare of high inventory is still spreading in the industry.

Adidas, an international sporting goods brand, reported a net profit of 140 million euro (about US $200 million) in the second quarter of 2011, up 11% year-on-year, better than analysts had expected of 137.3 million euro. The sales volume of Adidas Greater China reached 552 million euro, which was 37% higher than that of last year's 403 million euro. Excluding the exchange rate factor, it increased by 38% year on year, ranking first in the six major markets of Adidas. Adidas senior management stressed that the inventory of Adidas in China has returned to a healthy level.

In 2008, Adidas, as the sponsor of the Beijing Olympic Games, was too optimistic about the market and increased its production scale. Unfortunately, after the Olympic Games, Adidas encountered the global economic crisis and fell into the dilemma of high inventory. It took Adidas more than two years to clear the backlog of sales channels. Last year, the "domestic Adidas" brand fell behind China's sales in the first half of last year.

However, it is dramatic that today's Li Ning seems to have encountered a post Olympic inventory problem similar to Adidas. For a long time, it has occupied the leading position of local sporting goods, but also lost due to inventory problems. Li Ning's semi annual report released on the 24th showed that the amount of inventory was 992 million yuan, compared with 806 million yuan at the end of 2010, an increase of about 200 million yuan. Affected by inventory and other factors, Li Ning's revenue in the first half of this year was 4.29 billion yuan, a decrease of about 5% compared with the same period last year. Anta achieved a turnover of 4.45 billion yuan in the first half of the year, with a net profit of 930 million yuan. In terms of revenue and profit, Li Ning was surpassed by Anta.

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Data shows that the accounts receivable time of Li Ning this year has increased by about 20 days compared with the same period last year, and the inventory turnover days may increase by about 25 days. In 2010, the company's average trade receivable period was 52 days, and the average inventory turnover period was 52 days. In other words, if the products in the hands of dealers can not be sold, they will become inventory, and the funds can not be recovered. Naturally, there is no money to buy Li Ning's new products, which leads to the decrease of Li Ning's revenue in the new fiscal year.

The operating pressure of high inventory on the company is increasingly significant, and the inventory problem has become the dead hole of Li Ning's performance growth. Zhang Zhiyong, President and CEO of Li Ning, admitted that this period of time has been particularly difficult, and the next two to three years will be a period of transformation.

It is reported that Li Ning plans to invest 300 million yuan this year to recover inventory. All stores with a proportion of less than 60% - 75% of new goods will buy back the inventory to make room for new products. Morgan Stanley expects that Li Ning will need 1.448 billion yuan for inventory repurchase only in the next few years.

Li Ning is far from the only company suffering from inventory problems. The nightmare of high inventory is still spreading in the industry.

The company has two brands of "meters / Bonwe" and "me & city" Meibang clothing Our products cover many fields such as adult wear, children's wear and underwear. On August 22, Meibang clothing announced that during the reporting period, the company's operating revenue increased by 48% compared with the same period last year, and the gross profit margin increased by 4% to 47% compared with the same period last year. During the reporting period, the company realized a net profit of about 376 million yuan, an increase of 833% compared with 40.34 million yuan in the same period of last year.

As China's leading leisure wear brand, the substantial growth of mid-term performance of Meibang has not failed to live up to the expectations of the market. However, the inventory amount of Meibang in the same period last year was 903 million, and this year it reached 2.889 billion, an increase of 222% year-on-year. In the same period, the net assets of inventory accounted for only 9.2 billion.

Judging from the performance of the first quarter of 2011, Meibang achieved revenue of 2.075 billion yuan, with a year-on-year increase of 46.26%; net profit of 203 million yuan, a year-on-year increase of 1222.70%, both revenue and profit growth exceeded expectations. However, the first quarter report shows that the inventory pressure is obvious, and the inventory quantity has increased from 706 million at the end of the first quarter of 2010 to 3.162 billion in the first quarter of this year. In just one year, the inventory increased by 347.88%.

Zhou Chengjian, chairman of Meibang, explained: "the main reason lies in the abnormal climate and the labor shortage. As a result, the spring and summer clothes are not delivered until April to may, missing the best time to market. The abnormal weather disrupted the production and sales plan of Meibang clothing. Due to the short winter time in 2010, the winter clothes had no time to digest, and this spring came late, which affected the sales progress of spring clothes. The company will sell them at a lower discount in the form of special stores. The discount of these special products is higher than the cost price, which will not lead to the loss of Meibang clothing

It is worth noting that due to the increase of inventory, Meibang clothing also brought a series of problems, such as accounts receivable increased by 316%, short-term loans increased by 106%, cash decreased by 53% over the same period, and the operating cash flow at the end of the reporting period was also negative 554 million. With the rapid growth of business, the short-term loan increases, the cash on account decreases, and the operating cash flow is still negative, which is somewhat abnormal.

