“For 180 (size), we need three hundred pieces. Should we still make it (produce or not produce)?” “There is no more in the factory now. I will tell you as soon as I have one.”
This is a scene that happened in the Zhengzhou down jacket wholesale market. Since October, down jackets have been selling like hotcakes, manufacturers have been selling out orders, and raw material prices have soared. Some merchants can sell more in one month than all of last year. Wholesalers have to rely on connections and cash to get goods. However, behind the seemingly hot market conditions, it is not that simple.
One month’s sales exceeded last year’s sales
The epidemic hit the down jacket industry hard at the beginning of the year. At that time, Yin Jun (pseudonym) was so worried that he couldn’t sleep all night. A large number of customers returned goods, and packages of unopened down jackets piled up in the warehouse. After the market was unblocked, Yin Jun quickly sold goods out. The manufacturer came to collect accounts, and he took the factory to each directly-operated store to supervise the work. In October, he finally cleared the warehouse and completely paid off the debts owed to the upstream manufacturers. However, what surprised Yin Jun was that the market for down jackets, which had been based on inventory clearance in the first half of the year, suddenly turned around in October – down jackets unexpectedly became popular, and there were not even enough to sell.
“From mid-October to mid-November, sales in one month exceeded the entire last year. year.” Yin Jun told a reporter from Henan Business Daily that one of his stores sold 350,000 yuan in four days. He regretted it endlessly: Was the inventory cleared too early?
Behind the hot sales is the tight production capacity and short supply of the entire down jacket market. Structural imbalance of supply. Many merchants interviewed reported that upstream manufacturers were full of orders, had to pick orders, and even ran out of stock.
“In previous years, I had to ask for 50 pieces of goods (one finger is all of a piece of clothing) size and all colors), the manufacturer can send it immediately. This year, 30 lots are needed, and the manufacturer has to wait a week to send it.” Yin Jun told the Henan Business Daily reporter, “This year, the first thing is to look at the relationship, and the second is to look at the cash. If there is a relationship, there will be cash. , I will send it to you first.”
Going further back, down jackets are hot-selling, The source of tight production capacity is the shortage of down raw materials. Industry data and feedback from merchants show that in early May, the price of white duck down with 90% down content was 180,000 yuan per ton, and now it has skyrocketed to 290,000 yuan per ton.
Orders are transferred to China, and domestic production capacity is divided
Why are there shortages of raw materials and tight production capacity? On the surface, the cold weather this winter has increased consumers’ desire to buy. At the same time, the longer sales period before the Spring Festival than in previous years is also adding fuel to the sales of down jackets. At the same time, in the first half of the year, peers were trying their best to sell goods and use repatriated funds to survive. Manufacturers did not dare to conduct research and development, hold ordering meetings, or start production, resulting in insufficient grain storage in the second half of the year.
Looking at a deeper level, many industry insiders revealed whether the epidemic abroad has increased. The reduction has caused all global orders to shift domestically, and foreign trade volume has increased significantly, taking away the domestic market share.
A senior industry person told a reporter from Henan Business Daily that the world’s two largest down raw materials The main production areas are in India and China. In India, due to the epidemic, factories have stopped production and production capacity has plummeted, causing global buyers to turn their attention to China. However, the minimum 33-day breeding period for ducks cannot be exceeded, and the production capacity cannot keep up in time.
Some data can be used as supporting evidence. The Federation of Indian Textile Industry stated in a letter to Governor Das of the Bank of India in July that due to the impact of the new coronavirus epidemic, the overall demand for this fiscal year is expected to drop by 25% to 50%, and about 25% of textile factories and garment factories may close permanently, throwing thousands of people out of work.
Data released by the General Administration of Customs of China on October 13 show that in 2020 From January to September, the cumulative exports of textiles and clothing were 1,515.67 billion yuan, an increase of 12.2%. Among them, the performance of textiles was particularly outstanding, with an increase of 37.5%.
On October 14, Alibaba International Station data showed that starting from May , the number of orders for fabrics and textile raw materials in China increased by more than 100%; the number of orders in the clothing industry increased by more than 200% year-on-year. “If India cannot deliver goods, overseas merchants will be forced to transfer their supply chains to China.” This has been the consistent understanding of down industry practitioners since September.
Is the distribution model coming to an end?
The tight order situation has once again changed the distribution model that was previously prevalent in the clothing wholesale industry. Caught in a whirlpool of questionable public opinion. Manufacturers, general agents and franchisees are re-evaluating this model among themselves.
Distributing goods, that is, the downstream purchases goods on credit, and then settles with the upstream after selling them . It has natural advantages – because buyers do not bear cash pressure and inventory risks, brands can quickly replicate and expand across the country, and their scale and influence can explode instantly.
At the same time, it also contains many hidden risks. The distribution of goods pursues zero inventory for agents, and all risks are tied to the upstream. It is necessary to find a delicate balance between inventory, return rate, and funds, which extremely tests the control of the upstream. Once control is out of balance or the return rate is extremely high, a large amount of inventory will be returned to the upstream (some extreme return rates are as high as 95%). For agents, they do not have to bear the pressure of inventory and sales, so they will not focus on selling goods.
Today, the production capacity of down jackets has shrunk, as well as the high inventory and tight capital chain caused by the epidemic. , the distribution model is facing another test. Shi Qinghua, founder of the clothing brand Snowland Lost City, said that the epidemic is a turning point. In his view, the distribution model of using agents to complete the rapid expansion of the brand did create huge profits in the early stage, but in the current pursuit of transparent and open business creed, it has come to an end.
However, there are still persisters. A large brand in Zhengzhou that specializes in down jackets plans to distribute goods free of charge to 150 VIP customers this year.
Perhaps, as Yin Jun said, “No one is right or wrong. The king defeated the bandits.”
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