By 2020, the total employment of the upstream and downstream industrial chains of China’s textile and garment industry is said to be as high as 170 million.Although the exact number is impossible to verify, but the textile and clothing industry undoubtedly accounts for half of the national economy.
As a pillar industry, the domestic textile and garment industry is facing a crisis of internal and external troubles.In the past six months, more than nine well-known textile and garment companies have gone bankrupt.Four years ago, Metersbonwe made more than $1 billion in profits. Today, the former clothing empire is on a downward path of loss, while international fast-fashion brands such as ZARA and Uniqlo have become the new favorites of young people.
At such a moment, the transformation of the Internet to the traditional industry, reflected in the field of clothing, in fact, is far more shallow than we imagine.
1 “Even a simple tag in a traditional retail store is a very complicated thing”
Clothing is a huge manufacturing system.One of the things we talk about most with people in traditional clothing companies is the production supply chain in the back end of clothing.Each link in the clothing supply chain is like a set of sophisticated gears, which bite into each other to form a huge machine, and this machine is really affecting the development of the clothing industry.
In the traditional garment industry, the supply chain is roughly divided into three parts: garment companies, garment factories and noodle factories.Regionally, the entire garment industry is concentrated in Qingdao, Guangzhou and Yangtze River Delta, with fabrics distributed in Keqiao, Shaoxing, And Zhongda, Guangzhou, and production bases in Jiangsu and Zhejiang.
In terms of the specific operation of supply chain, some clothing companies are very light and only do brand operation close to marketing. Their clothing will be outsourced to the design team for design.Some clothing companies are heavier, and the corresponding design department will be configured below.No matter what kind, the final design of the designer can only be called a work. Before it becomes a product, it has to go through an important process of clothing production, including material arrangement, cutting, sewing, ironing and so on.
From design to production, there are two most common modes in the garment manufacturing industry: one is the all-inclusive mode.The factory is directly responsible for the whole package, the clothing company directly pays the total price, and finally only receives the finished products;One is the pure OEM model.The factory is only responsible for processing, the fabric by the clothing company to buy their own.The clothing company will pay two fees, one is the processing fee for the factory, the other is the fabric fee for the fabric factory.As for the material from the fabric factory to the factory logistics, you can choose to pull, you can also ask the factory for distribution.
In addition to the fabric to buy, there are accessories, refers to the button material on the clothes, etc.In the all-inclusive mode, the factory will directly prepare the accessories for the clothing company. In another way, the clothing company will buy the accessories itself, and the factory is only responsible for the assembly.
It is also complex to process fabrics and raw materials further upstream than manufacturing.The fabric itself has its own craft, for example, different fabrics have different undercloth.A knitted T-shirt in linen gray, with the undercloth dyed linen gray from the beginning;A skirt is laced with lace. In the production process, the fabric bottom cloth first needs to be processed with lace.These treatments may be made by the garment factory itself, or the undercloth may be ready-made by the fabric factory.Under different cooperation models, the upstream and downstream chains may be longer.
The complexity of the production process and the interconnectedness of the chains can be seen in the simplest T-shirt.
A T-shirt is a very standard item of clothing, but the supply chain involved in making a T-shirt is also a hassle.Starting from the purchase of garment embryo, we need to find the printing factory, then go through many different processes (such as printing, label, etc.), then to the packaging (at this time, we need to contact the packaging workers), and finally to the logistics supplier and after-sales service.In front of the garment embryo, there is a finishing process, which includes ironing, testing, folding and other procedures, and also involves washing, shearing, steaming, pressing and other methods.In front of the garment processing, cloth procurement, printing and dyeing, raw materials and so on.
Clothing is a manufacturing industry that has very, very many gateways.Just a simple tag, in a traditional retail store is a very complex thing.The information on the tag and the description of the clothes need to be very accurate, and with so many SKUs in the store, it is not easy to match them one to one.If the tag information and kimono is equipped with any discrepancy, it will also be very troublesome, because the store is the purchase record, it is distributed according to the number, quality supervision department will carry out spot check, if the detection of discrepancy, the punishment measures are very strict.Some stores simply put the labels off to save trouble, but retail clerks often don’t know.
