How Far Is Our Garment Industry From 40 Years To?

Mr. Han Xudong, a guest of this year, brought together the global perspective of the clothing industry in a joint event held by Gung lung and Gung lung Hui on Sunday's high end offline sharing activities. What kind of business is the garment industry in China? The development of China's garment industry has evolved to this day. So far, there has not been a big company that can match Nike, ADI and so on. Will there be any chance in the future?

One

What kind of business is the garment industry in China?

The Chinese garment industry started in 80s, and in the 20 years from 2010 to 2010, the market from 0 to 1, from scratch, brand awareness gradually awakened to brand upgrading; channels from the line to the electricity supplier to the whole channel competition. Taking 2011 as the watershed, China's clothing industry is divided into two stages.

Before 2011, China's garment industry was functional satisfaction from scratch. The path from scratch is extended from a second tier city to a three or four tier city.

After 2011, as the channel became more and more mature, more and more brands and more and more competitive globalization, the garment industry showed more personalized and diversified upgrading. The clothing industry began to evolve from a good to a good spiritual satisfaction stage.

Compared to other consumer goods, before 2011, the rate of return of apparel brands such as the US and the seven wolves was very good, either from the net profit margin or from the ROE perspective, or even inferior to Tsingtao Brewery (46.5, -0.10, -0.22%), GREE electric and other companies.

Why is there such prosperity? At this stage, clothing meets the functional needs of different levels from scratch. At this time, clothing enterprises are more like a channel than a brand. Many clothing companies are a selection of business models, depending on the choice of the supplier's design, without their own design and production.

At this time, many clothing Brand Company have part of their own business, more are two agents, through the way of joining, rooted in different levels of the city. Therefore, the role of the US and the seven wolves is more like a supply chain management company or a channel management company rather than a real Brand Company.

From 0 to 1, the development of the first line can not reach the second line. Before 2000, the front line was the main battlefield. After the international big brands entered the second tier cities, these brands began to develop to the two or three line. After 2010, the big international brands entered the two or three line through the electricity supplier, and these companies were squeezed very hard. Therefore, before 2011, clothing companies can earn money, mainly because they have undertaken the functions of the channel, established and expanded a deep channel, and developed the 2345 tier cities from the front line to the end by joining them.

Therefore, after 2011, domestic garment companies have undergone great changes. The original franchise system must be transformed into retail. At this point, the channel can not become an advantage, retail is a new way, clothing companies need to take part in more products, design and other links, so these channel brands have suffered a lot of setbacks. Take the United States for example, after 2011, the ROE of the US state declined rapidly, and the asset efficiency was extremely atrophied.

From ditch companies evolution to product companies, clothing has no special attributes compared with other things. Although clothing classification is very large, so far, compared to home appliances, mobile phones, condiments, dairy products, clothing properties are gradually decreasing, while the spiritual attributes gradually increase. However, although spiritual attributes can make clothing acquire pricing power and high gross profit, it is not well defined and has great uncertainty. For example, what kind of spiritual aspirations does a garment satisfy, and the group destination or self actualization? How to create brand to match different consumers' ever-changing personality pursuit?

Therefore, the most difficult part of the clothing industry is demand unpredictability, which will lead to the "Impossible Triangle" of the industry: expanding the scale of revenue, maintaining the sales rate of positive prices, and improving the sales rate are hard to maintain at the same time.

If garment companies want to expand their revenue scale, they will need to expand SKU to meet everyone's needs, but the stock of clothing companies is six months to a year ahead of schedule, and whether they can really be accepted by consumers is unknown. This is to ensure that inventory can be managed, or in the past quarter, goods can not be sold, forming a backlog of inventory.

According to statistics, only about 50%-60% of the clothing industry can be sold at a regular price during the season, and the remaining 40% can not be sold in the current season. This will lead to a large profit margin and a serious backlog of funds, which will hurt the brand greatly. Therefore, the first tier brand will discount in the second tier cities, second tier brand discount to three line city sales, this level of first class reduced dimension discount sales to form a love inventory, vip.com and other companies.

Therefore, if clothing companies want to maintain brand names and maintain a healthy positive sales rate, they must have a very precise positioning of product requirements and product definition, otherwise they will still be trapped in inventory difficulties.

Sold out rate, that is, whether the product is positive or discount, all sold. If the sales price is not high, it will seriously affect the rate of selling out and inventory backlog, which will affect the liquidity of the capital and cause the whole company to turn around. Therefore, at the same time, it is very difficult to achieve the scale expansion, maintain the positive selling rate and raise the sales rate.

