Under the influence of the epidemic, the garment industry is experiencing a rare impact. Many companies are in difficulty and have even announced layoffs or bankruptcy.
In May this year, J.Crew, a well-known American clothing retailer, officially filed for bankruptcy protection, becoming the first During the epidemic, it was the first major retailer in the United States to file for bankruptcy protection.
In June, Nike released a lower-than-expected financial report for the fourth quarter of fiscal year 2020, suffering a rare loss: quarter Net loss was US$790 million (over RMB 5 billion), a year-on-year decrease of 179.88%, while revenue fell by 38.14% year-on-year to US$6.313 billion.
“2020 is bound to be a turbulent year. It is expected that the Chinese clothing market will evaporate at least 400 billion yuan in revenue, and the overall market size will shrink by 15%.” Integrated Marketing Cloud Leading Enterprise Liu Jinyan, vice president of the marketing department of Convertlab, said publicly recently.
The industrial chain is almost at a standstill
The upstream involvement of the textile and apparel industry chain Production of natural fibers (such as cotton, linen, wool) and chemical fibers, the midstream includes spinning, weaving, printing and dyeing, and the downstream includes final products such as clothing, home textiles, and industrial textiles.
Anxi, who has 30 years of experience in supervision and observation in the textile and apparel industry, said that China is the country with the most complete textile and apparel industry chain in the world.
According to statistics from Wind Information and JD Digital Research Institute, from 2001 to 2010, China’s cloth production increased from 29 billion meters to 90.7 billion meters, and yarn production increased from 7.61 million meters. tons rose to 37.33 million tons, and chemical fiber output rose from 8.41 million tons to 48.86 million tons, both ranking first in the world.
However, industry insiders said that in the second decade of this century, due to rising labor costs, the downstream of the textile and apparel industry chain gradually shifted to economies with lower labor costs. , and amid the Sino-U.S. trade friction, textile and clothing products have accelerated their transfers due to the threat of additional tariffs imposed by the United States. Although there is a trend of processing factories moving to Southeast Asia, China is still the most important exporter of chemical fibers and fabrics.
According to statistics from UN Comtrade and JD Digital Research Institute, by 2018, yarn fabric exports will account for 30% of global trade, and chemical fiber exports will account for 40% of global trade. Downstream production countries such as Vietnam, Cambodia, etc. all rely on imported fabrics.
At present, the main buyers in the global apparel industry are concentrated in the United States, the European Union, and Japan. Under the haze of the global COVID-19 epidemic, market demand in Europe, America and Japan has dropped significantly, putting everyone in the entire textile and apparel chain at risk.
According to industry insiders, many garment processing factories and buyers now use commercial credit transactions, which leaves buyers with a lot of room and uncertainty. The one-to-one model has also become a small-batch operation, resulting in increased costs.
The payment methods of textile companies have also caused upstream suppliers to be in a state of “dare not produce” during special periods. Textile and apparel companies purchase goods first, and then pay the suppliers after the goods are sold. Some small weaving factories do not dare to produce more because they are afraid of customers temporarily canceling orders. They even prefer not to start up their machines in order to avoid risks.
Transformation from outside to inside
China is the global textile and apparel industry At the center of the epidemic, how the textile and apparel industry fights the impact of the epidemic has attracted global attention.
Shanghai was once the base camp of China’s textile and apparel industry. When textile and clothing exports are blocked, Shanghai’s textile and clothing foreign trade companies are the first to bear the brunt, and then spread to the entire industrial chain.
According to the analysis of the Qianzhan Industry Research Institute, due to the overall weak economy since 2019, both the apparel export and domestic sales markets have performed poorly, coupled with high manufacturing costs, order transfers, and factory price increases. Factors such as fatigue and inventory growth have led to severe compression of profit margins of clothing companies. The growth rate of clothing industry efficiency indicators has shown a significant downward trend. The pressure on corporate profits has increased significantly, and it has become more difficult to improve operational quality. According to data from the National Bureau of Statistics, from January to December 2019, there were 13,876 enterprises above designated size in the clothing industry (annual main business income of 20 million yuan and above), with a cumulative operating income of 1,601.033 billion yuan, a year-on-year decrease of 3.45%; total profits were 87.283 billion yuan Yuan, a year-on-year decrease of 9.75%.
Oriental International is a textile group located in Shanghai. It is also the largest textile and apparel group and the largest textile and apparel export enterprise in China. In the past few years, it has begun to transform from export sales to export + domestic sales, and has successfully cultivated brands such as Lily and Sangun. This year, it has almost completely switched to domestic sales. Industry insiders believe that how garment foreign trade companies represented by Oriental International transform and think about changes will become an important aspect in driving changes in the entire industry chain.
