Christine Tsui Fashion Community
Current Situation and Dilemma of the Wholesale Clothing Market
Tao -Shanghai / Hangzhou- Wholesale Manufacturer, etc. @ Wechat
Tao, Shanghai / Hangzhou, Architect. Bachelor of Architecture at University of Melbourne. Tao’s family owns a business dealing with wholesale stalls for 20 years. Tao is often found in wholesale markets in Beijing and Hangzhou.
Wholesale is a means of clothing sale, and it is also a very important process and link in the clothing industry, which controls the most important supply source in the entire clothing industry. It is indispensable for both manufacturers and vendors. From the reform and opening up to now, in just a few decades, China has entered the era of consumption upgrade from the stage of supply deficiency—so now, what course should the wholesale clothing market follow?
Distribution and Classification of Wholesale Markets
Wholesale markets exist in all major cities in China. In terms of scale, the wholesale markets in Guangzhou, Hangzhou, and Shenzhen belong to the primary market, and most of the other provincial capital cities belong to the secondary market. Beijing is special in the secondary market. Its wholesale market is dominated by the Zoo and Dahongmen. With an overall large volume in the past few years, it has been an important transit point from the south to the north. However, in recent years, due to industrial upgrading, most of Beijing’s clothing wholesale market has moved away.
Among all wholesale markets, there are many foreign trade factories in Guangzhou, due to geographical reasons. There are also tens of thousands of large and small factories in Humen around Guangzhou with very large output. The style producing is relatively the fastest, and the quality of clothes is generally guaranteed in the wholesale markets in Guangzhou. There are many markets based on different positioning including Baima, Thirteen Factories, Shahe, Huimei, and Red Cotton. They are also relatively mature and organized in terms of management.
The management of the Shenzhen Nanyou Wholesale Market is also very good. Compared with other wholesale markets, the Nanyou Market is more oriented towards original designs and higher class, while the price is also relatively high. It is generally export-oriented and will designate different processing systems based on the exporting countries.
In addition to Beijing, Shanghai, and Guangdong, basically, clothing wholesale markets exist in the capital cities of all provinces. For example, Qipu Road in Shanghai, Evergreen in Hangzhou, Hankou North in Wuhan, Lotus Pond in Chengdu, Enjoy in Zhengzhou, Wuai in Shenyang, Markwell in Harbin, Machine Station in Xi’an, etc., but the most important markets for clothing trade in the country are the three formulas of Guangzhou, Hangzhou, and Shenzhen. These.
Near Guangzhou, The Humen market in Dongguan is also large in size and belongs to the primary market. There are many product categories in Humen market that mainly focus on processing, and many products are exported to Singapore, Southeast Asia and the United States. The exported products are well finished, especially the ones exported to the United States, Taiwan, and Japan, which are usually subject to strict quality inspection, and product quality is guaranteed. Wholesale markets around Shenzhen deal in more high-end products. Most wholesale markets encompass all kinds of positioning, covering high, middle and low end. Wholesale markets in Guangzhou, in fact, also include different positionings. Various levels are distributed to different buildings, or different floors of the same building, China is a large wholesale country that sells clothing to foreign countries. Not only domestic consumers, but also many foreigners come to the Guangzhou market for products.
The positioning of Evergreen in Hangzhou mostly belongs to the mid-class. The more popular markets are Yifa, Zhongzhou and Jiutian. The products in Yifa are trendy, and most of them are from first-hand manufacturers, with slightly lower price than that of Zhongzhou. Most of them are in stock. The positioning of Jiutian is mainly cashmere with higher price. It is fair to say that Yifa is the most sought-after stall in Hangzhou in recent years with good management and fierce competition. Products in Zhongzhou are mainly European and Korean, and some are from studios. Mostly it is in Korean style, while there are also a few original brands that are developing well.
In addition to the ones mentioned above, there are also many markets in China that, despite not familiar to everyone, are important origins of clothing. For example, there are Tongxiang and Dongguan for knitwear, Xinji Haining for fur, Zhengzhou for women’s trousers, menswear in Changshu, down for Pinghu, denim in Dayong and Xintang, and double-sided wool in Kunshan. And Tongxiang’s cashmere product is also their big advantage– especially in the past two years, it has developed very fast. Merchants in the Jiangsu, Zhejiang and Shanghai like to go to Tongxiang, which produces good double-sided fabrics and sweaters. Although these markets are not large and cannot be categorized as primary markets by scale, they are important sources of clothing production.
There will also be a phenomenon of hyping in these markets, because many hit and hot sells will copy each other. One of the important characteristics of the wholesale market is the focus on volume, so it is fair to say that the overall requirement for design is not high. Some stalls buy designs from abroad, and sometimes Shenzhen, as a base for original clothing designs, is often copied by merchants in Hangzhou. From the perspective of fashion design, there tends to be a gradually weakening sense of fashion from south to north, so it is usually the north that follows the trend of fashion in the south. In the past, this cycle may take up to 1-2 years, but with the advent of the information network era, now it has shrunk greatly. For example, the difference of fashion trend for ladies between North and South is 10-15 days.
