China' s apparel industry seek new growth avenues

After a robust expansion over the last decade, Chinese apparel industry is looking for new growth opportunities by adopting a digitized, smart and flexible supply chain. Facilitated by the Regional Comprehensive Economic Partnership agreement, trade liberalization has caused labor-intensive processes in China to shift to emerging countries. The country faces several problems such as homogenized and technically low grade products, resulting in a slowdown in GDP and consumption growth. However, e-commerce platforms and a few apparel companies in the country continue to register strong performances, indicates a Women' s Wear Daily report.

JD’ Group reports a rise in revenues

Results released by JD Group earlier this month show, the platform' s net revenue increased 23 per cent year-over-year to 275.9 billion renminbi (about $43.4 billion) in the fourth quarter. Net revenue for 2021 surged 27.6 per cent to 951.6 billion renminbi (about $149.6 billion). The platform saw a strong year, with new Chinese designer and trendy brands and stores as Qinghe cashmere, Putian shoes and boots, Jiangyin thermal underwear and Xiaolan men' s underwear joining it.

Alibaba focuses on overseas markets

JD' s competitor platform, Alibaba' s revenues in the third quarter increased 10 per cent to 242.58 billion renminbi (about $38.1 billion), while net profit declined 75 per cent to 20.43 billion renminbi (about $3.21 billion) Chinese shoppers on Alibaba increased to 979 million by December 31 2021 and the platform hopes to reach its target of 1 billion annual active domestic customers by the end of this fiscal.

Alibaba is also developing its overseas markets, Lu You, General Manager, Apparel Business-Tmall reveals, Tmall had launched a tool called ‘Style Digital,’ to add various tags based on different styles, from preppy to bohemian. The system automatically identifies what style category the product belongs to and classifies it into the corresponding category using algorithms.

Single breakthrough needed

The financial results and strategies of these two leading platforms indicate only small percentage increase in revenues and restricted growth. To achieve significant multiples of growth, the industry needs to find a new breakthrough point. This is particularly evident from the moderate growth of companies like JNBY Cloth, Semir Apparel' s despite strong performances of Erdos, Lilanz, Xtep and other clothing companies.

Erodos' revenue increased 57.3 per cent to 36.41 billion renminbi (about $5.72 billion) in 2021. Profits increased 280.2 per cent to 9.63 billion renminbi (about $1.51 billion), compared to the pandemic-impacted year of 2020.The revenues of Hong Kong-listed Chinese menswear brand Lilanz also increased by 26.1 per cent to 3.38 billion renminbi (about $531.4 million ) for fiscal 2021. The firm’s sell-out rate increased to 73 per cent from 65 per cent during the fourth quarter. The 35-year-old Chinese menswear company is restructuring products, channels and brands besides transforming its sales model, notes Wang Dongxing, Chairman and Executive Director of Lilanz China.

Product customization for Lilanz

Lilanz' continues to focus on product customization and design. Its Less Is More collection adopted a self-operated model from the second half of 2020 while about 40 per cent of the main Lilianz collection stores adopted an “agency model” from Spring 2021. This resulted in a reduction of average annual trade receivable turnover days from 101 to 57 days. Manufacturer and distributor of its own as well as foreign activewear and lifestyle brands, Xtep registered a 22.5 per cent increase in revenues to 10.01 billion renminbi (about $1.57 billion) in 2021. The company registered 24.5 per cent growth in revenues for the main Xtep brand during the year.

Several emerging brands such as K-Swiss, Palladium, Saucony and Merrell also reported strong revenue growth in 2021. As per these companies ‘Five-Year Plan’, they aim to achieve revenues of 20 billion renminbi (about $3.14 billion) in future. China’s apparel industry continues to evolve in the context of globalization and amid significant pressures. The sector seeks new growth avenues beyond the traditional low-cost manufacturing model.