The rising cost has become a reality that garment companies must face in 2011. With such a rapid increase in costs, what attitude will companies take? What measures will it take? On this topic, the newspaper interviewed experts in the industry and the economics of the apparel industry in order to interpret the impact of rising costs on brand companies and related responses from different perspectives, including entrepreneurs and industry experts.
Moderator: Yin Lijie Special guests: Ding Hui, chairman of Fujian Naughtie Co., Ltd. Cao Shengkui, chairman of Beijing Garment Co., Ltd., and Chen Guoqiang, executive deputy director of the Institute of Industrial Economics, China Garment Association, have seen more widespread wage increases since last year. The situation in the Midwest still seems to be even greater than the coast. Does the brand feel pressure?
Ding Hui: There will certainly be pressure, but for Noci, the pressure felt is not as great as that of other traditional clothing brands because the company does not produce. All the products are produced under the designated suppliers, and most of the employees are recruited. For office workers and store sales staff, to a certain extent, get rid of the predicament of the traditional clothing enterprises on the labor dependence.
Cao Shengkui: The pressure of rising labor force is still very obvious. The salary level required by the company’s newly recruited staff is about 20% higher. Due to the increase in labor costs, processing costs in processing plants in Beijing have increased by 20% to 30%. Therefore, many of our processing orders have shifted to regions with relatively low wage levels in other provinces and cities.
Chen Guoqiang: The rise in labor costs is a common phenomenon in China. The cost of labor in the central and western regions has risen more than that in the coastal areas. This is because the transfer of industries since the beginning of this year has caused garment enterprises in the central and western regions to grow at a higher rate than the eastern region. Labor demand is high, so labor costs have risen. Will be big.
However, we must be aware that rising labor costs is an inevitable trend. China's pattern of low labor costs as a driving force for development has turned a corner. China's demographic dividend is drawing to a close. We must realize this to meet future development.
Topic 2 The price of cotton has fallen recently, but clothing prices have gone up. How do you see this phenomenon? How can consumers be loyal to the rising apparel brands?
Ding Hui: Clothing price increase is not only a reason for the rise of raw materials, but also includes the irrational increase in cotton prices led to the rapid price increase of almost all clothing raw materials; rising wage and welfare costs plus the decline in the number of labor also increased labor costs; commercial rent increase The increase in transportation prices raised the cost of business; the increase in the prices of water and electricity resources and the shortage of energy supplies had aggravated the manufacturing costs of high construction; several adjusted fiscal policies raised the cost of credit in the industry. Therefore, I believe that although the price of cotton has fallen, it is inevitable that the price of clothing will rise instead of fall.
To allow consumers to be loyal to the rising apparel brand, it is still necessary for the clothing brand to find a breakthrough point in itself. The most important thing is to do a good job of products and services and establish a brand reputation. Combining with Norwich himself, on the one hand, it is necessary to analyze the consumer demand of member consumption data and introduce products that follow the trend but meet the needs of mass consumption; on the other hand, we must continue to improve and improve customer service and do emotional maintenance. , to provide customers with more than expected service.
In fact, a phenomenon that is particularly noticeable in the apparel industry is that once a product rises to a brand, the motivation for a customer to actually buy is more emotional rather than the product itself. In this case, companies doing marketing should jump from traditional marketing products to marketing emotional strategies.
Cao Shengkui: Although the price of cotton has fallen, it has not been reflected in the finished fabric market, and the rising price of the finished fabric market has not risen due to the increase in the price level. Instead, it has increased. Therefore, the decline in cotton prices will not be transmitted to the apparel market soon. Although consumers feel that the price of clothes is higher than before, due to the rise in the level of comprehensive prices, consumers can understand it, but it will affect their purchasing power. Therefore, this year, garment companies feel that the sales growth rate has slowed down, the profit level has dropped, and the market pressure has become greater. Brand loyalty is particularly important in such a market environment. In addition to making the greatest efforts to reduce costs, brand companies need to increase the investment in brand building. Long-term tirelessly shaping the unique charm of the brand, enhance brand awareness and reputation.
