What Are The Costumes Behind The Clothing Companies That Are In The Service Of UNIQLO, Nike, Adidas And Puma?

Speaking of Shenzhou International Holdings Limited (hereinafter referred to as Shenzhou), perhaps many people have not heard of it.

As the boss of the clothing industry, it produces almost all of our products in wardrobes, and nearly half of the sports casual brand clothes we buy in the shopping mall are from the company.

At the end of 2018, the thirty year old foundry enterprise broke into the 100 billion market capitalization club, and the stock price was broken by 100%. This is somewhat different from the sweating factory we remember.

In the ten years since the 2008 financial crisis, Shenzhou International's share price has risen by 85 times, surpassing that of Tencent.

If calculated at the lowest price in 2008, Shenzhou International has increased by more than 100 times in the past ten years.

Shen Zhou's market value is 156 billion 500 million Hong Kong dollars in the first place in China's industry. As a OEM enterprise, Shenzhou International has broken the industry's recognition that the factory does not make money.

Shenzhou International has been an international company since its foundation. Almost all of its early products were exported to Japan, and then gradually opened up the European and American markets.

UNIQLO, Nike, Adidas, Puma, Lining...

Why do countless big brands have a liking for Shenzhou? Under the crisis of financial crisis, trade war and cost advantage, why did Shen Zhou overcome the difficulties and realize the growth of enterprises' counter trend?

1 from China to Japan: the cognition and layout of leading industries

In the garment manufacturing industry, the tastes of users change rapidly, and at the same time, they have to ensure large scale shipments. Many brands tend to concentrate their resources on the sales side, while the outsourcing process and the "foundry production" mode emerge as the times require, and cosmetics and consumer electronics industries have similar characteristics.

Foundries rely mainly on scale and technology to build moat. TSMC's advanced manufacturing technology and Shenzhou International fabric research and development capability are representative examples of the OEM industry.

Because of its close proximity to raw material producing areas, relatively low labor costs and policy support, Asia has become the world's major garment manufacturing base. China is an important part of it. Many early foundry factories came into being.

But the earlier scale of the foundry is smaller and the concentration ratio of the industry is relatively low.

With the integration of industries in recent years, the integration ability and scale of downstream brands are becoming larger and larger. The concentration degree of foundries is also gradually improving.

Shenzhou International was founded in the late 80s of last century. At that time, the government of the Beilun District of Ningbo, a weak economy, invested in Shanghai's state-owned enterprises and overseas Chinese in order to solve the local employment problem. In 1988, Ningbo District Shenzhou Weaving Co., Ltd. was established. This is the predecessor of Shenzhou International.

In 1990, Ma Jianrong's father, Ma Baoxing, was introduced to Shenzhou International as deputy general manager.

At the age of 13, he went to Shanghai textile mill to be a "child laborer", who has been promoted to deputy factory director and studied in Japan. Ma Baoxing is an expert in textile industry.

However, Ma Baoxing, who was out of school, arrived at Shenzhou, but the capital was delayed. Ma Baoxing made every effort to lend 3 million of the Bank of China.

Due to its short knitting process, low cost and wide application scope, Shenzhou set the company's main business in the knitting industry. In 90s, Shenzhou established the company's development path: to develop fabric and take the middle and high end route.

In 1992, Shenzhou began to focus on the high-end brand's OEM business and began to make profits.

At that time, the export of Chinese textiles was mainly based on foreign trade companies, with low quality and homogeneous competition. Ma Baoxing, who had been to Japan, decided to try it in Japan.

At that time, the Japanese textile industry was already in the boom stage, and the clothing indexes far exceeded the domestic standards. In this way, Shenzhou had embarked on the "internationalization road".

Shen Zhou began to pry open the Japanese market by analyzing and grasping the baby garment industry in Japan.

In 1997, the Asian financial crisis, Shenzhou International has ushered in a major turning point - management buyout.

The three party shareholders pferred the shares to the Ma Baoxing family.