Huachuang securities released a research report, pointing out that due to the continuous expansion of revenue scale, the high proportion of direct sales, and the arrival of autumn clothing, it is expected that the absolute amount of inventory of Meibang clothing in the medium term and the whole year will have little space to decline. At the same time, the company's gross profit rate may be flat this year. On the one hand, due to the high inventory and increased discount treatment in special stores, the price increase of the company has decreased with the decline of cotton price. On the other hand, the company's terminal discount is smaller than that in previous years, which is about 7.5-8% off in the first half of the year.

In addition, the local government Sports brand In the first half of the year, the company's inventory and profit increased by RMB 87 million and RMB 8 million respectively, but the profit increased by about RMB 92 million. In the first half of the year, the average number of inventory turnover days increased from 46 days in 2010 to 81 days, which is more than double that of Anta; the overall working capital turnover days of Tebu have been extended from 27 days in 2010 to 66 days; the turnover of China trend with kappa brand in the first half of the year is 1.179 billion, which is 45% lower than that of the same period of last year, and the net profit reaches 225 million yuan, which is more than 70% lower than that of the same period of last year. China trend has also said that it has taken out a non recurring provision of 220 million yuan before tax to buy back the excess inventory of dealers.

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???　? Increase the construction of clearance enterprises

Setting up special stores for digestion is an important way for most garment enterprises to solve inventory.

Zheng Wenbin, chief expert of the enterprise management research center, said that 50% - 60% of the unreasonable inventory of China's garment enterprises does not come from production and inventory management, but from the improper brand management that people have not attached much importance to.

For example, there is no uniform marketing strategy in the market. Enterprises with insufficient design and R & D strength and weak competitiveness will naturally leave a lot of inventory. Without accurate brand positioning and brand personalization, it is inevitable to produce inventory because of brand positioning and product development guidance.

Some experts also pointed out that the inventory problem of clothing enterprises is mainly reflected in the supply chain management. For the inventory problem of the clothing industry, promotion can only cure the symptoms, while the optimal management of the supply chain can help to cure the root cause.

In addition, too optimistic about the market prospects also led to high inventory, Adidas, Li Ning, Meibang are the victims.

As for the causes of Li Ning's inventory, some people in the industry said that in addition to the optimistic forecast of the market prospect, the overstock of Li Ning's inventory should also be regarded as the pain brought by the channel reform since 2010.

　??? Li Ning From last year, we began to adjust the channels and integrate some small-scale and inefficient dealers. Li Ning put forward in the strategic transformation, from the past vertical growth to horizontal growth, that is, to promote growth by improving brand value. Its purpose is to improve the overall operational efficiency.

In the past, Li Ning's channel network has formed a small and scattered situation, with many small distributors. It is understood that Li Ning currently has 129 dealers and more than 2000 distributors, of which about 1700 operate only one store on average, and many of them are "husband and wife shops" plus a clerk. Such a dealer structure leads to a big deviation in the specific implementation of Li Ning's policies, further increasing the inventory pressure faced by Li Ning.

It is based on this channel situation that Li Ning proposed reform to encourage large distributors to annex small distributors. In theory, the marketing ability of large distributors is stronger, but there is still no channel for intensive cultivation in the third, fourth and fifth tier cities in China. Therefore, it still depends on small retailers who are familiar with local conditions to maintain flexibility in the local market. After the reform, the sales of small dealers will be affected, while relatively large distributors will take more goods in order to get low discount points and offset performance.

It should have taken a long time to improve the brand value and then transfer it to the retail price of single products. Li Ning's pace is a little bit urgent. The original inventory plus the sales channel is facing adjustment, the conventional shipment will be affected, and the inventory will be generated.

It is affected by the dual situation of China's internal and external inventory. Industry insiders said that in terms of internal factors, China's trend focuses on sports fashion. Fashion is popular very fast, its problem lies in the product design. In the early years, China trend won the market through big patterns, such as big logo, national flag and slim fit version, cutting design, etc. at that time, its profit margin was at a high level in the industry. But now that fashion trend has passed, China needs to start again and strengthen its R & D and design capabilities. At the same time, kappa's brand gene is sports. It should explore more sports elements among them and embody them in the communication level.