Chen Guoqiang: Cotton prices are only part of the cost of raw materials, and raw material costs are only part of the cost of the company. Now, for business operations, labor costs, energy costs, ** costs, product sales costs, etc. are all on the rise. Of course, this is consistent with the rise in various costs of the entire society.
I think that the rise in apparel prices is not necessarily linked to consumer loyalty. Now we are facing the return of agricultural and sideline products. Should the price of our clothing products also be returned? We have already bid farewell to the era of low cost and low price in the past. We should think about how to increase the added value of the brand in a high-cost era so that the brand can form a reasonable relationship with its price.
Topic 3: How companies respond to rising costs
Is it just the price increase that can absorb the rising costs?
Ding Hui: Faced with the rise of various costs, price increases have become inevitable, but not only the price increase can digest the cost of a road, the same can be through the refinement and promotion of internal operations management to ease. In the face of rising costs, Nuochi gave full play to its many advantages in the business model, through the "Membership database marketing" and a variety of low-cost and efficient information technology for operational management.
Specifically, first of all, "Membership Database Marketing" is to accurately grasp the needs of members, to achieve a customer demand-oriented product supply model, reduce product development and supply risk. Secondly, reduce the intermediate links, reduce operating costs, and take the terminal as the guide, first develop the downstream, then gradually penetrate the upstream, and establish a vertical supply chain. Noch put the entire chain in a community of interests without any intermediate links, achieved rapid response and cost control, and made the retail price of the company's products clearly competitive.
Cao Shengkui: We cannot simply use rising prices to absorb rising costs. We can first increase market share, increase sales, and average diluted expenses. The second is to improve the design level and make customers feel value for money. The third is to consider the factors that reduce costs in the design, so that clothing as much as possible to reduce the price increase.
Chen Guoqiang: The garment industry is indeed a labor-intensive industry, but we should make it clear that China's current garment industry is not high in labor efficiency and product added value. We should work hard to increase labor productivity, increase the degree of mechanization, reduce labor costs, and reduce the cost of sales.
And we all know that the profits that sales make in garments are the greatest. We can not only reduce our costs in production but we must consider how we can increase the speed of response in sales and how we can reduce costs in circulation. How to increase the ratio of sales to sales.
Topic 4 What expectations do you have for the future development of the apparel industry? In the face of rising costs, what challenges will Chinese brand companies face and how should they respond?
Ding Hui: China's garment industry is in the post-crisis era of the industry recovery period and the beginning of the pattern transformation. In the future, the advancement of the industry will co-exist with various new and old constraints. I combine some professional news reports with my own business operations to analyze, in the future China's garment industry will face the following challenges:
First of all, the entire industry may fall into a shortage of overall operating rates due to “recruitment difficultiesâ€. Although many garment companies are gradually moving from independent production to brand operation and OEM production, as the processing requirements of “outsiders†are getting higher and higher, the problem of supply chain in China's garment industry will gradually increase, and some production companies cannot adapt. The fast and accurate supply method restricts the fast operation of the clothing brand supply chain. At the same time, many garment companies have gradually developed toward the direction of commercial brands, but their lack of control over the terminal channels, personnel training can not keep up, lack of a standardized chain management system.
Second, rising costs are still an important constraint to the development of China's garment industry. As I mentioned earlier, the irrational increase in cotton prices has led to rapid increases in other raw materials, higher labor costs, rising commercial rents, and rising prices in logistics and prices of water, electricity and other resources. Rising, including changes in macrofinancial policy to the industry's credit costs, and so on. Combining these factors, rising costs and further shortages of resources are adjusting the industry's supply capacity and structure.
