All Quiet On The Eastern Front
The summer session of Hong Kong Fashion Week seems to have gone from bad to worse. With traffic down and a bleak ambiance, exhibitors searched hard for signs of optimism.
By Ernest Kao
If ‘quiet but busy’ summed up the atmosphere at last January’s Fashion Week, ‘quiet’ would be it for the recent Spring/Summer Hong Kong Fashion Week. Inside Fashion arrived at the scene to witness the fair on a much smaller scale with a significantly smaller turnout and reduced trading activity. Despite the faltering economy and global trade scene, exhibitors gave mixed reviews as they expressed disappointment with the turnout at the fair, but some optimism for the second half of 2009.
Is the Worst Over?
The overall outlook was that a degree of stability had returned to the apparel manufacturing industry. Ten months into one of the world’s worst financial fallouts things were beginning to bottom out and many believed the worst of the crisis may have passed. But this did not mean business was out of the red as most exhibitors still reported that orders were still way below last year’s levels.
“It really has been quiet at this fair just as it had been in January,” said Aakash Vij, director of Sky Designs (HK) Ltd. “We haven’t been seeing any significant improvement for the last two years and may not consider returning for the next fair.” In terms of business in general, Mr. Vij believed that the rest of 2009 would be dismal while Spring 2010 would hold much better prospect.
“People just didn’t want to buy for Winter 2009. However, we are seeing a little more confidence coming back and people who held back for that season want to do business with us for November and December deliveries” he added.
Scarcity of Orders
For others such as Top Line Fashion director Ivan Ka, traffic levels were much lower than expected and after the first day (traditionally the busiest day for trade fairs) fewer visitors were passing through. “Lower demand is natural given the current economic crisis but purchasing activity is still here. The biggest concern for buyers is still price and our main problem is that we just don’t have enough orders on hand,” Mr. Ka said.
When asked about buyer purchasing trends, exhibitors simply pointed to a lack of orders. China’s exports suffered sharp declines in first quarter 2009, and manufacturers are still feeling the pinch as orders continue to drop.
“The biggest challenge we are facing is the slumping demand,” says Jimmy Li, manager of Guangdong-based Hiltop Development. “Our orders have been cut by at least 50%, mostly due to a fall in exports to the weak US market. The European market has been performing slightly better than the US, but it is still not too great.”
Looking to New Markets
Surprisingly, some Asian exporters were actually looking to the U.S. to tap for the coming seasons saying that it has a huge consumer market, albeit with decreased spending power as the country facing one of its worst recessions since the Great Depression.
Indian-based womenswear exporter Aadi International will be doing just that as it looks to expand into new markets to boost orders. Most would question the condition of the US market but Aadi International’s Kartik Gupta explains his strategy. “In terms of orders, US buyers often purchase in larger quantities than others even if order numbers are smaller than before. We have already done the European markets so it is now time to move on to new ones.”
This view was echoed by Bangladeshi exporter Anowara who was one of the few companies to express optimism in the market. “In this recession, orders are down but in the last month, we are seeing things a lot better and we have seen a lot more buyers making enquiries. This is an encouraging sign,” said Md. Mosabber Ahmed, a director at Anowara. “We have had a 50% fall in US exports but there are still orders and we can still fight with 50 %,” said his brother Md. Monabber Ahmed, also a company director.
China Domestic
As demand from former export markets fall and the global economy remains weak, exporters are beginning to reposition themselves to sell back into domestic markets. This is the case with China, as many Chinese exporters are shifting inland to capitalize on a huge domestic consumer market and in some cases even developing their own brands.
“Overall orders have been down 20 to 30% but we see great opportunities for us in the China market,” said Adam Zhang, vice general manager of the trade department at the China-based Jiangsu Huayi Group. “Orders from China are increasing and they compensate for the loss in exports. Currently we have 15-20% business vested in China and will expect more to come.”
Even foreign export companies based in Europe are looking to expand into the Chinese markets. Libantex, S.L, a Spanish-based had previously sold their Maria Coca occasion wear brand in Europe, with some sourcing in China. This time around, they are looking to sell to China, as well as source there.
“The European market is saturated. We want to target the Chinese market now,” said Nataly Coca of Maria Coca.
But developing a brand in China and moving from the traditional OEM to ODM model is not as easy as it may seem according to Ecico Fashion Garments marketing coordinator Selina Ao. “The Chinese market is huge and is divided into northern and southern regions. You also need to set up good relationships with local shopping malls to secure good distribution channels and do a lot of marketing, research and promotion.”
Cost vs Price
For most manufacturers price was still seen as the number one factor concerning buyers despite a slight pick-up in the market. Most of Ecico Fashion Garment’s customers are chainstores which have developed their own brands.
“Price is really our biggest challenge because we don’t have enough orders to be flexible on this. The buyer may really like your stuff but in the end it all comes down to price,” said Mr. Ka of Top Line.
Price pressures are making their way down the supply-chain as retailers face problems of rising costs. Retailers have already been looking for ways to reduce selling prices in stores. “Suppliers are changing their products to more basic designs or designs with fewer embellishments to bring the price down,” said Mr. Vij of Sky Design.
“Costs have gone back into line now. At one point, it was about 30% more expensive to produce but the spike last summer has gone back down. The problem now is that the dollar has gotten stronger compared to what it was 12 months ago so prices will be much higher for buyers abroad such as in Europe.”
Going forward...
In general, most of the manufacturing problems seen at the start of the year were still prevalent at the summer fair. Price pressures, rising costs and weakened export demand have continued to batter export enterprises throughout 2009. After speaking with manufacturers at the fair, Inside Fashion sensed more stability within the industry in contrast to January as many were forecasting a recovery in 2010.
“In January we were worried about the financial problems and expected the downturn to last at least two years. Things have been better now and much more so than we expected,” Ms. Ao said. “The market is still bad so we need to do a lot more and upgrade our services. Our budget for the coming months will be focused on design and pricing. We want to try and be the best partner for our chainstore parners.”
For others such as Hiltop Development, research and innovation will account for a big part of their game plan to boost orders. “We are going to spend more money on the research and development side,” said manager Jimmy Li. “We want to find new fibers, new materials, and new printing technology to create more incentives for customers to buy our products.”