Why Frequent Orders "Big Brands" Fled?

The first half year performance report of the famous fast fashion brand H&M shows that it has faced 3 consecutive months of profit decline for the first time in nearly ten years.

The industry attributed the cost of "made in China" to its recent surge.

Coincidentally, Vietnam has replaced China as Nike's largest footwear manufacturer since last year.

Correspondingly, reporters visited several shopping malls in Beijing, and found that many of the well-known brand goods sold were not made in China.

In the past, cheap and popular "made in China" is facing the challenge of cheaper manufacturing in Vietnam and other countries.

"Non domestic" popular shopping mall in Beijing

ZARA, UNIQLO and other internationally renowned "fast fashion" brand fans Miss Wu found that most of these brands were "made in China" when they first entered the domestic market.

But recently Miss Sun has discovered that many of these brands have become "made in Southeast Asia".

In order to investigate the situation reflected by Miss Wu, reporters visited several mainstream shopping malls in Xidan and Wangfujing.

Reporters found that many famous brands of clothing and footwear were made in China less and less.

Instead, they are made in Kampuchea, Indonesia, Pakistan, Vietnam and other countries.

The world-famous "made in China" seems to be less popular.

In the ZARA store of Xidan's Joy City, the store is full of all kinds of costumes and accessories as it is in the biggest promotion period of the year.

Reporters randomly checked several shelves of goods hanging tag found that many brands are not "made in China".

On the first floor, there are 8 pairs of shorts on the shelves of the ladies' shorts on the first floor. In addition to the 1 models without the tag, the remaining 6 are manufactured abroad, and the proportion of "outside products" is more than half.

Reporters looked at other shelves and found that the location of the goods was similar to that of the first shelf.

Even for women's long skirts with relatively high domestic production rates, there are several products from abroad.

Several customers who are shopping in the store say that they will not pay much attention to the origin of the goods in the purchase process, but pay more attention to the fabric, workmanship, style and cost performance of the goods.

It seems that we are aware of the cost pressure caused by "made in China" goods and the cost to enterprises. Another "fast fashion" brand H&M has also increased the proportion of "outside products".

The reporter randomly selected two men's clothing and one women's clothing shelf in Xidan H&M store.

The first man's shelf has a "external yield" of 100%, and the second men's shelf has more than half of the "external yield".

Meanwhile, on the two floor store, three garments in a women's clothing shelf are produced in India.

According to the staff in the shop, many of the commodities in the H&M store are imported and are mostly produced in countries such as India, Kampuchea and Vietnam.

Although there are some domestic products, they have been substantially reduced compared to the previous ones.

In Havana and many other brand counters, the products are mainly produced abroad.

Reporters then went to the UNIQLO store in the Min Si Temple to see that the goods produced by Vietnam and Kampuchea had begun to occupy the position of "made in China" in a large scale.

In a pair of women's pants shelves and two men's pants shelves, the "external yield" of goods reaches 75%, 100% and 75% respectively.

A staff member in UNIQLO store said that many commodities were imported from abroad.

Its production includes Kampuchea and Bangladesh.

Although the production area is not domestic, some consumers do not seem to care: "usually do not pay much attention to the origin of goods, so long as the quality of products is the same."

Not only the "fast fashion" brand quietly changed the production position, but also the famous sports brand.

Reporters at a Adidas store in Wangfujing saw that some of the products of the "clover" series were produced abroad.

All shoes and garments in the "STELLA" series are also "outside products".

The store's shopping guide says that the "STELLA" series takes the high-end route and the price is higher, and "outside production" may be related to positioning.

He also said that most consumers do not pay much attention to the place of origin when they buy, but a small number of customers will buy it because they are not domestic.

For the world's largest sports brand Nike, all its products are outsourced production, frequent pfer of production areas is no secret.

Not long ago, the "hat" of Nike shoe's biggest production has been pferred from China to Vietnam's top.

