How To Achieve Value Realization In Apparel Textile Enterprises

The first gunshot of the industrial Internet rings through the garment textile supply chain.

Since November 2018, the textile Internet platform "hundred cloth" announced the C2 round of financing from tiger Global Fund, and gold prospectors poured in.

"Zhi Bu Internet", "one hand net", "baton network", "time intelligence", "Lingdi technology", "second best technology", "fast clothes manufacturing" and "clothing pulse synthesis" have completed at least one financing, and the amount of transactions is over 100 million. At the end of 2019, he also won DST Global and CICC capital $300 million.

An industry revolution based on Internet technology is pressing the fast forward button in the clothing and textile industry.

After a year of follow-up observation of starring startups in this field, we are trying to answer the following questions for you.

Why does the supply chain of apparel and textile become the darling of the industrial Internet?

What are the mainstream modes of apparel and textile enterprises?

What is the stage of garment and textile Internet enterprises?

What is the focus of controversy about the Internet business model of garment and textile industry?

Are garment and textile Internet companies a good investment opportunity?

Why does the supply chain of apparel and textile become the darling of the industrial Internet?

According to incomplete statistics, there were at least 10 financing events in the field of textile and apparel in the trillions of scale, and there was no lack of large amount of financing amounting to over 100 million from the 100 rounds of the C2 round of financing to the press release.

In the process of industrial Internet transformation, the market of several trillion scale is naturally the first bastion to be captured. One of them is the clothing and textile industry whose market size has exceeded 2 trillion in 2019.

At the same time, the demand for transformation and upgrading of supply chain is the most urgent and basic condition for the apparel and textile industry. The driving force of change mainly comes from the survival predicament and new demand of downstream garment enterprises, and the two existing solutions of technological transformation of the industry have their own bottlenecks.

The industry is in urgent need of new solutions.

1, sales decline, inventory like mountain, traditional clothing enterprises change

The problem of painstakingly inventory in clothing industry is long. According to a sample survey of AI consulting, the stock turnover days of A share listed companies in 2016 -2018 have reached an average of 205 days. More authoritative data showed that in 2018 1-4, the apparel industry ranked seventh, higher than the average value of 3.1 percentage points, exceeding the average level of China's supply side industrial finished goods inventory. In order to solve the inventory problem, hundreds of inventory business companies including "love inventory" appeared.

In recent years, the sales volume of clothing brand enterprises has further slowed down the number of days of inventory turnover. In the first half of 2019, 14 of the 45 apparel listed group of A shares and Hong Kong stocks had negative growth, and inventory problems intensified further.

2, the electricity supplier channel and e-commerce brand spawned new demand for "small single quick reverse".

However, the traditional supply chain mode of "mass production first and then distributed" is not only a slow response, but also a high inventory. With the increase of the penetration channel of clothing electricity supplier from 14% in 2011 to 37% in 2016, this mode has been unable to meet the new demand of clothing brand.

Competitive clothing enterprises must be able to achieve "more styles, faster turnover, better quality and lower prices". This leads to the fact that not only the clothing brand orders are dismantled into smaller units, but the new cycle and sales cycle of products are also becoming shorter. Once the new explosions on the A shop are not able to fill up the goods, consumers will immediately go to the B shop with the same type or the lower price C shop, and who will pay attention to the new shop in the long run?

In the supply chain, both the traditional clothing brand and the emerging e-commerce brand hope to have a flexible supply chain that can quickly introduce new products and achieve small batch, multi style and multi batch production.

But there are few such supply chains in the market. Like the clothing brand industry, the upstream textile manufacturing and garment manufacturing enterprises are mainly small and medium-sized enterprises. The highest value of Shenzhou International Revenue is 20 billion 950 million yuan in 2018, and the market share is less than 1%. Small and medium-sized manufacturing enterprises, which occupy the main body in the market, are still dominated by pipelined production, with a low degree of digitalization and lack of flexibility. The small private workshop with flexibility is often uneven in quality, and the delivery time is difficult to guarantee. Because of its small size, it can not provide costumes to the clothing brand, nor can it match the production scale of large and medium-sized garment enterprises.

3, there are two difficulties in solving problems.

In the past decade, Internet technology companies have made little effort in the clothing and textile industry. Their most familiar Slogan is "promoting the digital transformation of the industry". The promoters can be divided into two main categories: one is the vertical industry software vendors, the other is the textile fabric and garment trading platform.

Software vendors mainly do Digitalization for large and medium-sized garment enterprises and manufacturing enterprises. The products include design software, MES system, ERP system and other information software, with localization software and SaaS.