At the same time, many international apparel brands are targeting the Chinese market as a big cake, accelerating access to the Chinese market, such as Spain's ZARA, Japan's Uniqlo, etc., and has extended to the second and third line markets, stepping up the obvious trend of the Chinese market layout. The competition in the domestic market will become increasingly fierce, uncertainties will increase, and market fluctuations will continue to emerge. In addition, the domestic demand market has been gradually out of the doldrums, especially the rapid development of the second and third tier cities. It has become the main force and strong growth point for stimulating domestic demand growth. However, consumers have strong expectations for inflation, even though the prices received in the financial crisis have been weighed down. It has been released, but not all companies are able to resolve cost pressures through price increases. Therefore, in the face of rigid rising costs, some companies will surely be eliminated.
To sum up, in the face of these difficulties, I believe that garment companies should start from transformation and change, take a new road to industrialization, and seek ways out by transforming development methods, adjusting and upgrading industrial structure, and changing business models. Government departments and industry associations are more involved in guiding apparel companies and building a platform for companies to improve supply chain management. Enterprises themselves must also work hard to improve their strengths in personnel training, terminal management, brand building, supply chain management, and product R&D. , More use of the latest information technology to improve business management, and constantly enhance the competitiveness of enterprises, from the Red Sea in China's garment industry to break out.
Cao Shengkui: Any price increase will cause poorly-run companies to withdraw from the market, and will enable competitive companies to experience and develop. The apparel industry is increasingly standardized in the process of continuously selecting the superior and eliminating the inferior. Outstanding clothing brands can become the backbone of the market, increase market reputation during the growth process, and establish brand loyalty among customers. Therefore, for garment enterprises, in the face of such rising costs and fierce competition, brand building must be strengthened.
Chen Guoqiang: The rising cost of Chinese clothing brands is an inevitable trend. What apparel companies need to think about now is how to improve themselves. Improve labor productivity, reduce the cost of circulation, and change the traditional sales model. In the past, we had achieved development at the expense of cheap labor and energy consumption. However, we are facing the stage of full-scale brand development. The brand has entered the modern management model, and it is necessary to truly improve itself from the management level, increase the effective production, and increase the production and sales ratio. , to enhance the brand's own competitiveness.
Moderator: Yin Lijie Special guests: Ding Hui, chairman of Fujian Naughtie Co., Ltd. Cao Shengkui, chairman of Beijing Garment Co., Ltd., and Chen Guoqiang, executive deputy director of the Institute of Industrial Economics, China Garment Association, have seen more widespread wage increases since last year. The situation in the Midwest still seems to be even greater than the coast. Does the brand feel pressure?
Ding Hui: There will certainly be pressure, but for Noci, the pressure felt is not as great as that of other traditional clothing brands because the company does not produce. All the products are produced under the designated suppliers, and most of the employees are recruited. For office workers and store sales staff, to a certain extent, get rid of the predicament of the traditional clothing enterprises on the labor dependence.
Cao Shengkui: The pressure of rising labor force is still very obvious. The salary level required by the company’s newly recruited staff is about 20% higher. Due to the increase in labor costs, processing costs in processing plants in Beijing have increased by 20% to 30%. Therefore, many of our processing orders have shifted to regions with relatively low wage levels in other provinces and cities.
Chen Guoqiang: The rise in labor costs is a common phenomenon in China. The cost of labor in the central and western regions has risen more than that in the coastal areas. This is because the transfer of industries since the beginning of this year has caused garment enterprises in the central and western regions to grow at a higher rate than the eastern region. Labor demand is high, so labor costs have risen. Will be big.
However, we must be aware that rising labor costs is an inevitable trend. China's pattern of low labor costs as a driving force for development has turned a corner. China's demographic dividend is drawing to a close. We must realize this to meet future development.
Topic 2 The price of cotton has fallen recently, but clothing prices have gone up. How do you see this phenomenon? How can consumers be loyal to the rising apparel brands?