According to reporters, Nike's factory was originally located in Japan, and then pferred to South Korea and other places.

Since then, Philippines, Thailand and Malaysia have once been the production sites of Nike shoes.

However, Nike finally handed over the largest production order to China.

It is reported that Nike began to produce sports shoes in China in 1981.

In the next 30 years, China became the biggest producer of Nike sports shoes. Until last year, Vietnam produced Nike 37% sports shoes, ranking the first in the world, ending the position of China's multi-year production boss.

The "disaster" caused by rising labor costs

A statistics from a well-known institution, Rui International, showed that the wage cost of Chinese manufacturing industry increased by 89% from 2005 to last year.

In fact, famous brands have shifted the order placed in the Chinese market to foreign production, in order to avoid the labor cost that has risen sharply in recent years in China, so as to control the production cost in the scope that it considers reasonable.

Take Nike as an example, all of its sports shoes are outsourced.

Because sports shoes are more sensitive to the cost of labor, Nike needs to control the cost of labor within 24%, so that price competitiveness can be achieved.

It is precisely because of this cost control principle that Nike's production base has been moving around in the past 30 years in compliance with the cost changes.

Coincidentally, H&M has just announced its first half performance report, which has declined for the first time in 3 consecutive months in nearly ten years.

H&M said that in the two quarter of this year, H&M's net profit fell by 18%, more than 16% of previous analysts' forecasts.

The analyst also pointed out that H&M is likely to lose 10% in the three quarter of this year.

In contrast to Nike and other brands that choose Vietnam to replace China to become the world's largest footwear producer, according to an analyst at the London Industrial Bank (601166, stock bar), the annual salary growth of Chinese workers is around 10%.

The boss of a large manufacturing enterprise in Dongguan also said that the rising cost of labor is an important reason for the "escape" of foreign orders.

Under the continuous labor shortage, the general manufacturing enterprises still have 10%-15% raise this year.

Even so, the mentality of many workers is unstable, leaving when they want to leave, increasing the uncertainty of production.

Compared with the wages of Chinese workers, production in Vietnam and other places appears to be "cheap and fine."

Vietnam is attracting footwear, clothing and computer chip manufacturers in recent years with various preferential terms such as tax exemption, cheap land and labor.

The average monthly wage of Vietnamese workers is only 50-60 dollars, which is only about half or even lower than that of workers in manufacturing enterprises in the Pearl River Delta region of China.

However, economists point out that cheap labor is not the only factor in the outflow of orders.

Including labor prices, land rent, local policies and other factors, the labor intensive enterprises have jointly promoted the production sites.

Yesterday, the RMB broke 6.45 against the US dollar and hit a new high.

In addition to the sharp rise in labor costs, the appreciation of the renminbi has been a major reason for the outflow of foreign well-known brand orders.

The Dongguan municipal government has done a survey, with RMB appreciation of one percentage point, the profits of Dongguan's processing trade will drop by 0.6 percentage points.

The appreciation of the renminbi in recent years has been very large, and has already consumed some of the profits of some low-end manufacturing enterprises.

A business expert said that in fact, many manufacturers from the Pearl River Delta region wanted to move the production base to the western regions such as Chongqing, where the cost of labor was relatively low, so as to keep orders in China.

However, as the renminbi continues to appreciate against the US dollar, this means that the renminbi also appreciates against other currencies such as the Dong.

After the combined pportation and other costs, these enterprises still feel that the profits of producing goods in Vietnam and other places are even higher.

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Industrial pformation is imminent.

In the view of the industry, at the present stage, although the loss of foreign orders will make the production enterprises in the Pearl River Delta and other regions of the domestic manufacturing industry feel the pressure of survival, and even face the tide of closure, they will also have negative effects on the economic growth of these regions. However, from a long perspective, the pformation of China's economic growth mode is imminent.

