Tongxiang Dilemma Of Private Apparel Industry: Upstream Price Rises And Downstream Difficulties

Pictures originate from the Internet.

At noon on August 16th, after a heavy rain in Tongxiang, the sun was seen again. However, the clouds of pressure from the typhoon "Wen Biya" in the distance indicated that the next rainstorm would soon hit again.

Tongxiang is a major city in Zhejiang and even the national warp knitting industry.

Nowadays, the place where the warp knitting industry is rapidly expanding in the initial stage of reform and opening up is also facing the test of "rising price typhoon" in the industry.

In August 6th, the Jiaxing Tongxiang, Haining and Changzhou Wujin area three place warp knitting Association issued the "stop production proposal", so that the predicament faced by the traditional manufacturing industry in Tongxiang, Haining and other places began to be made public.

The reason is that the price of raw materials in the upstream of warp knitting industry is rising all the time, making many small and medium-sized processing enterprises face increasingly difficult market environment.

According to China textile net data, the price of raw materials such as polyester filament, wool yarn and other warp knitting industry has been rising all the way in recent years.

In particular, polyester filament has soared in recent months. As of August 14th, the average market price of polyester filament POY150D was 10900 yuan / ton, and the average price of other raw materials was more than 10000 yuan per ton, compared with the same period last year, all of them rose by at least 2000 yuan / ton.

Wu Guoshan, 41 years old, is middle-aged, but has already been white haired on his temples. He is the director of the company. He has obviously felt the impact on the industry after the rise of raw materials. He always talks about "the coming season is getting late."

At the same time, for Wu Guoshan's warp knitting industry, what is more worrying is that the small and medium-sized processing enterprises scattered in Tongxiang, such as starry and starry, lack of cohesion and lead to low price competition within the market.

In Tongxiang, like Wu Guoshan, there were few practitioners who started to work in the warp knitting industry in the early years, but now the new era background and discovery stage, so that the enterprises that they created all those years have begun to face the "window period" of the ebb and pformation and upgrading.

Raw materials

Wu Guoshan's company is located in a very humble commercial building in Pu Yuan Avenue, Tongxiang. If it is not directed, strangers will be hard to find.

8 in the middle of the month, it should be the peak season for garment factories in previous years. But in recent years, Wu Guoshan obviously felt that the time of off-season began to grow slowly, and the busy season really had to wait until September.

"The previous off-season is the two quarter and three months. Now it has been extended to August."

Wu Guoshan told the twenty-first Century business news reporter that the shrinkage of the industry peak season is the impact of the rising price of raw materials in the warp knitting industry.

In twenty-first Century, an economic report reporter learned that the price of cashmere yarn, which is widely distributed in Tongxiang's cotton textile processing enterprises, has been rising in recent years, resulting in the market wait-and-see sentiment becoming more and more serious. Many orders that had already been prepared for stocking began to be postponed.

A person who has long been engaged in wool textile sales told the twenty-first Century economic report that the price of cashmere yarn rose from 800 yuan a kilogram in 2017 to more than 1000 yuan per kilogram. In less than a year, the price of raw materials increased by about 25%.

"Due to drought in Australia, the number of weeds is reduced, so the production of wool is limited, and the import of wool is mainly based on Australian dollars. Exchange rate fluctuations are also an important reason for the rising prices of raw materials."

The industry insiders told reporters.

In fact, the price of warp knitting industry has been rising and rising all the time. It is not only limited to the processing industry of cashmere garments, but the price of textile raw materials needed for garment processing industry has risen to varying degrees in recent years.

According to the real-time data released by China textile net, the reference price of PTA (main chemical fiber raw material) in August 16th was 8147 yuan / ton, which was 22.09% higher than that in August 1st, the highest increase this month.

An industry insider pointed out to reporters that the whole industry price pmission chain basically showed the pattern of "oil naphtha -PX-PTA- chemical fiber factory - Textile Factory - garment factory", of which PTA and other raw materials were mostly settled in US dollars, and influenced by the key source factors such as recent oil and foreign exchange, pricing is also inevitable.

"This wave of textile raw material price increases is mainly influenced by oil price and exchange rate, and the leading market gains are around 15%."

The industry told the twenty-first Century business reporter, because the upstream industry of clothing factories mostly monopolized and large enterprises gathered in large numbers, which also led to the higher premium of raw material market in some upstream industries under the situation of rising prices.

Manufacturing enterprises in "seam dilemma"

In fact, the industry "Butterfly Effect" brought about by the rising price of raw materials is far from being settled.

While the peak season is being squeezed, the price of raw materials has also brought new challenges and difficulties to the garment processing enterprises.

"Because there is a certain cycle difference in the quoted price, the anticipation of rising raw materials has brought about many changes and differences in the production of enterprises."

Wu Guoshan told reporters that this change is mainly reflected in two aspects: on the one hand, raw material prices rise, leading to the industry generally do not dare to easily prepare in advance; on the other hand, the stocking cycle gradually compressed to "double eleven" and "double two" sales season close, which led to the processing factory appeared "off-season too idle, busy season can not do" dilemma.

But according to the law of price pmission, can small and medium-sized enterprises represented by Wu Guoshan not imitate the price of upstream raw materials?

The answer is almost difficult.

Small and medium-sized garment processing enterprises represented by Tongxiang are all small and scattered. The competitive relationship among enterprises is widespread. The disadvantages of price war gradually weaken the bargaining power of the whole industry.

Qian Xueguang, general manager of Zhihua Clothing Co., Ltd., Zhejiang, told the twenty-first Century economic news reporter that over the past more than 10 years, Tongxiang and other places entered the garment processing industry with a large number of self-employed individuals, which led to capacity expansion and price wars between the two sides.

