Behind The National Tide And Lo Skirt: What Opportunities Are There In The Apparel Industry Chain?

From Lining duo boarded the world fashion week, becoming the new representative of the rising tide of the country, to the Chinese clothes and Lolita skirts of the wallet after the empty 95/00, and then to the uniqe library, which had been repeatedly attacked by "fighting style", and had just been exposed to the "Chinese version Zara" La Natsu Bell of the 2400 stores that had just been exposed for half a year. The clothing industry contributed a lot of hot spots in 2019.
As the head of "food, clothing, shelter and transportation", we are curious about everything in this huge market: what links do we have to experience from a raw material to a consumer? Where are the transformation anxiety and breaking points of Zara, Han Du Yi house and Metersbonwe? What is the future of the industrial robot's "walking everywhere"? What are the opportunities for the apparel industry chain?
From a definition, the standard vs is non-standard.
First of all, we would like to discuss a basic concept: non-standard products. To a large extent, this constitutes the underlying logic of the transformation of garment industry.
As a concept relative to the standard, non-standard products are mostly found in the field of electric business. Typical non-standard products include clothing, shoes and hats, cosmetics, health products, home textiles, agricultural products, etc. Generally speaking, there are several characteristics:
　 Single SKU/SPU can not meet the needs, personalized requirements are high.
New channels superimposed more, loyalty is low and dispersed.
Price difference is big, no rigid pricing.
What does this lead to?
Users have low awareness of product attributes, perceptual decision-making, insensitivity to price and high degree of individuation. Therefore, it is difficult to define non-standard products with specific models or standards. For example, searching for a garment or jewellery usually involves typing several key words to find the one that you want. At the same time, the concentration of non-standard products is low, so it is difficult to use single supply chain to assemble and explode money. There is always the problem of efficiency matching at both ends of supply and demand.
The non-standard products in Top10 category include women's wear, men's wear, furniture home, skin care, women's underwear / men's underwear, snacks, nuts and children's clothing.
China accounts for more than half of the global supply chain of non-standard goods. Among them, the clothing industry is a huge market which is far more than one trillion, and its capacity is very high in the world. But at the moment, it also faces "internal and external attack": from the perspective of supply, after decades of industrial change, the garment industry has gradually shifted from mass production to fixed production. However, the flexible supply chain can not substantially improve the labor intensive, inefficient use of funds and slow inventory turnover in the garment industry.
From the perspective of demand, users have low awareness of brand and poor loyalty. Han Du house listed failed, La Natsu Bell frequently closed shop, Forever21 encountered bankruptcy dilemma...... In recent years, the development of typical garment enterprises is not smooth.
Clothing as the most typical model of supply chain of non-standard products, facing the critical time point of front-end traffic becoming increasingly depleted, and from incremental market to stock game, superposing huge industrial structure adjustment and changes in internal and external needs, it is pregnant with huge industrial Internet opportunities. How will the garment industry develop in the future? This is exactly what we are trying to discuss in this article.
40 years, 2 trillion, panorama of garment industry chain development
In the past 40 years of reform and opening up, Chinese clothing has changed from the "blue gray black" of everyone to the "fashionable fan" of everyone. Since 1978, it has gone through five stages as illustrated.
Three to one complement: refers to the processing of raw materials, sample processing, incoming parts assembly and compensation trade. It is a form of enterprise trade that China tried to create in the initial stage of reform and opening up.
From the overall scale, according to the data of the National Bureau of statistics and the China Clothing Industry Association, the current domestic and foreign garment industry's total demand exceeds 2 trillion.
With the development of garment enterprises for 20 years, the continuous improvement of online penetration has brought about the optimization and transformation of the stock market. Calculation method: according to the data of the National Bureau of statistics and the China Clothing Industry Association, China's garment industry has completed 45 billion 600 million garment products in 2018, of which 22 billion 274 million of the total garment products have been completed by the enterprises above Designated Size, and the retail sales of garments (excluding shoes and hats) have reached 987 billion yuan, and the growth of online channels is strong and penetration rate is 32.1%. In 2018, China realized $157 billion 600 million in clothing exports.
