Despite the talk about shrinking markets, suppliers weren’t seeing a significant decrease in orders. On the other hand, they weren’t seeing many new customers either. What concerns them most today is how to find new growth points for the future.
At Fashion Access Hong Kong (March 29-31, 2017), one of world’s biggest trade fairs for bags, footwear, leather goods, and fashion, suppliers confirmed that the market is stable and many said that they managed to maintain their customer base, and their overall sale volume, at the same level as last year. However, they said that breaking into into new accounts is another story. For most, it seems nearly impossible. All of a sudden, suppliers are being forced to rethink their strategy and try to adapt long held business models to a changing market.
“The market is okay. We saw that orders started to pick up after Chinese New Year and at the moment, they are around the same level with last year. Eventually, 2017 may end up being slightly better than 2016,” said Olya Kriuchkova, chief operations officer at Bags Business Limited, a supplier of bags and accessories targeting mid-range retailer at EU and Russian market.
“The economy is not fully recovered yet. When the market is not booming, buyers tend to just work with their existing suppliers so it is very hard for us to get new customers,” Suzon Zhu sales manager at Time Win Ltd. told Inside Fashion. The company is a Chinese PU bag and accessory supplier focusing on the young fashion market.
“We did manage to see quite a few buyers at the show. However, nowadays, buyers are here more to see what’s available in the market than to really buying from us. With so many shifts and uncertainties in the consumer market, people are very cautious in terms of buying,” said Bobby Wang at Putian Mingrui Import & Export Co., Ltd.
Adjust To Changing Consumer Preferences
“Today’s consumers want different products,” said Jannet Chan at TRIVICT a Taiwan-based leather shoe manufacturer producing mid to high-end leather shoes for 30+ years old market.
“Consumers are much more picky about the product. They want products with much better quality, and they really care about details. Just walking into a shoe shop in Taiwan, you will hear consumers asking about details you would not expect them to know. It has put a lot of pressure on both retailers and suppliers,” Ms. Chan told Inside Fashion.
Across all market sectors, we see consumers are trading up. Suppliers have to either move up market or be very creative – usually both! The difficulty is to do this at costs that buyers will accept.
“We have to keep in mind that consumers want something new and interesting, however, adding something special doesn’t necessarily need to cost a lot more money. PU bags are not an expensive product to begin with. If we push up the price in order to add something we think consumers will like, buyers simply will not buy it. The product has to look interesting, but within a certain price range. It’s a fine line to walk,” said Ms. Zhu at Time Win.
“In our new collection, we are adding embroidery on the shoulder straps. It makes an interesting contrast with the PU materials and upgrades the total look. It’s a detail that doesn’t cost a lot of money but will give consumers the impulse to buy. We’re also adding other details such as a fuzzy ball or ribbon on regular products. It appeals to the young adult market and won’t make buyers scream when they see the price,” Mr. Zhu told Inside Fashion.
Selling Design And Creativity
The lower priced, mass-market shoes and bags production have already shifted to Vietnam, where the quality is acceptable and the price is unbeatable. Vietnam still behind China in term of skills set and supply chain efficiency, but the price difference is big enough to attract volume players. For any other country, the focus has to shift to selling on design and creativity.
“We see basic lines for H&M and Zara have shifted to Vietnam. Countries that are cheaper than Vietnam don’t have the level of skill. Right now, Vietnam has the right combination of price and skill for those orders. Therefore, we have to offer something different,” said Light Ye, product manager at Tingbang Leather Product Co., Ltd., a Chinese PU leather bag supplier. With prices ranging from US$4-5 per piece, the company is trying to differentiate itself from cheap Vietnam suppliers by adding more creative designs.
“To compete with cheap Vietnamese suppliers, we are making products that are more unique. This season, we’re showing a new collection made of punched out PU leather-look bags. The bags feature appealing geometric or floral patterns that are difficult to make in Vietnam. To make them even more special, we’ve added woven shoulder straps. We’re able to sell these bags for about US$5.2 per piece,” Mr. Ye told Inside Fashion.
Going Direct to the Consumer
As suppliers improving their design and development capabilities, many of them have also started to sell their own designs to consumers directly.
“We started building our own retail brands in China because the price pressure on the exporting business is ridiculous. Apart from that, the average orders sizes by brands used to be 2,000 pieces per color. Now we’d be lucky if we get orders 1,000 piece per color, ” said Stone Chen, marketing manager at Henney Bear.
The Guangzhou-based bag factory established the Henney Bear brand leveraging their market knowledge from being suppliers to international brands such as Guess, BCBG, Bebe and others. As the profit margin on their export business got thinner, the company started to design their own products and sell them to the China market. Now they are selling handbags and bag packs embellished with their patented Henney Bear carton character.
“When doing private label for brands, we can barely make ends meet. Now we are selling to consumers directly. The retail price is around US$80-90 per piece and the margin on each item is much higher, so we are able to do make smaller runs and get out of the ‘price game’,” Mr. Chen told Inside Fashion. Currently, the Henney Bear brand has more than 20 counters in high-end shopping malls or department stores in cities like Beijing, shanghai, Guangzhou, Nanjing, and Jiangsu.
As suppliers continue to try to move up the value chain, many of them are starting to retail products under their own brand. Many of the smaller and more flexible suppliers are taking the risk and stepping out of their comfort zone to establish their own brands.
“We can do a private label for some big retailers, however, we want to focus on promoting our designs under our own brand name Mintsa. Our target customers are boutique stores and mid to upper level department stores,” said Anita Bhatia, director at Mintsa, which high-end handbags using premium materials such as lace, leather, metal, and rhinestones.
For suppliers, venturing into retail market is not without challenges. Evolving one’s business model often means trading in one set of problems for another.
“It is a different business. It requires a different mindset and there is a different set of challenges. As a supplier, we never need to worry about anything other then making the product. Now our biggest headache is how to protect our own designs. We experienced a situation since we opened a new counter on the second floor of a shopping mall, that a month later someone opened a similar counter on the third floor selling fake Henney Bear bags. Even though we register every design, we still see copycat products everywhere,” said Mr. Chen. The company has hired a local law firms to help protect its copyright.