Traditional Suppliers Enhance On-line Channels, New Start-ups On the Rise
On Singles Day in 2016, large apparel brands were involved in the sales extravaganza and provided a comprehensive experience for consumers. Inman, A Life on the Left and Toyouth, three apparel brands of Huimei Group, worked with Disney and promoted a series of princess clothing based on stories of Snow White and Beauty and Beast. Mark Fairwhale upgraded its sales strategy and promoted a series of entertaining sales games; Tmall Singles Day introduced many international brands, with luxury brand Burberry involved in the sales event for the first time.
According to the 2015- 2016 China Apparel E-commerce Industry Report, released by 100EC.CN, the network-based sales market becomes increasingly mature, with e- commerce suppliers increasing varieties, enhancing logistics capabilities and improving after-sales services. Crossborder and rural e- commerce also began to grow. As one of the earliest varieties traded through e-commerce, the apparel e-commerce has become one of the largest and most mature ecommerce industries.
Apparel E-commerce Development Picks Up
The report shows that the total sales of apparel e-commerce reached RMB 3.71 trillion, up by 25.4% from the year 2014.
As the largest variety of E-commerce, apparel e-commerce business has been growing in recent years. The growth rate was stable during 20142015, marking the period of maturity. As the apparel industry environment is further improving, the companies’ ability to develop brands and earn benefits will be further enhanced.
According to data from 100EC. CN, the Chinese apparel e-commerce market reached RMB 615.3 billion in 2014 and RMB 745.7 billion in 2015, up by 21.2%.
Mo Daiqing, director of network sales department of 100EC.CN and senior analyst, said that the growth of apparel e-commerce sales have been slowing down in the past year. In the year 2015, the integration and connection between on-line and of-fline sales of apparel industry became much closer. The apparel e-commerce players opened up real stores and traditional apparel makers increased their investments in online sales. The consumption is transforming and up- grading. All these factors have contributed to the stable development of the apparel e-commerce industry.
The data by 100EC. CN also shows that in 2015, the penetration rate of online sales in the apparel market account for 34.7%, up by 10.2% from the previous year. It is estimated that the penetration rate will reach 36.9% in 2016.
Mo Daiqing said that apparel products are favorites by many consumers. The apparel always tops the list of online sales. The penetration
rate of online sales is further increasing. Many top apparel brands are opening up online stores on Tmall, Vip.com and Jd.com.
Three issues of apparel e-commerce industry
The Internet celebrity economy (also called “the Wanghong economy”) is in the middle of whirlwind and the e-commerce and wanghong brand are able to reshape the traditional apparel industry. The e-commerce platform has transformed from a single Taobao store to a comprehensive business model that includes wechat shop- ping, buyer e- commerce APP, and cross-border e- commerce. These new business models have promoted the development of e-commerce industry, and also allow apparel makers to take advantage of the supply chain to integrate into the Internet celebrity economy.
The e-commerce is undergoing transformation. As one of the most mature online business, apparel ecommerce industry is also suffering impact from the transformation and some problems have arisen under the rapid development. Problem 1 Homogeneous competition decreases the profit margin
Apparel manufacturers have been through thirty years of development and accumulated experiences in product design, production, sales and brand operation. The whole business procedure and human resources have entered a period of maturity. The brand replication is fairly easy and homogeneous products with similar brands have occupied the market. The competition has flown from the blue sea into the red sea market. Problem 2 Product variety is key to survival
Variety expansion is the issued to be faced by every e-commerce website. It is not easy and it vital to the survival of companies. For example, VANCL had been increasing varieties, pushing the companies to the edge of bankruptcy. VANCL later reduced the varieties and its billions of debt and 2 billion inventory have been solved until April 2016. The blind variety expansion has puzzled the old customers and new customers still could not find their favorite products. Problem 3 Improve supply chain to solve excessive inventory
In recent two years, the world economy has been gloomy, with a decrease in apparel export and shrink in domestic consumption. The sales terminal was dull and apparel inventories picked up. Under this background, the apparel companies have been seeking various business approaches to boost sales, such as discount sales, increase of on- line sales and developing second- tier and third-tier city markets. To solve the inventory issue needs to improve the supply chain and prevent the emergence of excessive inventory.
The excessive inventory of the apparel industry is mainly due to the dis-functional supply chain. The possible way to explore and change the business model, the business procedure of traditional apparel industry through supply chain management approaches. The purpose is to unleash resource utilization effect, improve resource allocation efficiency, develop and explore new business models featuring more variety, small transaction amount and short transaction period.
The business approach of “Network+apparel”
The apparel variety is always the major products sold online. The impact from e-commerce on the apparel industry and its sales terminals and channels not only optimizes the supply chain, but also changes the habits of consumers and promotes the transformation and upgrading of the industry. Solution1 Understand and integrate consumer demands into product design
Normally the apparel companies created preliminary idea based on limited analysis of consumer demands. The R& D department fol-
lowed the ideas to develop, manufacture, promote and sell the products. This is a stable business procedure. However, the companies could follow the other way by designing the basic ideas. The R& D, promotion and sales will be conducted by communicating deeply with consumers about their real needs. This process will last until the order production and delivery are finished.
