A U-turn in the long march
China is quickly turning from the clothing supplier from heaven to the clothing supplier from hell. On one hand prices are rising, while on the other production is falling through factory closures.
One of my Chinese importer friends tells me that prices have risen by at least 15 per cent in the last three months, kicked along by the revaluation of the Chinese currency, the yuan. Other contributing factors have been a worldwide rise in the price of cotton. This has hit the cost of cotton yarn-dyed fabrics and has pushed their delivery out to around four months.
Other economic factors have weighed in too. Like all emerging nations, China began its economic revolution with manufacturing clothing where millions of workers could be sat behind sewing machines. A textile industry was a logical clip-on to feed the clothing factories.
But now, what is being called the ‘instability of the workforce’ is seeing workers moving from clothing factories to electronics factories, where the wages are better because the value added is higher. If clothing factories want to compete they must offer higher wages and charge higher selling prices.
While some of the huge American buyers and some other long-term favourites of the Chinese are still getting their production, smaller players like Australia are becoming dispensable.
The immediate effect, apart from higher prices, is longer lead times. If we’re prepared to wait in line we can still get our clothing. There’s is an easy fix for that, the big stores say.
Wait out the extra production time and then airfreight the stuff. Oops, that will bump up the selling prices even more.
Okay, let’s look for alternatives. There’s India sitting there with almost as many workers as China, and prices are low.
Well, folks, if you’ve ever done business with India, as I have, you’ll soon realise that you’re not in China.
Currently, India is best known for fiddly exotica like beading, and sequins and silk. But it wasn’t always like that. Remember the cheesecloth rage? The one-size-fits-all tie-dye stories? That was India’s forte.
It didn’t offer the world bulk production of tailored suits or jeans or knitwear. Anything fitted was verboten. The reason for that had nothing to do with being inspired by what Indians themselves wore but what Indians could make that would pass quality control.
Has that changed? Well, maybe a little, but anybody who goes looking for Chinese quality in India will be looking for the rest of their life.
What about Bangladesh? If you don’t mind floods, delays and inexplicable quality failures, it might be worth a try – but expect plenty of disappointment.
As the Chinese production tide goes out, other countries will be found on the beach.
Vietnam, Indonesia, Taiwan, Malaysia and Thailand, to name a few, will all bear examination. And what about the countries the fabled Zara buys from? They don’t include China. There are clothing factories in Portugal and the Czech Republic, but I can’t see any of them offering the value formula of price and quality that China does.
I tell you, we’re in for some interesting times. Those with strong ties to Chinese production are in the box seats, just as those who have screwed them are now off the bus.
Vale Thomas Wardle
Thomas Wardle, a leading Melbourne fashion entrepreneur of the 1970s and onwards, died on 9 July. He was 79 and had suffered severe health problems, especially in his later years.
Wardle’s name rose to prominence with two other labels, Kenneth Pirrie and Geoff Bade, as fashion leaders for the young market at accessible prices. He supplied department stores as well as boutiques with great success.
When he quit garment manufacturing in the 1990s, Wardle became a textile wholesaler, specialising in women’s wear worsted fabrics – which he loved even though they had a limited market.
Show me the money
My old friend John Borer is moving along nicely with his printed t-shirts and tank tops which enforce the misconception that “old blokes rule”. The shirts sell best around Fathers’ Day and Christmas time. They wholesale at $18.80 with a recommended retail of $39.95.
While the prints are fun, the real story, to me, is in the pricing. On the face of it, the mark-up doesn’t give the kind of margin many garment retailers seek these days. At this point John holds up his hand and says “take a look at my terms”.
If you pay prior to shipment there is a discount of 20 per cent. If you miss the bus there you can get 15 per cent discount if you pay within 15 days of invoice. Getting down to the more pedestrian terms of 30 days, there is a 10 per cent discount.
John has gone the unorthodox route with freight, too. Every order carries a flat $30 freight charge but that is offset by the inclusion of a free -shirt that retails for $39.99.
Needless to say John doesn’t get bad accounts.
The t-shirt business is virtually transparent and has pretty skinny margins but, as you move up the design and novelty scale, price becomes less critical, along with the opportunity to build in a bigger incentive to pay early.
I’m sure that if more fashion garment suppliers offered more creative incentives to hand over the loot, there would be less waiting time and fewer bad debts.