From the geographical distribution, the top three export sites are still the United States, the European Union, Japan and South Korea. Production capacity has been transferred to Southeast Asia, and exports to new Ma Tai have declined for three consecutive years.
A total of more than 2 trillion of domestic demand and external demand. Affected by trade wars, total exports amounted to US $137 billion 600 million in 1-11 months in 2019. Exports to the US amounted to US $26 billion 200 million in 1-10 months in 2019.
From the perspective of brand concentration, the concentration ratio of China's clothing industry is significantly lower than that of the United States and Japan. The top five players in the industry account for 6.9% of the total market size, of which underwear and women's clothing are the biggest difference between the United States and Japan, for example, the concentration of women's clothing industry is only 1/3 of the United States and Japan's 1/6.
China's clothing market concentration
From the point of view of the upstream and downstream industries, the garment supply chain is a complex network structure that flows from parts to intermediate products to the final products, and flows through the channels to consumers. The main roles in the chain are as follows:
1. the upstream market of raw materials for cotton and chemical fiber production is affected by supply and demand, natural climate and the price difference between inside and outside cotton.
2. in the upper and middle reaches of the textile manufacturing process, the fabric is formed by spinning and weaving, and then knitted and woven to form fabrics for printing and dyeing. The overall process can be mechanized.
3. garment factories are mainly made for tailoring and sewing fabrics. Some garment factories supply specific routes under specific lines, and old factories such as red collar are being gradually intellectualized.
The 4. industry chain is downstream sales channel, and brands are mainly through direct outlets and distributors. Non brand businesses are mainly through small B (wives' wives' stores or regional small and medium-sized retailers). In recent years, the rise of live broadcasting business and community group buying has brought various new small B sales channels.
From the model: three points of pain in the apparel industry chain
1. cost utility curve: imbalance between long tail demand and production efficiency
It is everyone's nature to pursue diversity. Ideally, everyone wants to wear clothes that are different from everyone else.
However, users' personalized long tail demand is often difficult to achieve dynamic equilibrium with the pursuit of marginal cost reduction at the end of production.
We combine the utility cost curve with a series of calculations, and get the relationship curve between the total production of clothing and the corresponding price, which is nonlinear. There is a potential loss of utility, and it is difficult to achieve a dynamic balance between supply and demand.
At the end of production, the marginal cost of single SKU will rapidly drop to the extreme value with the increase of production scale, as shown in figure A. Assuming that the total garment demand is M, the corresponding number of SKU is M. With the external constraints, the single SKU corresponds to the increase of the number of production. Assuming that the single SKU produces N parts, the number of SKU is equal to M/N. The changes brought by different SKU numbers are shown in figure B. When the cost curve corresponding to different SKU numbers is superimposed, as shown in figure C.
The whole garment industry is suffering from no good technical solution, which is transmitted from the production side to the two sides for a long time, making the whole industrial chain equally inefficient and suffering.
2. inventory "Impossible Triangle": contradiction between capacity, sales rate and increase rate.
Capacity, sales and rate of increase constitute the Impossible Triangle of inventory. There are several possible situations in the relationship between the three, but you will find that in any case, it is difficult to achieve the ideal state, always "two high one low".
Situation 1: scale production and high turnover rate will inevitably increase the price.
Zara and UNIQLO are selling at a rate of over 80%, while the rate of increase is only 2.5 times. Zara relies on its powerful backstage system to master the sales data of terminal stores, and sends them back to the company headquarters in real time to coordinate production and replenishment with self factory and external cooperative suppliers. UNIQLO relies on its high performance price ratio and minimalist SKU, which has led to scale production.
Situation two: scale production and high markup rate, resulting in low turnover rate.
