The COVID-19 pandemic has created real challenges for the Chinese garment industry. The global apparel supply chain has slowed down, and the internal market, which was already suffering because of the China-US trade war, had to overcome new constraints thanks to factory shutdowns at home as well as travel bans and quarantine measures across importing nations.
According to Apparel Resources, China’s market share in the US apparel import market alone fell to a mere 21.3 percent this February. The country also saw a loss of $1.19 billion in textile and apparel export shipments to the US in the first half of 2019, primarily due to the trade war.
Apparel Resources also highlights how the trade relationship between the US and China has become more fractured. According to their data, the US was China’s largest export market for textiles prior to the outbreak, with roughly 18 percent of China’s textiles exports going to the country.
China was also the largest exporter of textiles and apparel to the US, accounting for 38 percent of the nation’s total imports. Similarly, Apparel Resources emphasizes that there is an additional challenge: the rise of global competitors. China’s loss of market shares has boosted apparel exports from other Asian suppliers like Vietnam (18.8 percent so far in 2020 versus 16.2 percent in 2019) and Bangladesh (9.1 percent so far in 2020 versus 7.1 percent in 2019).
The South China Morning Post singles out research by the United States Fashion Industry Association — which surveyed 25 fashion retailers in the second quarter — which found that sourcing diversification has become the new norm. In fact, 29 percent of the executives polled said they now source more from Vietnam than China, which is up from 25 percent in 2019.
To cope with these tensions and weak demand, Chinese textile producers have slashed their prices. “The unit price of the US apparel imports from China dropped from $2.25 per square meter last year to around $1.88 in the first half of 2020,” says the South China Morning Post. “Prices offered by Chinese suppliers have been around 30 percent lower than other Asian countries this year.”
Meanwhile, domestic demand is also witnessing significant changes. And the textile and clothing industry is embracing the premiumization trend. That has catalyzed business disruptions.
How can textile manufacturers navigate the “new normal”?
Chinese textile producers are resilient, and they’ve adapted faster than their competitors to challenging new realities. To a certain extent, it seems that Chinese manufacturers have been preparing for this new reality for the past few years and have fast-tracked digitalization while employing direct to consumer strategies.
Moving online has allowed many textile companies — including small-batch manufacturers from lower-tier cities — to capture the benefits of e-commerce while bypassing the middleman and arriving directly to the consumer. Through Aliexpress and Amazon, Chinese manufacturers have found a way to sell directly to overseas buyers.
Cross-border, direct-to-consumer commerce is the future of the fashion industry because it creates value for the customer by cost-cutting measures that don’t undermine product quality. Instead of settling for lower profit margins and increased costs via resellers, a manufacturer can now take his products straight to the buyer.
A second trend that was rapidly expedited in post-pandemic China is sustainable consumption. Osmud Rahman, Benjamin C.M. Fung, and Zhimin Chen write in their article Young Chinese Consumers’ Choice between Product-Related and Sustainable Cues —The Effects of Gender Differences and Consumer Innovativeness that “as people become more affluent, they do not necessarily search for a product merely based on its functional and monetary benefits, but also its aesthetic, altruistic and ecological values.”
The authors highlight how wealthy consumers are comfortably meeting basic life needs, so they “have more opportunity and greater freedom to search for products with intangible/added values (less materialistic/pragmatic), such as sustainable or recyclable products.”
Today’s consumer mindset puts ethical manufacturing and eco-friendly practices first. Consequently, Chinese manufacturers have implemented product diversification strategies while including a range of bio-products as part of their production lines. Sustainable and recycled fibers, green product development, and eco-design innovation have become “the new normal.”
Moreover, the eco-friendly movement has brought about a shift from standardized, large-volume manufacturing to customized production. Personalization processes, made-to-order, and customization all constitute bespoke experiences, and global consumers have embraced manufacturers that offer these services.