"If you don't want to do it, naturally others will do it."

Qian Xueguang told the twenty-first Century economic news reporter that the overcapacity of private enterprises has resulted in the low bargaining power of the industry. The upstream and downstream enterprises of garment processing SMEs are mainly large enterprises. The upstream is a strong seller's market, and the downstream industry is also a strong buyer's market.

In such a situation, facing the price rise of raw materials, similar to Wu Guoshan's small and medium-sized processing enterprises, there is basically no market space for price adjustment, thus becoming a "sandwich biscuit" industry that has been squeezed on both sides.

Wu Guoshan recalled to reporters that once a foreign customer found him with samples, a clothing processing fee gave a price of more than 30 yuan, but Wu Guoshan needed at least 50 yuan for processing fees, so that he could keep the capital, but the other party was clearly prepared.

"Many orders customers give the price seems to be factory as long as we can feed workers."

Wu Guoshan recalled that many processing factories, because of low cost, were willing to receive orders that were compressed to a very low level, which also kept lowering the bottom line of the industry.

At the same time, besides the rise of raw materials, the surrounding production factors of warp knitting industry have also risen to varying degrees, becoming another "sword of Damour and Chris" that the industry has to face.

In twenty-first Century, an economic report reporter learned that the key elements of the garment processing industry represented by Tongxiang, such as labor, rent and washing, all showed a general upward trend.

In Tongxiang, the rent of processing workshops has risen from about 10 yuan / three years ago to over 20 yuan / Ping.

Wu Guoshan gave the reporter an account of his factory, a total of 1300 square, three years ago signed the rental cost of 12 years, now has risen to 25 years.

In addition, workers' wages go up every year with a rise of 10%. Now the factory cost nearly 500 thousand yuan per month, and this figure is basically out of balance in the off-season.

In addition, the environmental cost is also a part that can not be ignored.

Water washing, printing and dyeing factories are closing down because of stringent environmental protection, which indirectly leads to the fact that Tongxiang's small and medium-sized processing enterprises are facing constant costs.

In early 2016, Tongxiang issued the "long term management measures for printing, dyeing, papermaking, leather and chemical industry in Tongxiang". After eliminating a number of sub standard printing and dyeing enterprises, the remaining enterprises could not meet the market demand of warp knitting and textile enterprises, and the market quotation also rose rapidly.

Wang Zhenbo, President of Tongxiang warp knitting Association, said in an interview with the twenty-first Century economic report reporter that besides the influence of raw materials, labor and rent, the price increase of the dyeing and finishing plant is also an important reason for the current situation of Tongxiang's warp knitting industry facing "difficult situation".

Failure of capacity aggregation?

In fact, it is not the first time that the small and medium-sized private manufacturing enterprises born in the market are facing the current market predicament.

Experts who have long observed the development of Zhejiang's private economy have indicated that in the development of traditional manufacturing industries represented by Zhejiang, the phenomenon of small and medium manufacturing enterprises being squeezed before and after the lack of bargaining power has also appeared.

It originates from the original block economic development pattern. If there is no leading enterprise in the market competition or a large enterprise that does not form a large market share to dominate the market discourse right, it is bound to face such a development problem.

Pan Yigang, chief investigator of Zhejiang Development Planning Research Institute, said in an interview with the economic news reporters in twenty-first Century. In fact, most of the traditional industries in Zhejiang have gone through this process. In the current environment, they can actually push the pformation of their organizational structure through the market.

However, in the process of pformation of small and medium-sized manufacturing enterprises represented by the Tongxiang warp knitting industry, it is undeniable that market and government guidance can play an important driving force, but the most crucial change is from the enterprises themselves.

Chen Jianjun, executive director of the regional and urban development research center of Zhejiang University, said that the dilemma encountered by the warp knitting industry in Tongxiang and other places is a problem that the market economy has to face. For the development of the industry, the only way to solve the problem is the pformation and upgrading of the enterprises themselves.

Chen Jianjun told reporters that the current difficulties encountered by small and medium-sized manufacturing enterprises in Zhejiang and other places are a common problem. The key is how to promote the industrial upgrading of the warp knitting industry to achieve high value-added.

In the course of the interview, in twenty-first Century, the business reporter also found that, within the tens of thousands of small and medium-sized garment processing enterprises in Tongxiang, the market division of labor began to appear after a certain scale, and the small businesses scattered by the force of capital were integrated into a relatively aggregated productivity group to enhance the industry's own right to speak.

Qian Xueguang told reporters that the basic mode of this internal division of labor is that the larger medium-sized processing enterprises gradually float upstream to the industrial chain of the garment processing industry, mainly responsible for undertaking orders in the form of trading companies, and then send them to small enterprises to undertake all links of production and processing. Finally, the trade companies will check the quality and deliver the order to the customers.

"In the whole production process, we concentrate only on local production capacity and do a good job in processing, and the key links such as raw material procurement, stock preparation and so on are all undertaken by customers."

Qian Xueguang told reporters that in this way, on the one hand, it can realize light capitalization, reduce the impact of price rise of manufacturing enterprises, such as raw materials and other upstream links; on the other hand, it can also centrally distribute productive forces and increase market influence.

For Wu Guoshan, he also began to think about the way for the pformation of his own business.

He told reporters that the pattern of factory outlets in the future will also be a direction of pformation and upgrading. By creating their own clothing brands, they can directly deal with buyers and customers through the channels of network sales, and may be effective ways to get rid of the long-term "generation processing" of enterprises.

(Lu Changle, Chen Yi)