Trillions Of Business Hidden In The Apparel Supply Chain In The Internet Age

In the era of industrial Internet, any industry is worth redoing. The clothing supply chain is almost one of the earliest areas of attention.

In 2019, the investment and financing events in the field of garment supply chain increased significantly, and a small outlet was created. There were hundreds of millions of dollars in investment.

"Almost every year last year, I received WeChat news from 2~3 investors asking for some clothing industry related developments or exploring some industry's current development logic." Chen Jianzhi has been working in the garment industry for 26 years before he founded the company. He has worked as a consultant for many domestic clothing brands.

However, when it comes to clothing, it is impossible to keep up with ALI.

As the fist category of Ali's e-commerce business, clothing is the bridgehead for Ali to promote the practice of Internet industry. Holding the biggest online sales channel and the most consumptive big data of the clothing industry, Ali can reverse the upstream supply chain transformation. This logic is successful.

At the end of 2019, Taobao re organized and set up C2M business unit. The new department adopts a two line reporting system, reporting to Taobao and Tmall business President Jiang Fan, and reporting to Dashian, President of B2B business group, which is considered to be the C business and B Department of Ali.

What the C2M division wants to do is to rely on Juhuasuan's daily sale to open up the sales channel. The back-end relies on 1688 to open up the production channel. In the middle, it relies on the IoT Department of Ali cloud to provide technical support, so as to draw a large closed loop of production, supply and marketing.

Before that, 1688 of the Amoy factories and IoT of Ali cloud have been co ordinated under the new manufacturing project to promote the digitalization and intellectualization of the factory. First of all, it was the garment processing industry.

But in the clothing supply chain that Ali cannot touch, a lot of entrepreneurial projects began to grow savagely.

So, is the digital transformation of apparel supply chain really impossible for Ali, or is there really a chance for entrepreneurs?

Why do garment supply chains need to be redone?

Let me give you a background.

People's demand for clothes is extremely individualized. No one wants to crash shirts with others, so the clothing industry from the front-end retail to the back-end supply chain is extremely dispersed. However, the scale of the garment industry is huge (the apparel and Textile Association of China estimated that the total sales volume of Chinese clothing in 2018 was 3 trillion and 80 billion).

Therefore, the clothing industry has gradually divided into two camps: one is the big brand + efficient integrated supply chain camp, the other is the small and medium brand + loose supply chain camp.

The clothing industry is very wonderful, and the big brands are also hard to be big.

In 2019, Anta's share price doubled, and its market value was more than 200 billion Hong Kong dollars. It settled on a domestic clothing brand. Once a brother Lining came out of a perfect inverted U curve, the stock price doubled 3 times a year. A well-known clothing supply chain enterprise, Shenzhou International, was not very high. After the middle of 2017, the stock price began to enter a fast rising channel. In 2019, its market value was more than 170 billion Hong Kong dollars. The stealthy giant of the garment industry began to be noticed by more and more people.

These successful brands have gradually built their own supply chain, integrating vertically and vertically from raw materials to garment processing. According to Chen Jianzhi, the brand with annual revenue of more than 3 billion yuan is almost the same as a big brand, and has the ability to build its own supply chain. But there are still a few large brands that have completed the integration. From the sales point of view, no market share of domestic brands can exceed 2%, while the overall market share of large brands is less than 30%, and the remaining 70% are small and medium-sized brands.

These small and medium-sized brands can not build their own supply chain because they do not have enough sales volume in the downstream, so they can only share the supply chain with other brands. At present, the hot supply chain of hot clothing is worth doing again, referring to the supply chain industry of small and medium-sized brand camps (the clothing supply chain, especially the supply chain of small and medium-sized brands).

Sales of small and medium-sized brands are about 2 trillion and 100 billion yuan (3 trillion and 80 billion *0.7), divided by their average 2~2.5 times rate of increase (ex factory price to retail price), and the supply chain of small and medium-sized brands is about 800 billion ~1 trillion yuan.

With the background, let's talk about why the clothing supply chain is worth redoing.

