Since the beginning of this year, “export to domestic sales” has become a hot word in the field of foreign trade. Many companies whose foreign trade has been hindered have sensed opportunities at their doorsteps and are about to return home.
In order to stabilize foreign trade, the policy gift package also arrived as scheduled. On June 22, the General Office of the State Council issued the “Implementation Opinions on Supporting the Conversion of Export Products to Domestic Sales”, which mentioned that “while encouraging enterprises to expand into international markets, we will support marketable export products in developing domestic markets and focus on assisting foreign trade enterprises.” Overcome difficulties and promote basic stability of foreign trade.”
However, for foreign trade companies that are accustomed to foreign markets, switching to domestic sales is not easy. The domestic market is a completely unfamiliar world for these companies. There are many difficulties in terms of demand, sales channels, customer preferences, brand awareness, etc.
01 Overseas markets continue to be sluggish, and the harsh winter for clothing exports remains the same
In the past two quarters, domestic export volumes once surged, which attracted widespread attention. At that time, the main force behind the sharp rebound in exports was electronics and home appliances, and foreign trade in clothing was not among them. Clothing sales are highly dependent on the recovery of offline social interactions and consumers’ impulse purchases. At present, the epidemic prevention in Europe and the United States is still impacting the real economy, and consumers are still rational.
The U.S. market is one of the most important markets for Chinese foreign trade companies. According to a survey by CBRE, a commercial real estate services investment institution, U.S. retail sales growth has recently exceeded that before the epidemic. Consumption has led the recovery of the U.S. economy, but clothing retail sales are relatively bleak. In addition to sportswear, fast fashion, professional wear, and customized clothing , dresses and other categories are still in a downward trend.
In previous years, companies would bet on traditional “consumption seasons” such as Thanksgiving and Christmas at the end of the year. Yang Jinchun, executive vice president of the China National Garment Association, told reporters that this year, the factory will receive at most “Christmas” orders that are the same as the previous year. Volume, the more common situation is to continue the year-on-year decline throughout the year.
Dayang is China’s largest suit manufacturer and one of the world’s largest suit customization companies. Its revenue growth has remained at 40% in recent years, and 80% of its orders are contributed by overseas markets. Due to the impact of the epidemic this year, , this year’s revenue will fall back to the level of 2017.
“Overseas retail is recovering too slowly. Store rents and clerk salaries cannot be paid, and cash flow cannot be sustained.” Hu Dongmei, general manager of Dalian Dayang Group, said that the clothing industry often needs to do a lot of marketing advertising. To obtain traffic, without cash, these marketing activities are impossible, let alone bring cash income.
This year, Dayang also encountered customer bankruptcy. Since May, four of Dayang’s overseas customers have gone bankrupt.
The U.S. market accounts for more than half of Dayang Group’s foreign trade business. The U.S. listed clothing company J.Crew announced bankruptcy and reorganization in May this year, becoming the first company among Dayang’s customers to declare bankruptcy and reorganization due to the impact of the epidemic. Before bankruptcy, J.Crew owed Dayang US$1.2 million. From May to October, Dayang was able to get 50% of the repayment, and the remaining 50% will be increased through new orders in the next 18 months after J.Crew’s restructuring. way to make up for it.
After a French customer went bankrupt, the credit insurance company paid USD 1.5 million to Dayang, and the remaining USD 300,000 in accounts could only be settled in a possible future restructuring. In the past few months, Centric Brands, a client of Dayang and the agent of American women’s clothing brand BCBG, also declared bankruptcy. In September, Dayang received another bankruptcy notice from a British customer.
For clients who encounter difficulties, Hu Dongmei tries her best to provide help, and she will actively help clients with mergers, acquisitions and restructuring matters. “For the factory, getting the payment is one thing. We also hope that the foreign trade customers can survive the crisis and the cooperative business can continue.”
Suits in the Dayang Group factory workshop Three-dimensional warehousing. Photo courtesy/Dayang Group
Zhao Mingyao, president of Qili Group, a Shandong garment foreign trade company, told reporters that the company’s turnover once dropped by 50% this year. Recently, foreign trade orders have been slowly recovering. He predicts By the end of the year, the company’s overall revenue dropped by 30%.
Huang Hong, domestic sales director of Guangdong shirt manufacturer Esquel Group in China, expects the downward trend in orders to continue. “The prospects for overseas epidemic control are unclear, and economic recovery will also take time.” Esquel is a sales company Large-scale clothing companies with a value of over 10 billion yuan accounted for 85% of their foreign trade volume in 2019, including 70% from the European and American markets and 15% from the Japanese and Korean markets. Esquel’s foreign trade orders this year will be 30%-40% lower than in previous years.
02 Sino-US trade friction accelerates the shift from exports to domestic sales
The impact of the epidemic on foreign trade may only be temporary, but more important What worries foreign trade bosses is that the Sino-US trade friction in recent years may have a long-term impact on clothing exports.
After the United States imposed additional tariffs on clothing and textile products imported from China, the price advantage of China’s clothing exports to the United States has been reduced. Starting from February 2020, the United States has implemented an adjusted tariff increase: clothing products imported from China have been levied an additional 7.5% tariff, compared with the previous 15% tariff.
In July this year, Esquel’s spinning mill in Changji, Xinjiang was included in the “Entity List” by the U.S. Department of Commerce. Listed under export control regulations established by the United StatesLearn the rules of the market and learn from the practices of successful companies.
Many business owners are still optimistic about the long-term opportunities in the field of foreign trade, but only if the epidemic problem is resolved and social interaction returns to normal. Regarding the uncertainty in the trade outlook, international trade will still be the mainstream. The general trend of global division of labor will not completely collapse just because of the noise from the leader of a certain country or region. It is normal for geopolitical relations to fluctuate in specific historical periods.
Many foreign trade people believe that the experiences in 2020 may objectively be an opportunity for the transformation of China’s garment industry, inspiring more OEM companies to develop brand, design, and intelligent production capabilities.
Although in the long run, China’s garment foreign trade companies have the opportunity to transform in a more technological direction, in the short term, for most garment foreign trade companies, the goal this year is just to maintain the basic market and maintain the employment.
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