Also from the apprenticeship, in the factory for nearly 20 years, Ma Baoxing's son Ma Jianrong held 46.62%, and began to take charge of Shenzhou International.

The first thing he did was to spend 30 million on sewage treatment plants.

Today, pollution emission is an important consideration for brands to choose suppliers.

Also in 1997, Shen Zhou delivered 350 thousand urgent orders of UNIQLO in just 20 days, and got the opportunity to cooperate with UNIQLO for a long time. Since then, Shenzhou's fabric research and development advantages have been gradually developed and strengthened.

In the following period, Shenzhou International Business in the Japanese market continued to grow, and established business relations with Japanese clothing brands and retailers such as UNIQLO, ITO, Ito, and so on.

Because of close cooperation, Ma Jianrong and Ryui Masa have become very close friends and have the chance to play golf together.

In 2001, Shenzhou International made the first three of the domestic knitting industry sales revenue, total profits and taxes and total profits. At that time, the Japanese market accounted for more than 90% of its sales.

2 from Japan to the world: do not put eggs in one basket.

In 2002, Shenzhou began to explore sports apparel business to prepare for future pformation.

In 2004, Shen Zhou began to make multiple attempts to launch a preliminary test of track pformation, attempting to pform from casual apparel to higher profit sportswear.

At the same time, Shenzhou International began to increase sales in Europe and the US market and avoid relying on the business risks caused by Japan's single market.

In 2005, Shenzhou listed in Hongkong, raising more than 900 million Hong Kong dollars to upgrade equipment to further enhance its competitiveness.

Now, with high-end equipment, from 2 million to 4000 orders, from shin to delivery, Shenzhou International can control within 15 days.

Although the state has gradually liberalized the export quotas of the Chinese market, it has provided a policy spring for Shenzhou to enter the European and American markets. However, in order to avoid the import quota of European and American products to China, Shenzhou began to set up factories in Kampuchea, and Shenzhou's ambitions were obvious.

With the spring breeze of the 2008 Beijing Olympic Games, the business diversification of Shenzhou in 2007 has achieved initial success. Shenzhou sportswear orders have surged and sales of casual wear have dropped for the first time.

It is this year that Shenzhou gets customers like Nike, Adidas, Puma and so on, and sets up Nike and Adidas special factories.

Sports clothing increased rapidly, increased the proportion of Shenzhou high end products, and doubled the company's revenue.

Besides, Shenzhou's underwear business is gradually expanding.

The Asian financial crisis in 2008 brought a disastrous blow to the industry. The clothing industry began to shift to lower labor prices in Southeast Asia and India. Due to the low added value and serious pollution, the garment industry was no longer encouraged in China.

In the low economic cycle, Shenzhou has decided to expand its capacity.

Shen Zhou built a new weaving industrial park in Ningbo, built a garment production base in Anqing and Quzhou, and seized market share against the market.

By 2009, Shenzhou export sales ranked first in the country.

In 2011, Nike chose Taiwan manufacturer Fengtai to produce Flyknit shoe upper, but the 150 Flyknit production machines bought were only dedicated to special machines, and Flyknit technology promotion was uncertain. In 2012, Fengtai gave up this business.

Shenzhou International boldly seized the opportunity to purchase 2000 devices and undertook Flyknit orders.

This technology is a huge leap in the history of Nike company. Shenzhou accounted for 70% of the total orders of NikeFlyknit, becoming a huge driving force for its performance in recent years.

In the 2013-2014 year, due to the warmer garment industry in the lower reaches, the improvement of the external environment and the consolidation of Shenzhou's industry status, Shenzhou has pushed the market to a broader market.

So Shenzhou set up a fabric production base in Vietnam to further enhance production capacity and speed up the pace of overseas expansion.

Shenzhou has gradually become a high quality enterprise in the field of foundry. The confidence of the capital market on Shenzhou can be seen from the soaring stock price of Shenzhou.