Trading platform, mainly through the supply and demand sides to connect, improve the efficiency and accuracy of the matching, to solve the problem of cross enterprise procurement and sales, that is, we know the B2B trading platform, some platforms will also have a certain proportion of proprietary business, they can be regarded as the Internet aborigines in the apparel industry.

But these two kinds of players are faced with some limitations.

First of all, to say that software vendors are using the project system to serve large customers, there is nothing wrong with the business logic itself. However, the garment industry is extremely fragmented. The number of "big clients" is limited, and the scale of business revenue is often limited to tens of millions of dollars. If we want to find new business growth points, we have to serve small and medium-sized customers, but the average gross profit of the garment industry is less than 10%. Enterprises with annual revenue only tens of millions of scale will invest 200-300 million into the information system a year. This is not realistic. Moreover, they are most concerned about increasing revenue rather than "limited cost of compression".

The defect of trading platform is the lack of digital foundation. The B2B platform mainly serves customers in small and medium-sized enterprises. When the supply and demand relationship between buyers and sellers is unstable, the connection value of platform can be reflected. This is the mainstream group in the clothing industry, but the digitalization level of the upstream and downstream SMEs is not high. Only through the online circulation of the industrial chain, the efficiency is limited, and it is far from enough to completely open the whole industrial chain.

At the one end is a garment enterprise facing the death and death exams and the urgent need of the new supply chain. One end is the scattered backward production capacity, but the efficient connection and scheduling of the whole industrial chain should be realized. The existing problem solving method has not completely solved the problem -- the textile and apparel Internet enterprises are going to appear on the spot.

How do garment and textile enterprises achieve their value?

1, what are the mainstream modes of garment and textile Internet enterprises?

Industrial Internet companies are not generated from nothing. They are mostly transformed or evolved from software vendors and trading platforms. Now that the existing solutions are facing bottlenecks, what if they merge together?

Indeed, industrial Internet companies do this.

If we disassemble the Internet into three dimensions: digitalization, online and intellectualization, the original two categories of players will either be digitalized or just online, often the system and data between the various business departments within the enterprise can not be connected to the Internet, let alone the collaboration among enterprises, and the state of data separation can not be further excavated. The relationship between data mining and nurturing enterprises will not achieve real intelligence.

The Internet creates value through connections, and industrial Internet companies are no exception. In this way, we can well understand that the grand vision of industrial Internet enterprises is to realize the digitalization and online implementation of enterprises, and to realize the synergistic interconnection between enterprises and enterprises, forming a collaborative network of the whole industrial chain, and finally realizing the intellectualization through data mining. To promote the efficiency of the entire industrial chain.

The most successful case is Ali, which takes Taobao as its core node. (except for one end is C consumers, the path of Ali to reshape the fashion retailing supply chain is roughly the same as the development logic of the industrial Internet. Before the case of deeper popularity of the Internet industry has been seen, let's make this analogy easier for readers to understand. But this road, Ali walked for seventeen years, only gradually derived from Alipay, rookie network, Ali mother, Ali cloud this huge system to support Ali's retail empire. The industry internet company wants to achieve this vision, no less than the long march.

But these brave men have already gone to different positions. According to the survey results, we classified the initial business entry points of the industrial Internet enterprises into three categories: Design (Research), cloud factory (production), transaction (Sales), and according to the main categories, they were divided into textile fabrics, garment manufacturing, footwear, and some representative enterprises were selected.

The industrial Internet companies whose design and cloud factories are the first foothold are mostly software vendors, such as the second best technology and the flying technology. Among them, the cloud factory mode to control factory capacity, complete the order production, will also invest in intelligent hardware, and then intersecting the concept of industrial Internet. The software products provided by Internet enterprises in this industry are basically SaaS and standardized. The purpose is to reduce the threshold of using digital products for small and medium-sized garment enterprises and manufacturing enterprises, so as to form a synergistic office network with multiple roles and real-time interaction.

The evolution of trading platform enterprises can be regarded as offensive defense, and the main tactic is the export of technical services. In this regard, it is hoped to enhance the degree of informatization of the industry, deepen the upstream and downstream of the industrial chain, and better serve the transaction itself. On the other hand, it is also protecting the existing territory and resisting the potential penetration of technological players.

But no matter where it is in production and marketing, the inevitable trend of the Internet industry that operates the same category of industry is mutual penetration, because for the industrial Internet enterprises, the establishment of a real-time collaborative network to open up the industrial chain is the only way for the grand blueprint. (among them, textile raw materials and garment manufacturing are upstream and downstream relations, and there is a possibility of further integration of industrial chains. Once the software vendors and trading platforms that have only solved the single point problem have stepped out of the first step towards the upstream and downstream, they have stepped out of the first step of the Internet industry.

