This month, Ragtrader has made its April edition digitially available for free. In this story, Langsey Company’s Li Zhang gives us an extraordinary look at the logistical impact of coronavirus.
The last day of February 2020 coincided with the weekend, and my friend Dong Xu was driving to his office in Nanjing, the capital city of Jiangsu province in China.
It was not necessary to go to work on the weekend, but the stagnation of work for more than a month caused Dong to panic.
The government extended the Lunar New Year holiday in an effort to contain the spread of the deadly coronavirus (Covid-19). It wasn’t until late February that businesses in the provinces outside Hubei started to be reopened.
Dong’s overseas clients were extremely concerned that they would not receive their products on time, and he thought they may be right.
Dong owns a small-scale garment export company that accepts European and American orders and sends them to cooperative factories for production.
He has been in this industry for more than 15 years and experienced various challenges including Chinese manufacturers’ decline in competitiveness due to the rapid growth of labour and environmental protection costs.
But this time is a story beyond his imagination.
Gigi is an Australian KOL who has 300,000 followers on Instagram.
She founded her own activewear brand three years ago, and all of her products are made in Zhejiang province.
When she saw the epidemic in China at the end of January, Gigi immediately contacted Pan, the person who looks after her production in China.
Pan was optimistic that the virus mainly affected Hubei province while Zhejiang should have no problem.
Pan said confidently that her factory would be reopened after the normal holiday, and Gigi’s 20,000 pieces of fitness clothing would still be shipped in early March according to the contract.
Gigi was very relieved.
After all, this is the largest batch since she started her business, and if all the pieces are sold out she stood to make a net profit of $400,000.
Although Pan was confident, Gigi kept watching the situation China and contacting Pan on WeChat from time to time to ask about the updates in Zhejiang.
However, after the Lunar New Year, the situation seemed to crumble rapidly.
In early February, Pan told Gigi that all businesses including her factory were required to extend their holidays and not allowed to open.
Gigi was so shocked that she began to think about how to explain and apologise to her fans in case she has nothing to sell on her announced Official Release Day.
To Gigi, fans were everything, and the last thing she wanted to do was disappoint them.
When SARS raged in China in 2002, a large number of clothing factories in places such as Guangdong province were producing low-cost products such as cotton T-shirts for the whole world.
At that time, the ‘World Factory’, China, had just joined the World Trade Organisation, and its economy was still centred on exports while not the domestic consumer market.
Seventeen years later, China has completed the transformation from a large production country to a large consumption country.
As far as the garment manufacturing industry is concerned, the last ten years have been the decade when global fashion brands have fled from China, not because the quality of ‘Made in China’ is not good.
On the contrary, in the years of making clothes for people all over the world, the ‘Made in China’ of textile and clothing products has already become a guarantee of high quality, but fashion brands are gradually unable to afford ‘Made in China’.
Today, the strategy of most high-street brands is to produce products with high margins in China and products with low margins in Cambodia, Vietnam, Laos and other places with lower labour overheads.
Does that mean that the impact of this new virus on the global clothing industry will be less than the impact of SARS in 2002?
The answer is quite the opposite. The impact of the Covid-19 on the global consumer goods supply chain is just unpredictable.
Although Southeast Asian countries have seized opportunities to vigorously develop garment production in recent years, the industry in these countries has so far been mainly a ‘Cut-Make-Pack’ (CMP) model.
It lacks a coherent upstream and downstream industry chain, and is particularly weak in the supply of raw materials, including main materials such as fabrics and yarns and accessories such as buttons and zippers.
The Myanmar Garment Manufacturers Association (MGMA) held a media conference on February 21, and a spokesman of the association discussed the challenges they’re facing due to the out of stock nature of raw materials which came from China due to Covid-19.
Garment production has long been one of the important pillar industries in Myanmar.
There are more than five million garment workers in the Yangon region alone. At present, as much as 90% of the clothing raw materials used in the country are imported from China.
Once the supply of raw materials is broken, almost all factories will be unable to produce, cannot fulfil the contracts signed with customers, and of course cannot accept workers to return to work.
At the same time, Japanese fashion giant Uniqlo, like many fashion companies around the world, is enduring difficulties under the influence of the Covid-19.
Vietnam is one of Uniqlo’s important production bases, and about 60% of the clothing raw materials used in Vietnam come from China. In terms of current impact, the delivery time of Uniqlo’s Vietnam orders will be generally delayed by two to three weeks.
In Cambodia, another clothing production destination, ministry spokesman for the Ministry of Labour spokesman Heng Sour said at a media conference on 27 February that due to the interruption of the supply of clothing raw materials by China, 10 factories had already been closed and around 3,000 workers had been affected.