It can be seen that the whole chain in the garment supply chain is very long with many nodes. Almost every process involved has different factories responsible for it, which is very professional and subdivided. The cooperation mode of the supply chain is also flexible and diversified, but in the end, it is a result of the cooperation between multiple suppliers.
2 “The industry itself is not made on demand”
When I asked what was wrong with traditional garment production, Wang replied.In his view, the two biggest problems in the traditional clothing industry are inventory and fabric.
When organizing production, the brand shall place orders according to the annual plan for the back-end supply chain. For example, 100,000 pieces will be placed for one order, and then the factory and surface material factory will organize raw materials and production lines according to the order quantity of 100,000 pieces.Once the clothes are produced, they may or may not sell because the brand’s forecasts are wrong.
If they don’t sell, they create inventory.In order to COVER the inventory, the brand usually adopts the method of high gross profit rate and increases the price to ten times of the cost, so that it will not lose money even if it is sold on fire.If it sells well, the entire supply chain of clothing production is so large that it is almost impossible to keep up.Because the raw materials are also in batches, all the fabrics and accessories may not be available when chasing the order.For factories and noodle factories, they also have to bear a lot of uncertainty and risk because of the relationship between the brand.
Large fabric suppliers will be pressed forward by brands.In fact, in order to meet the needs of large businesses will also choose their own pressed fabrics (calculated by cylinder).If the market does not go well and these fabrics cannot be sold, they will also generate inventory.The most typical example is the rise of fast fashion brands such as Zara in recent years. In pursuit of rapid response to the market, they require the fabric suppliers to have the ability to quickly replenish goods, so they often transfer the risks to these fabric suppliers.
Still, most fabric makers are happy to work with big brands that can’t afford to offend, because they usually pay well and carry a lot of goods.As for the problem of loading, the fabric supplier will take some strategies to alleviate it, such as opening the channel by itself, or putting the overstock on the platform to sell bulk goods.
Another owner of a guangdong family business that does traditional clothing OEM told me that all-inclusive factories are usually strong because they deal with big brands, so the pressure and risks of factories are greater.For example, after the factory is fully contracted, it is responsible for a series of processes, such as moulding, cloth purchasing, cutting, production, QC (both at home and abroad) and bulk production.In these processes, the factory has to press the cash flow to the fabric factory, bear the risk of unqualified QC, and pay the labor cost of the workers.And tricky brands often pick holes in each other. If the clothes end up being dumped, the factory gets only 20 per cent of the cost, with all the risk turned into a loss.
Due to the complex production process and various working procedures, as well as the uncertainties superimposed on each layer of the factory, fabric factory and raw material factory, the communication, coordination, logistics and transportation among various factories are integrated to form a huge and bloated supply system.The supply system is bound to be less efficient, but the bigger problem is that it is an unstable structure.
The industry’s biggest problem is that it cannot find suppliers with stable quality on hand.None of the manufacturers are willing to stock.And it’s really hard to be stable.We have searched in China. Some suppliers can give you a good experience at one time, but they cannot guarantee a stable supply of this quality in the long term.Because the cost is still very high, the supplier prepares hundreds of thousands of pieces every time.Eventually we found two that we were happy with overseas, one in the United States and one in Japan.
In addition to the existing problems of the industry itself, the external market environment and some other increasing “new variables” also deepen the hidden diseases of the traditional clothing industry.
First of all, the most direct impact from the garment trade.TPP has a great impact on China’s garment industry. The domestic garment industry will face the pressure of trade transfer effect and the position of integrated division of labor will be weakened.In addition to foreign trade, manufacturing cost is another variable factor.
Many foreign brands have begun to shift their production to Southeast Asia instead of China’s OEM factories. Vietnam, for example, is a TPP manufacturer. If they are asked to do OEM work, tariff profits in the garment industry will be subject to tax rebate policy.Bulk fabrics are valued rolling, affected by the global market is very large, domestic textile and garment industry is now unable to pull up external demand.However, with more and more competitors and more and more domestic trade, the market share is bound to be dispersed, causing a squeeze.
Manufacturing costs include land costs, logistics costs, bank borrowing costs, electrical/natural gas costs, labor costs, etc.Shanghai, for example, has become weaker because it is not supplied with raw materials and its manufacturing costs are too high.LEVIS is said to have a turnover of more than 20 million yuan in Shanghai, but a profit of only 400,000 yuan.The rising cost of Labour is also obvious. As a labour-intensive industry, garment factories are finding it increasingly difficult to find workers.
