What we heard and saw at Intertextile, PV Shanghai, Mode Lingerie & Kingpins
China Still Holds Hope for Mills
By IF Staff
Currency wars, rising commodities prices and labor issues, the mainland still remains the place to be for mills and garment manufacturers.
After a year that’s been a bit of a nail-biter for most companies, all eyes were trained on Shanghai last week in hopes of catching the buzz about the China market – the last hope for the apparel and textile industry. A convergence of four trade fairs, Shanghai Mode Lingerie, Premiere Vision Shanghai (for high end, primarily European fabrics), Kingpins (denim) and catch-all Intertextile created an ideal barometer of the health of the industry.
The news was good…despite facing tough challenges of its own, China has so much growth potential that even in bad times things are still pretty good, relatively speaking.
Intertextile: The View from China
Once the focal point of the China textile industry, Intertextile is starting feel the effects of the adage that ‘bigger is not always better.” Noticeably less exhibitors participated in this year’s fair, in part a result of mills migrating to “niche” shows like Mode Lingerie, Kingpins and PV Shanghai. However others, such as the big chemical companies, passed the fair by altogether.
The fair also attracted less visitors, and mills told Inside Fashion that there was a lot more “looking than buying” taking place.
With Chinese mills dominating the exhibitor portfolio, the fair was an ideal place to see how things looked from the other side of the pond.
Having survived the economic crisis only to be hit with currency wars and rocketing commodities prices, Chinese mills were struggling to find a safe haven. While the rest of the world thinks Chinese companies are ‘sitting pretty’, inside China it’s a different story.
Mills were divided on whether things were better or worse these days.
“This is the worst year. Raw materials prices have gone up very quickly, and the rising RMB is very bad for our company,” said Yu Zhongxiang, general manager of Hai Feng Textile, a producer of fancy woolen fabrics and yarns. He fears that a weakening of the U.S. dollar will hurt exports in the coming year.
Raw materials prices were not the only problem. At Shaoxing Cheergo Textiles Co., Ltd, general manager Allen Wang said “Suppliers are increasing. The competition has become difficult.”
In contrast, a representative from Wujiang Dahe Textile Co. Ltd., which makes man-made fabrics for daywear, said that the market has become much better, and that the financial crisis seemed to be easing up. “However, the prices are going up too,” he said.
“This year the business for wovens have improved, and the outlook for China is much better. However, fabric prices are too low and there is no profit,” said Huang Wen Huo, sales manager at Huzhou Gaoge Textile Co., Ltd., a producer of wool blends, fancy fabrics and fleece.
If exports are getting more difficult than there’s no place like home. Chinese mills are changing their strategy to focus more attention on their expanding domestic market. “Chinese orginal brands are getting stronger. The price [for the same fabric] we sell to China customers is higher than our overseas customers,” said one mill.
“The customer’s standards have become high. They no longer accept cheap fabrics. They want high quality and so quality control is our greatest challenge right now,” said Wujiang Dahe Textiles.
At Taiwan’s Ding Textile Company Ltd., managing director Johnson Chen told Inside Fashion, “Chinese people have gotten rich. They are no longer satisfied with basics. We expect our sales in China to increase 10 percent over last year.”
“Previously our sales ratio was 70:30 with 70 percent being exports to the US, Europe and Japan. Going forward its likely to be 50:50,” said Sandra Wu of Kong You Industrial Co., Ltd. “The outlook for the China market is very good. GDP is strong and the people’s salaries will rise so demand will rise,” she explained.
PV Shanghai: Quality Counts
At Premiere Vision Shanghai, exhibitors told Inside Fashion that the prospects of a stronger yuan (RMB) signaled that business would certainly improve for European mills exporting to China. “The quality of the customers here is getting better,” said Frederic Faure, export agent for FTA (France), who was showing a line of tweeds, jacquards, prints and chenilles.
Exhibitors noted that unlike previous fairs which drew some foreign buyers, this year visitors were all from China. Which wasn’t necessarily a bad thing.
“Now Chinese buyers are willing to pay up to 20 Euro for a meter of jacquard. Eight years ago this was impossible. The most they’d pay was 10 Euro,” said Juan Gratacos, manager at Gratacos (Spain). Not only were customers willing to pay more, they were placing larger orders as well. “Before we were getting 100 meters per style. Now its 1000-2000 meters,” he added.
