Vicky, who had been running a clothing store in Shanghai for many years, closed her physical shop in July. "The contract expired, and I decided not to renew the lease," she said, noting that the store had been experiencing a lull in business for some time. By the end of last year, she had also shut down her Taobao store, which she had been operating for a decade.
Journalists have learned from individuals in the fashion industry that the traditional apparel retail business has been challenging in the first half of this year. Apart from some large chain brands that managed to achieve some growth, many small and medium-sized merchants are doing well just to break even.
Looking at the broader picture, the entire industry has seen only a slight increase. According to data from the National Bureau of Statistics, from January to June, the cumulative retail sales of apparel goods by units above the designated size reached 515.63 billion yuan, a year-on-year increase of 0.8%.
Even Uniqlo, once extremely popular and a staple among programmers, has been experiencing a "slowdown" in the Chinese market. The CFO of Fast Retailing, Uniqlo's parent company, Okazaki Ken, previously predicted at a performance meeting that the brand would face a decline in revenue and profits in the second half of the year in China. "Consumer willingness to spend is low, and the product mix that meets local needs is not well-matched, leading to a tough sales battle."
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Small and medium-sized merchants are struggling to keep up.
Vicky studied fashion design in Italy and, after returning, chose not to work for a large company but to open a women's clothing Taobao store with a good friend. Due to their precise selection of products, they initially caught a wave of e-commerce benefits and made a considerable profit. Two years later, they decided to open two more physical stores to enhance customer experience and loyalty.
In the past two years, live streaming has been popular, and Vicky also followed the trend and tried it out. However, without the backing of an organization to boost her traffic, her attempts were unsuccessful after several tries, and she eventually gave up.
Vicky told reporters that a high online return rate in the apparel industry is a well-known fact, with the industry average being 40%-60% in the past few years. The specific rate depends on the platform you sell on, as different platforms have varying return rates, but overall, it is much higher than in physical stores. Since last year, Vicky noticed that the online return rate began to rise, and to cut losses, she completely closed her online store at the end of the year. "Some friends in the clothing circle told me that this year, some of their stores have seen a return rate soar to 70%. In the women's clothing live streaming sector, the return rate is even higher. Coupled with other types of costs, the overall accounts just don't balance." Additionally, she mentioned that policies like "refunds only" are also very damaging to merchants.
Based on Vicky's years of observation of the industry, she has noticed that consumers are becoming more "frugal." "Ten years ago, when I first opened my store, as long as the clothes were of good quality and fashionable, there were still many people willing to pay for clothes over a thousand yuan. There were also customers who would come to the store, get in the mood, and buy several pieces at once, which was a common occurrence." However, in recent years, she has found that "expensive" clothes do not sell well, and the clothes in online stores are generally getting cheaper, as people seem to be more focused on "cost-effectiveness." "There are too many promotional activities on the platform, and our small stores often do not participate, so the traffic we can get is越来越少, making it harder to sell clothes."
The increasing competition in apparel e-commerce has become a recognized fact in the industry. Previously, media reports indicated that this year, several Taobao women's clothing stores that have been open for more than ten years have closed. In July, "The Bubble," a Taobao women's clothing store with over 400,000 followers, announced its closure, stating that the store has entered the clearance stage. "Sunk into Deep Blue LOSVLUE," a store with 550,000 Taobao followers, also announced its decision to close on social media platforms.The domestic apparel industry is a trillion-yuan market, with major e-commerce platforms such as Taobao and JD.com having entered the market early to share in this cake. Later on, Douyin, which has risen to prominence, has also been keen to not be left behind, cultivating apparel merchants on its platform in recent years. However, now that the tide of traffic is receding, some merchants who have fully enjoyed the dividends are beginning to decline.