Most Chinese clothing brands have more than 6 times the markup rate, low brand delivery efficiency, and less than 40% sales. La Natsu Bell, once known as the Chinese version of Zara, has more than 20 product lines at the peak because of blind expansion of the product line, resulting in large inventory accumulation and low capital turnover.
Situation three: high sales and high price increase will bring inefficient production capacity.
The high rate of sale and the double rate of price increase generally appear on the customized or pre-sale products, while the customization and advance sales can not be mass produced. In the past 16-17 years, sharing, renting clothes and clothing subscription projects have been implemented, falling into the fragmentation of users' demand, and the sales volume of the front end is too low. Many Amoy brands quickly return to the market through the pre-sale mode, but it is difficult to jump out of the Amoy system to build their own traffic pools, and apply the flexible supply chain to large-scale production.
It is difficult to balance the three levels of capacity, sales and rate of increase, always showing "two high and one low".
3. there is a rigid link which is hard to mechanized. It is difficult to replace manpower in the short term.
From the perspective of labor demand, there are still some rigid links which are hard to mechanized in clothing production, and human labor is hard to replace in the short term. For example, the current "soft" cloth clamping is still the most difficult problem in automation, such as cuff link, and so on. The degree of flexibility of the mold is poor, and the non-standard parts such as plate and design are difficult to mechanization.
From the perspective of labor supply, labor costs doubled more than five years after 2008 as demographic dividend declined and regulations improved. Many garment factory workers work for more than 10 hours a day, with only one day off a month, with a small salary and few young people willing to try. But in such heavy physical industries that require high attention, the eyesight and attention of workers aged 40 or above are hard to maintain. Young people are unwilling to do so, and middle-aged people can not do so, and labor supply is in short supply.
In the 2015 Made to Measure, the economist pointed out that, although many production processes have been automated, millions of people around the world still engage in manual sewing of garments. This is also the main reason why the major garment factories are actively expanding their production capacity to low labor prices.
Fragmentation, shipping and concentration: the three typical trends of apparel industry chain
In the fast changing garment industry, the back-end will react to the changes in the front end. It is hard to expect the back-end to improve production efficiency and change the whole industry. We see the following industry trends:
1. faster and more fragmented front-end channels
Online apparel channel diversification
The current penetration rate of electricity providers has reached 36% CAGR in the past 10 years. Under the guidance of the first B2C electricity supplier, the electricity supplier mode is iterated every 3 years. From C2C to social networking providers to the latest live business providers, traditional e-commerce giants, traffic oligopoly and start-up companies are fighting hard.
The front-end channels inevitably become more and more fragmented. At the same time, new channels usually represent smaller and smaller order sets and faster and faster feedback requirements.
Take the changes brought by live business providers as an example. In 2019, hundreds of billions of GMV live TV providers generated vitality for a large number of small and micro garment factories. The fast and high conversion live broadcast mode makes the anchor long run out of stock. The two ends of supply and demand chime together, forming a large number of interesting formats before the factory.
Live broadcast changes traditional supply chain: shortening link, flexible production
Head anchors can easily cover the annual production capacity of small garment factories. Take Taobao live broadcast as an example. Nearly ten thousand clothing category anchors, hundreds of contracted MCN institutions, correspond to 10-20 000 small and micro garment factories whose annual output value is less than 20 million yuan. Single factory, seize the opportunity of structural change, directly connect with front-end anchors, increase business rapidly, and become an integrated apparel supply chain enterprise, with the ability of copying, designing and assembling goods, more flexible and more efficient.
Technology transformation live supply chain: algorithm improves the matching efficiency of people and goods, data collection speeds up reaction speed.
After transforming into a comprehensive service supply chain, a vertical platform electric provider like the fish has achieved higher operational efficiency through technical means. In the traditional front-end data collection which can not be touched, anchors have strong desire to share the accurate data of users and anchors with the supply chain, in order to achieve more efficient matching between people and goods. This part, whether matching algorithm, group control tools, BI analysis and so on, will double the single point efficiency. It is possible to create explosive funds quickly through efficient selection.