One of the biggest challenges mills reported was in finding new customers. Existing customers remained loyal with most increasing the size of their orders, but expanding their customer base was proving to be frustrating for most.
Mode Lingerie: European Ambiance in ShanghaiIt seems that the niche fairs fared better than the multi-category mega exhibitions this year, and Mode Lingerie was no exception. Mills told Inside Fashion this season was the busiest fair ever with lots of traffic and lauded organizers Eurovet for a job well done. The fair was more like a European fair with a bit more “exclusivity” in terms of the kind of buyers invited, as well as the atmosphere of the event itself. Mills often has semi-private booths giving buyers a sense of privacy and privilege when viewing their collections.
Organizers boosted the fair’s added value by offering a host of buyer services.
Unlike other textile fairs, Mode Lingerie included a selection of leading lingerie brands on display featuring finished garments.
“Chinese brands are looking for European fabrics. ‘Made in Germany’ indicates that the product is high quality,” said Thomas Siemensmeyer, CEO of Penn Textile Solutions GmbH. “Customers are now looking for more sophisticated products. Before it was difficult to promote quality,” added Enrico Serafini, export director at Piave Maitex (Italy). “The Chinese market is becoming more mature…the way people dress…the way they walk in the streets…Chinese brands want to be more sophisticated but they realize that they can’t do it themselves. That’s why they come to us.”
However, while the market is moving up the value chain, expensive European fabrics still command a narrow segment of the market.
“You need to select your customers according to the brands who can afford [your product],” Siemensmeyer cautioned. While Chinese buyers are starting to develop ‘champagne tastes’, many still have ‘beer wallets.’
PT. Kewalram Indonesia their embroidered tulle and cotton fabrics and laces were more competitive and they were getting big volume orders thanks to China’s stronger buying power, said Vidhu Shrivastava, general manager. Priced lower than the European mills, they were well positioned to compete for China business.
For China-based Pak Tak Accessories, currency woes had the company refocusing their efforts on the domestic market. “The RMB is making exports more difficult. Chinese buyers can buy more and pay more so we are looking for more domestic customers,” said Ming Wong, executive officer.
Kingpins: Shanghai DebutKingpins made its Shanghai debut last week to a small, but enthusiastic group of exhibitors and buyers. Focusing specifically on the denim sector, this niche fair offered select buyers (entrance was by invitation only) an abundance of hospitality from dinners to small welcome gifts. The aim of Kingpins organizers is to provide an intimate environment where quality buyers can meet with leading international suppliers.
“Chinese buyers have fewer issues with price. If the quality is good, people will pay for it – especially in Shanghai and Beijing,” said Kelvin Sin, product development manager at Cone Denim. “Today everyone is focusing on China. If I go into a shop in Hong Kong no sales assistant will approach me for maybe 15 minutes. However if I start to speak Mandarin, they come running,” he added.
Despite the overall bullish sentiments about China’s growth potential, mills noted that a stronger yuan is likely to push apparel manufacturing business out of China. Mills are being careful to keep a finger in competing markets such as Vietnam, Bangladesh, Mexico and Latin America.
“Now that materials prices are up, production is moving away from China,” said Ricky Tang, managing director at Chinese zipper manufacturer Tat Fai Zipper Co. Ltd. “China will remain a major player in the garment industry as it is very integrated, but it will no longer dominate the market. It’s hard to replace China, but companies like ours are looking to diversify into other markets.”
When you’re talking with denim mills, sooner or later the conversation always gets around to cotton prices. Of more immediate concern to denim mills than even currency fluctuations are commodities prices.
“Demand for quality cotton has picked up in the past years, with long staple cotton becoming more significant in the market,” said Richard Shaw, manager at Bayer Crop Science. One of the biggest challenges today is meeting demand, said Robert Antoshak, managing director of FCStone, LLC, a cotton exporter from the U.S. Referring to the shortage of cotton in the market he said “Chinese mills have no other alternative than to buy U.S. cotton.”
However, at Cone Denim, Kelvin Sin believed that part of the price is driven by speculation and not demand.
Rising raw materials prices was also hurting accessories manufacturers who were hit by higher polyester prices and copper prices.