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Fast fashion "slow down", fabric enterprises looking for orders?

Author: name From: name Modify: Jun. 17, 2020
Jul. 15, 2022
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  As fast fashion becomes more and more "slow", as a supplier of downstream clothing retail brands, orders from fast fashion brands decrease. This phenomenon in the fabric industry practitioners, feel more intuitive and profound.

  In recent years, ZARA, Uniqlo, C&A and other well-known fast fashion brands have seen their performance decline to varying degrees. This makes part of fast fashion brands as the main customers of the fabric business pressure significantly increased. In the face of the dilemma of order reduction, how to seek new positioning and strength of fabric enterprises, who should find new orders?

Fabric suppliers profit decline 

  Uniqlo has been the largest customer of Mutual Pacific Textiles Holdings Limited (" Mutual Pacific Textiles "). Recently, Hutai Textile released its annual report for fiscal year 2022. According to the financial report, from April 1, 2021 to March 31, 2022, the company achieved operating revenue of HK $6.066 billion, with a year-on-year growth of 12.65%; Net profit attributable to the parent company was HK $573 million, down 20.63% year-on-year.

  The last two years, mutual Pacific textile life is not easy. After the fiscal year 2022 results, Mutual Tai Textile was another "knife". Morgan Stanley, a financial services firm, on June 27 issued a research note that lowered its target price for WPACIFIC textile, including a 7% to 8% cut in its revenue forecast for 2023/2024, a 16% to 20% cut in gross profit and a 4% to 7% cut in net profit.

  Market analyst Liao Hongying has many years of experience working in textile industrial parks around the world, serving a number of fast fashion brand partners. "As of the first half of the fiscal year 2021, Uniqlo accounted for more than 50% of the company's revenue, showing the extent of its dependence on Uniqlo," she said. "The results show that while Uniqlo's shipments have continued to grow and revenue has increased, the decline in profit is clearly not negligible."

  Profit is not satisfactory, seems to have become fast fashion brand suppliers "common disease". "Head" companies that supply fabrics to fast fashion brands such as ZARA are also caught up.

  The financial report of the first quarter of 2022 shows that the operating revenue of Huafang Co., Ltd. in the reporting period is 829 million yuan, with a year-on-year growth of 0.68%. Net profit attributable to shareholders of listed companies was 1,526,900 yuan, down 67.57% year-on-year. Zhejiang Yingfeng Science and Technology Co., Ltd. achieved operating revenue of 310 million yuan in the first quarter, with a year-on-year growth of 105.62%; Net profit attributable to shareholders of listed companies was 7.979 million yuan, down 67.31% year-on-year.

  Fast fashion brands mainly rely on running volume to maintain profits, and the profit space of brands is limited. As their suppliers, fabric companies tend to have lower margins." Liao Hongying pointed out that global fast fashion brands are basically in a strong position in the face of Chinese fabric suppliers, holding the "pricing power" of fabrics.

 Fast fashion orders are still popular

  Even though fast fashion is becoming "slow", there are still a number of fabric enterprises, especially small and medium-sized enterprises are still "sharp head" to fast fashion brand supply chain drilling system.

  "Getting into the fast fashion supplier list is a very important goal for us next. Profit is not our primary concern."

  Suppliers complain about the thin margins of supplying fast fashion, but at the same time want access to their supplier lists "at all costs". The seemingly split direction reflects the difficult situation of some fabric enterprises in China.

  "Fast fashion brands usually buy in large quantities and we use these orders to protect the base; Combine that with the endorsement of these fast fashion brands, and it's much easier to find other customers." Hu Zecheng told reporters that although international fast fashion brands are losing ground in the Chinese market, the total business volume and brand appeal of these fast fashion brands can not be underestimated.

  Indeed, in the previous major side of the exhibition, do ZARA, Uniqlo and other brands as advertising slogans of the fabric enterprises everywhere. Overall, in the view of some fabric enterprises in China, as long as they can win orders from fast fashion, it doesn't matter if the profit is lower. 

  "But in recent years, purchases of fast fashion brands have declined, especially since the global pandemic." According to Hu zecheng, the company once received orders of more than 1.2 million meters per year from a fast fashion brand, but now orders have nearly halved to just a few hundred thousand meters per year. "Developing new customers is our top priority. On the one hand, we should pay close attention to old customers, strive for customers who have signed supply contracts, and strive to increase the proportion of supply; On the other hand, we should try our best to develop new customers and find new growth points."

 Transformation opens up a new national tide track

  With the progress of epidemic prevention and control across the country, shopping malls are still crowded, but fewer and fewer people are entering fast fashion stores. Consumer demand for clothing tends to be quality, diversified and young, and fabric enterprises are also looking for new power points.

  Sports brands become the choice of many fabric enterprises. In its annual report for fiscal year 2022, Hutai textile revealed that it will keep close cooperation with sportswear and will spare no effort to develop new products with higher added value in the future. For example, the company has identified environmentally innovative functional fabrics as a key development area in the future.

  "This year the company launched a new product, because of super wear resistance, tear resistance, but also low carbon environmental protection, favored by outdoor sports brands at home and abroad." Hu zecheng said the company will increase cooperation with sports brands. "Functional fabrics have a relatively high gold content, and the profits are considerable. What's more, only China has a complete industrial chain for such fabrics, which will ensure that these orders are not easily snatched up by companies from other countries."

   In addition, the concept of "national tide" has activated the domestic clothing consumption market of hundreds of billions of yuan, and also brought a broader development market for the textile industry. Many fabric enterprises are opening up a new national tide track.

   "Different from the previous focus on the comfort of fabrics, now the sense of quality, crisp, stylish is the new standard of brand procurement." Hexing source knitting textile co., Ltd. related person in charge of introduction, in order to cater to the tonality of the country tide brand, the company in addition to strengthen product innovation, but also carried out a full range of brand planning. For example, in terms of products, the brand logo "Hexing Yuan" is set into bright white characters on a blue background; In terms of stores, the exhibition hall is re-matched with colors, so that the exhibition hall presents a sense of jumping, personalized and other young colors; In terms of display, stores will display featured fabrics into ready-made garments, and attach corresponding color cards for reference.

  Facing the rapidly changing market demand, the transformation and upgrading of the fabric industry has become an inevitable choice. In response, Qu Mengwei, trend researcher of the Fashion trend Department of China Textile Information Center, pointed out: "High-end 10 years ago represented better quality, better design and better appearance. And now the high-end, is not a single concept, but all beneficial to the high-end brand additional points are included. First, it must be based on the future and take the lead in technology. Second, it must have a strong humanistic value orientation, because the price of all goods not only reflects the value of the product itself, but also includes the extra premium brought by the brand. Third, it must create value for the clothing brand. Fourth, have a high quality brand image and service."

  For fabric enterprises, the "slow" track of fast fashion is exactly the new track of enterprise transformation and upgrading. All the new stories, just write down the prelude......

  Source: China Textile News

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