The financial crisis swept through, and the “famous knitting city” Xiangshan remained calm
At present, the financial crisis is sweeping across the country, and the textile and garment industry has become one of the real economic industries that have been greatly affected by the crisis in China. It is reported that in the first ten months of 2008, the growth rate of China’s textile and apparel exports hit a six-year low, and two-thirds of the companies in the textile industry suffered losses or were on the verge of losing money. After experiencing an accelerated development stage, China’s knitting industry is now standing at an inflection point of industrial economic transformation.
At the end of the year, when you walk into Xiangshan, the “Famous Knitting City in China”, you will still see a busy production and operation scene in front of you. In this bone-chilling economic winter, Xiangshan’s knitting industry is still moving so calmly. In 2008, Xiangshan’s knitwear exports reached US$660 million, a year-on-year increase of 32.3%, accounting for one-sixth of Ningbo’s total exports, showing a good development trend.
Upgrading – seizing the high end of the profit pyramid
“The key to the development of Xiangshan’s knitting enterprises in difficult times lies in the concerted efforts of the government and enterprises to promote enterprise transformation and innovation.” An industry insider familiar with Xiangshan Industry said.
Since the beginning of 2008, the county party committee and county government have further implemented the knitting industry policy, established and improved a public service platform, implemented technological transformation and innovation, and promoted the transformation and upgrading of the knitting industry. The “Outline of the Construction and Development Plan for the Advanced Manufacturing Base of Xiangshan Knitting Industry” has been revised to encourage technological innovation of enterprises and promote operations.
To this end, the county finance department has specially allocated 20 million yuan in industry development funds, focusing on supporting the introduction and application of knitting high-tech, advanced processing technology and key equipment. On the basis of the original fabric, printing, dyeing and finishing centers, leading enterprises are encouraged to cooperate with universities and commodity inspection departments to accelerate the construction of research and development, testing and display centers for the knitting industry, and spare no effort to promote the structural adjustment and industrial upgrading of the knitting industry.
Xiangshan knitting companies originally produced mostly low-end products such as cultural shirts and ordinary T-shirts. The unit prices were not high, profits were not huge, and competitiveness was not strong. If there was any “turbulence” in the external environment, many companies would be in trouble. Facing the “cold wave”, companies are rushing to seize the high end of the profit pyramid. Chen Zhao, chairman of Giant Eagle Group, said fabric processing and garment production are the two main products of knitting companies. In contrast, fabric processing requires a lot of capital and is technically difficult, but the profits are also more substantial. In the past, most knitting companies in Xiangshan rarely involved in fabric production. Giant Eagle Group invested 600 million yuan to establish a fabric center and reduced 1/3 of its garment production capacity. “Now, 1/3 of our fabrics are used by ourselves, 1/3 are supplied to other local companies, and 1/3 are directly exported. The year before last, the proportion of fabric production accounted for only 25% of the company’s total sales, and last year it increased to 40%. ”
Yongnan Knitting Company has also taken a unique approach and jointly developed a number of new high-end fabrics such as wood pulp fiber, soybean fiber, bamboo fiber, and colored cotton with knitted fabric manufacturers. “We have a cotton yarn warehouse of more than 3,000 square meters, with hundreds of varieties, and have the ability to undertake knitted apparel products with small batches and high added value.” said Zhang Chengzhi, general manager of the company. He gave an example. Originally, a piece of knitted underwear was sold for about 15 yuan, and the profit was quite meager. Now, the price of printed and embroidered casual women’s clothing produced by the company has increased to 40 to 50 yuan. The monthly sales volume in Russia alone is more than 3 million yuan, and profits have also increased. Under the guidance of leading enterprises, many companies have reduced their export business of low-end textiles and turned to the production of high-end products with competitive advantages such as women’s clothing, casual wear, and sportswear. In the first five months of 2008, the export volume of ordinary T-shirts in Xiangshan’s knitting industry dropped by 1 million pieces year-on-year, while the proportion of high-end clothing exported with a unit price of more than 5 US dollars accounted for more than 30%.
Isolated islands become bridges – creating a complete vertical industry chain
In the past few days, the machines in Yisheng Knitting Company located in Juexi have been roaring, and the employees have been busy. The company receives orders for more than 100 different styles of products every month, keeping employees’ production tasks fully scheduled. Chairman Chen Sheng revealed the “secret” of the company’s impressive performance: moving the design and sales departments to Japan, implementing upstream and downstream service outsourcing, and building a vertical industry chain, thereby tightly grasping the pulse of the market.
Faced with the complex and ever-changing domestic and international situation, some knitting companies in Xiangshan have “prepared for rainy days”, laid out and constructed a complete vertical industrial chain early, and tried to speed up the “dance” of linkage between upstream and downstream. In the words of these business owners, in the past, the company was just an isolated island. Whether it went to the left bank or the right bank, someone else had to ferry it across. Now it has become a long bridge. From one bank to the other, you can walk freely, control the rhythm freely, and not be controlled by others. .
