Export Service Enterprises Scramble For Domestic Market, Resulting In Industrial Chain Imbalance

"The financial turmoil is on sale, and foreign trade clothing is 1 yuan!"

In recent days, the nine streets of Guangzhou's bustling pedestrian streets are occasionally mingled with some bargains.

"First Financial Daily" reporter found that 1 yuan clothes are very few, usually just to attract consumers a gimmick, but 5 yuan short T-shirt, 10 yuan sweater can still be found from time to time.

These cheap clothes are tagging with yellowing, and some trademarks have been cut off. It is likely that they are stock or returned defective products.

Among them, there are many brands involved in the price reduction competition. In the Baohua Road near the top nine roads, one of the top ten children's clothing brands in China is priced at one hundred or two hundred yuan, which sells for 19 yuan or 29 yuan.

The price war makes Chen Fen, who is engaged in the wholesale and retail trade of clothing in the thirteen line of Guangzhou, very helpless. In the past, the price of clothing to the terminal retail price could be doubled 3~4 times, but now it has become an extravagant hope for her.

According to the data released by the National Bureau of statistics on 12, in October, the factory price (PPI) of industrial products increased by 6.6% compared with the same period last year, of which clothing increased by 2.6%; the total level of consumer prices (CPI) rose by 4% compared with the same period last year, of which clothing decreased by 1.3% compared to the same period last year.

This year, the cost of all aspects has increased the price of clothing industrial products at around 2%, but clothing prices have been hovering between -1% and -2%. There is a strange circle between CPI and PPI.

The fourth quarter has always been the peak selling period of clothing industry. However, judging from the current situation, the competition is so fierce that it is difficult to pfer the rising cost to consumers, and even some new products have been discounted in advance.

This year, there is a popular saying in the industry that it is not lucky to lose money.

Wang Yisheng, a Hong Kong businessman engaged in children's clothing business in Guangzhou, said in an interview with our reporter.

Owing to the cost advantage of mainland China, Wang Yisheng has set up factories for processing children's clothing and toys in Dongguan, Guangdong since 1998.

In recent years, Dongguan has gradually lost its comparative advantage. He began to shift the focus of his business to brand, design and sales, and set up the headquarters of the company in Guangzhou. Most of the production was outsourced to other processing plants.

Now, they have more than one task: to see if the factory will show signs of bankruptcy.

"Once the factory closures, the fabric and advance payments we are likely to get out of the way, which is relatively small, and it will be more troublesome to deliver the goods to customers on time, so the risk control has to be more cautious. It is estimated that the factory situation will be stabilized after another year."

Wang Yisheng said, "at present, the difficulties of the clothing industry are recognized, but many enterprises have their own problems.

For example, some due to the blind expansion of the scale led to the breakup of capital chain, some of which were taken away from the clothing profits to finance speculation, speculation, and so on.

As a whole, the factories with the exception of the single main ones are in a rather bad condition, while the domestic sales orders are relatively stable.

Wang Yisheng's own business situation is also similar, because of the RMB exchange rate and rising production costs and other factors superimposed on the impact, the overall cost of exports surged more than 10%, coupled with the impact of the U.S. subprime mortgage crisis, this year, his export orders shrank by about 30%, while the domestic sales business remained relatively stable growth, the proportion of domestic sales and export sales from 50:50 to 70:30 this year.

Export orders are higher and market risks are greater. Profits in the past were 50% higher than those in domestic sales, but now they are almost the same.

With the sharp rise of cost and the weakening of international demand, labor intensive clothing industry, which has a high dependence on foreign trade, bears the brunt.

According to customs statistics, 1~10 clothing and clothing accessories exported to US $98 billion 270 million in the month of 1~10, only increased by 2.8%, down by 20.1 percentage points over the same period last year.

Although the official figures did not disclose the total export volume, the industry generally believed that exports were declining.

Since the subprime mortgage market triggered the financial tsunami in September, garment export enterprises are facing not only the problem of order reduction, but also the delay in delivery due to customers' requests, and the risk of return is increasing.

The downturn in the consumer market has made European and American buyers more picky and prone to pick up some minor problems to return.

Because of the difficulty of export, some enterprises turned to domestic sales.

In addition, many returns are returned to domestic sales.

In Guangzhou, the largest clothing distribution center in the country, the foreign trade clothing store can be seen everywhere.

According to some shopkeepers, now it is easier to get goods from foreign trade garment factories than before. There are only a few odd pieces left before, so we get all the goods. Now the factory returns more and the price is nearly 30% less than that of the previous year.

The homogenization competition of low-end products in the domestic clothing market has been serious, but the export situation has deteriorated since the beginning of 2008, and a large number of enterprises have shifted to the domestic low and middle end market, which has intensified the competition in this market.

