The服装 Industry Approaches the Inventory Warning Line
Recently, the "contraction" adjustment experienced by Li Ning, a domestic sports fashion apparel brand, is actually a microcosm of the domestic clothing industry. High inventory, high investment, and low returns have become problems troubling enterprises.
The latest financial report of Metersbonwe shows that, as of September 30, 2011, the company's inventory amount reached as high as 2.982 billion yuan, accounting for 83% of its net assets. The inventory amount of Tebu Company also increased by 92% last year, reaching 887 million yuan.
A salesperson from a garment company revealed to the reporter that Adidas experienced negative sales growth in some regions of China, with production increasing while sales were declining, which repeatedly caused a large accumulation of inventory.
High inventory has always been an important factor troubling global apparel enterprises. A large amount of inventory directly affects the cash flow of enterprises, and may even lead to a break in the capital chain, ultimately making it impossible to avoid bankruptcy.
Industry insiders stated that 4.5:1 is the critical point of inventory in the garment industry, and many domestic clothing brands have already reached the edge of this critical point. If this ratio is exceeded, the situation will be very dangerous. There is a saying in the clothing market that even if all clothing companies in China stop operations, the inventory volume is enough to supply the domestic clothing market for three years.
An operations director of a clothing brand said that compared to other industries, the demand for funds in the clothing industry is relatively large because most of the money of clothing companies is circulating in factories. For example, summer clothes are just finished and launched on the market, and autumn clothes are immediately put into production. Repeated investment keeps the funds of clothing companies tight throughout the year. High inventory will directly lead to a break in the capital chain, and if it cannot be effectively relieved, the company can only go bankrupt.
He also said that due to the pressure of high inventory, people who started in the clothing business early have also begun to seek other ways to get rich, and many clothing companies have started to switch industries. Domestic clothing companies will face a transformation initiated by inventory, and the reshuffling period for clothing companies has arrived.
Hidden Dangers After Wild Expansion
In recent years, China's clothing industry has been in a stage of rapid development, and fierce market competition has led companies to begin competitive expansion. Why did a large amount of bad inventory appear when the market was doing well?
Industry insiders said that in recent years, the growth rate of domestic clothing brands has been too fast, while consumers' purchasing power has not improved synchronously, thus forming a seller's market where supply exceeds demand. Secondly, some clothing companies choose mass production to reduce costs, leading to serious homogenization of products, which reduces consumers' willingness to buy.
Peng Danrong, deputy general manager of Haoshare Group, said that in recent years, the sportswear market has been very popular, and many brands have begun to increase production scale and accelerate store opening speed. A brand specialty store with an operating area of 40-50 square meters needs at least 200-300 SKUs (stock keeping units) for the first batch of goods. The huge inventory隐患behind the wild expansion is inevitable.
However, small enterprises are not necessarily the first to go bankrupt due to high inventory. Peng Danrong said that the brands most affected by inventory are those large clothing companies that have expanded wildly in recent years. A well-known domestic sports brand was still expanding stores wildly last year, but this year it closed stores with poor performance, and the number of closed stores reached 30% of the total number of stores.
This article comes from Fashion Matching Network (http://www.daban.org.cn). Please indicate the source when reprinted.