Tra­di­tional Sup­pli­ers En­hance On-line Chan­nels, New Start-ups On the Rise

China's Foreign Trade (English) - - Survey - By Jenny Hu

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.

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