Damn Profits, The Pain Of Clothing Enterprises

China's labor costs increase and textile and apparel Buyers in Western Europe are in trouble.

It is reported that the current global financial and economic crisis is not over yet, followed by geopolitical upheaval and the rising price index of raw materials. The textile industry, like the oil industry, has experienced unprecedented price fluctuations. In this economic, social and political environment, coupled with the changes in China, the supply of Western European fashion brands has made a huge impact, making it in a dilemma.

Reported that China in 2010 Labour costs To increase prices, China's factories focus on domestic market and expand domestic demand. China is no longer a paradise for subcontracting. As a supplement to China's orders, textile and garment buyers have shifted some European orders to Bangladesh, Pakistan, Laos and Indonesia. But the production capacity and quality of these countries can not be the same as that of China, and their role can not take the place of China. Moreover, some countries do not have raw materials, such as Bangladesh, there is no cotton. The five countries of Maghreb, closer to Europe (Libya, Algeria, Mauritania, Morocco and Tunisia), despite their short delivery dates, quality assurance, quick response and fashion, are politically unstable and unable or rarely able to undertake the upstream production of the textile industry. The transformation of Arabia countries has made the employer turn to Turkey. The textile industry of this country is complete, which is the market where the employer has entered the market, but there is a danger of market saturation. The areas currently available for promotion are Eastern European countries, which can recover orders from some Mediterranean and other countries.

The price of raw materials is high and the appreciation of RMB is constantly increasing, so that the garment companies are having a hard time. The price hike of products is far less than the increase of costs. The profits of enterprises have not improved, but have become increasingly thin. Without worrying about the profits from orders, China's labor intensive clothing export enterprises are facing the painful process of Phoenix's nirvana.

Cotton is too expensive.

Recently, the 109th session. Canton Fair The third phase of the transaction ended successfully. According to Liu Jianjun, a spokesman for Guangzhou Trade Fair, the short order in this order has maintained a trend of rapid growth, accounting for 90% of all orders, and the length list is only 10%. The same was true in the previous China Fair (East China Import and Export Commodities Fair), with short and medium accounts for 89% and orders for more than 6 months accounted for only 10%.

Unlike the previous two years, this time, unwilling to sign a long list is no longer a buyer but a change. supplier 。 The head of a foreign trade company said that now the company does not allow long orders, especially exports to Europe and the United States, but to take more short-term orders, because enterprises worry about losses caused by exchange rate settlement.

"The main reason for the export of short and medium term orders in the first two years is that buyers are more cautious about the latter market, mainly based on phased replenishment and unwilling to make longer orders. This year, the situation is quite different. Because of the frequent changes in exchange rate and raw material prices, export enterprises generally dare not sign long bills or even dare not accept them. The profits of export enterprises are falling more obviously. Wang Qian analysis, chief analyst of China's first textile network.

Guan Yan, director of overseas sales of Zhucheng Ailing bag Garments Co., Ltd. told reporters that these days, the company can receive more than 50 foreign new customers every day, with an intention to reach US $600 thousand, and the order has been released to mid July.

"What worries companies now is not orders, but profits." Guan Yan said that during the financial crisis, enterprises were focused on preserving orders and ensuring production. But in the post crisis era, worries were increasing. The cost of raw materials and labor has risen sharply, making the gross profit margin of its company from the past 20% to about 5% to 10% today.

The rising price of raw materials is the biggest problem facing textile and garment enterprises. In recent two years, domestic cotton prices have increased by 40% and 86% respectively, and the prices of alternatives such as chemical fiber have also soared. Coupled with the difficulties in recruitment and inadequate construction and appreciation of the renminbi, the cost of the textile and garment industry has soared.

Hong Ping Huang, executive director of Quanzhou Hengfeng Chemical Fiber Co., Ltd., which provides fabrics for seven wolves, Anta, PEAK and other famous brands in China, accounts for an increase of 20% to 30% of raw material prices compared with last year, and labor costs also rose by 20% to 30%. Driven by the two, the price of fabrics has also risen by about 30%. "Our price has not gone up very much, and it has been a small profit but quick turnover. The profits of enterprises have dropped by about 30% than in previous years.

"Although the price of cotton has dropped briefly in recent years, it is only a short-term adjustment in the off-season. In the long run, the supply and demand of cotton in China is still tight, and the price will remain at a high level of 25000 yuan / ton. Therefore, the high cost era of textile enterprises is irresistible. An industry analyst told reporters.

According to the Ministry of commerce data, the average profit margin of China's export enterprises in 2010 was 1.47%, far lower than the average profit level of industrial enterprises. In 1~2 months this year, it dropped further to 1.44%.

China's clothing exports enter a new period of reshuffle

After the financial crisis, China's exports were strong, and export growth in 2010 was 31.3%. Even at the beginning of the year, the most neglected textile and clothing, after twists and turns, also reached a 23% growth rate. But it is undeniable that China's clothing export is undergoing a period of reshuffle.

According to statistics from the General Administration of customs, China's textile and apparel exports totaled 68 billion 500 million US dollars in 1~4 months in 2011, an increase of 27.39% over the same period last year. Among them, the export of textiles was US $28 billion 931 million, an increase of 34.05% over the same period, and exports of clothing and accessories reached US $39 billion 569 million, up 22.93% over the same period last year. This result is reasonable. The main reason for the substantial increase in export volume is that domestic export enterprises have been raising the prices of export products (the price of export products is about 5% to 10% yuan per month) in the environment of rising prices of raw materials and labor costs. Therefore, the increase in the prices of export products has increased considerably, resulting in a substantial increase in export volume.