In 2015, the market fever of the downstream movement brand clothing increased further. Shenzhou's technological research and development capabilities and scale effect advantages gradually increased, and the market share of the company expanded. Shen Zhou opened the accelerator of development.

Shenzhou has become the core supplier and brand partner of many international first-line brands, which really occupies the leading position in OEM industry.

In 2016, the two phase of Vietnam fabric factory and the completion of garment factories, and the proportion of overseas production capacity gradually increased. In the same year, Shenzhou became the world's largest apparel supplier of Nike and Adidas.

In 2018, Vietnam's fabric production capacity continued to improve, and the layout of new garment factories in Kampuchea and Vietnam made the business layout of Shenzhou grow steadily.

Today, Shenzhou has diversified businesses and is less dependent on single products and markets.

Shenzhou is China's largest knitting vertical garment manufacturer and exporter. Its capacity is distributed in China, Kampuchea and Vietnam. It is the largest supplier of Nike, UNIQLO, Adidas and Puma clothing brands, accounting for 12%, 14%, 30% and 14% of Nike, Adidas, UNIQLO, Puma clothing purchases respectively.

From the perspective of product category, Shenzhou 2018 accounted for 68.14% of the three categories of apparel, 68.14% of sportswear, 24.66% of casual wear, 6.34% of underwear and 0.9% of other knitwear.

From the regional market, international sales account for 69.87% of turnover.

Among them, Japan accounted for 15.45%, the United States and Europe accounted for 33.65%, the Chinese market accounted for 30.13%, and had strong competitiveness and popularity in the global market.

The company, which has been founded for thirty years, has achieved very impressive results, but its business line is very clear.

In the past thirty years, we have been focusing on the garment foundry track, upgrading efficiency through equipment upgrading, and developing modular production through global and domestic continuous investment, making it a global leader.

3 innovation and management: Shenzhou moat

Shenzhou, a knitting factory, can stand out in many OEM enterprises, and it has to be attributed to its layout in the upstream fabric processing field.

Due to the development of medium and high end fabrics, Shenzhou took the order of UNIQLO in 1997 and maintained close cooperation for many years.

Therefore, Shenzhou is well aware of the importance of technology and R & D.

Shen Zhou changed from the earlier casual wear OEM to the more profitable sportswear foundry. The success of the pformation is inextricably linked to the research and development capabilities of Shenzhou's high-end fabrics.

Functional sports products are featured with fewer styles, higher requirements for fabric quality and functionality, and larger quantity.

This requires suppliers to have advanced garment technology and technology development capability and scale strength.

Enterprises that can help customers develop and produce high value added products are bound to get the favor of brands.

The strict quality control system, efficient management mode and diligent staff team have been constantly strengthened in Shenzhou development.

So Shenzhou has gathered a very strong core customer base. Its service Nike, Adidas, Puma and so on are the sports brands of the industry's head.

Shen Zhou's top five customers account for a very stable share in their sales, and basically remain at the 80%-85% level.

At the same time, Shenzhou also set up an information sharing mechanism with new suppliers of raw materials to exchange consumer demand with customers, seize the user's consumption thinking, enhance the forefront of market trend tracking, and improve product research and development efficiency.

Shenzhou's first class fabric laboratory with a floor area of over 6000 square meters has excellent fabric research and development capabilities.

Moreover, all the fabrics developed by Shenzhou are all used internally, which has become an insurmountable moat for Shenzhou.

Before listing, Shenzhou International insisted that more than 60% of the annual profit be put into technology.

After listing, Shenzhou International's annual R & D investment is about 2% of annual revenue, and it continues to improve technology and equipment to improve production efficiency.

In addition, the company also has a relatively complete R & D system, set up technology centers and other innovative groups, introducing outstanding engineering talents at home and abroad, and strengthening R & D team building.

By the end of 2017, it had 246 patents, including 90 patents for new material fabrics and 156 patents for process equipment modification.