In contrast, the entry point of business is not so important. It depends on the original accumulation of the entrepreneurial team itself, but the ultimate goal of the industry internet enterprise is to achieve the same goal by pulling together a high efficient network that runs through the whole industrial chain.

Investors' recognition of this mutual penetration has also been published. At first, it was only a software manufacturer providing production process management. After its transformation into factory production orders, it immediately attracted investors to go back to Update's latest development. Even when investors talk about similar software vendors, they even speak frankly to 36 krypton: "if you still do SaaS, there's nothing to look at." "

2, how do garment and textile enterprises achieve their value?

While paying for the capital, apparel and textile Internet companies have also handed over their transcripts. Hundred cloth announced in the financing news the 2019 annual sales volume nearly 10 billion yuan, and the wisdom cloth month average sales volume also has been very considerable, and has realized the scale profit.

The basis of this revenue scale is established on the basis of apparel textile Internet enterprises to help their customers reduce costs and increase efficiency: for clothing brands, reduce raw material procurement costs, shorten delivery cycles, improve customer experience in managing supply chains, increase orders for manufacturing enterprises, and improve internal management efficiency.

According to public news reports, Zhi Bu Internet mainly integrates the production capacity of many yarn factories, weaving factories and printing and dyeing factories through cloud factories, and provides textile fabrics for large and medium garment brands and garment factories with self operated mode. It can reduce the purchasing cost of 5%-10% for target customers, and the delivery cycle can be shortened by 30% (about 2-3 weeks), and the delivery time is more precise and controllable.

Second best technology, through the information transformation of specialized garment manufacturing plants, initially built a cloud manufacturing factory with flexible and fast reverse characteristics. From design, print to factory, the whole cycle can be controlled in "7 days" or even 5-6 days, and the top level in the industry is in "21 days".

The online technology of 3D's online design and cooperative office system, which is designed to communicate with each other on average, needs 4 cycles. It shortens 1.5 cycles on average, and the digital 3D design avoids the waste of printing and modifying.

How can industrial Internet companies do all this?

For all industrial Internet companies, they have two valuable implements: synergy network and data intelligence.

A, cooperative network

The low efficiency of traditional clothing industry is mainly reflected in two aspects: role communication and resource allocation.

On the one hand, the clothing industry from design, printing, production, logistics to sales, involving several departments, more than ten links of internal and external communication, and in the traditional office software and workflow, the role can not form real-time interaction, communication path and business line is not the shortest optimal.

On the other hand, there are many intermediate links in the industry, while the unproductive capacity and market demand can not be effectively matched in the whole society. More fatal is that some enterprises no longer adapt to the new supply chain ecology from the organizational structure to the business category. They belong to the backward production capacity lacking in value in the industrial chain and should be eliminated.

The industrial Internet enterprise is building a collaborative network composed of different roles through digital products to achieve real-time interaction and collaborative office work. Based on the perspective of the whole industry chain, resource scheduling and process optimization are carried out, so as to improve the internal operation efficiency and external connection efficiency, and ultimately achieve the upgrading of the whole industry chain efficiency.

This is why industry internet enterprises need to emphasize that "scenario is greater than technology", because enterprises must fully understand all aspects of the industry chain, so that they can optimize the efficiency of internal and external enterprises from the organizational structure and business process level, and transform their technology accumulation into products. Therefore, the investment institutions concerned with the industry and Internet will attach great importance to the double background of the industry and technology of the team.

B, data intelligence

In order to make the cooperative network operate efficiently and realize the resource connection and deployment in the whole industry chain, data, algorithm and calculation power are particularly important. Whether it is the 3D design database of Lingdi technology, or the production scheduling system of smart fabric and second best technology, it is based on data intelligence that can provide designers with design tools, and divide and merge many orders into different factories.

This step not only realizes the core step of intellectualization, but also measures the gold content of an industry's Internet company. It determines whether the growth of enterprises comes from people or from technology.

Can garment and textile Internet companies enable investors to make money?

For investors, enterprises worthy of investment should not only create industrial value, but also create value with efficiency, scale and sustainability, and the valuation should be reasonable and bring high returns. Can the clothing and textile Internet companies be able to debate?

1, the pattern of contention: "new species" or digital version "processing alliance".

Among the many models, the most concern is cloud factory mode.

Part of the reason is the ripple effect brought by Zhi Bu Internet, which is worth considering. But more importantly, capacity control is the core of realizing the flexible supply chain, and this mode has also been effective in improving production efficiency and reducing raw material costs.

Bai Po, a trading platform, has also landed in the cloud factory mode after the Spring Festival of 2018. It claims that by the end of December 2019, its AIoT equipment has laid over 100 thousand looms, covering 8% of the loom production capacity in the whole industry.