"Despite the sharp increase in costs, the difficulty of raising export prices is not small." According to the relevant personages of the Ministry of Commerce, the order price of textile enterprises increased by 15% to 20% year-on-year, and the price of individual products increased even more. However, foreign businesses are generally unable to accept more than 10% to 15% raise prices. Some European and American customers have begun to reduce their purchases in China, and some low-end goods tend to purchase from low cost regions such as Southeast Asia.

"We raised the price of the down jacket to 22 dollars. The foreigner said no, only 21 dollars. At this price, we export only 1 dollars for a down coat." Luo Weiming, chairman of Shanghai Dragon Textile Co., Ltd., said that two or three years ago, the export profit of a down garment was $2~3, and the profit fell sharply because of the rapid rise in costs, such as duck down, which was only 80~90 yuan per kilogram, but now it has risen to around 300 yuan, but the export price can not be raised.

Luo Weiming said, according to his prediction, by August this year, about 20% of the small and medium-sized clothing trade enterprises in Shanghai, Jiangsu and Zhejiang will break down.

The same problem is also troubling dealers. Compared with the same period last year, the price of bound goods in autumn and winter has generally risen by two or three, but that does not mean that the retail price will also rise at the same time. Insiders said that considering the market acceptance, retail prices could rise by about 15%. Profit margins are falling and risks are increasing, and some clothing sales companies are considering leaving.

"I have to check the cost well. If the risk is too great, I will prepare for a change." Connie dealer, Mr. Ma, said that the competition in the clothing sales industry is fierce. The rent of the store and the wages of the workers account for a large part of the cost. If the price is a little careless, the product will be overloaded and the whole market will lose. Last year's autumn and winter clothing prices skyrocketed, resulting in a sharp decline in sales and heavy cargo pressure. This is a good example.

A recent survey shows that tens of thousands of small and medium-sized foreign trade enterprises in China are facing a severe test. From Guangdong, Zhejiang, Jiangsu, Liaoning, Sichuan, Hubei's 6 major export provinces, foreign trade research shows that about half of these enterprises have lost profits, and some enterprises have increased or even failed.

Industry analysts pointed out that in the future, in the era of high cotton prices, the structural adjustment of textile industry is inevitable. After a big shuffle, the enterprises will be polarized, and the industry will appear "strong Heng Qiang, and the weak will be eliminated". Advantageous resources will accelerate to large enterprises. Orders are concentrated on large enterprises, and large enterprises' market discourse power is increased. As far as the current situation is concerned, large textile and garment export enterprises generally reflect good order in early 2011, and have made preparations for expansion. In addition, SMEs do not dare to take orders, large enterprises have larger order options, and order quality is valued by these enterprises.

Transformation pains inevitable

Kong Qingfeng, Professor of economics at Shandong University, said that with the world economy entering a new low speed growth cycle, trade protectionism is rising and the cost elements are on the rise.

China's foreign trade enterprises will inevitably enter the era of meager profits.

In the face of many unfavorable factors, how should China's textile and garment export enterprises survive? Industry experts believe that if we want to seek profits in the era of meager profits, export enterprises will only have transformation and upgrading, and now it is undoubtedly the best node.

Reporters learned that, in order to digest the pressure brought by the rising cost, many garment enterprises pay more attention to the extension value of the brand, and attract buyers through transformation and upgrading, the introduction of innovative and high value-added products. Mr. Ouyang, the head of the apparel industry, said that in the increasingly fierce market competition environment, the profit margins of OEM and OEM enterprises are being squeezed. Only those who focus on product design and take the route of their own brands can get better survival and development space. {page_break}

Luo Weiming, chairman of Shanghai long Shang Textile Co., Ltd., is also making a brand name for himself and changing the way of domestic sales. A down price garment with a factory price of $21 can sell for about $120 in European retail markets such as Germany, which can sell for 220 dollars, and foreign retailers earn at least 9 times their profits. "Metersbonwe has achieved the scale of about 7000000000 yuan a year, accounting for about 1% of the total market share. There is still a chance to make brand." Luo Weiming said.

At the 109th Canton Fair, Shandong cheerful home textiles rely on a complete industrial chain, research and design advantages, from the source to control the cost of enterprises, customer quality and transaction prices still maintain a high level. With the brand and technological innovation, Linyi Xinguang blankets not only increased the volume of transactions, but also made a number of excellent customers. The Zibo LAN Yan Group actively "go out" and invest in Kampuchea to set up factories. It not only cleverly dissolves the cost pressure, evade trade friction, but also can pass the ASEAN channel to re export Europe and America.

Facing the great impact of RMB appreciation on export enterprises, Ningbo garment enterprises skillfully resolved the exchange rate risk by means of cross-border trade RMB settlement, shortening the quotation cycle and floating quotation.

"RMB settlement makes Taiping bird import and export company's order of about 200000 yuan reduced by 600 yuan exchange rate loss, although the amount is not large, but the meaning is different. This attempt has accumulated experience for us to use RMB as export settlement currency in the future." Wang Dingying, general manager of Ningbo Taiping bird import and export company, said.

Xiaoping, chairman of Ningbo Zhongji Textile Co., Ltd., said that the quoted price of the export products in the past was fixed all the year round, and now it was adjusted several times in one or two months, especially in the recent 10 days. "At the 109th session of the Canton Fair, we also adopted a floating quotation strategy to minimize the exchange losses caused by the appreciation of the renminbi."

With the rising cost of raw materials and labor and the fluctuation of RMB exchange rate, many garment enterprises have also stepped up the pace of e-commerce. Not only did some small brands transform rapidly, but even large clothing enterprises such as Lining and seven wolves were involved in e-commerce. At present, in China's B2C online retail market, clothing B2C market share has ranked second.

"Transformation itself contains the painful process of Phoenix, but only by breaking cocoon, can it become a butterfly." A textile and garment industry insider said.