Exploring the Mystery of "Missing" Profits in Textile and Garment Industry (II)

This is in comparison with the reasons for the decrease in the profits of textile and garment companies caused by the increase in raw material prices. At the end of the year of 2010, the power cuts taken by some regions to complete energy-saving and emission-reduction goals have become ridiculous and have made textile and apparel companies helpless.

The sudden implementation of the new standard for energy conservation in unit GDP in June 2010 made many local governments unprepared. In fact, the original intention of the country to use new indicators is that electricity is controlled by the state, and the assessment of electricity consumption cannot do anything at all. However, this sudden new assessment method has led some local governments to invent new methods of “energy saving and emission reduction”, to cut power, and even to directly cut off power.

In response to power cuts, textile and clothing companies have had to purchase diesel generators to generate electricity on their own to maintain normal production. Li Helin is the boss of a textile factory. Because of his flexible operation, he is honest and trustworthy and his business has been relatively prosperous. However, with the increasing frequency of power cuts, the factory was seriously under-run, and he was very annoyed when the order was over. In desperation, he purchased two medium-sized, domestic low-end diesel generators. However, due to the long use time, the quality of low-end diesel generators is not very stable. Therefore, these two diesel generators often have some problems and their working conditions are very unsatisfactory.

In order to complete the order on time, Li Helin also bought two Yamaha generators. In fact, the cost of using diesel generators to complete production is ridiculously high. Taking the Li Helin plant as an example, he uses a diesel generator and the daily production cost is 5,000 to 6,000 yuan more. However, the order signed cannot be produced. Even if you can't make money, you have to do it in the long run to consider a loss. If you fail to complete the order, your next order will be difficult to get.

In the middle and late 2010, some localities in China have successively staged thousands of officials to guard against farsighted electric power meters. This simple, rude and ridiculous “power cut” has a direct impact on the overall profitability of many industries including the textile and apparel industry. At the same time, it also led to the sharp rise in prices, the decline in corporate competitiveness, the weakness of economic development and other shortcomings. At present, the relevant departments of the state have explicitly stopped the act of “power cuts” due to energy conservation and emission reduction. However, its "aftereffects" are still unresolved, and it still affects the development of China's textile and clothing industry.

Apparel Enterprise: The sky-high entrance fee is a total of ultra-high logistics costs. As a clothing company in the downstream of the industry chain, the impact caused by rising raw material costs is actually far less than expected. According to the analysis of senior figures in the textile industry, branded apparel textile products are generally higher in listing prices in shopping malls and have enough profit margins to cope with the increase in costs. The upstream and downstream industrial chains of brand enterprises are relatively wide, they can offset some of the rising costs and have pricing power, so they can guarantee the profits of enterprises. Therefore, the profit margins of retail terminals and brand manufacturers are basically not affected by rising raw material prices.

However, as the saying goes, "Every family has this scripture." The "hidden rules" for astronomical entrance fees encountered by Chinese garment manufacturers are even more bizarre. Visitors to shopping malls abroad, most of them will be issued after the same is made in China's textile and apparel products in foreign prices actually much lower than the domestic sigh. What caused this abnormal phenomenon to happen?

To find out, the reason for exploring this phenomenon has to be traced back to the mid-1990s. At that time, the retail industry in all parts of China was basically in a situation where department stores were the only ones. The mode of operation is basically a “consignment sales” model. From the textile and apparel industry, it is the production companies that hand over their products to department stores. After the department stores are sold, they have to make payments with the company and receive profits from them. Since most of the department stores at that time were still the status of state-owned enterprises, reputation, funds, etc. were all relatively assured to enterprises.

In 1995 and 1996, international retail giants Carrefour and Wal-Mart entered the Chinese market one after another. They first bought out the goods of textile and garment companies in one go, then turned them into sellers, and sold them to customers in small increments. In this way, the price that the company sets out is constantly being depressed, and the textile and apparel products in foreign supermarkets are becoming cheaper and cheaper. The low price soon attracted the Chinese people like a flood. By the end of the 1990s, a large number of department stores across the country had suffered losses and were shut down and turned around. Yangzhou Supermarket soon took the advantage of the channel. At this point, Chinese textile and apparel companies lost their dominance over product prices.

The change in the relationship between textile and garment companies and retailers has directly led to the emergence of the astronomical entrance fees that have been intensifying for the next few years. In March 2011, Xi'an Liu Yunlang acted on behalf of a well-known brand of clothing in the local sales right. Can not wait to go to a well-known department store in Xi'an to discuss the approach of sales.

Merchants in this mall received Liu Yunlang enthusiastically in the reception room. After a few greetings, they talked directly about the core issue of “entry fee”. In fact, the appropriate amount of entrance fee is a tacit agreement between the two parties in mutual agreement and common observance when the textile and apparel products enter the consumer market from the production enterprises. However, Liu Yunlang was told that his clothing needs to pay an entrance fee of 2,000 yuan per square meter per year for business if he wants to enter the market.

At this time, Liu Yunlang secretly estimated himself, paying the entrance fee at this price is still profitable under the premise of guaranteed sales. However, the other party told him again that in addition to the entrance fee, there were other expenses to be paid. First, the store's rebate is about 28%; second is to charge another 1% of the advertising fee; Third, the store fee is collected at a rate of 5,000 yuan per year; and fourth, management fees, training fees, etc.