From the perspective of external factors, the success of kappa has brought other people's imitation. Nowadays, the pace of sports brand sports and fashion brand is speeding up, which constitutes a competitive pressure on China's trend.

In the first half of the year, in order to help dealers solve the problem of overstocking, China Dongxiang took the initiative to reduce sales orders and buy back of inventory to help dealers restore normal inventory levels as soon as possible.

Setting up special stores for digestion is an important way for most garment enterprises to solve inventory.

Zhou Chengjian, chairman of Meibang apparel, said that Meibang clothing and its dealers will open special stores to digest the inventory, and strive to basically solve the inventory problem in the first half of next year.

According to China Merchants Securities Research Center, Meibang's special sales channels are gradually under construction. At present, there are more than 80 special sales channels (some of which are in the stage of decoration preparation), and a small part of them can be sold. The company's attitude towards special sales channels is also more rational, which is only an auxiliary means to digest inventory, but can not become the main means of dependence. Too many special sales channels will have a certain impact on the brand image. Therefore, the company has planned and controlled the development of special sales channels.

It is estimated that most of the inventory in autumn and winter of 2010 will be digested in the second half of this year, and the spring inventory in 2011 can also be digested in this autumn. By the end of the year, the main inventory products left by the company are spring products in 2011, which can be solved in the first half of 2012. Therefore, the inventory index can be basically normalized in the first half of next year We can expect the continuous improvement of inventory structure in the second half of the year.

Zhang Zhiyong, CEO of Li Ning company, also said that 300 million yuan will be invested to recover the inventory in the hands of dealers this year, and the amount used for inventory recovery next year will not exceed this year. At the same time, about 240 factories and stores will be opened this year to digest the inventory.

Li Ning has already announced to give dealers an additional 3% discount to encourage them to play a positive role in improving their performance. In addition, Li Ning has opened 191 factory stores to specifically digest inventory. Zhang Zhiyong said that at present, the operation effect of Li Ning's factory stores is good, with an average monthly turnover of 400000 yuan per store, which is higher than the monthly turnover of Li Ning discount stores and brand stores. In the future, the number of factory stores will increase to about 240, mainly dealing with inventory.

Zhang Zhiyong said that the revenue from inventory clearing accounted for about 6% of Li Ning's revenue in January this year, and rose to about 10% in June this year, and will reach about 15% in the future. It is expected that by the second half of next year, the inventory will be basically digested, and Li Ning will try to find an appropriate way to restore growth.

He thinks that Short term strategy It is very clear that the first step is to increase the construction of clearance channels and remove inventory as soon as possible; the second is to reduce three wholesale discount points around distributors and distributors; the third is to strengthen the transformation of brand creativity. The next stage of brand advertising will be launched in London Olympic Games.

In terms of opening stores, Li Ning also adjusted the number. By the end of 2011, it aims to open 8300, 8650 by the end of 2012 and 9000 by the end of 2013. Zhang Zhiyong said that Li Ning's future focus will be on retail efficiency rather than simply opening and expanding stores, which will focus on quality and efficiency. Some of the new stores will also be opened in some blank areas, especially in lower level cities. In the second half of the year, Li Ning will focus on deepening the promotion and implementation of channel reform.

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??　?? Hundreds of millions of business opportunities in stock

It has been said that fast fashion and brand discount chain is the next spring of China's retail industry. Foreign fast fashion giants, such as H & M, Zara, gap, etc., have achieved annual global sales of tens of billion yuan at least and hundreds of billion yuan at most.

The largest fast fashion brand in China, Metersbonwe (002569. SZ), also had sales of 7.5 billion yuan in 2010, which has confirmed this assertion to a certain extent. However, from the perspective of China's brand discount retail industry, it seems that it is only a prediction.

However, Shanghai Xuandong Industrial Development Co., Ltd. (hereinafter referred to as "Xuandong"), which is not well known to outsiders, has quietly made this business known as "garbage disposal" to achieve a scale of hundreds of millions. Bao Qinghua, the leader of Xuandong, aims at Tjx, a listed inventory processor with annual revenue of nearly 22 billion US dollars.

?　?? Turning waste into treasure

The 21st century economic report points out that for clothing, shoes and hats brands, a bad stock of about 15% of the purchase amount will normally be generated every year (i.e. it has been on the market for more than three months and has not been sold). These bad inventory can be divided into two parts: the bad inventory of brand and the bad inventory of channel.

What Xuandong has done is to help the upstream manufacturers solve the bad inventory, and at the same time, maximize the secondary value of the inventory, so that these originally regarded as "garbage" can be turned into treasure.

