Apparel industry: Price increase is not a solution to cost increases

The chairman of Jeanswest International (Hong Kong) Co., Ltd., Yang Xun did not expect it. When he opened his first JEANSWEST store in Shanghai in 1993, many people in the Mainland did not know what the concept of “casual clothes” was. In the past 20 years, it has suffered from nearly 2000 kinds of casual brands.

At present, casual wear has become one of the most competitive market segments in China's clothing competition. The casual brands brought by Hong Kong businessmen in the early 1990s, such as Jeanswest, Giordano, and Baleno, were still active in the young world, but it was difficult to stroll at that time.

Both foreign and domestic leisure brands are affected by rising labor costs, fluctuations in raw material prices, and changes in the operating environment of the market. Since last year, the inventory problem has plagued the rapid expansion of the US state apparel, the 2011 quarterly report shows that the amount of Smith Barney apparel inventory is 3.16 billion yuan. The leading company in casual wear had to adjust its strategy and deal with inventory through different channels such as discount stores and state purchasing networks. The situation gradually improved. In addition, there is another dire affair of Meibang Apparel, which is the problem of investing in the new brand Me&City. Zhou Bangjian, Chairman of Meibang Apparel admits to the media last year, and Me&City goes awry because of “no awe and not enough risk awareness”.

At this time, Eslite is not easy. The low price, huge amount of advertising, and unique e-commerce positioning have enabled Vanke Eslite to grow rapidly in a few years. General clothing brands will use 6 to 10 times of the cost price as the final sales price. Brands with a certain reputation will set the price at about 20 times the cost price. Whereas the sales price of the customer is only 1.5 times the cost, The price of passengers is one-sixth or even one-tenth of the ordinary brands under the same goods. Although the price advantage has created Vanke Eslite, profitability has also become a big puzzle.

In January of this year, the clothing retail sales data was not satisfactory. The retail sales of the country's 100 largest retail enterprises increased by 12.3% year-on-year, 7.52% lower than the fourth quarter of the previous year, while the retail sales decreased by 0.18% year-on-year, although January In the traditional peak season such as New Year's Day and Spring Festival, even though sales volume still fell year-on-year, the situation is not optimistic. In the absence of improvement in the apparel market, the pressure on the casual wear segment, which is the most competitive in the apparel industry, has increased significantly.

Yang Xun recently admitted in an interview with the “First Financial Daily” that it is difficult to expand this year. However, it is expected that the Chinese casual wear market will still have some room for growth in the next 10 to 20 years. The company can go ahead with the original plan this year.

As for the Rising Sun Enterprises where Jeanswest's apparel brands are located, as of the end of June 2011, the company's consolidated total business volume was 3.18 billion yuan, a year-on-year increase of 13.47%.

Jeanswest plans to maintain a 15% to 20% annual sales growth in mainland China and hopes to exceed 10 billion yuan in 2014. Currently, Jeanswest has opened more than 2,800 stores in more than 300 cities in the Mainland. “Our store speed is not fast, and it is very important to be stable. Although we can quickly take possession of the market in the form of franchise, the pace is too fast to control orders and control risks. More than 60% of our stores are directly operated stores.” Say.

Faced with rising costs, Yang Xun said that raising product prices is not the main solution, but more to digest through the strengthening of sales and management. In addition to the sinking of third-tier and fourth-tier cities, online sales have continued to grow. Last year, Jeanswest’s online sales doubled. In addition, the control of the return rate is also an important factor in reducing costs. The return rate of Jean-Wiex is controlled at 2/1000, and the return rate for the entire apparel industry is about 1%.

Although the competition for casual wear has intensified, the rising cost has made it difficult for the industry to fight the price war. Many casual wear enterprises have adjusted their strategies to maintain stability and are no longer blindly expanding. According to the report of Shenyin Wanguo Securities Co., Ltd., Meibang Apparel plans to open a store in the future and is striving to win. Currently, the total inventory of Smith Barney is about 2.5 billion yuan. In January and the Spring Festival this year, the revenue maintained a steady and rapid growth, but the winter discount may have an impact on gross margin.

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