In addition, the clothing companies that enter the department store sales also need to participate in malls from time to time to conduct some of the activities such as how much to spend full of gifts, how much to reduce the number of full consumption, one hundred as two hundred activities. In fact, such activities are a dilemma for garment manufacturers. If you do not participate in, sales of your own clothing products will not go up. If you participate, the profits of your own clothing products are gone.

In response to such harsh conditions, Liu Yunlang hesitated. He couldn't determine whether the sales profit of his own branded apparel could “surpass” such a high entry threshold. However, Liu Yunlang was paralyzed after seeing this mall containing almost all the well-known clothing brands in the country. He does not know how these branded clothing can make money after paying such a high entrance fee. It is understood that a large proportion of the branded apparel products sold in large department stores are earning money. Some of them even cut their blood to sell meat and have already lost their money. However, no matter how low the profits of the garment manufacturers, or how much money they lost. The profits of department stores are guaranteed by droughts and floods and are guaranteed.

The only way for textile and apparel companies to respond to the sky-high entry fees for department stores and the unreasonable charges is to increase the selling price of products. According to industry sources, the cost of a shirt with a cost of tens of yuan in department stores is often more than a thousand dollars. In fact, the astronomical approach fee, a Chinese-style “commercial geek”, has become a black hole for the embezzlement of textile and garment manufacturing companies’ profits and exploitation of consumers’ pockets. In addition, excessively high logistics costs also unknowingly eroded the profit margins of textile and apparel companies. Lu Shuhai, deputy director of the Economic and Trade Department of the National Development and Reform Commission, pointed out at the 2011 China Logistics Development Report that the toll rates for highways in China are too high, and that the cost of all kinds of passing bridges has already reached one-third of the costs of transport companies. In fact, if coupled with a variety of fines, the cost of road transport can account for more than 50% of the cost of the company. Needless to say, the astronomical entrance fee for department stores and the excess logistics costs are another major factor affecting the profits of Chinese textile and clothing companies, leading to the rise in retail prices of textile and apparel products. But what worries people is that, because too many interests are touched, the solution to these two problems is not something that can be accomplished in two days or two. China's vast textile and apparel companies also need to be psychologically prepared for long-term struggles. Online direct marketing: pros and cons are all ready for fear of quality risks. Faced with the current situation of retail prices of textile and clothing products “a wave higher than a wave”, it can effectively avoid a series of costs such as astronomical entrance fees, and reduce the intermediate link to reduce the selling price of online sales. It is quietly popular among consumers, especially young consumers. The vast majority of branded textile and apparel manufacturing companies also opened windows such as online flagship stores in a timely manner, and started to deal directly with retail customers.

Huang ** is a company's white-collar workers. In recent years, when the prices of old people have risen and the wages have not risen under the objective circumstances, she has gradually developed the habit of buying relatively cheap brand clothing online. Every weekend, she will invite about 32 friends to go to the brand clothing store. After picking your favorite style and personally trying on it to determine the size. Huang Yu will return home and open the computer directly to find the brand's online clothing store. According to try on a satisfied style, size order exactly the same clothing products. It is understood that buying the same clothing products from online stores, including shipping costs, will still be about 20% cheaper than the price of store sales.

The advantage of online sales of branded apparel is that companies reduce some of the expenses that must be spent on traditional retail channels. However, in the case that the company's profits have not been reduced, this part of the reduction will benefit the majority of consumers, and in fact it will also increase sales. It can be said that the formation of a more perfect win-win mode.

However, the complexity of the online world is also filled with too much uncertainty to confuse people. The branded textile and apparel products of the cottage have long been nothing new. It is said that even the branded clothing company sales websites of Shanzhai have emerged one after another. This does make ordinary consumers easily gullible. At the same time, for the textile and apparel products that are sold online, the relevant departments are very difficult to supervise them. The hidden dangers of product quality problems cannot be ignored.

A consumer purchased a T-shirt at a clothing company's online shop at half the market's retail price. After getting the product, he found the T-shirt's cuff-locking direction reversed. The cuff, which should have been locked inwards, was accidentally turned from inside out. As a result, he asked the manufacturer to return the goods, but was categorically rejected by the sales staff. The reason is that the original is a defective product is sold at half price, once sold will not be returned. Later, the consumer was found in a very inconspicuous place in the shop and found the manufacturer's indication of defective products. In fact, this is not the case. It is understood that 60% of the complaints regarding the quality of textile and clothing in China came from products sold online. How can we effectively manage the direct sales of textile and apparel products on the Internet? Currently, it is still one of the directions for various functional departments to study.

Maintaining a certain profit margin is one of the fundamental guarantees for the healthy development of the Chinese textile and apparel industry. But under the superposition of many subjective, objective, artificial or innate adverse factors. The profits of China's textile and garment industry have long been at a relatively low level, even at the level of meager profits. Such a situation will inevitably affect the reduction of R&D and innovation investment in the entire industry, leading to sluggish development of the industry and declining international competitiveness. How to crack the mystery of “lost” profits in the Chinese textile and apparel industry still requires serious research and resolution by relevant parties in the industry.