The norm of the apparel industry is that capital input is imperative before the clothes were designed, manufactured, promoted and sold. So before the products find their way into the market, the mass production shall be finished, and the inventory is precondition of making sales. If the sales are not smooth in the market, huge inventory will be created, leading to capital stress. Many apparel brands would quickly acquire knowledge of consumer needs by way of big data technology, to realize the network-based transformation. The famous brands like Nike and Zara have applied such a model into their production. Solution 2 value chain
Under the impact from e-com- merce and famous brands, traditional apparel wholesale industry has posted a bad performance and mass store shutdown could be seen frequently. With the development of mobile network, many apparel e-commerce businesses, which prospered from Taobao. com, have been transforming towards wechat stores. Some capital-affluent companies have developed their own B2C market. Some operated the business through the network. The rise of O2O has been changing the landscape of apparel wholesale industry.
The core of O2O is the sense of participation, which indicates the close interaction between product and consumers and sense of attachment and recognition. This is especially important for apparel makers, which shall identify their customers by improving their brands in the aspects of quality, design and price. It is necessary to use a series of mobile network
Under the impact from e-commerce and famous brands, traditional apparel wholesale industry has posted a bad performance and mass store shutdown could be seen frequently.
interaction to let consumers know more about and recognize the brand products. Solution 3 New opportunities created by the Internet celebrity economy
The Internet celebrity e- commerce platform has changed from a single Taobao store to wechat shopping, buyer e- commerce APP and cross- border e- commerce. It has promoted the development of e-commerce and allows the apparel makers to take use of the supply chain to help integrate their businesses into the the Internet celebrity industry chain.
The flow inlet of social platform and top IPS has not fully developed the traffic value. There are a lot of investment opportunities in each link of the industry chain.
At the marketing platform ● terminal, although Weibo has an increasing number of registration users, its growth also lags behind other major platforms and there is a lot of space for further development. Huasi Holing Company, has taken shares of the Weimai app, in hopes of entering the Wanghong big data and supply chain service market.
The marketing of top IPS is ● still not targeting and because of lack of supply chain, it is difficult for IPS to make sales. We have recommended many DIY platforms, which are working with top IPS. It is hopeful that the IP will provide a comprehensive solution to traffic monetizing.
The supply chain needs solu● tions to manufacturing issues, to meet the personalized demands of “small amount, many varieties and fast transaction”. This has posted new challenges to the traditional supply chain of the apparel industry, such as Huafu, Nanji E- commerce and Senma. Solution 4 Market channels extend to third-tier cities and fourth-tier cities, large potential for apparel eshopping
The first- tier and second- tier markets have been occupied by large international brands. As the urbanization is growing fast, the apparel companies shall develop new markets in the third-tier and fourth-tier cities, where the marketing channels are relatively limited. There is still large space and potential for developing online shopping business.
The apparel e-commerce will attach more importance to on-line channel and seek personalized brand
Trend 1 E-commerce platform invests more in the apparel industry
That the Amazon has entered the apparel industry indicates a new trend of apparel industry reform. It is apparent that the e- commerce platforms have been developing their own apparel platforms. Domestic e- commerce players like Alibaba, Jd.com, Vip.com are investing more in the apparel industry by increasing apparel variety and promoting personalized brands and new products. Trend 2 Traditional apparel brands expand offline channels
The rapid development of ecommerce has propelled traditional apparel companies to invest in ecommerce. These companies sell the seasonal products on both online and offline markets, promote distinct products online, develop e-commerce sales platform and establish e- commerce logistics base. All these moves have shown that traditional brands are attaching greater importance to online channels. It is imperative to control the online channels and combine on-line channels with offline channels. Trend 3 Tailored production becomes direction of apparel companies
Ta i lored product ion is an important trend of “etwork+”. As the f irst batch of Network users grow older, online wholesaling has opened up new chances for developing high- end customers. Reading the apparel consumption, high quality and personalized products are demands of new middle class. The tailored production has some pain points of consumption, such as high price, long period of production, low consumer recognition and low consumption frequency. The ecommerce will combine network ideas and consumer demands to develop network-based apparel tailored services. Trend 4 Crowd funding design increases fashion of apparel industry
The crowd funding design will become popular on the network ecommerce platform. The products will be designed based on consumer demands, with customers involved into the product design process.
Meanwhile, the apparel industry shall increase product value and quality and make clothing products with professionalism, dedication and spirit of the craftsman. Trend 5 Overseas shopping as a new way of change
For those listed apparel companies intending to decrease capacity and inventory, the e- commerce has become an inevitable choice. More than 80% listed clothing companies, including Semir, Busen and J& F Labi, have expanded their business in both online and offline market.
The listed clothing companies are also making overseas merger and acquisitions to make a change. Shandong-based Ruyi Group spent EUR 1.3 billion to take the holding position of SMCP, a French fashion group. Ruyi Group will further extended their business in Europe, North America, Middle East and Asian markets. Before that, Modernavenue, LANCY, Semir and Ellassay have started businesses in the overseas market.