The ups and downs of cotton prices have troubled Xiangshan knitting companies. “That’s because the original industrial chain is too short. The first thing to repair is the source.” Fu Jinguo, general manager of Giant Eagle Group, believes that only by controlling the upper end of the industrial chain can we Starting from raw materials, we reduce costs, ensure quality, and improve product competitiveness. To this end, Giant Eagle Group actively built “reservoirs” in the upstream to draw water, and integrated and acquired Xinjiang Aksu Cotton Co., Ltd. with a debt of 150 million yuan, acquiring a 10,000-acre cotton production base and 30,000 spindles of combed spinning production capacity, and invested 10 million yuan to carry out comprehensive technological transformation of the enterprise to make production more efficientThe capacity has been expanded to 45,000 spindles, and the company is no longer affected by cotton price fluctuations. Fuhong Knitting and Jianying Knitting have also invested in and established cotton spinning bases in high-quality cotton producing areas in Xinjiang, forming a complete internal industrial chain.
Product design has always been the top link of the industrial value chain that Xiangshan textile companies rarely enter. Since last year, Juexi’s two knitting companies, Yisheng and Mingjia, have established R&D and design departments in Japan and South Korea respectively, taking the lead in going abroad to carry out service outsourcing. Gan Guocheng, chairman of “Mingjia”, said that if a knitted garment with a retail price of US$100 is processed by a foreign businessman based on the style, the company can only get 15% of the profit at most, but if it is designed by the company itself, the profit will be 15%. You can get 25-30%. At the fashion festival held in South Korea not long ago, “Mingjia” won an order of US$3 million and earned US$900,000 with its two types of women’s clothing and sports and leisure knitted clothing designed by itself.
While tracing back to the source and gradually controlling the upstream, Xiangshan Knitting Enterprises strives to expand the downstream industry chain. Evergrande, Juying, Fuhong and other companies have established sales companies in the United States, South Africa, France and other countries, and are building sales networks. Yisheng Company originally had to go through wholesalers and dealers to receive orders. Now, through the sales department in Japan, it skips the wholesaler step, has a certain say in pricing, and shares sales profits with dealers. 10% more profit per piece of clothing. Evergrande Company opened a “Beautiful Sports and Leisure Clothing” trading company in South Africa and established its own sales network abroad. It has thus captured most of the profits from marketing, the high-end link of the industry chain, and has become one of the most profitable enterprises in the Xiangshan knitting industry.
Take the road of brand leadership and find new coordinates on the value chain curve. The export proportion of Giant Eagle Group’s own brands has reached 15%, which is a major breakthrough for Xiangshan Textile Industry, which mainly focuses on foreign OEM or OEM processing. Several key knitting companies in Juexi are also discussing that the Chamber of Commerce will take the lead in purchasing an international brand and jointly explore the international market.
A breakthrough in the Central Plains – shifting from “export dependence” to “domestic demand driven”
Relying on the industrial agglomeration effect and the popularity accumulated over the years, Xiangshan’s knitting companies have hardly had to worry about foreign trade orders in recent years. When a batch of knitted clothing orders come in, it only takes a few days for our county’s companies to complete the entire process of weaving, dyeing and finishing, printing, clothing processing, and packaging. Foreign trade companies and foreign dealers will take the initiative to come to our door.
In Juexi Street, one of the country’s major export bases for cotton knitwear, some savvy business owners have long been aware of the crisis hidden behind the “no-worry orders.” “Orders that don’t have to worry about will make people lazy. When encountering difficulties, companies will lose the courage and ability to cope. Blind reliance on exports is a sign of business operators’ lack of crisis awareness and unwillingness to make progress.” Chen Zhao said.
“The financial crisis is an opportunity for companies to get rid of their dependence on exports and expand the domestic demand market.” More export-oriented knitting companies have begun to set their sights on the domestic market. Following Pengcheng Garment Company’s deployment of its production and manufacturing base in Wannian County, Jiangxi Province, which has comparative advantages in resources, costs, etc., in June 2008, a group of Xiangshan knitting companies such as Fuyong and Juying jointly invested 1.2 billion yuan. The Textile and Garment City project has started construction in Weishi County, Kaifeng, Henan Province. It plans to produce 30,000 tons of high-grade gray fabrics, 10,000 tons of printing, and 60 million pieces of clothing per year. According to reports, the domestically sold knitwear produced in this textile and garment city is positioned in the mid- to low-end range and will go deep into the vast towns and rural areas through the “caravan”.
“A ‘caravan’ is a mobile clothing supermarket. Farmers can buy knitted clothing with similar export quality and price at their doorstep, and enterprises can also take the lead in the vast rural ‘domestic demand market.'” Fu Yong Zhang Yifan, chairman of the group, said that the Central Plains region has a large population, developed transportation, low rigid costs, and wide commercial exposure. In addition, under the guidance of the country’s current policy of expanding domestic demand, “those who win the Central Plains will win the world,” and the market prospects are very broad.
In order to encourage enterprises to actively explore the domestic market, our county has specially introduced special support measures for the knitting industry. For every 1 million yuan of domestic sales increased by enterprises based on last year, the government will give 2% rewards.
“Domestic sales must have their own brands, which is not a big problem for large companies. For example, Yongnan Company’s own brand Weishen series of underwear has won titles such as ‘Zhejiang Famous Brand Product’ and ‘China Famous Brand Knitted Product’. Selling well all over the country. However, for small and medium-sized enterprises that mainly process imported materials, they are often limited by funds, management, etc., and it is impossible for every company to build a brand.” said Qian Guohua, secretary-general of the Xiangshan Knitting Association, “Therefore , our association has applied to register the trademark ‘Xiangzhilian’, using the reputation of Xiangshan as a famous knitting city, just like the protection of origin, to build this trademark into a regional brand of Xiangshan. In the future, as long as the knitwear produced in Xiangshan meets the quality standards, You can use this brand.”
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