Orders Are Plummeting! Export Of Rice Straw To Foreign Trade?

Since the beginning of this year, "export to domestic sales" has become a hot word in the field of foreign trade. Many enterprises that are hindered in foreign trade smell the opportunity at home, and they will set sail back.

In order to stabilize foreign trade, the policy package also arrived on schedule. On June 22, the general office of the State Council issued the implementation opinions on supporting the transformation of export products into domestic sales, which mentioned that "while encouraging enterprises to expand the international market, we should support the export products that are suitable for export to develop the domestic market, strive to help foreign trade enterprises tide over difficulties and promote the basic stability of foreign trade".

However, for foreign trade enterprises accustomed to the foreign market, it is not possible to transfer to domestic sales if they want to. The domestic market is a completely strange world for these enterprises, and there are many difficulties in market demand, sales channels, customer preferences, brand awareness, etc.

01. The overseas market continues to be depressed, and the clothing export is still in severe winter

In the past two quarters, there was a surge in domestic export volume, which caused widespread concern. At that time, the main force of export recovery was electronics and household appliances, and clothing foreign trade was not among them. Clothing sales are highly dependent on the recovery of offline social contact and the impulse purchase of consumers. At present, the epidemic prevention in Europe and America is still impacting the real economy, and consumers are still rational.

The US market is one of the most important markets for Chinese foreign trade enterprises. According to a survey conducted by CBRE Ellis, a commercial real estate service investment agency, the growth of American retail sales has exceeded that before the epidemic. Consumption has led to the recovery of the U.S. economy, but the clothing retail is relatively bleak. In addition to sports clothing, fast fashion, professional wear, customized clothing, and formal dress are still in a downward trend.

In the past years, enterprises will bet on the traditional "consumption season" such as Thanksgiving and Christmas at the end of the year. Yang Jinchun, executive vice president of China Garment Association, told Caijing that this year's factories could get the same amount of "Christmas" orders as that of last year, and more generally, it continued the year-on-year decline.

Dayang is the largest suit manufacturer in China and one of the largest suit customization enterprises in the world. In recent years, the revenue growth rate has remained at 40%, and 80% of the orders are contributed by overseas markets. Due to the impact of the epidemic this year, the revenue of this year will fall back to the level of 2017.

"The recovery of overseas retail is too slow. If the shop rents and the wages of the clerks can not be paid, the cash flow will not be able to sustain." From the marketing of Dalian Dongmei group, there is no need for the general manager of Dalian Dongmei group to make a lot of cash flow, let alone to make a lot of cash.

This year, Dayang also suffered from the bankruptcy of its customers. Since May, four overseas customers of Dayang have gone bankrupt one after another.

The U.S. market accounts for more than half of Ocean Group's foreign trade business. J. crew, a US listed clothing company, announced bankruptcy and reorganization in May this year, becoming the first company among ocean's customers to declare bankruptcy and reorganization due to the impact of the epidemic. Before the bankruptcy, J. crew owed ocean $1.2 million. From May to October, Dayang could get 50% of the payment, and the remaining 50% would be made up by increasing the price through new orders in the next 18 months after J. crew's restructuring.

After a French customer went bankrupt, SINOSURE paid $1.5 million to Dayang, and the remaining $300000 could only be realized in a possible restructuring in the future. In the past few months, centric brands, an agent for the American women's clothing brand BCBG, also announced bankruptcy. In September, Dayang received another bankruptcy notice from a British client.

In the event of merger and acquisition, Hu Donghui will try her best to help her clients. "For the factory, getting payment is on the one hand, we hope that foreign trade customers can survive the crisis and continue the cooperation business."

Zhao Mingyao, President of Qili group, a Shandong clothing foreign trade enterprise, told Caijing that the company's turnover once fell by 50% this year. Recently, foreign trade orders have been recovering slowly. He estimated that by the end of the year, the company's overall turnover would drop by 30%.

"It is not expected that the trend of overseas orders will continue to decline, and it is not expected that the trend of overseas orders will continue to decline." Yida is a large garment enterprise with sales of over 10 billion yuan, accounting for 85% of its foreign trade volume in 2019, including 70% in Europe and the United States and 15% in Japan and South Korea. This year, Yida's foreign trade orders will be reduced by 30% - 40% compared with previous years.

02. Sino US trade friction accelerates "export to domestic sales"

The impact of the epidemic on foreign trade may be temporary, but what worries foreign trade owners is that the Sino US trade friction in recent years may have a long-term impact on clothing exports.

After the United States imposed tariffs on the clothing and textile products imported from China, the price advantage of Chinese clothing exported to the United States decreased. Since February 2020, the United States has implemented the adjusted tariff increase range: 7.5% tariff will be imposed on clothing products imported from China, and 15% tariff has been imposed previously.

In July this year, Yida's spinning factory in Changji, Xinjiang, was listed in the "entity list" by the U.S. Department of Commerce. According to the export control regulations established by the United States, foreign companies listed in the "entity list" will have many restrictions on the export and transfer of American products.

Such events directly prompted Yida to shift its business focus to the Chinese market, with the goal of reducing the proportion of orders in the European and American markets and increasing the domestic market share. At the same time, we should expand the domestic market share by 45%.