But conversely, if we do not pursue large-scale, is it possible to subdivide one category into intensive farming? The answer is yes, as many of the brand names are alive now, and there are also A shares listed companies, such as bryin, who have done very well in their golf apparel industry. Various operating indicators and repeat purchase rates are healthy. This year, the company's share price has nearly doubled.

So it is no problem to maintain a small and beautiful business, but to achieve tens of billions or billions of dollars, there will be a problem of "Impossible Triangle".

Two models are used to analyze the impact of different positive selling rates and discount rates on the net profit margin and operating net cash flow.

Model 1: 1000SKU, the three batches have different sales rates, which are 50%, 40% and 40% respectively, which will lead to a net profit difference of 36000 to 16000. Taking different discounts will also lead to huge differences in net profit and operating cash flow. It can turn net cash income from 16000 yuan into net cash income of -4000 or even -16000.

Model two: if different SKU numbers and different discounts, it will also have a huge impact on net profit and net cash flow.

Therefore, if we want to maintain sustained growth, but there is no perfect control over the various operational efficiencies in the middle, even if the selling rate of the positive price drops from 50% to 40%, it will have a very serious negative impact on net profit and net cash flow. This is also one of the reasons why clothing companies are hard to grow.

Therefore, we believe that the core contradiction of the apparel industry at this stage is the contradiction between multiple varieties of demand and the rapid change of multiple demands and the slow supply satisfaction of batch. With many demands and rapid changes, supply can not keep up, which will lead to impossible triangles.

Two

Can you create a huge company?

What are the requirements for becoming a huge company?

Is there a huge company in the clothing industry? From a global perspective, whether the global rich list or the company's market value ranking, we can see that some of the garment industry has become a large scale company.

Nike has a market capitalization of $131 billion 900 million, followed by Inditex (Zara) at a maximum value of $120 billion, a huge retreat from 2018, the latest closing price of $82 billion 300 million, and UNIQLO market capitalization of $61 billion 600 million. The luxury LV market value of 188 billion 200 million dollars, belongs to the spiritual satisfaction category, this article does not elaborate. Above sorting, we can see that both the traditional casual wear and Nike sports areas, there are large companies. There is also a very special company, Lululemon, which has been developing rapidly in recent years. Now it is 23 billion 500 million dollars.

This table is the composite growth rate of several companies in the past 10 years as of 2017. The fastest growth is UNIQLO, and Shenzhou International (111.6,1.20,1.09%) and Lululemon. If Lululemon combined with 18 or 19 years of data, the composite growth rate will be about 20%; Nike and Adidas will have a compound growth rate of 15% in 2019. These companies have lasted for more than ten years without compound dividends, which are very good.

How can the garment industry become bigger? First, we must break the Impossible Triangle. Comparing the successful path of Zara, UNIQLO and Shenzhou International, we can see that the core of the whole industry is supply chain management. The whole industry chain supply management is a means to improve the efficiency of the reaction, break the Impossible Triangle, and alleviate the core contradiction between the rapid change of demand and the slow supply.

Take UNIQLO as an example to analyze in detail.

Case study: UNIQLO

The core of UNIQLO's strategy is to reduce SKU and make only basic funds. It is necessary to diversify the needs and become optional. Basic funds can enable the company to focus on fabric development and reduce costs, and maintain a strong performance price ratio. Reducing SKU can reduce inventory risk, and cost-effective products can improve the sales rate. There is no rapid and varied demand change, which reduces difficulty and helps better manage the whole supply chain.

In addition to the centralized style, UNIQLO has another core business. Direct battalions can more effectively control the efficiency of stores and channels, abandon diversified demands, concentrate on managing flexible supply chains and flexible flexible supply management systems, from supplier end to channel to terminal supply chain management.

UNIQLO mode is easy to learn, but the function of basic funds is greater than that of mental attributes. When it comes to UNIQLO, consumers will know that the price is high. What is the brand value of UNIQLO?

My personal understanding is that the role of brand is only one, reducing the time cost of choice and use. So low? Brand is equal to quality, but this quality is not equal to good product rate and uniform pass rate. This quality is a sustainable, reproducible, high-density and high latitude set of process parameters from raw material to production management to distribution system to the final marketing side. It can ensure that the product's quality, quality and use effect can be accurately communicated to customers after 10 or 20 years. Through this continuous communication, the brand is rooted in the user's mind.