Although there are many first-tier wholesale markets in super-first-tier cities, such as Beijing, Shanghai, Guangzhou and Shenzhen, in the future, with the development of scales and industrial upgrades of cities, the wholesale markets in these cities will be gradually marginalized—the clothing processing industry will definitely not be accommodated in first tier cities, so these wholesale markets may shift to the model of ordering.
Operation Mode of Wholesale Market
There are several types of merchants in the wholesale market, including self-producing and selling, production outsourcing, hyping (second tier market), brand ambassador, etc., who focuses are different. However, a large number of merchants in the market copy each other, jeopardizing the environment of original design, and sales are dominated by volume.
Self-producing and selling: Own a processing factory and sell at stalls.
Production outsourcing: Produce designs yourself and place orders for shipment to processing factories, which puts more emphasis on design capabilities.
Hyping (Second-tier market): Take products from other suppliers and resell them to make profit from the difference of prices, which is common in secondary wholesale markets. This model takes advantage on geographic conditions and information asymmetry to make profits—a test for overall capabilities.
Brand ambassador: Represent a certain brand, order and ship from the head office for resale. Unlike the common second-tier market, the design is provided entirely by the head office.
Online wholesale mode: The most famous online wholesaler is 1688. In fact, 1688 can be compared with self-producing and selling, as well as second-tier market. One is the manufacturer’s self-operated shop, and the other is to firstly get the products from the manufacturer and then sell them online; meanwhile, the price is really Cheap. For many stalls that rely on speed and market sensitivity as a selling point, online wholesale provides a faster and wider platform. However, the disadvantage is that the actual fabric is out of touch. Since it is easy to copy from online wholesale products, many manufacturers would not put new and popular products online for wholesale. These popular hit products are often quickly digested offline already. Although the cost is low for online stores, it is necessary to keep promoting to ensure the exposure rate. Real manufacturers do not have so many hit products. And after the online investment is completed, the major customers will go offline. Some merchants that are doing well on 1688 are actually in the secondary market, but once they have really cultivated a customer base, they usually would not like to see their stores overly exposed. Online stores are just a type of sales channel. There are distinct positionings and sales plans for different products. Various e-commerce platforms also have their own positioning, and different products are suitable for different channels at different times. The channels for profitable designs and clearance designs are usually not the same. For example, Y.Sing takes the form of independent design and sales, both online and offline.
In fact, there is no clear-cut boundary between these models, and they are often mixed with each other. For example, some of the second-tier merchants will also order hit products from factories; those who produce and sell themselves will go to other suppliers to get products to supplement their own ones. The emergence of online wholesale will not exert a fundamental impact on the physical wholesale market. After all, physical retail still has its irreplaceable function and charm that online retail cannot replace. The current technology has not yet reached a level where people can have a good experience solely online. Although the technology is getting more and more advanced, it will only boost the physical market to further improve its requirements for quality and service.
Due to the different models in the wholesale market, we need to accumulate experience to get products from the stalls in the wholesale market. For those who are new to the industry, most wholesale markets are still quite confusing. In the wholesale market, it usually requires few sizes for one single design, providing that the single price is almost the same with retail price. It’s easy to get pitted at the beginning. There may be different quality and price in different stalls for the same style. There was an article on Zhihu: someone bought the same garment from Taobao, Tmall, and JD.com for comparison. While they all looked the same, the fabric was still different. For the same design, different platforms have different suppliers and purchase channels, so the quality may be different. Usually Taobao sellers who buy products the wholesale market will go to shops that are exclusive to Taobao. There will usually be signs hanging on the door of this kind of shops—for example, there is a lot of stalls in Shahe Jinma in Guangzhou that are dedicated to Taobao, with lower prices and poorer quality. Other stalls do not want business with Taobao sellers, because they think it will disrupt market prices. The prices of physical wholesale and Taobao are very different, which also applies to the quality of products. Nothing for nothing and very little for a half penny. Competition of price online will definitely affect the quality of materials.
The present and future of the wholesale market
Currently, the first problem for wholesale markets is rising rents. Because the wholesale markets were built in the central areas of cities in the early years, they were generally close to transportation hubs, such as train and bus stations. Therefore, the value of the areas in these years have become unsuitable, and the rising rent has become a major problem. For example, one of the two major clothing markets in Beijing was entirely demolished, and the other was rectified. Wholesale markets in other cities, such as Shanghai and Hangzhou, also face relocation. Physical stores on the street, especially during the previous two years, are not doing well, mainly because there are now more sales channels like WeChat and online stores, etc. Physical chain stores, due to their size and quantity, are doing fine. If it is not a designer shop, a single shop is still difficult to manage, which makes the high rent a great burden.
The second problem is management. Most of the place for wholesale clothing is a mix of good and bad, and the feelings the market gives people are dirty, disordered and bad, often causing problems such as traffic and order. Therefore, many markets are undergoing rectification or relocation.