Looking back at the changes in consumption over the past two years, the rise of domestic brands is a trend that many people are discussing. The "Lining China" Square clothing has already landed in international fashion week such as Paris and New York. Some personalized small domestic brands are also rising rapidly due to the needs of the new generation of consumer groups.

This is a good thing, giving the latecomers more opportunities to grow, but it is a disaster for the garment industry to be specific, because the more dispersed and individualized demand side, the supply chain is at a loss. According to Zhang Xingchen, executive director of source capital, "users' pursuit of the contradiction between wearing personalization and large-scale production, slow response and high manufacturing cost is the main predicament of the apparel industry. It is inevitable to transform the garment supply chain."

Apart from this, the garment industry is not the only one.

Fabric accessories manufacturer - cloth wholesaler - garment processing factory - brand / clothing wholesaler - retailer.

The chain is not too long, but it is very complicated, because there are too many SKU in each link. China's fabric market has about 3000000 SKU every year, and the clothing market has more than 10 thousand new formats every day. The long tail supply chain determines the existence of a large amount of information asymmetry and selection costs.

"Clothing industry in the past needs 6~12 months ahead to make product planning, predict the trend of the coming year, and then step up design, print, find cloth, mass production and other follow-up actions so as to keep up with sales in the coming year." Chen Jianzhi sniffed Pro to the tiger, further explained, "but this prediction is almost equal to fortune telling. The probability of miscalculation is very large, and the brand that can accurately predict the trend of the market every year is very rare. As a result, a large quantity of products can not be sold out for second years."

In addition, with the increasing demand for personalized clothing and increasing demand for decentralization, the difficulty of product planning is further enhanced, and the probability of inventory backlog is getting higher and higher.

But Zara and other fast fashion brands have seen the hope of domestic enterprises. The supply chain of its quick response (short term "quick response") can only take two weeks from design to listing, which ensures that the new stores will be launched two times a week and 12 thousand new products can be launched throughout the year. This fast and reverse speed can greatly reduce the probability of prediction errors, which can not only capture the hearts of consumers, but also eliminate inventory. Risk of pressure.

However, this fast reverse supply chain can not be built overnight. There are tens of thousands of textile factories across the country. The downstream corresponds to hundreds of thousands of garment factories. These garment factories have to undertake orders that are in great demand and find cloth in the cloth market, and the whole process is still in a purely artificial stage, and there is no digital support at all.

The supply chain enterprises like Shenzhou International can expand because they only serve four giants such as ADI, Nike, UNIQLO and Puma, and have accumulated enough scale in 30 years to achieve the vertical integration of the whole chain from cloth to garment.

But for a large number of small and medium sized brands and some innovative brands, they can not build their own supply chain, nor are they likely to share the old and loose supply chain of socialized clothing with the supply chain giants such as Shenzhou International. However, each individual in this system has no scale, and has not integrated well with other individuals. It lacks modern management concepts and new technologies. Therefore, it is difficult to support the demand of small and medium brands "first small quantity, multiple returns".

The personalized demand of consumers has forced clothing brands to optimize their new rhythm, but brands can not find suppliers who can support their small single fast reverse demand. The backwardness of supply side seriously restricts the innovation of demand side, and the reform of garment supply chain is imminent.

"Traditional factories are planned production. They need to make production plans six months in advance, and they are good at reducing marginal costs through large-scale production (thousands of pieces produced at once). But now brands need factories to provide small single quick reverse services, not only with a smaller volume (a few hundred times at a time), but also faster delivery, and the factory can't make sure of its original business logic, so there is an opportunity for entrepreneurs to promote change. Zhang Xingchen said. "We can see that the" cloud factory "model, like hundred cloth and second best, is rising in the field of fabric production and clothing production.

8 thousand ~1 trillion market size, long tail and inefficient pattern. This is the test ground where the concept of industrial Internet is looking for lanterns, so the investment and financing of garment supply chain began to be so high last year. But as the core category of Ali, the supply chain transformation of clothing is also the most important part of Ali's Internet strategy.

Two, who will do it?