Ding Hui: Clothing price increase is not only a reason for the rise of raw materials, but also includes the irrational increase in cotton prices led to the rapid price increase of almost all clothing raw materials; rising wage and welfare costs plus the decline in the number of labor also increased labor costs; commercial rent increase The increase in transportation prices raised the cost of business; the increase in the prices of water and electricity resources and the shortage of energy supplies had aggravated the manufacturing costs of high construction; several adjusted fiscal policies raised the cost of credit in the industry. Therefore, I believe that although the price of cotton has fallen, it is inevitable that the price of clothing will rise instead of fall.
To allow consumers to be loyal to the rising apparel brand, it is still necessary for the clothing brand to find a breakthrough point in itself. The most important thing is to do a good job of products and services and establish a brand reputation. Combining with Norwich himself, on the one hand, it is necessary to analyze the consumer demand of member consumption data and introduce products that follow the trend but meet the needs of mass consumption; on the other hand, we must continue to improve and improve customer service and do emotional maintenance. , to provide customers with more than expected service.
In fact, a phenomenon that is particularly noticeable in the apparel industry is that once a product rises to a brand, the motivation for a customer to actually buy is more emotional rather than the product itself. In this case, companies doing marketing should jump from traditional marketing products to marketing emotional strategies.
Cao Shengkui: Although the price of cotton has fallen, it has not been reflected in the finished fabric market, and the rising price of the finished fabric market has not risen due to the increase in the price level. Instead, it has increased. Therefore, the decline in cotton prices will not be transmitted to the apparel market soon. Although consumers feel that the price of clothes is higher than before, due to the rise in the level of comprehensive prices, consumers can understand it, but it will affect their purchasing power. Therefore, this year, garment companies feel that the sales growth rate has slowed down, the profit level has dropped, and the market pressure has become greater. Brand loyalty is particularly important in such a market environment. In addition to making the greatest efforts to reduce costs, brand companies need to increase the investment in brand building. Long-term tirelessly shaping the unique charm of the brand, enhance brand awareness and reputation.
Chen Guoqiang: Cotton prices are only part of the cost of raw materials, and raw material costs are only part of the cost of the company. Now, for business operations, labor costs, energy costs, ** costs, product sales costs, etc. are all on the rise. Of course, this is consistent with the rise in various costs of the entire society.
I think that the rise in apparel prices is not necessarily linked to consumer loyalty. Now we are facing the return of agricultural and sideline products. Should the price of our clothing products also be returned? We have already bid farewell to the era of low cost and low price in the past. We should think about how to increase the added value of the brand in a high-cost era so that the brand can form a reasonable relationship with its price.
Topic 3: How companies respond to rising costs
Is it just the price increase that can absorb the rising costs?
Ding Hui: Faced with the rise of various costs, price increases have become inevitable, but not only the price increase can digest the cost of a road, the same can be through the refinement and promotion of internal operations management to ease. In the face of rising costs, Nuochi gave full play to its many advantages in the business model, through the "Membership database marketing" and a variety of low-cost and efficient information technology for operational management.
Specifically, first of all, "Membership Database Marketing" is to accurately grasp the needs of members, to achieve a customer demand-oriented product supply model, reduce product development and supply risk. Secondly, reduce the intermediate links, reduce operating costs, and take the terminal as the guide, first develop the downstream, then gradually penetrate the upstream, and establish a vertical supply chain. Noch put the entire chain in a community of interests without any intermediate links, achieved rapid response and cost control, and made the retail price of the company's products clearly competitive.
Cao Shengkui: We cannot simply use rising prices to absorb rising costs. We can first increase market share, increase sales, and average diluted expenses. The second is to improve the design level and make customers feel value for money. The third is to consider the factors that reduce costs in the design, so that clothing as much as possible to reduce the price increase.
Chen Guoqiang: The garment industry is indeed a labor-intensive industry, but we should make it clear that China's current garment industry is not high in labor efficiency and product added value. We should work hard to increase labor productivity, increase the degree of mechanization, reduce labor costs, and reduce the cost of sales.