In addition to powerful technology and R & D capabilities, time is also highly significant for OEM companies.

As a vertically integrated knitting manufacturer, Shenzhou is a foundry factory with five complete processes: weaving, dyeing, finishing, printing, embroidery, tailoring and sewing, packaging and logistics. It has a very fast supply chain reaction capability due to seamless connection of production links.

Moreover, Shenzhou has offices around the world, and can conduct business meetings with its main customers before the start of each quarter, so as to formulate plans for the next quarter's production and sales.

The company also coordinates with the customer's special design, fabric requirements and budget, develops and produces corresponding fabrics and produces garments to complete the customization and quality requirements of the international brands.

This mode has greatly improved the efficiency of communication between enterprises and customers, and greatly reduced the response time of the supply chain.

By designing (shorten product lead time and new delivery cycle), production (production process concentrated in an industrial area, reduce time and logistics cost, establish a main customer special factory, one-stop completion of all links from development to production, and logistics packaging), an integrated industrial chain can effectively improve production efficiency, shorten the supply cycle, avoid risks arising from uncertainties in the industrial chain, ensure timely delivery and enhance product competitiveness.

A strong supply chain is enough to support a quick product cycle of 15-20 days.

Shenzhou, which has all its links in its hands, has also greatly increased its synergy and has left all its profits inside the company.

In terms of cost control and scale advantage, Shenzhou's overseas expansion is also worth learning.

With the free trade agreement reached between Southeast Asian countries and more developed countries, the cost advantage of Southeast Asia is stronger, and the trend of textile industry shifting from China to Southeast Asian countries is more obvious.

Therefore, Shenzhou International pformation of market trends, the pfer of production to Southeast Asia, a good way to enhance the profit margins for the company, but also further expand the scale advantage of enterprises.

At the same time, in the process of overseas production capacity layout, there are corresponding measures in solid waste disposal and energy conservation, and the construction of energy saving and emission reduction capability should be emphasized, so as to clear up obstacles for the further development of Shenzhou.

4 Conclusion

Affected by the slowdown in economic growth, global consumption demand is relatively weak. Sino US trade friction brings greater uncertainty to the future export situation, and the manufacturing costs continue to rise. The domestic textile and garment industry is under the dual pressure of market and cost.

The Shenzhou market, which is packed in different baskets, has successfully evaded many market crises through globalization and diversified business layout.

China + Southeast Asia's capacity layout enhances productivity advantages, reduces labor costs, and evade trade risks caused by trade policies.

Diversified customer composition and business structure enable enterprises to walk on multiple legs.

Sustained and innovative R & D and innovation, vertical integration business has enabled Shenzhou to have rapid industrial chain reaction capability, benefit collection advantages, and reduced reliance on the market. All these have become Shenzhou's deep moat, thus laying down an unshakable industry hegemony of Shenzhou.

Therefore, the financial crisis in 2008, the abolition of China's GSP treatment by the EU in 2015 weakened the price competitiveness of the EU market in the Chinese market. In 2017, the Sino US trade war began to hit the textile and garment industry again, and Shen Zhou not only passed through it, but also went against the trend again and again in a difficult environment.

In 2018, Shenzhou reached a new height: its revenue was 20 billion 950 million yuan, and its profit was 6 billion 610 million yuan.

In the development strategy of foundry enterprises, there will always be the voice of establishing independent brands to cultivate the core competitiveness of enterprises.

But "doing one thing for life" is Ma Jianrong's business philosophy. He said that at present Shenzhou International brand is not in a hurry to make its own brand. It is necessary to stabilize the current market and improve itself.

Shenzhou must insist on innovation and constantly upgrade its production level and capability. In addition to improving the added value and profitability of the product, it will make the company a sustainable development operator through environmental protection design, reducing the use of fabrics and reducing production and emissions.

Shenzhou has reached the volume of today, but is still committed to its own escalation, excellence in the pursuit of excellence, such a business is indeed worth learning.