Wenzhou OEM Garment Enterprises In Crisis

"At least 100 clothing manufacturers are running this year," many Wenzhou residents told reporters. In contrast, Wenzhou's clothing manufacturers added up to more than 2000.

The cyclical downturn in the market environment is not surprising. But in this round of crisis, the city relies on developed private finance and low cost advantages. clothing The manufacturing industry is once again exposed to chronic diseases.

How to spend winter clothing in Wenzhou is also witnessing the future of OEM.

　　 Affected by the global economic downturn

According to Zhang Wen, Minister of economic affairs of Wenzhou clothing trade association, the output value of Wenzhou clothing has increased by 6%-8% in the past three years, compared with 2% in the same period this year. The main reason is the decline in international orders. In the 1-9 months of this year, the output value of export clothing was 1 billion 480 million, down 9.39% from the same period last year. This is undoubtedly a great harm to Wenzhou's garment manufacturing industry, which relies mainly on exports. "At present, Wenzhou's foreign trade market is relatively concentrated, and Europe and the Middle East account for 80%-90%." Wu Yiheng, Secretary General of Wenzhou chamber of Commerce, told new business week.

Wenzhou Austrian Clothing is one of the enterprises affected. Zheng Chenai, chairman of the Wenzhou clothing trade association, told reporters that last year's foreign trade accounted for 50% of the total sales, mainly exported to Europe and the Middle East. The European debt crisis had the greatest impact on them. Secondly, the exchange rate of Iran and other countries is also rising this year, and consumption power has also been weakened. "This year foreign trade orders fell by 20%, basically no profit. And the domestic market has a gross margin of 5%.

At the same time, the instability of exchange rate and raw materials also impact the manufacturing industry. "As producers, the most need is a stable external environment."

Mr. Li, general manager of a Sino Japanese joint venture OEM manufacturer in Ningbo, told reporters that at present, signing an order, paying 50% of the deposit, determining the design plan and samples, only 1 months later will be able to buy the fabric, only 2 months to deliver the goods, and the balance will be charged to 50% if it arrives, so that the exchange rate will be settled at the time of signing the order. "If the cotton price rises or the cost of exchange rate increases, it will only be borne by the enterprises themselves. However, the policy of locked exchange rate trading has been rejected by most foreign brands because it is too cumbersome. As a larger manufacturer, export is mainly represented by foreign trade companies and settled in Renminbi, thus avoiding the impact of exchange rate fluctuations. However, most small and medium sized manufacturers have difficulty in making room for cooperation with foreign trade companies.

At the same time, Wenzhou clothing manufacturers are also looking for new markets. Wu Yiheng told reporters, "Russia and Brazil clothing light industry accounted for a small proportion, the potential demand is very large. But these two countries are the environment of "grey customs". Customs clearance procedures are cumbersome and tariff is chaotic. This gives some "clearance companies" the opportunity to rent. Russia's entry into WTO this year may improve the environment. " The relatively standardized American market channel is basically monopolized by Korean businessmen. Wenzhou manufacturers usually cooperate with them before entering, which also reduces the profit margins. "We are now applying to the government for an electronic display platform in the United States, organizing 30 enterprises to demonstrate for a long time. The cost of exhibition is borne by enterprises, hoping to win a certain proportion of government subsidies.

　　 High cost is not easy.

abroad Brand foundry The trend of withdrawal from China seems inevitable. This year, Adidas, Nike and other brands of commercial land continue to transfer manufacturers to Southeast Asia. He was once the largest producer of dandy in China and has stopped working with him. "Now that production costs are rising, I am also considering whether to move the factory to the West or Southeast Asia." Chen Zhonghuai, chairman of the local three point children's clothing in Wenzhou, also said so. Three point water is a sales enterprise, upstream and dozens of manufacturers cooperation, "because of capital turnover is more difficult, this year, manufacturers of an order capacity is also declining."

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The gap between raw materials and foreign prices has squeezed profit margins. In order to protect farmers' interests, the State implements cotton import quotas and protects domestic cotton prices, which has led to a 5000 yuan / ton increase in domestic cotton prices this year. (international cotton price is around 10000 yuan / ton). "International cotton prices continue to fall, foreign enterprises are priced at international cotton prices, while fabrics are purchased at domestic cotton prices, which compresses profit margins." Mr. Li told reporters, "the cost of raw materials for a leisure T-shirt is 16 yuan, 6 yuan for labor, and the cost of raw materials is more than 60%." "To increase the competitiveness of domestic garment manufacturing, quota liberalization is the most important." Xu Feng, editor in chief of textile and clothing weekly, agrees. And in September of this year, there was news that the NDRC was about to halt the import quota of cotton. But soon, the NDRC said it was only temporarily halting. It is not yet clear whether the quota system will be implemented next year.

The bigger impact comes from the weakening of the demographic dividend. "China's manufacturing industry has always been known for its low labor force, but this situation can not exist." First textile network chief analyst Wang Qian said. "The average wage of ordinary workers in Wenzhou this year is 2000 yuan -3000 yuan / month, an increase of 50% over last year." According to Zhang Wen, the cost of labor in Southeast Asia is only 600-700 yuan / month.

