Reduce high inventory with "fast fashion" mode

Nowadays, the main problem faced by the Chinese garment industry is “high inventory”, which is not only affected by the European debt crisis, but also includes well-known domestic brands, such as: Eslite (microblogging), Metersbonwe, and Li Ning.

Analyzing Li Ning’s annual report from 2007 to 2010, it is not difficult to see the trend of gradual increase in inventory. Inventories in 2010 grew by more than 62% compared to 2007. At the same time, according to the relevant data of Hong Kong stocks, as of June 2011, Li Ning's inventory has grown and it has approached 1 billion.

High inventory not only generates additional storage and transportation costs, but also wastes a lot of production capacity. When production capacity is used to produce a product that is later proven to be slow-moving by the market, it means less production of another product that may sell well. It can be said that inventory is the most important factor in eating profits. This article intends to systematically analyze the causes of the high inventory of garment manufacturers, using foreign companies as a reference, and then propose solutions for domestic manufacturers.

Reason one: demand is gradually enlarged In the Chinese clothing industry, for each product sold, the manufacturer must prepare at least 2.5 items for stock turnover, sometimes exceeding this ratio, thus forming a large amount of inventory. For example: The end customer actually needs 100, the retailer thinks it needs 150, the distributor expands to 200, and when it reflects the manufacturer, it becomes 250. Although the demand of end-customers does not always fluctuate greatly, the order quantity will increase one level at a time after the enlargement of retailers and wholesalers, and the greater the order deviation will be towards the upstream of the supply chain. The demand variation in this kind of marketing activity is amplifying phenomenon. The scholarly community commonly refers to it as the “bullwhip effect”—the little waving at the beginning, and the whipping point is enlarged into a very exaggerated movement.

Second reason: The model leads to a time difference. China's garment production model still stays in the ordering mode, relying on downstream distributors rather than consumers to provide market information. All kinds of clothing brands will hold ordering meetings in spring and summer and autumn and winter. The enterprises will guide the merchants to order through on-site model shows and shopping guides, and then formulate production and sales plans according to the order quantity.

In this model, it takes a long time for real demand to become a product. Most domestic manufacturers take an average of 90 days from receipt of orders to the listing of finished products, and some can reach 120 days. Imagine if the consumer saw a brand on a certain brand shelf that was popular for 3 months or even 4 months ago, sales of the branded product were lower than expected, resulting in an inevitably inventory backlog.

If we ask what is the cause of the high inventory in the industry, the answer is likely to be "the production and sales of the models do not match." A sales director once interviewed by the author said: “We are vigorously producing the last popular style in the current period, and we are always chasing the trend instead of leading the trend!”

It can be said that China's garment companies are not short of manufacturing capacity and imitation capabilities, but they are far from customers.

Reason 3: Underestimating Consumers In recent years, there have been frequent reports that Chinese movie stars have encountered a jersey with foreign stars when they participated in an international awards competition. This means that two or more people wear clothes of similar style on the same occasion. The movie star is the group that can most pursue fashion and individuality. This phenomenon frequently shows that China's fashion design is basically synchronized with international fashion trends. This is a good thing. At the same time, however, some manufacturers believe that “the current international fashion models can be sold in second-tier and third-tier cities after they cannot be sold in first-tier cities in China.” This can only lead to a backlog of products – they ignore the power of the Internet. And function.

The author was on a business trip in Hu County, Shaanxi Province in 2011. When the taxi driver was found wearing Kappa, he chatted. The driver said: “The clothes bought locally last year were not popular seasons and were not very satisfactory.” It can be seen that the perception of popularity has gone deep into Guanzhong, a small and medium-sized county town, where Weibo appears, mobile Internet access, and other technologies. Development has really smoothed our world. To underestimate the consumer's fate may be to lose market and profits!

Of course, in addition to the above causes of inventory pressure, there may be other factors, and apparel manufacturers have also introduced relevant policies to digest inventory. However, in spite of this, it is the right way for domestic manufacturers to find a way to deal with both local and regional problems. Here, ZARA's experience is worthy of reference.

Domestic manufacturers should learn from the ZARA model. ZARA is both a clothing brand and a chain retail brand that specializes in ZARA brand clothing. Founded in Spain in 1975, ZARA is the world’s third-ranked, first-ranking clothing company in Spain and has established over 2000 countries in more than 56 countries around the world. Many clothing chain stores. In the past five or six years, the average growth rate reached 25%. Even when Europe fell into recession in 2008, its growth in the third quarter still reached 18%.

The ZARA with the business concept of "What kind of clothing do consumers need" is the most worthy of our learning is its "fast fashion" model. The so-called "fast fashion" mainly includes three aspects: that is, fast time, cheap price, and keeping up with fashion trends. Consumers' functional demand for fashion is far less than psychological needs. Fashion involves satisfying consumers' psychological needs such as aesthetic experience and self-realization. And fast is the basis for meeting these demands.

In the fashion innovation model, the average company participates in the whole process or joins in the second half, which is costly and low risk. ZARA is just the opposite. His product designs can intervene in the early stages of launch and achieve small-scale production, and then in the early stages of the early stages of rapid production, rapid sales and rapid exit.

This model can be seen clearly in the industry, and is truly based on the following three aspects: rapid production distribution, close to the market, and an efficient product planning system.

First of all, ZARA's products range from design to store on average only 14 days (10 times faster for some domestic counterparts). To this end, ZARA hollowed out 200 miles of the Spanish underground and set up an underground conveyor network to connect its 500 OEM terminals. Every day according to new orders, the most fashionable fabrics are delivered to the terminal factory on time, guaranteeing the overall time requirement. The ultra-fast production distribution process allows styles to be updated faster, increases freshness, and attracts consumers to repeat visits.

Second, the channel for ZARA headquarters to grasp market information is fast and transparent. For example, in various stores around the world, they can directly feedback the opinions and ideas of customers during the sales process to the headquarters; and there are design teams who also feedback the latest fashion trend information captured in various places. So close to the market mechanism undoubtedly allows ZARA's clothing always walk in the forefront of fashion.

The third is the efficient planning system, which is often referred to as the buyer model. ZARA does not completely own design and research and development, but more inspiration from other fashion brand conferences. Domestic clothing has also been imitated with little success. The reason is the lack of product accumulation and related frameworks.

In short, the current inventory problem of Chinese clothing brand is undeniably affected by sudden factors, but the deeper reason is the structure and mode. The effective reference to ZARA's "small batch, fast turnover, hot pursuit of fashion" model may be One of the solutions. Under the background of a new round of industrial upgrading and transformation, the apparel industry has been hit by no small impact. It is believed that the survival of the apparel industry must be “a company that truly meets customer needs, leads fashion, and provides products in a shorter time”.

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