Transformation and Change of Employment: Diversified Ventures for Garment Enterprises

In the world of textiles, 200 million shirts can be exchanged for a single Boeing airliner. This stark comparison highlights a long-standing consensus among industry experts: China is a giant in clothing production, but not yet a true powerhouse in fashion. As the apparel sector faces an era of transformation, companies are forced to rethink their strategies—whether it’s through digital innovation, diversification, or rebranding. The survival and growth of these firms now depend on their ability to adapt and evolve. Many domestic garment companies initially relied on low-cost, high-volume strategies such as “heavy products, large quantities, wide circulation, and low prices” to drive rapid growth. However, this model has created a false sense of security, leading some to believe that past success can be replicated indefinitely. But markets are ever-changing, and what once worked may no longer be effective. The recent quality inspection failures at Shanshan’s underwear line serve as a cautionary tale, showing how even well-established brands can face serious setbacks when they fail to keep up with evolving consumer expectations and market demands. In Xiamen, at the headquarters of Xiamen Trade Group Co., Ltd., the view from the office window often includes seagulls flying by—a peaceful contrast to the intense competition in the apparel industry. Despite this serene setting, the company is navigating a complex landscape where traditional sales models are being challenged by e-commerce and global expansion. Haopai Group, a 67-year-old company, managed to weather the financial crisis and inflation by focusing on its core domestic business. Yet, under the leadership of Hongshou, the group took a bold step into the e-commerce space. With a budget of 100 million yuan, the project aims to launch independently in May, signaling a shift toward digital innovation. Over the past three decades, Haopai’s chairman, Hongxuan, has maintained a cautious and steady approach. Since the founding of Xinjiali Garment Factory in 1979, the company has never strayed from its clothing roots. In 2010, Hao brand sales reached nearly 2 billion yuan, marking a 30% increase from the previous year. However, the same year also brought unprecedented challenges, with fabric costs rising from 8 yuan per meter to 17 yuan, and labor costs increasing by 50–60%. Meanwhile, Youngor and Shanshan have taken divergent paths. While Youngor expanded into real estate, equity investments, and other sectors, Shanshan shifted focus to lithium battery materials and new energy technologies. Both companies have moved away from their traditional apparel businesses, raising questions about whether they are still truly in the clothing industry. Youngor’s 2009 annual report revealed that over 86% of its net profit came from real estate and equity investments, with only 6.9 billion yuan from textiles and apparel. Similarly, Shanshan has gradually reduced its direct manufacturing operations, outsourcing most of its production. These shifts reflect a broader trend in the industry: many companies are moving away from traditional manufacturing to explore more profitable ventures. Despite these changes, the textile and apparel sector remains a significant part of China’s economy. In 2010, China’s exports of textiles and apparel totaled $206.53 billion, up 23.6% year-on-year. Domestic retail sales of clothing, shoes, and textiles reached 587.4 billion yuan, an increase of 24.8%. However, experts warn that this growth may not be sustainable in the long term. Industry analysts like Wang Qian note that the recent rebound in exports was largely due to Western destocking after the financial crisis and increased demand in the post-supply phase. But this is a short-term phenomenon, and the future looks uncertain. Rising cotton prices, labor costs, and intense competition could put pressure on smaller companies, while larger firms will need to find new ways to remain competitive. As the industry evolves, e-commerce is becoming a key battleground. While some companies are experimenting with online sales, few have fully embraced it. For example, Seven Wolves’ online sales in 2009 accounted for just 1.5% of total revenue, highlighting the challenges of transitioning to digital platforms. In this rapidly changing environment, the future of the Chinese apparel industry will likely be shaped by capital, innovation, and strategic vision. Whether companies choose to stay focused on their core businesses or pursue diversification, one thing is clear: the days of relying solely on low-cost, mass production are coming to an end. The path forward requires careful planning, bold decisions, and a willingness to embrace change.

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