And we all know that the profits that sales make in garments are the greatest. We can not only reduce our costs in production but we must consider how we can increase the speed of response in sales and how we can reduce costs in circulation. How to increase the ratio of sales to sales.
Topic 4 What expectations do you have for the future development of the apparel industry? In the face of rising costs, what challenges will Chinese brand companies face and how should they respond?
Ding Hui: China's garment industry is in the post-crisis era of the industry recovery period and the beginning of the pattern transformation. In the future, the advancement of the industry will co-exist with various new and old constraints. I combine some professional news reports with my own business operations to analyze, in the future China's garment industry will face the following challenges:
First of all, the entire industry may fall into a shortage of overall operating rates due to “recruitment difficultiesâ€. Although many garment companies are gradually moving from independent production to brand operation and OEM production, as the processing requirements of “outsiders†are getting higher and higher, the problem of supply chain in China's garment industry will gradually increase, and some production companies cannot adapt. The fast and accurate supply method restricts the fast operation of the clothing brand supply chain. At the same time, many garment companies have gradually developed toward the direction of commercial brands, but their lack of control over the terminal channels, personnel training can not keep up, lack of a standardized chain management system.
Second, rising costs are still an important constraint to the development of China's garment industry. As I mentioned earlier, the irrational increase in cotton prices has led to rapid increases in other raw materials, higher labor costs, rising commercial rents, and rising prices in logistics and prices of water, electricity and other resources. Rising, including changes in macrofinancial policy to the industry's credit costs, and so on. Combining these factors, rising costs and further shortages of resources are adjusting the industry's supply capacity and structure.
At the same time, many international apparel brands are targeting the Chinese market as a big cake, accelerating access to the Chinese market, such as Spain's ZARA, Japan's Uniqlo, etc., and has extended to the second and third line markets, stepping up the obvious trend of the Chinese market layout. The competition in the domestic market will become increasingly fierce, uncertainties will increase, and market fluctuations will continue to emerge. In addition, the domestic demand market has been gradually out of the doldrums, especially the rapid development of the second and third tier cities. It has become the main force and strong growth point for stimulating domestic demand growth. However, consumers have strong expectations for inflation, even though the prices received in the financial crisis have been weighed down. It has been released, but not all companies are able to resolve cost pressures through price increases. Therefore, in the face of rigid rising costs, some companies will surely be eliminated.
To sum up, in the face of these difficulties, I believe that garment companies should start from transformation and change, take a new road to industrialization, and seek ways out by transforming development methods, adjusting and upgrading industrial structure, and changing business models. Government departments and industry associations are more involved in guiding apparel companies and building a platform for companies to improve supply chain management. Enterprises themselves must also work hard to improve their strengths in personnel training, terminal management, brand building, supply chain management, and product R&D. , More use of the latest information technology to improve business management, and constantly enhance the competitiveness of enterprises, from the Red Sea in China's garment industry to break out.
Cao Shengkui: Any price increase will cause poorly-run companies to withdraw from the market, and will enable competitive companies to experience and develop. The apparel industry is increasingly standardized in the process of continuously selecting the superior and eliminating the inferior. Outstanding clothing brands can become the backbone of the market, increase market reputation during the growth process, and establish brand loyalty among customers. Therefore, for garment enterprises, in the face of such rising costs and fierce competition, brand building must be strengthened.
Chen Guoqiang: The rising cost of Chinese clothing brands is an inevitable trend. What apparel companies need to think about now is how to improve themselves. Improve labor productivity, reduce the cost of circulation, and change the traditional sales model. In the past, we had achieved development at the expense of cheap labor and energy consumption. However, we are facing the stage of full-scale brand development. The brand has entered the modern management model, and it is necessary to truly improve itself from the management level, increase the effective production, and increase the production and sales ratio. , to enhance the brand's own competitiveness.
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