The anchor is sold live.
2. China's brand internationalization and cross-border electricity supplier
Efficient network supply chain requires all players to respond quickly and collaborate with each other so as to achieve the best efficiency. China's apparel industry has natural advantages in sea going. China's mature industrial chain is very close to the huge consumption side. Regardless of the speed of reaction, the application and iteration of technology are achieved before the rivals. At the same time, the production data link is mature and close to industrial clusters, which is comparable to any other country in the world. Mature online offline self organizing and efficient online retail networks have nurtured a large number of flexible supply chains.
In addition to the amazing export volume of overseas garments, a considerable proportion of foreign factories worldwide are controlled by China's supply chain. The more sophisticated and quick response the high-end and fashion orders are, the harder it is to leave China.
Figure: the scale of China's exports (US $100 million); although the Sino US trade war has already reached the textile industry, more than 1000 textile products have been included in the list this year. But no single region in the world can undertake the collective spillover of China's garment industry's capacity.
In addition to the mature channels such as Amazon, eBay, Wish, Lazada and 1688, in view of emerging markets such as the Middle East, two India, Latin America and other large emerging markets, more and more excellent Chinese companies have gone out and become local brands and e-commerce platforms with controllable resources.
Over the past decades, the clothing brands that have seized the user's mind are mostly from Europe, America, Japan and Korea. As the global garment manufacturers, China's own clothing brands are hard to build user barriers continuously. With the transformation and upgrading of Chinese enterprises in recent years, China's brand has begun to improve in the direction of high quality and multi performance. In 2019, with the revival of the national tide and the popularity of Hanfu, many independent designer brands in China went to the world. UMA WANG, HUISHAN ZHANG, ANGEL CHEN and other brands have gradually entered the department store, leading the Chinese culture to sea.
3. industrial chain concentration increase
Zuo: in recent years, the centralization of the middle reaches of the garment industry chain has been continuously improved; right: under the influence of environmental protection policy and TPP agreement, small and medium-sized factories are the main victims of the closure of factories in 2015.
1) the surface accessories market has a high degree of standardization and strong scale effect: the surface accessories market is more standard than the garment parts, and the degree of automation is even higher.
2) the introduction of environmental policies has significantly increased barriers to entry. Since the State Council promulgated water ten in 2015, the environmental protection policy has been promulgated at a rate of more than 2 per year, and the small enterprises whose equipment is not up to standard has been rapidly cleared.
3) the cost of human resources can be gradually increased, and the profit of small factories has been seriously overloaded: the small and medium sized factories represented by Jiangsu and Zhejiang provinces are unable to make fixed assets and information technology input in the face of small batch of scattered orders, and are deeply involved in the production.
4) fluctuations in raw material prices, weak bargaining power in small factories, and weak risk bearing capacity. As a commodity, cotton prices fluctuate greatly. Short term fluctuations in raw material prices test the cash flow of enterprises.
The end of the industry: where are the opportunities and challenges ahead?
Generally speaking, for the industry chain which is very long and the single step links are not absolutely complex, there will be a good chance of information matching and trading platform.
The above is the scale of each market; the following is the rate of increase in each link. Many single links are in the process of industrial upgrading and exploration, and also a sprout surging in the new retail wave. Although it is difficult to have platform opportunities, single point value is hard to replace.
1. raw material processing to garment production end
From raw material processing to garment production end, extreme dispersion and multi-level information gap at both ends is a standard bilateral market. The surface accessories plant needs to confirm the stability of the incoming materials, and the garment factories also need to determine the stability of the surface accessories, and there is a platform opportunity to make the overall efficiency more efficient through information matching. Proprietary trading platform can also win the competition in the comprehensive efficiency by using technology and industry chain.
The challenge for this sector is that the production end of the surface accessories is relatively concentrated in SKU, and more dependent on manpower, and the degree of mechanization and concentration of the industry will be steadily improved. More importantly, the upstream upstream of the downstream may become more and more fixed. The source of the raw materials in a single garment factory tends to be concentrated. The bilateral trading parties in the bilateral market are becoming more and more stable and become bilateral balance. The pure information platform will be squeezed.