In fact, in many scholars' view, laborers' trade and GDP prosperity brought by laborers' low wages and low environmental costs do not mean that China has really ushered in economic prosperity.

On the contrary, this is only a "impoverished growth", and the "sweatshop" model is not sustainable.

Mei Xinyu, a researcher at the Ministry of Commerce and international trade and Economic Cooperation Research Institute, also believes that many products currently popular in the domestic market are carrying the lifestyle and value of the western world.

Domestic manufacturers are just doing OEM and OEM for these brands, while the big manufacturing countries are losing money in manufacturing. Meanwhile, high value-added links such as brand, design and circulation are still in the hands of these European and American brands.

This is indeed the case.

Take Nike as an example, the mode of light asset operation praised by the industry is outsourcing the commodity manufacturing and retail distribution business.

Brand is focused on product design, development and marketing.

This mode of "light asset operation" has greatly reduced the capital investment of companies, especially the purchase of equipment and production of workers and so on.

However, this "light asset operation" mode is only beneficial to the brand business, and the profit of Chinese foundry enterprises is not high.

According to the reporter, in the United States, a pair of Nike shoes with a retail price of 100 US dollars cost about 16 dollars, and the factory price of Chinese factories is about 25 US dollars, including about 3 US dollars in labor costs, about 4 US dollars in management fees and about 2 US dollars in factory profits.

Even if the production enterprise is harsh, the profits from each pair of shoes will not exceed $9, less than 10% of the retail price.

But when the Nike shoes, which cost about $25, are exported to the United States, the wholesale price of these shoes will exceed 50 dollars.

The retail price of these shoes will exceed US $100 after a series of distribution channels.

The brand that does not spend any production cost has made the biggest profit, but the Chinese factory which carries the commodity production has become a "sweatshop".

In fact, this has become a universal mode for international famous brands to be put into operation in China.

Besides, in the foundry trade, the environmental cost of Chinese manufacturing enterprises is more difficult to measure.

Because factories produce and discharge waste water, waste gas and solid wastes in the process of manufacturing products, that is, "industrial wastes", the pollutants imported from the production are pferred to the exporting countries of the production Commodities, and become a hidden cost that can not be ignored behind the domestic Foundry Trade.

Liu Hui, a business consultant, believes that China's overall economic strength is stronger and stronger. Only by vigorously developing its own brand can Chinese enterprises occupy the highest yield link in the production and circulation field.

Many domestic enterprises seem to have seen this.

Xue Baojin, general manager of Beijing's homegrown men's clothing brand, said that from the beginning of this year, the proportion of domestic sales will increase to more than 70%.

The pformation of DKNY and other international large scale foundry is also a microcosm of changing the business mode of domestic clothing brands in the case of sharp reduction in foreign orders.

According to the China Textile Industry Association, at present, more than 80% of the export enterprises in China's clothing industry have begun to "export to domestic sales".

Not only are garment enterprises aware of the seriousness of the problem, but most of the well-known Chinese sports brands are only 20 years ago, and are only important foundry partners of Nike's "light asset operation" mode.

A data showed that in Jinjiang, Fujian, there were nearly 3000 footwear manufacturers, with over 300 thousand employees and an annual output of 650 million pairs.

But at present, Anta, 361 degree, Xi De long, del Hui, Jordan and PEAK brands from the region, relying on the initial imitation of Nike and other brands, have established their own brand image in the domestic market and become an important force in the domestic sporting goods market.

In 2009, China's regional sports brand sales list showed that Nike ranked first in China.

In the view of business experts, for domestic production enterprises, although the profits of foundries are relatively low, they are only involved in the upstream, and the operation mode is simple.

Manufacturing enterprises develop their own brands to enter the domestic sales channels, which means that the production of goods is only the first step. Enterprises should not only invest heavily in product development and brand promotion, but also deal with rather complex domestic retail stores.

Despite the huge potential of the domestic market, it is a test of the adaptability of enterprises.