In fact, flashy business can be understood with the long tail theory of the Internet. The long tail theory means that the future of business does not lie in the head of the traditional demand curve which represents the "best-selling commodities", but the long tail which represents the "cold goods" which is often forgotten. When the space and channel of commodity circulation and exhibition are wide enough and the sales cost is low enough, almost any product that seems to have low demand before can find the customers.

The total market share of these "cool commodities" with low demand and sales volume can match or even exceed the market share of mainstream products. For example, a quarter of Amazon online bookstore's book sales come from books ranked after 100000. And the sales proportion of these "cold" books is growing at a high speed, and it is estimated that it will account for half of the whole book market in the future.

When the demand for such products is no longer high, people will realize that the demand for such products will be cold. This long tail in the real economy means that the shelves are limited, and the inventory that cannot be put on the shelf may eventually bring greater and longer-term value.

"Suppliers show off the inventory data, and we give a reasonable evaluation according to dozens of parameters, such as brand type, product type, fashion degree, production date, marketing season, gender ratio, size structure, good product rate, cost price, tag price and other dozens of parameters, and then cooperate in the form of buyout, consignment or outsourcing services. In terms of outsourcing, our current mode of outsourcing is similar to that of the upstream service provider, which is similar to the traditional mode of selling inventory to help the dealers earn more revenue from the inventory service in the future. For example, brand manufacturers have 100 million inventory that we need to help clean up. OK, no problem. You give the inventory to me for management, and we are responsible for formulating the cleaning plan and specific implementation. Brand manufacturers directly issue sales invoices to channel customers. Finally, according to the invoice amount and the target clearance rate, we charge a certain proportion of service fees, which will be about 20 to 40 points Between the dots. " Bao Qinghua said.

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????　 Make China's Tjx

Dazzle action seems novel, but it has been common in foreign countries. In the United States, there are many companies engaged in inventory clearance business. They are often called off price retailer or closeout retailer. Among them, the largest is the Tjx Companies, Inc. (NYSE. Tjx), with revenue of $21.942 billion in 2010. Ross stores, in (NASDAQ: Rost), the second largest company, also had revenue of $7.87 billion in 2010.

Tjx is the leading apparel and family in the United States and the world Fashion products Discount retailer ranks 119 among the latest Forbes Global 500 companies. In 2010, it operated 2717 stores and 7 chain stores in six countries around the world, selling clothing products of famous brands and designer brands in all categories at a price lower than 20% - 60% of the price of department stores and exclusive stores. The average area of Tjx stores is about 31000 square feet, and the annual sales of single store is about 8 million US dollars.

Zkmaxx sigma discount Plaza under zkmaxx is an innovative mode after localization of Tjx model. Based on the needs of upstream supply chain integration and market development, zkmaxx sigma discount Plaza currently focuses on selling the bad inventory products of famous sports and leisure brands.

Bao Qinghua said that in 2010, the market size of China's sports and leisure clothing was about 605.3 billion yuan, and the sales volume of off season sports and leisure clothing accounted for about 15% of the whole market. In mainland China, the annual sales of major sports and leisure brand manufacturers are basically more than 1 billion yuan. According to the 2009-2010 annual reports released by these companies, the top annual sales revenue in mainland China is more than 5 billion yuan, such as Bailey HK $23.7 billion, Nike $1.742 billion, Adidas 1 billion euro, Li Ning 9.48 billion yuan, Anta 7.41 billion yuan and Metersbonwe 7.5 billion yuan. According to the statistics of wholesale price, there are more than 30 sports and leisure brands with annual sales of more than 1 billion yuan in the Chinese market. The total annual sales of listed sports and leisure brands in China has exceeded 130 billion yuan. According to the cost price statistics, it is conservatively estimated that the bad inventory exceeds 15 billion yuan. However, according to the actual retail price caliber, it is enough to support several discount retail enterprises with annual sales of more than 10 billion yuan and engaged in inventory clearing services. "Therefore, the future strategic development of zkmaxx will focus on the expansion of zkmaxx sigma discount Plaza. It is estimated that within five years, zkmaxx stores will cover more than 200 core prefecture level cities in China, and more than 1300 core counties in eight years. We will build zkmaxx into the flagship brand of Xuandong's inventory clearing channel with an annual sales of more than 10 billion yuan."

Learning from the mature mode of foreign countries, but not copying, and skillfully applying the long tail theory to the inventory processing, which makes the value of these goods which are considered to be out of date and maximize the secondary value, Bao Qinghua has successfully exploited hundreds of millions of business opportunities.

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