The third problem is the model. Many merchants in the wholesale market are pursuing hit products. In order to supply in season, they have to gamble to stock up, which puts a lot of pressure on manufacturers.
The fourth problem lies in the shortage of processing resources. Labor for making clothes is becoming increasingly low. The operating cost of places for clothing assemble is also increasing year by year.
Despite this, there will be a market when there is demand. Although the physical wholesale market faces many problems, it will not disappear. Instead, it will respond to market and consumer needs and develop in new trends. What is the future trend of the clothing wholesale market?
The first trend is that as consumer requirements become increasingly high, the demand for design capabilities become gradually higher. In recent years, the life cycle of a single design in the wholesale market is getting shorter. A hit product can be sold for two or three years before, but for now, sometimes it can only be sold for up to a quarter, which requires manufacturers to keep promoting.
Take Hangzhou Yifa as an example. Many merchants originally turned out to be “gambling”—preparing a batch of goods was for a quarter and sometimes rely on luck to see whether it “hits” and “dies”, so many owners ran away a few years ago. There have been some changes in the model over the years. More designs have been used to test, and the fault tolerance rate has increased.
In the future, the requirements for design style and speed are also going up. Design is something very costly. Only merchants that do well in the wholesale market can slowly develop or cooperate with designers to seek common development. Evergreen Wholesale Market is learning from in Shenzhen by putting the original design in front. Now a Yifa original center is newly established, together with M21 opened by Jiutian Group—they both seem to be developing into the showroom mode. Consumers’ spending power has been improved, and domestic products will become increasingly good in the future.
The second trend is the relocation of core areas, which was also mentioned before. Sooner or later, the wholesale market will relocate to the suburbs or surrounding cities, and even move closer to the source as the factory moves.
The third trend is decentralization. Now that the information is getting more and more developed, it will become increasingly difficult to hype. Many long-time practitioners will go to factories for products, and the space of the secondary market will become smaller. It is only possible to save costs by reducing intermediate price difference. For some fast fashion companies, except when they request documentary assistance in China, in any other countries, they would purchase through buyers, who directly communicate with suppliers (may include factories). Now factories are also very versatile, with both design capabilities and foreign trade export capabilities. For example, in Bacheng, Kunshan, factories specialize in the production of woolen coats. Basically, each of them is a family-based workshop. While taking orders for processing, it also deals in wholesale and retail, and cooperating with Taobao sellers as well. After the seller takes a picture of the clothes, the order is shipped directly from the manufacturer, so that Taobao sellers can reduce the amount of stock.
The fourth trend is the labor problem, that is, the problem of processing resources. The rivalry for human processing resources will intensify, and the cost of employment will also increase significantly. In Hangzhou, the average salary of processors has reached more than 10,000 yuan, and the annual income of one couple (husband and wife) is about 180,000 yuan. The workers who make double-sided fabrics are earning 10,000 yuan a month because they need to sew by hand. A video a few days ago shows that more than 2,000 recruiters in Guangzhou lined up in the street, waiting to be picked by the workers. Even if the daily salary has increased to 400 yuan, instead of suitable workers, they could only get green hands. In addition, factory processing is very difficult, and working 12 hours a day is normal. Young people rarely choose to be garment workers because they can’t stand the boring assembly lines. Processing resources will become more and more scarce in the future, and there is also the case that orders from Hangzhou are sent to Anhui, Hubei, and Hunan. Because the cost is too high in Hangzhou, some experienced workers went back to their hometown to open a small processing mill. A lot of wool factories now outsource orders twice or three times, and then 50 or 60 year-old women sew them at home, settling wages with the factory according to the number of pieces. Maybe in the future, artificial intelligence will be used to replace part of the clothing processing, however, the current cost of technology is too high, and profits cannot afford it.
The fifth trend is the trend of singularization of products. Now manufacturers are becoming more devoted, categories are starting to be subdivided, and more emphasis is placed on small scale and refinement, doing something more professional as professionals. In recent years, most of the companies dealing in brand operation in Hangzhou have declined, and single-product companies have begun to rise. More often than not, only by focusing on one thing can we do our best.
The sixth trend is the polarization of high and low-end products. These years, the businesses of some low-class markets are also very popular, since a large number of people who pursue cost-effectiveness in remote areas still exist. But corresponding to this is the consumption upgrade. Manufacturers with good quality will survive well, and there are also many consumers pursuing quality consumption.
With the development of the Chinese economy, the traditional wholesale market is facing the problem of transformation and upgrading, with multiple markets already in the plan of relocation and rectification. The market’s requirements for merchants’ professionalism, originality, and production capacity have also become increasingly high with the improvement of consumption levels. As an important part of clothing sales, the clothing wholesale market is facing many problems today, however, this does not mean that it has reached the end, but instead, it is undergoing a process of elimination and adaptation, as well as upgrading and transformation. The temporary predicament also means the arrival of breakthrough. While the traditional clothing wholesale market seems to be gradually declining, in the long run, it is the beginning of more industrialization, standardization and specialization.