Looking At The Development Of Fast Fashion And The Pfer Of Garment Industry From The Side

Artificial intelligence and robots are increasingly calling for the revolution of manufacturing industry.

Manufacturers Jingyuan International (hereinafter referred to as "Jingyuan") still betting on human workers, do not think that the early stage of the robot can compete with low-cost labor in the country.

Today, Jingyuan is pferring the industry to Bangladesh and Vietnam.

According to the world clothing and shoe net, in 2016 magazine released 50 companies that changed the world in 2016, Jingyuan ranked seventeenth (another Chinese company drops thirtieth). Most people are strange to Jingyuan company, but its main customers are UNIQLO, H&M, GAP and so on.

Brands are familiar.

This article looks at the development direction of garment manufacturing industry through Jingyuan's leading garment manufacturing industry nearly 50 years ago. From the side, we will see the development of fast fashion and the pfer of garment industry.

Southeast Asian shift of old fashions and fast fashion foundries

Jingyuan was founded in 1970 by Luo Lefeng (his father is known as "king of knitting"), and leisure brand Bossini.

Founder Luo Dingbang, founded in Hongkong, has now become the leader of global garment manufacturers. In five countries, there are 20 self owned factories and 70 thousand employees, producing about 350 million garments and garments each year.

According to the data of Euromonitor International, Jingyuan became the world's largest garment manufacturer in 2016, accounting for 0.4% of the market share in this highly dispersed industry.

However, according to the output value, Jingyuan ranked second in the world, accounting for 0.3% of the market share. We can see that the unit output value of Jingyuan is lower than the average line, that is, the clothing cost of its production is relatively low.

In November 3, 2017, Jingyuan officially listed on the main board of HKEx, stock code: 02232.HK. According to the prospectus, Jingyuan serves more than 30 garment companies, covering more than 50 brands, and its main customers are among the world's top fast fashion brands, many of which have twenty or thirty years of cooperation with Jingyuan.

From the prospectus disclosure, at present, Jingyuan's overall health, accounts receivable turnover days remain in 46 days or so, cash flow is stable and sufficient, raw material inventory turnover days also remain in about 50 days. In recent years, with the expansion of the south of the expansion of factory revenue growth, next, pick up the key point.

Look at the picture, Jingyuan's revenue is relatively stable.

Jingyuan has a very stable cooperative relationship with its customers, and its capacity utilization rate is above 90%.

In the apparel industry chain, the contribution ability, production capacity, price, quality, delivery date and so on can form better competitiveness and inertia, especially fast fashion, which emphasizes the width, speed and stability of the supply chain, maintaining stable turnover speed is very important.

The gross profit margin and net interest rate of Jingyuan rise overall, which is synchronized with the pfer of industry to Southeast Asia.

The garment manufacturing industry is a labor-intensive industry because it needs to invest a lot of manpower in sewing and post processing.

From 2014 to 2016, the cost of employees in Jingyuan accounted for 16.9%, 18.5% and 17.9% of the revenue respectively. Obviously, the sharp increase in staff costs in 2015 led to a marked decline in profitability.

At present, Jingyuan has production bases in five countries including China, Vietnam, Kampuchea, Bangladesh and Sri Lanka. Its capacity in China has dropped from 43.9% to 34.3% in 2014 and 2016, and its capacity has been pferred to Vietnam and Kampuchea.

The above is the production and average selling price of all kinds of garments in Jingyuan. The price is the same as quality. We can see that the production capacity of Jingyuan is increasing. The changes of various categories also reflect the changes in consumer preferences of fast fashion consumers. The obvious changes are underwear, sweaters and sportswear.

The output and quality of underwear are on the rise. This market is also a promising market in clothing category.

Sweaters reflect the preferences of young consumers. This category is encroached on by clothing and light technology products.

Sportswear and outdoor wear are fast growing clothing categories. In December 2016, Jingyuan purchased Vista, a Singapore company that manufactures sportswear, to expand into this rapidly growing field.

The above figure is gross profit and gross profit margin of all kinds of products produced by Jingyuan. Compared with the products, Jingyuan's products are not only low in average selling price, but also very low in gross profit margin, and most of the gross profit is less than 20%.

In fact, the gross profit margin is good. The average gross profit margin of domestic garment manufacturing should be single digits. Jingyuan makes the ODM product design additional profit to be higher.

This is the decision of the garment manufacturer in the position of the industrial chain. At present, the whole value chain is mainly in the brand side, then the channel side and the fabric technology development.

On the whole, Jingyuan's situation is highly regulated and its volume is huge. Its business source basically comes from the fast fashion clothing brand similar to the fast moving consumer goods. It belongs to the profit mode with low gross profit and high turnover, and the inertia is very large. It is almost on the road of mass production.

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Jingyuan wants to make "Foxconn" made of garments.

At present, Jingyuan pformation "co create" business mode: Jingyuan, like brand operators, thinks about the whole apparel industry chain from various aspects such as fashion trend and market trend research, product concept design, raw material development and procurement, product and industrial innovation, sample production, global manufacturing planning and optimization, inventory management and logistics and delivery, providing comprehensive one-stop service for customers at different stages.