During the Shaoxing Textile Expo held in October 25th, Du Yuzhou, chairman of the China Textile Industry Association, told the media that China's current textile and garment enterprises had a relatively large 2/3 business and were at the edge of losses or on the brink of losses. Only 1/3 enterprises were profitable, with a profit margin of around 8%.

"Exports and domestic sales have basically been maintained for over half of the year. The total output of China's clothing [2.37 -1.66%] last year was about 59 billion, of which about 29 billion were exported.

This year, more enterprises are inclined to sell domestically, and the competition in the domestic garment market is fierce.

In addition, China's clothing industry has been in excess of demand, is in the "inventory sale" stage, the current inventory of about 12 billion, cheap goods impact the entire industry, this is also the clothing CPI and clothing PPI, the overall CPI is one of the important reasons for departure.

Wang Qianjin, senior textile analyst, said in an interview with this newspaper.

The international clothing brand ZARA perfectly combines the information management and zero inventory management of global supply chain, and maintains fast and unimpeded links from design, manufacture, distribution to terminal retail. This is an important weapon for ZARA's success.

However, at present, almost no Chinese clothing [2.37 -1.66%] enterprise has such a controlling ability. Clearing up goods and speeding up capital circulation has become a headache for enterprises.

In the past few years, Wang Yisheng usually sold the goods at a slightly lower price to Hongkong, Taiwan and other regions, but now, because of the exchange rate and other factors, they turn to the mainland.

This year, a marked increase in the number of goods, he through agents to put the products in the mainland two or three line market discount sales to accelerate the return of funds, and new products are still placed in the first-line market does not discount or maintain a higher discount, the use of multi-level market to separate the price of the same brand different products competition.

Despite the difficulties of declining exports, increasing pressure on mainland sales and increasing inventories, Wang Yisheng still did not see the gloomy prospect of the clothing industry.

In addition to competing for the domestic market with "Lotte" and "Little Prince" brand, he is striving to further expand the export of his own brand to Southeast Asia, Western Europe and Russia.

In his view, after this round of fierce elimination, the whole garment industry will develop in a benign direction. This is actually an opportunity for down-to-earth enterprises. With quality, brand and good capital chain, it will break through and have new development in the industry's reshuffle.

In view of the unprecedented grim situation of light textile industry, the state is further strengthening its support.

Following the two rounds of textile and clothing export rebate rates in recent months, the 19 executive meeting of the State Council held 6 policy measures to promote the healthy development of the textile industry. It referred to continuing to appropriately raise the export tax rebate rate for textiles and clothing. In addition, it also suspended the "real pfer" policy for the margin of textile processing trade, and made full use of the central foreign trade development fund to support textile and textile enterprises in marketing, R & D and M & A activities, as well as strengthening the technological pformation of light textile industry and promoting industrial upgrading.

Wang Qianjin believes that at present, the state's support policies for textile and clothing are basically adequate, but this can only reduce the cost pressure of enterprises, unable to reverse the situation of shrinking international demand, and more importantly, rely on enterprises to save themselves. Expanding the domestic market in the unstable international situation is a way to "winter".

He also pointed out that behind the slowdown in the growth of domestic clothing consumption, the polarization phenomenon between high-end brands and low-grade products has been increasing, which is different from that of the low-grade market. The middle and top grade clothing brands are maintaining a good sales growth trend and become an important driving force to support domestic consumption growth.

Yang Xun, chairman of JEANSWEST International (Hongkong) Co., Ltd., has a deep understanding of this brand. In an interview with our reporter, he said that the performance of JEANSWEST casual wear remained 20% this year, and the sales volume in mainland China is expected to reach 3 billion 600 million yuan in 2008. This is mainly related to the strategy that the company changed from processing and manufacturing to "design + production + brand operation" as early as possible, and the brand effect plays a key role in stabilizing the consumer group.

The production is basically in the mainland of China, and JEANSWEST is also troubled by rising costs.

On the face of it, JEANSWEST is afraid to raise prices in the process of industry shuffling. This year there are no obvious changes in the retail prices of many styles in mainland China compared with last year. But in fact, the cost pressures are quietly being adjusted by adjusting the product mix. The proportion of basic prices unchanged has been reduced from 70% to 60%, while the proportion of fashion items is increasing. This year, the price of fashion items is raised by 6% per unit price.

At the same time, the price of new brand is 60% to twice that of JEANSWEST.

In addition, controlling the return rate is also an important factor in reducing the cost. Last year, JEANSWEST sold 50 million garments with a return rate of 2/1000, while the return rate of the entire garment industry was around 1%.

The domestic market or the cake, the different is the increase of the Snatcher, which makes the garment enterprises work hard and hard.