Cloud factory can be divided into self run mode and matching mode. Ali Amoy factory is a typical matching mode. It was launched at the end of 2013, matching supply and demand between Taobao sellers and manufacturers. But the main business is Ali's ecosystem services, and almost no involvement in the internal process transformation of production enterprises. The panning factory can rely on Taobao's entire network flow to operate. What can start-ups rely on?

Most of the start-up companies that build cloud factories have adopted proprietary mode, such as Zhi Bu Internet, Changsheng technology and second best technology. Changsheng technology has even chosen to set up a joint venture factory to build supply chain. The revenue of this mode is revenue fabric and clothing sales, and gross profit margin is also equal to the average level of the industry.

Some outfield investors are worried about the revenue structure, wondering whether this is a new species or a digital version of the processing alliance.

The most typical reference cases are Shenzhou International and Jingyuan international.

Shenzhou International is a leading enterprise in the textile manufacturing industry. Because of its patented technology and high proportion of technology and automation equipment, the annual revenue of the company is 20 billion 950 million yuan, and the gross profit margin can reach 31.6% from Tencent. The per capita output and per capita revenue are still increasing year by year in 2018. Before this year's US stock market crash, the market value was about 120 billion yuan. In 2018, Jingyuan international, a raw material processing garment manufacturer, had a total revenue of about 17 billion 500 million yuan in 2018 and a gross profit margin of about 7%.

But there are essential differences between the technology companies and the processing plants in terms of revenue structure, cost structure and growth momentum.

Income structure, in addition to fabric, clothing sales revenue, enterprises and technology services revenue, platform enterprises often have warehousing, logistics, finance, marketing services and other revenue growth points. In terms of cost structure, the technological inputs and raw materials of the cloud factory mode are dominant, while the raw materials processing plant is mainly based on land and power plants, raw materials and personnel services.

The key difference lies in the driving force of growth. The raw materials processing plant will achieve a linear growth mainly through continuous input of funds and personnel to expand production, and there will be no essential change in industrial efficiency and gross margin. With the expansion of the collaborative network and the enhancement of data intelligence, the network effect and intelligence will bring exponential growth to the enterprise income, and the industrial efficiency will rise and the scale barrier will also appear.

In addition to the irreversible wave of fancy clothing industry, the investment institutions that enter the market pay attention to the long-term growth of industrial Internet enterprises and the potential to open up the whole industrial chain.

2, can data driven stories justify themselves?

This leads to another pending debate, whether data driven stories can justify themselves, which largely determines the upper limit of growth and potential.

But it is not easy to achieve data driven. It requires both digital products and orders to activate the system.

Yi Ling Capital Partners Li Dong (wise Internet early investor) told 36 krypton that orders were the first hurdle, so in the early cold start stage, the Internet focused on limited SKU, and tried to integrate more orders, so that the platform's original data accumulation and algorithm model could be built.

The amount of data is only the first step, through the algorithm model, through the automation decision to complete the resource scheduling, we can call it data intelligence, and pry the growth flywheel of the enterprise. Fu Junchao, CEO, told 36 krypton that simple, basic and continuous orders are of great importance to the building of algorithm models in the early years of the Internet, which greatly reduced the difficulty of splitting orders and making production orders. The next step will be to touch more complex fabrics.

However, this experience is of great significance to the industrial Internet enterprises in garment manufacturing industry. First of all, the downstream customers of the trading platform are mainly small and medium-sized garment enterprises. The foundation and continuous large orders are not the mainstream. Secondly, the process complexity of garment manufacturing is much higher than that of textile fabrics. In order to standardize the operation of garment making, second best technology divides all the movements of garment manufacturing into 118 movements. The production process of different categories is the combination of 118 actions, and then the same category is allocated to different specialized chemical plants. In the whole process, not only materials, actions and resources should be labelled, but also huge amount of calculation is needed to make the order and production capacity highly adaptable.

Jumping out of the endless public opinion field, the industry is still at a very early stage, whether it is the financing of start-ups or the maturity of products, and the prospect is not yet clear. Industrial Internet companies want to justify the data driving story, and are also faced with the following difficulties: Technology players often have technical data lacking transaction data, trading platforms are trading data lacking technical data, and digital technology for garment manufacturing is difficult and difficult to manufacture.

In the current bet investors view, technology data and transaction data accumulation, one of the two, it is worth betting, the greater the technical difficulty, the inevitable technical barriers will be higher. Because the manufacturing industry has many links and assets, even if it is integrated through the Internet platform, the trillion level dispersed market can at least accommodate tens of billions of reformers.