Ali has always been ambitious to create a complete garment supply chain (in fact, not just clothes, but all kinds of products). Its large Taobao (Taobao, Tmall, Juhuasuan, etc.) is the C business outlet, and 1688 of the B business entrance, theoretically covering the whole chain of garment processing factory to terminal consumers.

But Ali wants to eat the supply chain of clothing, but finds that his traditional advantages are useless here.

The essential feature of the electricity supplier is "short flat fast". Both suppliers and buyers are trading around the stock spot. The merchant sells the stock that is marked out. If sold out, it can continue to sell. If it can not be continued, the delivery link will only be sent to the receiving section. The whole transaction closed loop is relatively easy to achieve, and the standardization of the process is relatively easy to unify.

But the supply chain is different, so the supply chain should be collaborative. Take the clothing industry as an example, from yarn to cloth, from cloth to garments, and subsequent clothing wholesale and retail, it is not a transaction, but a multi-level transaction, and there is a strong synergy and planning between layers of transactions. For example, a disrupted supply of cloth may lead to a failure to produce a number of garments, resulting in numerous terminals losing their trading opportunities due to shortages.

Therefore, in order to complete the Internet closed loop of the apparel industry, the platform should not solve a transaction but a series of transactions.

Ali's original e-commerce business chain is not equipped with a ready solution, so there are many attempts such as Amoy factory, factory cargo pass, C2M division and so on.

Among them, the C2M front is the longest. It hopes to open up the whole chain of production to retail, and use the terminal's consumption big data to guide the factory to produce targeted, or even transform the production process itself to ensure the digitalization of the pipeline.

But that is the problem. Too deep playing can not guarantee the coverage. C2M can only play in the basic clothing areas such as socks and underwear. Moreover, the transformation of the production side is not the director of Ali, and insiders told tiger sniffer Pro that the intelligent transformation project of Ali at the plant side was not smooth.

On the contrary, last year, the newly established factory cargo through 1688 project was relatively practical. According to Zhang Xiang, director of the cargo handling industry of Ali 1688 factory, the goal of the factory pass is to create a platform based supply chain rather than a deep supply chain.

In Zhang Xiang's plan, he did not plan to transform the factory in the early stage, but to help the factory get the power to operate the electricity supplier. In the past, factories used to take wholesale stock from stock to 1688 wholesale, but this is only a surplus of their production capacity. It may be a tail product for a certain brand, or it may be a stock not sold by its own white card business.

Zhang Xiang hopes that the factory can digest more capacity through 1688, while 1688 will guide factory production by providing Amoy consumption data and sales channels, adding more demand oriented capabilities to the original push supply chain of the factory's white card.

However, translating consumer data into production language requires translation work. Specifically in the clothing industry, it is possible to undertake the task of transmitting smart goods to the fast reverse supply chain platform. Therefore, we have established a cooperative relationship between intelligent manufacturing and factory delivery.

Since then, it has become possible to enter the field that Ali can not touch. Specifically, there are three areas that are currently the focus of the fashion supply chain entrepreneurship, namely cloth B2B, ready-made clothing B2B, and fast reverse supply chain B2B.

1. Cloth B2B

For garment factories, the most painful thing is not orders, but orders, but no production. Pinching the fate of the garment processing plant is the supply of cloth.

There are tens of thousands of cloth producers across the country, and about 3000000 cloth designs are provided each year. Garment factories need to find cloth that meets users' needs, but there is no doubt that they are looking for needle in a haystack. Finding cloth difficult and finding cloth slow is the biggest pain point in the fabric market. For this reason, a group of entrepreneurs went into this field in 2014 to increase the efficiency of information matching between supply and demand by B2B. Among them, there are hundred cloth easy to sell, chain Shang net, wisdom cloth interconnection and so on.

He welcomed the opening of tiger sniffing Pro members, unlocking B2B's real pain points, mode evolution and current entrepreneurial trend.

2, ready to wear wholesale B2B

Similar to the wholesale market logic, garment wholesale market is also a pattern of upstream and downstream distribution. It is also a cut in mode of B2B, and there is also a strong problem of one or two level wholesalers. Players have a network of hands, batches of nets and so on.