Corporate governance and the ageing of clothing owners themselves is also a problem.The current crop of clothing owners are quite old, with many losing their momentum in their 50s and 60s.In addition, in recent years, Internet technology momentum is very fierce, many people are less and less enthusiastic about investing in industry, and the traditional clothing industry has also been affected.
3. “ZARA has 200 designers who fly around the world and watch shows every day.”
There are so many reasons why traditional clothing companies are having a tough time, but if there is one most worth mentioning, it might be the impact of this generation of internet-savvy young people on the clothing market.
With the consumption upgrading and the post-90s group becoming the main consumer force, two new changes have appeared in the clothing market: on the one hand, the mainstream consumer group’s demand for personalization has gradually increased;On the other hand, the brand awareness and concept of these post-90s generation is weakening.
Young people tend to buy different clothes rather than the same hot style on the street.Their emotional appeal is getting stronger and stronger, and the pursuit of personalization also makes the market demand changeable.At the same time, most of these young people find it hard to name a strong domestic clothing brand right away.With the exception of suits for more serious occasions, they rarely have brand recognition.This is also true in the cosmetics and luxury goods markets.
Before the girl must buy LV bag, cosmetics must buy Estee Lauder, but now the post-90s have no such idea.They seem to care more about other things.For example, there was a cosmetics brand in South Korea that was cheap and didn’t have a reputation for efficacy, but they made the bottles look cute and the stores were pink and they sold very well.
When Metersbonwe hired Jay Chou a few years ago, the Chinese clothing brand was synonymous with fashion for many young people.In the first half of 2015, the company posted its first loss in seven years as a public company.Four years ago they had an annual net profit of more than $1 billion.
Smith Barney’s biggest problem, from a billion dollar profit to a loss, is that the family business is stuck in its old ways and has no innovation.When Smith Barney was founded in 1995, the market environment was completely different.The same consumer groups that caught up with it have now been replaced by a different generation.Smith Barney continues to do marketing and marketing, but it can’t compete with Uniqlo and ZARA in terms of management, design, inventory, and supply chain.People used to think that Smith Barney fashion, now users lose interest, a lot of the market has been stolen by international fast fashion brands.
This step change in consumers’ perception of a brand from fashionable to unfashionable can be almost fatal.And the brand impression is related to Smith Barney’s business forecast.As they become less and less able to keep up with trends and consumer demand, mass-produced clothing that doesn’t appeal to young people can lead to inventory buildup.In addition, young people become the main force of online shopping, e-commerce as a stable sales channel to impact the operation of physical stores, losing ground is a natural result.
When the change on the consumer side increases and the change on the production side is insensitive to the change, players who cannot keep up with the fast pace of change will be disjointed.By contrast, ZARA, a fast-fashion clothing brand, has achieved the speed from design to delivery within 15 days by using a small batch and rapid reaction chain.They are always faster to grasp the current trend, closely in line with the changes in the consumer end to launch the appropriate style.
ZARA employs 200 designers who fly around the world every year to see shows, explore fashion trends, or, to put it unpalatable, copy designs.The designers then hand over their designs to the process makers, then produce a small batch of the designs, airlift them to the stores using the quickest means of transport, and see how the market reacts.There are PAD sales statistics in ZARA terminal stores. The store manager will make preliminary prediction according to the local sales market, and then summarize the data to the headquarters for shipment transfer, twice a week.
This operation mechanism ensures that ZARA can always provide the latest and most abundant fashion clothing styles in the stores, so that consumers have the reason to keep coming to the stores for consumption. Moreover, the small-batch method can sell the clothes quickly, and the most annoying inventory problems can also be avoided.
However, closely conforming to consumers’ demands is only the performance of the garment industry in the front end of the market. The reason why most traditional clothing brands cannot stick to users in the front end is that the back-end supply chain cannot keep up with the response speed.
How does ZARA solve this problem?”ZARA has several measures in place to alleviate the problem of long reflection arcs in their supply chain.
First of all, it does not fully cater to the consumer market. Another factor that changes the fashion trend comes from the fashion circle.ZARA’s bottom 200 designers find design elements from the fashion end, so that their clothing production has a certain degree of planning.