At the beginning of June this year, the women's clothing store "Lola Password," with a follower count of up to 5 million, stopped broadcasting and went offline, and cleared all related videos. Public information shows that Lola Password was established in 2016, and the brand is named after its founder, Wang Shanshan (LOORA Lola). Initially, Lola Password's business focus was mainly offline. In 2018, Lola Password saw the development potential of the online market and began to shift to the short video industry, settling on the Douyin platform. In 2019, as live commerce was booming, Lola Password officially started live streaming to sell goods on Douyin. In the following years, Lola Password entered the forefront of Douyin's clothing sales rankings, successively winning the first place in Douyin's clothing category anchor sales rankings and the first place in Douyin's Double 11 overall rankings.
Established merchants seek new opportunities
According to data from the National Bureau of Statistics, from January to June, the total retail sales of apparel goods by units above the designated size in China was 515.63 billion yuan, a year-on-year increase of 0.8%, with a growth rate that slowed by 14.7 percentage points compared to the same period in 2023. Among them, the retail sales of apparel goods by units above the designated size in April and June decreased by 3% and 2.2% year-on-year, respectively. Over the same period, the total online retail sales of clothing and apparel goods increased by 7% year-on-year, slowing down by 6.3 percentage points compared to the same period in 2023.
Small and medium-sized businesses with thin capital are under pressure, while established apparel companies with substantial capital are looking for opportunities in slow growth.
Many Chinese companies are seeking opportunities to go global, and apparel companies are no exception. For a long period, domestic apparel companies going overseas mainly focused on processing or OEM, with low profits and added value, making it difficult to establish a solid foothold abroad. However, now, more Chinese apparel brands are actively going global.
For example, Semir Garment (002563) is also accelerating its overseas layout. Its Balabala brand opened 7 stores in Vietnam in the first half of the year and entered the Southeast Asian e-commerce platform Shopee. The semi-annual report shows that in the first half of this year, Semir Garment's overall gross profit margin abroad was as high as 69.93%, higher than the current gross profit margins of children's wear and casual wear, which are 49.55% and 38.57%, respectively. In terms of performance, the company has already reached a scale of tens of billions. In the first half of 2024, the company achieved a business income of 5.955 billion yuan, a year-on-year increase of 7.11%; it achieved a net profit attributable to the parent company of 553 million yuan, a year-on-year increase of 7.14%.
Domestic outdoor apparel is also one of the few high-growth tracks in the entire apparel industry, a niche track that many companies are competing to tap into. Zhou Chengjian, the founder of Metersbonwe, announced his return to the front line this year and subsequently carried out a series of reforms for Metersbonwe. After noticing the boom in outdoor sports, the company plans to transform from casual wear to the outdoor track, announcing the implementation of the "big brand substitute" strategy, targeting one of the "middle-class three treasures," Arc'teryx. Zhou Chengjian also mentioned at a recent public event that the company internally defines it as the "bird-catching strategy," with the product positioning as "affordable luxury." Metersbonwe (002269.SZ) achieved a business income of 414 million yuan in the first half of the year, a year-on-year decrease of 25.8%; the net profit attributable to the shareholders of the listed company was 76.7806 million yuan, a year-on-year increase of 648.07%.
However, whether it is the decision to go global or to transform the track, in the view of senior apparel industry insiders like Ling Fang, it is not an easy task, and future competitors will only increase, not decrease. But on the bright side, in the current stock market, these two directions are still incremental, with the apparel going global track and sports outdoor currently in the golden dividend period.
The reporter noticed that in the overall relatively flat industry this year, many companies no longer choose an aggressive strategy of "high-profile and high-impact."In a recent briefing, Uniqlo's CEO for Greater China, Pan Ning, for the first time acknowledged that the "affordable substitute" consumer trend has had a significant impact on the company. "Value-for-money consumption is particularly evident among the younger generation. Under the 'affordable substitute' consumer value, consumers no longer choose branded products but opt for more cost-effective products with little difference in quality," he said. To address future challenges, the company's specific plan is to close down unprofitable Uniqlo stores within the next 2 to 3 years and focus on opening stores in areas with high foot traffic and prime locations.
"The main goal this year is not 'scale growth,' but to maintain the guiding principles of 'prudent operation and pragmatic development,'" Li Ning Group's Co-CEO Qian Wei stated previously at a performance briefing.
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