The entry logic of one hand network and batch network is different, representing two different directions respectively: the former adopts a buying system, and a large number of funds are selected through a buyer to a wholesaler at first level, and then selected by retailers. The latter adopts the mode of merchant entry, invites the first level wholesalers to enter, so that the first-class wholesalers are directly butted with the retailers.

He immediately joined the tiger sniffing Pro members, unlocking the core grip of B2B, and the short board that needed to be filled at the moment.

3, fast reverse supply chain B2B

In addition to the above clothing wholesale mode, in fact, there is a very mainstream mode of clothing industry, that is, the processing mode of garment factories. In this mode, the factory no longer distributes products to the downstream with its own brand, but becomes a brand processing plant.

In the current trend of increasing demand, brands and factories are suffering: brand providers need small single quick reverse supply chains, but the capacity of factories is single batch production. Brand businesses need stable supply chains, but are limited by the uncertainty of cloth, and factories often break their supply. Brands need factories to provide some original design formats, but factories often lack design innovation genes.

And small and medium-sized brands lack the scale advantage of large brands and have no ability to build their own exclusive supply chain, so they can only tolerate the present situation. Since the pain point is clear, there is an entrepreneurial opportunity to create a fast reverse supply chain platform through the integration of supply chain. But this field is just beginning.

He immediately opened tiger sniffing Pro members to unlock the entrepreneurial pointcuts in B2B, a fast reverse supply chain.

Three, clothing supply chain or batch hatching unicorns.

If the transformation of the apparel supply chain industry continues to deepen, will Ali and various entrepreneurs be safe in the long run?

As a platform side, Ali has to face the choice of two directions in order to promote the landing of the industry, or to go deep into the industry to promote digitalization, or to build a horizontal industrial embedded platform in a certain dimension, but no matter how to choose, there must be trade-offs.

In the current situation, the lateral development logic seems more suitable for Ali, because the platform playing method is not only more in line with Ali's genes, but also this kind of game can greatly rely on the big data advantage of Ali's existing consumption side. On the contrary, the vertical play is a bit thankless for the current Ali, and the cost of its education market is extremely huge, and it is difficult to cover all industries.

The breadth is unable to take into account the depth of the industry. Digging in depth can not guarantee wide coverage. Ali has to give up many segments of the strategy between the two elections. In addition, Alibaba also has a long way to divide.

Still taking the clothing industry as an example, specifically to the wholesale and retail sectors, although Ali holds 1688 and big Taobao, the part under the line still can not be covered. According to industry insiders, there are about 120 retail outlets in the country, and these resources are not available to Ali.

Moreover, the logic of online clothing and offline clothing from products to sales is completely different. Online shops are more concerned about the stock depth of a particular item (especially explosive money), while the offline shop cares more about the new speed of the style, and does not require much inventory, and the same clothes carry a few goods at most and seldom return. It can be said that the online and offline apparel industry is not only a channel difference, but two totally different worlds.

For offline channels, the vertical B2B is currently in deep ploughing, and its core advantage is the ability to select and control goods. It is also trying to realize the digitalization of the entire industrial chain, which is now outside the range of Ali.

Outside the range of Ali, the business of apparel supply chain has entered the spring.

In contrast, Shenzhou International serves only four giants, which can achieve 170 billion market capitalization in the year of about 20000000000 output value. In the middle and long tail area of the larger supply chain of clothing, cloth B2B, garment B2B, fast reverse supply chain B2B and other subdivision tracks have the chance to hatch unicorns and even hatch super unicorns.

Like GMV, which is already close to billions of hundred cloth and easy to sell, the latest round of financing is US $300 million. According to the ratio of single share financing of the first tier market 10%~20%, its valuation is about 15~30 billion, which is already a unicorn enterprise. A new round of financing is also worth $100 million, and the valuation is not far away from unicorns.

"Clothing supply chain is an opportunity to incubate tens of billions of dollars or even tens of billions of dollars in volume." Chain Shang net founder and CEO Zhao Junhao to tiger sniffing Pro predicted. Moreover, it probably does not hatch only one or two hatches, and it may hatch a number of unicorns.

Source: Tiger sniffing Pro Author: Shi Fuyuan