Estimates are that as many as 200 factories will face raw material shortage if supplies coming from China continue to be delayed, and as many as 160,000 workers could be laid off if those supplies don’t arrive in the very-near future.
The Cambodian Prime Minister Hun Sen asked Chinese Ambassador Wang Wentian to help coordinate the delivery of those supplies to garment factories whether by ship or by Cambodian and Chinese planes.
“I think that my Chinese friends can do this,” he said. After all, the garment manufacturing industry is currently the largest industry in Cambodia, generating US$7 billion in revenue for the Cambodian economy each year.
At the press conference of the Myanmar Garment Manufacturers Association, the industry experts conducted a long discussion but eventually no solution was found. They only hope that China could control the situation as soon as possible.
When can China’s raw materials resume normal supply to Vietnam? Uniqlo’s parent company, Fast Retailing Co., Ltd., is deeply concerned about the unpredictable further huge losses.
As for Cambodia’s huge number of garment industry workers, I can’t be as optimistic as Hun Sen about whether China can free up its hands to produce and deliver the raw materials that Cambodia is in an urgent need of.
Let us turn our eyes to Europe on the other side of the planet.
In every February and March, the long-established Fashion Week is always the focus of the global fashion industry. In recent years, Chinese faces have appeared more and more in European Fashion Weeks.
There were talented young Chinese designers, exotic Asian models, and especially Chinese fashion editors and KOLs who can introduce the brands to Chinese middle-class consumers with incredible purchasing power.
But this year, things were different.
The number of audiences on the shows during the London Fashion Week (14-18 February), the Milan Fashion Week (18-24 February) and the Paris Fashion Week (24 February-4 March) had dropped significantly.
The National Chamber of Italian Fashion launched an event called ‘China, We Are With You’ at the opening ceremony of the Milan Fashion Week and arranged a series of live broadcasts and online showrooms for the absent Chinese audiences.
All major brands are trying their best to extend their tentacles to China and compete for online resources on the major internet platforms in China.
Gucci opened up a live broadcast channel on Weibo to allow Chinese buyers staying at home to watch the show. LVMH, Chanel and other brands have also followed up to establish their live broadcast channels.
However, would the Chinese consumers who were not allowed to go outside and stayed home in pyjamas be in the mood to appreciate these exquisite big-name shows?
In Nanjing, Dong, who worked on the weekend in the office alone, sounded a lot more excited on the phone. “All of my cooperating factories have just been reopened.”
“But the situation is still very complicated. All returning workers must declare whether they have left the local area within 14 days, and they cannot return to work without local government’s approval.”
“Someone from the local community administration department comes to inspect everyday. They check whether the business stocks sufficient masks for employees.
"The requirement is two masks per employee per day and at least stock for one-week usage. They check whether the business measures every staff’s body temperature every morning and make detailed record for inspection. In the factories, workers must wear masks, and machines must maintain an interval of more than 1 metre.”
“Anyway, it’s finally back to normal. All the shipments have to be delayed, but at least it hasn’t gotten out of control.” Dong thought for a while and added, “Now we are mainly stuck in logistics. The delivery of the fabric and accessories sourced from other provinces is two or three times slower than usual. “
In Sydney, the KOL Gigi has accepted the reality in the overwhelming media report about the Covid-19.
Pan told her that the factory had resumed work. However, a large number of backlogs of production orders need to be completed on a first-come-first-served basis, and Gigi’s shipment has to be delayed to April.
Gigi filmed a clip for her 300,000 followers around the world. In the video, she describes the current situation of Chinese clothing factories and announces the postponed release date. Gigi was pleased that the video received countless praises, and few people blamed her for not keeping her word.
The most deserted Fashion Week in history is coming to an end. Tens of thousands of garment factory workers in Southeast Asia are anxiously waiting on the brink of unemployment.
Chinese factories have resumed work but production capacity cannot return to normal in the short term. But what I am most concerned about and want to alert the global fashion industry is the quiet changes of the Chinese middle class consumers’ mindsets and behaviours.
The urban men and women who stayed at home for extended holidays gradually became accustomed to the minimalist lifestyle with no-makeup faces and old pyjamas, and began to examine the past of excessive consumption.
For the young Chinese middle-class generation born and raised after China’s economic reform, this sudden disaster has given their smooth life a huge shock. They have become more concerned about health, more inclined to save rather than splurge, and more cautious and conservative.
It can be expected that the impact of the Covid-19 on China will be in all aspects, including consumer behaviour. The flashy consumer bubble may be completely broken this year. Perhaps the impact of the Covid-19 on the world fashion industry has just begun.