However, transformation is not that easy, and cultivating a brand does not happen overnight. Many large domestic apparel export companies are developing independent brands. Oriental International and Shenzhou International are representatives at the forefront of the industry; Lily, Youngor, and Bosideng are all cases of successful transformation.
On June 22, the General Office of the State Council issued the “Implementation Opinions on Supporting the Conversion of Exported Products to Domestic Sales” (hereinafter referred to as the “Opinions”) to encourage…While enterprises expand the international market, they also support marketable export products to develop the domestic market.
Shen Jianguang, chief economist and director of the research institute of JD Digits, believes that from the perspective of short-term epidemic emergency situations, every measure in the “Opinions” is beneficial to textiles and clothing. The benefits for the industry, tax reduction and exemption, are a timely help for enterprises in difficulty, and customs facilitation, cross-border e-commerce, etc. will also have a certain positive impact on exports.
“But in the long term, the future of China’s textile and apparel industry will still move towards the high end. In recent years, we have seen some good signs. Comparison of technical content and added value Exports of high-end textile machinery and chemical fibers have begun to rise, and clothing processing that truly relies on human labor has begun to move to Southeast Asia. Trade frictions and the epidemic may accelerate the adjustment of the industry.” Shen Jianguang said.
How to successfully transform when exports are weak? Zhang Yugui, dean of the School of International Finance and Trade at Shanghai International Studies University, believes that it is increasingly important to design and produce clothing that is close to the Chinese market, consumers and young people.
“Textile and apparel companies must achieve rapid transformation in market segmentation and personalized product supply, innovate in technology, technology and service concepts, and develop products for all age groups. Not enough work has been done on sexual needs. For example, the current market demand for customized suits in Shanghai is huge, but there are very few companies that can truly meet the high-quality demand. Training can be strengthened to retain old masters and expand the team of ‘national treasure’ craft masters. .” Zhang Yugui said.
Seeking online innovation to save ourselves
Facing a rare industry impact , how should the costumers save themselves? Judging from the situation in the first half of the year, one of the mainstream paths is to innovate through channels such as live streaming and social e-commerce to boost online sales and make up for the shrinking offline sales.
For example, Peacebird, which specializes in men’s and women’s clothing, achieved revenue of 3.217 billion yuan and net profit of 121 million yuan in the first half of this year. Revenue increased by 3.09% year-on-year, and net profit fell by 8.55% year-on-year. , realizing non-net profit of 56.2227 million yuan, a year-on-year increase of 129.14%.
Peacebird stated that during the epidemic, the company actively and rapidly promoted new retail business, and the company’s new retail and e-commerce retail sales increased significantly, especially in the second quarter, e-commerce retail sales increased by 30% year-on-year. % or above, causing the company’s operating income to buck the trend and grow by 3.09% compared with the same period. The rapid advancement of the company’s new retail business, the substantial growth of e-commerce retail sales, and the rapid adjustment and recovery of offline retail business in the second quarter have made up for the losses of offline stores during the epidemic to a certain extent, as well as the rent reduction and exemption support provided by channel partners and the national Given preferential support such as social security exemptions and reductions, the company’s operating profits increased significantly year-on-year.
Behind Peacebird’s growth against the trend, the company’s active optimization and adjustment of loss-making assets also played an important role. This is also one of the mainstream self-rescue methods. Semir Clothing also announced on July 20 that it planned to sell 100% of the equity of its wholly-owned loss-making subsidiary French Sofiza SAS to reduce the company’s operating risks and avoid greater losses in performance.
Cheng Weixiong, an expert in textile and clothing brand management and general manager of Shanghai Liangqi Brand Management Co., Ltd., said that the “great retreat” experienced by the clothing industry this time is the first step that the domestic clothing industry has experienced in the past few decades. Inevitable after the rapid development in 2017, the industry’s characteristics such as overcapacity, low threshold, low added value, low-end manufacturing, and price wars have determined that the clothing industry has reached a time when it must change, and the epidemic has accelerated and aggravated the industry’s changes. Therefore, he believes that it will be difficult for the garment industry to get out of the development dilemma in the short term, and industry adjustment will last one to two years. During this period, backward production capacity will be eliminated, the strong will remain strong, and the domestic garment industry will gradually begin to move from extensive to refined.
In Cheng Weixiong’s view, in the current difficult situation of the garment industry, the top priority for enterprises is to do a good job in internal control, ensure cash flow, and strive to survive; secondly, the Internet is promoting the industrial upgrading of the garment industry, and enterprises should Make full use of new tools, new platforms, and new technologies to tap market demand and activate consumption potential; in addition, the overcapacity in the domestic garment industry is mainly due to industry homogeneity and severe low-end competition. Therefore, it is recommended that enterprises work hard on technology research and development and strengthen Innovation and application in original design and fabric application, such as the development and application of environmentally friendly and healthy fabrics, etc., can enhance the added value of enterprises and products and improve their competitiveness. </p