To achieve this kind of communication, we need data combination in each link. For example, the ratio of chemical fiber and cotton as raw material is probably the best, which can adapt to various environments, and achieve the functions of sweat absorption, light weight and breathability. What kind of production process's time ratio, efficiency ratio and quality ratio are the best, such as how long and how long the vehicle will make different cloth loose. Degree and tightness to achieve a better texture. All these need constant test and verification to get good parameters. If all of these can be digitalized, we can get effective methodology and get the latest matching. This is the conclusion of the past ten years that large companies have come to this day to ease the contradiction between supply and demand.

Compared with the past ten years, new infrastructure and technology have brought new opportunities for the development of the industry.

First, the transparency and flexibility of socialized whole supply chain management are improved. The management capability of the factory has been continuously improved. The flexible manufacturing and flexible management of the factory have been greatly improved, and the delivery cycle has been greatly shortened. For example, the fastest shipment time of Shenzhou International is 15 days, and the opponent needs 30 days. This benefits from the overall supply chain management and the efficiency improvement of end-to-end supply chain management. This is not achieved in the past 20 years. The future 5G, Internet of things, industry 4 and other technologies and changes will greatly enhance the transparency and flexibility of the supply chain.

The efficient logistics system and the maturity of the electricity supplier provide huge space for the efficiency improvement of the channel side. After 2013, Anta and Lining (19.84, -0.26, -1.29%) have been reducing warehouses, setting up factory straight barn, and enhancing distribution efficiency from factories to retail terminals and customers.

The construction of end-to-end digitalization has provided tools and possibilities for the transparency and efficient management of the industrial chain. The efficiency improvement of garment industry chain from past to post is a vertical efficiency improvement, while horizontal management efficiency improvement is less in all aspects of Chinese enterprises. Large foreign companies will enhance the management efficiency of HR, finance, IT, sales and so on. This is a direction for Chinese enterprises to dig deeper into reform.

In the past, the clothing industry was incremental bonus, and only selling socks and shoes could become the richest in the region. But now the efficiency bonus is larger than the incremental bonus, especially in traditional industries.

Secondly, the insight and excavation of demand is the inevitable way for many non functional clothing transformation. The apparel industry has completed its stage from scratch, and is now in a good stage. At the same time, this industry is the earliest to open up global competition, whether foreign brands enter the country or Chinese enterprises go out. With the deepening of the electricity supplier system, it is also very easy for the three or four tier cities to buy global cards. From good to bad, what is "good"? How can the garment industry see and dig out their own "good"? This is another problem that can be deeply considered.

Of course, the functional properties are relatively strong, such as sports shoes category, it mainly depends on the accumulation of research and development, therefore, many companies have barriers such as fabric, technology, technology and so on. Therefore, the CR2 or CR5 of the global sports industry is very high. It has been improving and it is hard to be overturned. In addition, diversified and comprehensive digital channels provide precise tools for the spiritual attributes of insight customers, and also enhance the possibility of achieving more sophisticated management for these Brand Company.

　 Three

Chinese sports apparel industry, who has the opportunity to become bigger?

The sportswear in the clothing industry has obvious functions. The shoes are more functional than the clothes, and need R & D and accumulation. After 2010, the market share of Adidas and Nike continued to rise. China's sportswear CR5 is about 75%, CR2 is about 40%, and more and more concentrated. The sportswear industry's leisure and fashion trend is obvious, and the market space continues to expand.

The industry chain of sportswear industry is very perfect, coexisting with ODM, the industrial structure is clear, the concentration of industrial chain is continuously improved, and the globalization trend of the whole industry chain is clear. For example, Shenzhou International, the penetration rate to the global supply side continues to rise, accounting for more than 15% of the four households in Adidas, Nike, Puma and UNIQLO.

The globalization of sports brings about the coexistence of globalization and localization in the sportswear industry, and upgrading from all levels to products.

China's sportswear representatives are Lining and Anta.

Lining founded in 1990 to 2000, the ten years of rapid growth, mainly rely on the national penetration bonus, and Lining's personal brand effect; in 2000 -2008, the main logic of the sinking stage was the expansion of the channel and the penetration of the 345 line; in 2011 -2015, the penetration stage of the national garment industry ended, and the strong brand strength of foreign brands such as Nike and Adidas joined each other. The electricity supplier from the second tier to the three or four tier of the whole level of competition, to suppress all industries profiteering, the extensive operation of the company ended.

Since 2008, stocks of Lining, Anta, XTEP and 361 degree companies have started to grow and their efficiency is very poor. In 2013, Lining carried out efficiency reform, cleaned up old stock, upgraded products, arranged supplier system, improved channel efficiency, tried to improve supply chain's flexibility, but failed because he touched too many people's interests. After 2015, Lining returned to the company and deepened the reform. He used 1 billion 800 million buybacks to destroy the whole channel inventory, rid of the burden, rebuild product strength and channel power, and improve efficiency. After death, the stock price and its performance turn a great turning point.

