Clothing brand deep in price increases, inventory hikes

This year, the clothing brand seems to have entered a vicious circle - high prices and high inventory.

Not only sports brands, but also major brands including leisure and fashion seem to be bothered with inventory. On the one hand, companies continue to discount promotional inventory, but on the one hand, consumers believe that the price of clothing is still high.

Regarding this “weird phenomenon”, some people pointed out that this is not unrelated to the intermediate links in clothing distribution. "After the garment came out of the factory, it passed through dealers, agents, and distributors before it circulated to the market. In addition to considering the cost factor, clothing prices also need to consider the price increase process in the sales channel. Large profits.” Xiong Xiaokun, a light industry researcher at China Investment Advisors pointed out.

According to statistics, the domestic brand's channel increase rate is 4 to 8 times, while the international second-line brand is 6 to 7 times, and the leisure and fast fashion brand is 2.5 to 4 times.

“This is definitely a very conservative data.” Chen Changsong, an analyst at the branch of the textile industry branch of the business community, said that the domestic second-tier brand’s markup rate can reach 6 to 7 times. With the increase in clothing prices in the past two years, the corresponding increase rate has also gone up.

According to industry sources, the factors driving the increase in apparel prices include labor costs, business terminal costs, and production costs. In recent years, the cost of raw materials for clothing, rental costs, labor costs, etc. have increased significantly. Brand owners can only increase their margins in order to seek profits, which leads to rising prices.

Xiong Xiaokun explained to the reporter of the “Daily Economic News” that the low cost of Chinese clothing provides more space for the price increase. “The cost price of international second-tier brands is high, and if the channel price increase rate is also high, it will weaken its competitiveness in the apparel market. While the domestic apparel cost price is low, the channel operators will increase domestic apparel prices in order to maximize profits. To the market average."

With regard to the rise in the price of clothing, companies have used the cost increase as a pretext in their annual reports. However, an industry official who declined to be named stated that the cost increase is only part of the factor. The fundamental reason is that the price of the domestic garment industry is still too “virtual” and the terminal price increase has consistently exceeded the cost increase.

The industry insiders who did not wish to be named pointed out that under the current strong pursuit of e-commerce, it is precisely because of higher pricing that major brands have to have high-profile promotions to inventory and increase.

The China Merchants Securities Research Report predicts that the four major sporting goods companies such as Li Ning, Anta, China Trends and Xtep have over 10 billion yuan in inventory in 2012. But on the other hand, the price of branded clothing can't go down. "The rise in apparel prices will further aggravate the apparel market and increase the company's inventory," Xiong Xiaokun said.

Chen Changsong pointed out that high clothing prices not only increase stocks, but also compete with e-commerce companies, the advantages of traditional brands will be even more absent. The comparatively healthy clothing brand pricing model needs to consider the positioning of the brand. “First-line brands have high prices for their own words, but the second and third-tier mark-ups are not so high. After all, mass consumption is all here.”

Relatively speaking, the domestic apparel industry is still in the stage of franchise development. Compared with direct operations, there are many intermediate links in this model, and the natural price increase rate is also higher than that of direct operations. However, in the future, the industry will not necessarily have to go straight to allow the markup rate to return to normal.

Chen Changsong further added that "there are basically many brands that have malls. The correct approach should be to make progress online and offline, and to do daily routines online, while the line is focused on higher-level categories."