Affected by the trade environment, in the long run, foreign trade enterprises have the motivation to expand domestic sales. In the short term, enterprises hope to make up for some of the decline in foreign trade this year through domestic sales.

Under the new target, Yida is increasing investment in the domestic market, especially increasing the support for its own brands, such as putting more resources into the domestic product development team and sales team, and readjusting the production system to meet the domestic production demand.

This year's situation prompted Yida to make a plan to open a large number of private brand stores, actively recruit agents and participate in the exhibition. "Some brands have reduced their investment, but we are in the opposite direction. On the contrary, because of the epidemic situation, we have accelerated our determination to expand the domestic market." She said.

At present, it also provides foreign trade brands such as hisenta, ficomer, and other international brands, such as hisenta, tominigo, etc. Foreign brands are usually very dominant. For OEM of domestic brands, the factory needs to provide more design and selling point ideas, and create business with brand customers, so that the factory can play a bigger role.

At present, Yida also tries to cooperate with several online brands. Compared with the big goods mode, online single has weak planning, small quantity, urgent demand and fast product update. At this stage, foreign trade enterprises are more concerned with how to do online brands and get closer to the market.

03. Transformation must cross many barriers

According to the reporter's investigation, the foreign trade enterprises that have successfully turned to domestic sales mainly present two major characteristics. From the perspective of enterprise types, most of the enterprises that have started are leading enterprises. These enterprises often start to "walk on two legs" in the international and domestic markets earlier, which can make up for the loss of current export decline through more mature domestic sales channels. From the industry point of view, textile and clothing, light industry, agricultural products enterprises are more feasible to transfer to domestic sales. These three types of enterprises are close to the terminal market and have low cost to enter domestic sales channels.

At the same time, there are still some enterprises that "want to turn but dare not to turn" and "want to turn can not" situation, the underlying reasons are from many aspects.

The market is not mature enough. A number of business people told reporters that due to the different domestic market environment and foreign countries, many of the best-selling goods in the international market are not acclimatized after being transferred to domestic sales, so it is difficult to obtain orders due to the lack of sales market. For example, Hubei Xiangyang Hengde Auto Parts Co., Ltd. mainly exports refitted vehicle hubs, but due to the small scale of domestic refitted vehicle market, it is difficult for the enterprise to adjust its market strategy in the short term.

The brand is not loud enough. Turning to domestic sales can open up the domestic market with the help of e-commerce platform in the short term, but in the long term, it still needs to take the road of brand development to gain a firm foothold. After years of hard work, some export enterprises have established their brand image overseas. However, domestic users are not familiar with their products and the domestic market is not well-known. It takes time to cultivate customers.

There is still a lack of experience. Some enterprises said that there are differences in the business operation mode of domestic and foreign trade. Most foreign trade products are in large quantities and few batches. The business model is simple and the process is relatively short. The domestic market is generally small batch and multi batch, and there are many links such as R & D and design, advertising marketing and channel expansion. Foreign trade enterprises are often inexperienced in transferring export to domestic sales. A person in charge of a machinery manufacturing company in Hubei Province told the reporter that the company is a small and medium-sized foreign trade enterprise. Compared with large enterprises, it has insufficient ability to develop domestic market and faces greater risks. Therefore, it lacks confidence and turns to domestic sales business has been stagnant.

Experts said that with the ever-changing international market situation, export and domestic sales are facing a very different environment, and foreign trade enterprises should make rational choices based on the actual situation. For enterprises that want to "walk on two legs" in the international and domestic markets, in addition to relying on the government's help, they should also improve their "internal skills", strengthen domestic market research, actively adapt to the new environment, create word-of-mouth and brand, and truly realize endogenous "blood production".

04. Learn to walk on two legs

For the foreign trade clothing enterprises which are turning to domestic sales, the better strategy is to give consideration to both foreign trade and domestic sales. In the short term, it will take time for orders and sales to pick up significantly.

The domestic market still needs time to recover, and people's consumption power is generally declining. Many clothing factories have not sold the clothes produced last year, and they are still digesting the inventory until recently. The inventory situation in various regions is not balanced, and the brands are busy dumping goods at low prices, and the whole production chain is very chaotic. This kind of influence is very delicate, caused the entire clothing market new order not many, further affected everybody's production expectation.

Many clothing foreign trade enterprise boss's mentality has changed from the early anxiety to calm. They said that the market will not be smooth all the time. It is necessary to adapt to the environment, study the rules of the domestic market and learn the practices of successful enterprises.

Many business owners are still optimistic about the long-term opportunities in the field of foreign trade, but the premise is that the epidemic situation is solved and social contact is restored as usual. For the uncertainty of trade prospects, international trade will still be the mainstream. The general trend of global division of labor will not be completely disintegrated because of the noise of the leaders of a certain country or region. It is a normal phenomenon that geopolitical relations fluctuate in a specific historical period.

Many foreign trade people believe that the experience in 2020 may objectively be an opportunity for the transformation of China's clothing industry, and encourage more OEM enterprises to develop brand, design and intelligent production capacity.

Although in the long run, China's clothing foreign trade enterprises have the opportunity to transform towards a more technical direction, but in the short term, for most of the clothing foreign trade enterprises, this year's goal is only to maintain the basic situation and employment.