Wages are rising and workers are harder to recruit. "The total number of workers is short of 30% this year." Zhang Wenru said. Mr. Li's factory has 500 workers, and the monthly labor cost is 2 million yuan. "Now it's all about piecework wage. In order to retain the workers, many lists have to be answered even if they lose millions of dollars." At the same time, he and Chen Zhong Hui both mentioned that workers in this era were "hard to wait for". "The manufacturers are all left in 90s, and no one has the heart to start a factory. The generation after 90 has high welfare requirements and is hard to endure than the previous generation. Training is difficult and there are many losses.

But Zheng Chenai is confident of the prospect of high-end OEM. He has invested 10 million of the production line this year, saving 20% of the labor cost. "Middle and low end production and processing will be eliminated. But Wenzhou has a mature industry supporting system, and high-end processing can not be transferred. "

　　 Cash flow is too nervous to take orders.

It has been reported by the media that a boss of a Wenzhou textile enterprise has received a list of about 1 million yuan in profit, but to deliver on time, several production lines must be opened, and another 30 workers will be recruited. The annual manpower investment should be increased by 1 million 500 thousand -180 million. According to the current labor contract law, the contract signed at least 2 years, that is, two years to increase nearly 4 million of the cost. The boss believes that within 2 years to receive such a large order probability is not large, can only choose to give up.

In the first two years, another company made a loan of about 10000000, doubling its capacity, but this year's orders decreased by 50%. The pressure on interest is about $600 thousand a month. "Compared to the gross profit margin of 5%-10%, the interest rate of the bank's loan is more than 8%, the interest rate is too high." Zheng Chenai told reporters that the current financing of the bank relies on the bank's revolving loan, and the repayment period is one year.

"Wenzhou gold reform" was very hot, but we did not feel the actual effect, "Chen Zhonghuai told reporters." at present, the loan channel is still dominated by banks. Meanwhile, according to the CBRC data, the Wenzhou bank's non-performing loan ratio in August this year was 3%, which was 7.1 times higher than that of 0.37% in the same period last year. In order to deal with non-performing loans, the Wenzhou municipal government subsequently put forward the "asset quality protection year", hoping to reduce this proportion to 2.5% at the end of this year, which will be more difficult for SMEs to raise funds.

In September, Yang Jiaxing and Cai Zhaoqing, a Wenzhou native who founded private joint-stock urban cooperatives earlier in the country, submitted the proposal of the private enterprise bank to the relevant departments of Wenzhou, and suggested that local key enterprises should be selected as the main shareholders to support the upstream and downstream businesses. However, Wenzhou has not yet received official reply.

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At the same time, the state has introduced a series of policies this year to encourage foreign trade. In October, the State Council issued the "opinions on promoting stable growth of foreign trade", which reduced the 3 charges of printing costs of declaration documents, declarations of single code and customs supervision fees, and reduced the 20% of customs declaration fees. But Mr. Li disagrees. "Now supporting exports is more important than shortening the tax rebate period." According to its introduction, the current tax rebate is short for one month, and a long time is one and a half years. The main profit of the product comes from the tax rebate. The cycle is too long to affect the cash flow of the enterprise.

　　 How difficult is it to upgrade the industry?

Compared with the gross profit margin of 5%-10%, a production enterprise such as Austrian, etc., the gross profit margin of sales enterprises is 30%. The prospects for transformation of productive enterprises are very attractive. Zheng Chenai said that this year began planning to build its own brand and increase the ratio of domestic trade, and it will not plan to take orders for new foreign brand OEM in the future. But the road of transformation and upgrading is not easy. "OEM wants to transform into a brand business, but management and talent matching is hard to keep up with." Zheng Chen AI and Mr. Li believe that the threshold of production is not low, and channels and publicity are the key. These are not the advantages of a OEM.

The initial investment in brand is huge. According to Chen Zhonghuai, a brand should start building a brand image from a direct store and accelerate its expansion. The cost of setting up a direct store is 700 thousand -80, and the large flagship store even needs millions. Last year, three point water also invested 8 million in publicity and promotion, and for Mr. Li's 500 employees' factory, last year's profit was the same.

At the same time, the transformation also needs to face the pressure of inventory. "There is no inventory pressure on production enterprises," Zheng said. But brand companies are different. "Retailers can't order orders, and they must prepare their stock beforehand," Chen Zhonghuai told reporters. "At least half a year is needed for products from R & D, cooperation with manufacturers, orders to final shipments, and there is a need to predict future forms." In the stocking cycle, a larger cash flow is needed, which also leads to a much higher debt ratio of the brand. The debt ratio of three point water is 40%, much higher than that of Mr. Li's factory less than 10%. Zheng Chenai also thinks that inventory is the biggest problem for clothing enterprises, and cash flow is easily crushed. And many of OEM and many of them are starting to make brand names. They start with customization, and do it alone. "This can reduce the inventory pressure of 20%-30%." But the time of brand building for customized services is relatively slow.

"In addition to physical stores, the electricity supplier is also an important sales channel, but its inventory is facing the risk of drastic fluctuations," Chen Zhonghuai said. "In this year's" double eleven "cycle, the stock preparation is several times higher than the off-season," said Liu Liyan, general manager of Kim en children's clothing, which is mainly based on Tmall sales. In the off-season, the warehouse is idle.

Earlier this year, Zheng Chenai appealed to the financial industry to make adjustments based on the transformation and upgrading stage of the industry, provide low interest free interest policy, establish industrial transformation and upgrade special loan funds. But he told reporters that because the government's financial pressure is also great, the fund is unlikely to be established.