Its pattern is as follows:

From ODM to provide product development and production to the whole product chain solution provider, the development direction of Jingyuan is worth looking forward to. The precipitation in the past half century is enough to see fashion take a cycle, and many international leading garment brands, especially fast fashion decades of cooperation experience, a wealth of product data will become one of the core competitiveness of Jingyuan.

At the same time, the pformation direction of this manufacturing industry is successful cases. The concept of "co creation" business model of Foxconn in 3C industry is more similar to Foxconn's concept of "co creation" business mode, and the two are also comparable.

At present, Jingyuan is far away from its "co creation" mode. From its current business description, it is more similar to the pattern of product development of brand buyer and supplier design team, that is, further directional development. Such cooperation mode already exists between domestic clothing brands and suppliers, which is a form of localization of buyer's mode, far from the "co creation" blueprint depicted by Jingyuan.

Jingyuan has strong technical strength in logistics and information systems. Now it has developed some products with high technical content, such as "water-saving" jeans, no steel ring bust, intelligent visual products, and a clothing patent technology called BME, which is used in sportswear and outdoor wear.

But in general, the main customers of Jingyuan are still locked in a fast fashion brand with large quantity and low price. The low-end garment manufacturing and processing will be their long-term business.

If you want to make breakthroughs in the added value, in addition to the "co creation" mode to increase value chain participation, learning Foxconn is a good choice for patent technology research and development.

Cheap labor is still the best choice for tailors.

In order to reduce manufacturing costs, Jingyuan is still pferring the industry to Southeast Asia for cheap labor.

Before 2019, Jingyuan will spend 3 years to expand 129 million 500 thousand additional annual production capacity in Vietnam and expand 26 million 600 thousand additional production capacity in Bangladesh. It is expected that the number of employees in Bangladesh and Vietnam will increase by 10% over the next few years.

Luo Zhengliang, Andrew Lo, once said that the labor cost of manufacturing centers in southern China has exceeded $700 per month, which is two times the average monthly salary of Vietnam and Bangladesh. The average monthly salaries of these two countries are 300 to 350 US dollars and 150 to 200 US dollars respectively.

Garment manufacturing industry pfer is like looking for a game of labor price depression. After the baptism of all kinds of intelligent technology in the past year, the price driven shift of labor force is particularly dazzling.

In Atlanta, a Softwear Automation company is developing Sewbot robotics technology to automate the entire garment manufacturing process.

The development of this robot has been funded by WAL-MART (Walmart) and Defense Advanced Research Projects Agency, which is under the US government.

Of course, this technology can not compete with the human workers in Bangladesh and other places. Softwear Automation CEO Parra Kniss Wa Mi Rajan (Palaniswamy Rajan) said that his robot has the sensitivity and visualization skills to deal with soft fabrics, but even for making a simple T-shirt, it takes 10 to 20 different steps to enable the robot to complete these steps. Engineers need to spend time programming, and 70 to 80 steps to produce a good shirt will be the next challenge.

Softwear Automation plans to launch the first automated T-shirt production line in the United States this year, and then will continue to enter more complex products such as jeans and shirts.

But from a professional point of view, garment manufacturing automation is far from being expected.

Since the advent of the automatic sewing machine in nineteenth Century, the process of making a T-shirt has hardly changed.

Such low threshold work requires only duplication of hands, but it is also so complex that even the most skilled software engineers are hard to reproduce.

Jingyuan pfers manufacturing plants to Southeast Asia, which is the inevitable path for its survival. Only by keeping low manufacturing costs can Jingyuan get more orders from fast fashion brands.

On the other hand, this is also the choice of Southeast Asian countries.

In Bangladesh, the clothing industry is its fist industry, clothing accounts for 82% of the country's exports, and 2.5% of the country's population is engaged in the garment manufacturing industry.

A total of about 27 million people in Bangladesh, India and Pakistan have been employed in the clothing industry, according to Clean Clothes Campaign data for better working conditions for garment workers.

Just as China did 20 years ago, now these Southeast Asian countries begin to have "demographic dividend" and need a large number of job opportunities, which is what Jingyuan can offer.

Imagine that if a sewing robot appears in a few years, clothing will inevitably go back to local production (which can save tariffs and pportation) and replace the jobs of some developing countries. The demographic dividend of this country will become a nightmare of human mouth structure.

Now some western scholars have begun to pay attention to the impact of rapid technological change on developing countries.

Perhaps someone has heard of the fast fashion sweatshop. This phenomenon does exist, but most clothing manufacturers provide regular jobs, which are very tired and mechanical but have to be done.

To sum up, with the rigid demand of global consumption, Jingyuan should be able to develop steadily and slowly.

The biggest risk is: Jingyuan really "half lives to partners"; the two is the labor intensive industry form. In theory, the more the number of employees in Jingyuan is, the worse its ability to resist risks. Three, Jingyuan's main business is "massive and low-end", and it is difficult to erect barriers.

Garment manufacturing industry will continue to pfer industries for a long time, but this shift to cheap labor areas is not necessarily a bad thing. Jingyuan can enter the list of "changing the world" not only because the technology of Crystal Garden reduces the freshwater consumption of cowboy industry by 30% to solve its pollution problems, but also because crystal brings many jobs and continuously works to improve the quality of workers' lives and impart important computer skills to women. These are very valuable to many developing countries.

More interesting reports, please pay attention to the world clothing shoes and hats net.