The reconstruction of product power is mainly reflected in the following aspects: reducing the non core commodities of the former high proportion and refocusing the designers, adopting the sports fashion instead of the whole movement, positioning the "new country tide" with the four words of "China Lining", and accurately catching the enthusiasm of the new generation after 90. Through different channels and omni-directional coverage, new products are greatly increased, and new products are improved. Before Lining made a change, he would advertise for TV in CCTV, but China Lining began to make a direct start from New York fashion week, and marketing through Instagram, micro-blog, Xiaohong and other Internet means. Lining personally opened micro-blog to interact with consumers and fans. Therefore, compared with rival Anta, Lining's biggest change in the past two years is that he is good at using new marketing methods and new channel ways, and more accurately excavating demand. The biggest achievement of China in the past ten years is the improvement of mobile Internet infrastructure. Lining made good use of this and found the methodology of continuously mining accurate demand.

The main strategy to improve efficiency is: efficiency promotion mainly adopts strategies:

We will reduce the third party channels, increase self employment, and business operators themselves. This improves the transparency and digitalization of the whole channel, improves the accuracy of prediction, improves the elasticity of supply chain, and integrates the whole industry chain online with suppliers. The supply has been shortened from 90 days to 50 days.

Raw materials inventory increased, intermediate goods inventory reduced, opened up the whole industry chain digitization, using various tools to improve the accuracy of marketing. Lining's inventory did not increase with the increase of revenue, but Anta's revenue increased by 20%, and inventories increased by 20%.

At the same time, Lining used to be ODM, and started to run factories this year. A self run factory of nine production lines in Yunnan was launched this year, and the proportion of the self supply chain was upgraded to create the entire supply chain to meet the better supply chain flexibility and flexibility.

Therefore, the deepening of this reform has brought about an increase in inventory turnover, accounts receivable and turnover of current assets. Precision marketing has reduced advertising costs, advertising expenditure accounts for close to revenue and Anta, product quality has improved, product unit price and gross profit margin have improved.

In 2013, Anta began to take the lead in the crisis of the clothing industry. It paid much attention to R & D investment. The annual R & D rate of 5% is about three times that of its peers. It has built the largest laboratory and material center in China. The manufacturing side self added ODM mode is very mature, and the whole factory digital construction has been completed and promoted continuously. Lining has been marketing in the past few years. Li, without its own factory, started building factories this year. R & D is mainly dependent on suppliers. Therefore, its R & D cost and product strength are lower than Anta, and ASP and gross margin are also low. Anta relies on strong product strength to buy FILA, relocate FILA's brand power, further enhance its product strength, FILA a T-shirt can sell to 400-1000, compared with ASP by Lining, the difference is 3-5 times.

Although Anta's supply chain side is doing well, compared to Lining, Anta's insight into demand is not as strong as that of Lining, but also weaker than that of Lining in terms of channel and brand building. In particular, Lining has the natural advantage of personal brand image, which Anta can not achieve. Lining has the first mover advantage in the electricity supplier channel and digital marketing, but how long will Lining's first growth advantage continue with the opening of Tmall digital marketing platform to all brands? This requires constant attention.

Four

summary

China's clothing industry has gone from scratch to good stage. In the past, the core contradiction of the industry was the contradiction between rapid and varied demand and slow adjustment of quality supply management. UNIQLO and Zara used two ways to alleviate this core shield and create brilliance. But now, especially in China, efficient Internet infrastructure and social logistics infrastructure and the continuous evolution of China's garment manufacturing industry provide a very solid foundation for the possibility of brand manufacturers. Diversified tools provide a continuous optimization of the core contradiction between supply and demand.

Precise mental needs discovery and insight and methodology may be a basis for sustainable development of Brand Company. The improvement of total supply chain efficiency is the source of continuous barriers for many manufacturing companies such as Shenzhou International. In addition, the potential for enhancing the efficiency of horizontal management is also worth exploring. These points are the continuous observation of the Chinese garment industry in the future.

The brand is a brand, in addition to its quality assurance, it is also a comprehensive parameter system composed of data such as texture, product consistency, processing accuracy, material stability and innovation. It needs to use the existing tools to form this parameter, and exert the power of this parameter. The more factors involved, the fluctuation and uncertainty in the middle. The higher, and the conclusion after verification, its accuracy and consistency will be higher, which is also the quintessence of industrial 4. Author: Han Xudong