Leadership Series
Speed, flexibility, low MOQs and cutting edge tech are making China a smart bet for more brands
Speed, flexibility, low MOQs and cutting edge tech are making China a smart bet for more brands
Built on a ‘volume at a price’ model, Asian manufacturing remained unchallenged for decades. Even as times got tougher, brands raised their demands – and then again – and again (!) suppliers throughout the region held the line.
While price has always been a big part of what keeps brands sourcing in Asia, what’s kept them there has been manufacturers incredible ability to adapt, even when it seemed almost impossible to find a solution, and more recently to embrace technology.
Still, with pressure to nearshore, the new US tariffs, massive demands for traceability and growing geopolitical pressures, it’s not surprising that people are starting to wonder what might be next for Asia’s massive apparel supply chain.
“What DTC brands proved is that you don’t have to make things very complicated.”
— Sean Coxall, Chairman, 707 Limited
“One of the biggest changes I’ve seen is the growth of what I call the new ‘demand chain,” said Sean Coxall, Chairman of 707 Limited, a Hong Kong-based company that provides sourcing and supply chain services to international brands.
“If we look at how we used to develop and source goods, retailers and brands would develop ideas and we’d spend an awfully long time actually creating samples and then wait for approvals and finally go into production. By the time the goods got to the store, it would be a very long time. And quite often they didn’t sell and then there was a lot of markdown.
“We spent the last few decades trying to reduce time, trying to do things faster, shipping things in a very complicated way to get them to the stores faster. Then we went down a whole track with digital sampling and trying to digitize things. But what I’ve really seen is that a lot of the new brands – particularly the online retailers and influencers – are really connected to their customers very closely. What happens is they know what their customers like – at a very granular level,” said Mr. Coxall, who previously served as president of Li and Fung’s Branded Fashion and Sportswear Group, with a major focus on speed and innovation, both in terms of product and new business models.
“On some recent pricing that I’ve done, I found prices in China even to be less than in Vietnam and Cambodia – and with much more flexible MOQs.”
What DTC brands proved is that you don’t have to make things very complicated.
“They basically find out what their customers want and then they go and find out how to get it. And you’d be amazed how uncomplicated their systems are. We work with some people who just send us a photo or a diagram or a few words. We have a very good product development and design teams here and we can make things very quickly, whether that be design or production, and we can ship them very quickly. Because these brands know what their customers want, they pretty much sell out of most styles.
“So it’s not really a change in the sourcing that I’ve seen. It’s really a change in how they connect with the consumer and find out what the demand is,” said Mr. Coxall.
“There are billions of dollars of business out there, but perhaps it’s in small segments and chunks.”
In the face of geopolitical tension and now the new US tariffs, brands have spent the past few years moving a supply that was built around China now out of China. Many major brands have as little as 20% of their production in China – and in some cases none at all.
That once sound strategy might now be facing critical stress points.
The migration to Vietnam, Cambodia and Bangladesh has led to full capacity at factories there. Prices have surged. MOQs are far less flexible. And lead times are not what they used to be.
On some recent pricing that I’ve done, I found prices in China even to be less than in Vietnam and Cambodia. And in terms of MOQs, these factories are very flexible. Even 300 – 500 pieces is not a problem.
“As other Asian countries are becoming less flexible, I’m now seeing a huge opportunity in China.
“MOQs have always been a struggle for European customers. I see China as a huge opportunity for our European friends because there’s available capacity, the MOQ is very low, and also prices are very keen. European customers can perhaps reopen their eyes to China again.
“And actually, if you look at some of the established factories in China that we’ve known for many, many years, they have tremendous expertise. They are quite competitive.
“We still see most of the raw materials coming from China, especially trims. So China is still very much a part of the apparel supply chain.
“They always say ‘you don’t know what’s good until you lose it’. I think that’s very true of what we had in China.”
As the apparel industry moves into Industry 4.0 China is clearly taking the lead in developing and successfully executing cutting edge technology that is literally revolutionizing apparel manufacturing.
From pioneer work in robotics to advancements in applied AI, China is indisputably breaking new barriers and achieving things most industry watchers thought were impossible.
The ‘addiction’ to big orders is now working against manufacturers, keeping them working with customers who have been too high risk and accepting orders with virtually no margins.
Manufacturers are starting to realize that while everyone wants big orders, there might be hidden gold in smaller orders – if you can figure out how to work with mid-sized brands.
“It’s all about being flexible. There are orders out there, there always are orders. But as I said, some of the countries are already full. Quite often you go to some of those factories and they quote you very long lead times. So I think vendors that are looking for business, if they can be flexible with their timelines, do things quickly, be flexible with their MOQs, you can get started with smaller brands who over time might become tomorrow’s big customers.
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