For small companies that are more vulnerable to sluggish foreign trade, cross-border e-commerce can provide a lifeline. More and more of them are trying platforms like AliExpress, Amazon and Wish.
Data from Askci.com, a Chinese consulting company, shows that between 2017 and 2021, the share of clothing and footwear of the overall cross-border e-commerce trade volume rose from 17.4 percent in 2017 to 27.4 percent in 2021.
One way out for small businesses is becoming part of the supply chain for big online retailers like the Guangdong-based Shein, which has a network of family workshops and small manufacturers that rely on orders from the quickly expanding e-commerce platform. In 2022, Shein’s revenue totaled US$22.7 billion.
According to Chen Shaotong, clothing exports from Guangdong Province account for a quarter of China’s total garment industry. Over 80 percent of provincial production capacity is concentrated in the Pearl River Delta Region, which boasts the most complete industrial chain, from R&D and design to manufacturing and cross-border promotion of brands.
To Chen Shaotong and Wen Danfeng, Shein’s rapid success, based on its speed and flexibility in responding to market demand and its cheap prices, is due to the industrial clothing cluster surrounding Guangzhou, capital of the province.
Industry insiders revealed that factories that meet Shein’s requirements are its main manufacturers that design and make samples. But the products consumers receive are not necessarily produced by these central factories, which outsource orders to smaller ones.
“Shein chose Guangzhou because it has countless small factories. Such mini factories or workshops, mostly with fewer than 20 workers, don’t mind working overtime and are willing to take smaller and low-profit orders that are ignored by bigger companies. They are the right fit for fast fashion orders,” Wen said.
“Twenty workers in one workshop probably can do it all, from tailoring to sewing, from making collars to sleeves. They are experienced but lack qualifications, clustering in urban villages. These workers don’t want to work on an assembly line. When there’s an order, they can go to the labor market, quickly assemble a team of 8-10 people, and the job is done. It’s unbelievable to people outside the industry,” he said.
But this ultra-fast Shein model of small orders and quick response to market demand means very low profit margins. “It’s a double-edged sword. The efficiency requirements mean you have to work hard to meet deadlines, but you are paid. The most important thing is that Shein pays quickly, which means a high turnover rate of capital,” said Hu Hebin.
Both Wen and Xie believe that as the costs of running businesses keep rising, Shein gives small factories surrounding Guangzhou a lifeline, and offers access to digital equipment like computer-controlled automated tailoring and sewing devices they could not otherwise afford.
According to Wen, platforms like Shein have really increased the speed of the fast fashion industry around Guangzhou. “Such efficiency means the new industrial cluster will be able to meet all fast fashion orders in the future,” Wen said.
Currently, low prices remain the biggest advantage for Chinese clothing, as shown on platforms like Temu and Shein. But people in the industry NewsChina interviewed believe that relying on low prices is not sustainable, particularly as global industrial chains shift. They believe original design, innovations in materials and equipment, talent cultivation and consistent exploration of new business modes must be the solution.
Lai revealed his greater ambitions for overseas e-commerce. “We will make high-end products in the future, and I don’t think traditional distributors will find these products acceptable. We’ll have to rely on ourselves to find customers,” Lai said.
In the clothing industry, Canadian athletic apparel brand Lululemon reminds Chinese clothing manufacturers of their inadequacy. It is particularly so for Lai, a yoga wear maker. “One of Lululemon’s material suppliers is from Guangdong. Chinese factories could do 95 percent of the manufacturing, but the hardest part comes in the remaining 5 percent that involves making technological breakthroughs in materials,” said Lai, explaining why Lululemon’s products can be four times more expensive than similar products. Lululemon created its own fabric, and relies on third-party manufacturers in several countries, including China, to make its products.
Now Lai is trying to find customers who can afford high-end products. Meanwhile, he believes that following the example of Lululemon and investing in R&D is the way forward for Chinese manufacturers.
Chen Shaotong believes the most practical and feasible way forward for Chinese clothing manufacturers is to stand out with original designs by tapping the country’s large reserve of creative talents. Guangdong Fashion Week, jointly hosted by Guangdong Fashion Designers Association in March, showcases original design to motivate industry transformation and upgrading.
But Wen added that design is more than aesthetics. He called attention to the often ignored industrial design, which includes the application of new materials. “Our fashion designers are almost all art students. But fashion design today requires multi-disciplinary cooperation instead of a single designer,” Wen said.
“We don’t need to worry about the inevitable industrial transfer, it won’t put an end to the industry. But we need to make sure companies in the upper stream keep pace with technological changes,” Xie Hailong said.