For example, at the beginning of the year, they will make a plan for the color system, which often comes from the fashion circle.When these plans are finalized, ZARA asks its suppliers to prepare large frame dyed semi-finished products to save reaction time later.And if you look closely at ZARA’s clothing, you will find that the undercloth of these styles is almost of the same type, because only in this way can the pressure of the fabric factory upstream be reduced.
Finally, ZARA never does hot style, they even do limited hunger marketing.Combined with ZARA’s strong position, the supply chain is willing to cooperate and it is possible to produce garments in small quantities quickly.
Like ZARA, Chinese fast fashion brand Handu Clothing has taken a similar approach to its supply chain problems.A person in the industry told me that The whole operation mechanism of single product is adopted by Handu Clothing Co., LTD., headed by the market, design and planning team, it makes adjustments in real time according to the market response, realizes analysis according to the sales data, and forecasts the market at the same time.Because of the high requirements on the supply chain, it is easier to make individual products.
On the other hand, there are many small manufacturers in China who are always struggling to meet the changeable market demands. However, once they change the fabrics, their reaction speed cannot catch up with them, because it is very difficult to make the whole category, and the supply chain needs to be rebuilt.
4. “In fact, China has the earliest flexible supply chain, namely the small workshop model.”
The flexible supply chain proposed in recent years is actually a way of supply chain reconstruction and transformation proposed in order to cater to the consumer market.
The traditional supply chain model is the supplier market. Consumers buy what the enterprise produces. It is related to the enterprise products.Now the demand-led, increasingly strong emotional appeal, forced clothing enterprises to cater to consumers, with consumption as the leading.But consumer demand is changeable, fast, personalized strong appeal, small batch become the mainstream.
Therefore, this market change prompts garment enterprises to face transformation: previously, they used to adopt a large-scale industrial production mode, producing large quantities and distributing them in a year, but now they are likely to cause inventory overstock, so they need to cater to the market, sell well and then order again, and reduce the inventory of garments.
This puts forward new requirements for the supply chain: the original chain operation starts from the production plan at the beginning of the year, when the fabric supplier begins to organize grey cloth, dyeing process, etc., and then it is arranged and delivered to the garment factory for processing. After the garment factory is produced, it is handed over to the brand manufacturer, who then spreads the goods.Now, due to unstable market demand, frequent, small batch and unstable orders have become the mainstream, requiring fabric garment factories to cater to the changes of brand owners. Hence, the concept of flexibility (quick reaction chain) has emerged.Flexibility is to leave elastic space for supply chain.
Strictly speaking, China’s flexible supply chain actually came out very early. The small workshop model is a kind of flexible supply chain, which is flexible enough.But for garment factories, industrial production is standardized.The machines and equipment in the factory need to adapt to the production line, and the flexible supply chain with consistent speed and quality needs to see whether the production line can adapt to the personalized production requirements.The opposite material factory is the same, before more than 1000 meters free cylinder fee, now small batch production costs rise, fabric factory can only use price increase or adjust the equipment process to respond to speed.
Most factories generally do not have the courage or money to do so.At the same time, the transformation is also very difficult.A single order of big brands is usually only a few hundred pieces, but there are many SKUs, so it is very demanding for the factory to transform the production line.
While it is difficult to transform flexible production lines, the need for reverse customization is becoming increasingly apparent.There may be only three types of manufacturers who will continue to adhere to the industrial mass production mode. The first type is those enterprises with strong brands, which will not cater to consumers but proactively guide them.Second, there are enterprises with strong sales channels, which occupy all the long tail and support standardized industrial production.The third category is export-oriented enterprises, whose products are mainly sold to Africa and other third world countries and regions.
And for most apparel companies, transformation is almost a must.At the beginning, Chinese garment enterprises did OEM without any clothing brands. Now, with the increasing profit cost, garment enterprises find that the opportunities for pure OEM are getting smaller and smaller. If they do not do their own products now, they will go bankrupt.
When these apparel enterprises are ready to do their own brands, they will inevitably encounter these problems: first, the channel problem, the channel is not want to enter can enter;The second problem is that you don’t know what the market needs, so it’s very risky.From the perspective of its own operation, it will be a general trend to attract buyers by the uniqueness of goods and organize rapid production for delivery.So more and more garment factories will start to adopt this model.