2. garments to C consumers
From clothing to C consumers, it can be simply divided into online brand operation, which is closer to consumers, more informational and faster in feedback.
For online channels, the domestic e-commerce platform due to excessive monopoly, channels must be unconditionally attached to the giant platform. In addition to the basic skills of traffic acquisition and basic operation, channel providers can get part of the data of the final consumers, and rely on the long-term accumulation of data to try to do the transformation of users. Through the gradual formation and consolidation of brands, they can interact with users steadily through member operation and SCRM.
The challenge of this part is that in addition to the deep binding with the platform, it is necessary to look for links that can be more than ten times more efficient in the re operation of the business, thereby enhancing their capital value.
For offline channels, although the current state of survival is extremely squeezed by the electricity supplier, every link is irreplaceable, such as new inventory, inventory storage, logistics turnover and terminal data collection. Players need to strengthen the property that cannot be replaced by online, consolidate barriers, and wait for the market to reach a balance between online and offline. Terminal retailers need to rely on offline traffic to collect and integrate a series of consumer data in real time and stack the service modules such as entity tries and flash lines to enhance the consumer experience. It is possible that a technology company that completes data acquisition, data accumulation and data analysis and closed loop completely will naturally become the application scenario of new technologies such as AI.
The challenges facing this sector include the simple mode innovation which can not replace the unique role of the existing links and replace the mature channel pattern. For example, wholesale trading platform is difficult to replace a group of new and unique role, and also difficult to become a single small B main purchase channel.
In the process of optimization, technological progress provides the underlying infrastructure and driving force for the development of the whole industry chain. The whole industry chain automation technology is gradually improved, so as to achieve personalized demand to personalized production. For example, technology can directly improve the production efficiency of garment end, reduce the proportion of manpower, or improve the efficiency of turnover and circulation through data and information empowerment.
What can we see from the extension of the apparel industry chain?
Apparel supply chain is a microcosm of China's economic transformation.
China has the largest independent consumer market in the world and continues to radiate overseas. Our business model has moved from Copy to China to Copy from China. In the field of e-commerce, new retail, live streaming and streaming media, the whole world is imitating China, and the post-90s generation also has their own independent personality and cultural confidence.
After officially entering the era of stock game in 2020, the business world needs to shift from mode innovation to technological innovation. The objective environment also determines that China can not copy and innovate. Despite the anticipation of rising labor costs, China's industrial chain cluster, including apparel supply chain, still has an excellent position and historical mission.
The mature industrial chain is very close to the huge consumption end. No matter how fast the reaction is applied, the application and iteration of technology are realized before the rivals. No other country in the world can match it. In the future we can see, the status of the world's factory is also hard to lose.
In the apparel supply chain, we hope to see the following new players and new opportunities (including but not limited to):
Vertical software can solve the most painful links in the industry chain, and cut into the industry quickly.
The software and hardware integrated solution provider completes the data acquisition, data accumulation, data analysis and closed loop, and guides the back-end production.
In the heavy operation mode, we can find an efficient industrial router that can use technology more than ten times to improve efficiency.
New electricity providers that capture new traffic dividends, quickly scale up and get rid of inventory problems.
Hardware black technology that directly improves the production efficiency of garment end and reduces the proportion of manpower.
Custom player who can accumulate personal data.
Along the non-standard supply chain track, we also hope to be able to accompany outstanding entrepreneurs and industry veterans. Welcome to interact with us through email.
Small partners who like thinking can consider the following questions and discuss with them:
What kind of B2B trading platform will eventually win this protracted war?
Is there any possibility of success on line ZARA?
Why is fast fashion shrinking on a large scale?
Vertical electricity providers have a very low markup rate. Why didn't they survive? (this article is limited to research means and research cycle, not as investment basis).