After the Spring Festival, the textile and apparel industry often enters an off-season period, with many clothing and shoe products entering clearance phases, leading to sharp price drops. For many garment factories, production costs have been steadily rising, yet they struggle to pass these increases onto consumers. This has created a difficult situation, with numerous factories in the Pearl River Delta either closing down or reducing their production scale.
Wu Yixiong, General Manager of Southland Garment Co., Ltd., shared that the current environment is tough for manufacturers. Many companies in Zengcheng, Guangzhou, have shut down or scaled back operations. “If we can’t keep going, we may consider shifting our focus to other industries,†he said. He added that factory prices are not keeping up with rising costs, especially for overseas orders, which are hard to price higher. Since last year, costs have increased by 50%, but some export prices for jeans have only risen by 5%. Domestic sales also lack experience, making it challenging to open new markets.
Currently, textile and garment production costs continue to climb. The domestic 328-point cotton prices have been affected by rising U.S. cotton prices following the Chinese New Year. Recently, the price of 30,000-ton cotton has gone up again, by 10% to 15% from the end of last year. In the Pearl River Delta, due to labor shortages, many factories raised salaries by more than 10% after the holiday. If the monthly salary doesn't reach 2,000 to 3,000 yuan, finding workers is nearly impossible. With rising costs, even large factories in the south are struggling, and small ones are under even greater pressure.
Xu Yuping, General Manager of Shenzhen Guller Fashion Co., Ltd., told reporters that this year, their clothing products need at least a 20% price increase to cover rising costs. To cope, the company has closed its own small factories and shifted focus to trade and R&D, outsourcing clothing orders to other manufacturers.
Due to significant increases in raw material and labor costs, many shoes and apparel products have seen price hikes of 20% to 30%, but market acceptance remains uncertain. Both foreign and domestic markets show resistance to higher prices. In Guangzhou, spring clothes have been launched at high prices—some reaching 670 or even 1,000 yuan, about 20% higher than similar items from last year. Reporters found that some consumers are opting for seasonal discounts instead of the new collections. Autumn and winter clothes have been heavily discounted, with some brands offering up to 50% off.
Wang Qiang, a senior analyst at First Textile Network, noted that the sharp rise in cotton prices in the fourth quarter of last year has brought many uncertainties to the market. Branded textile and apparel companies generally have stronger cost-absorbing capabilities compared to general processing plants. Branded clothing is typically sold at three times the cost price, with high-end brands having even higher markups. This allows them to maintain higher profit margins despite market fluctuations. Some branded products currently being sold at lower prices were produced before the raw material price hike, and are now being sold at a 20% discount while ensuring profits on the remaining 80% of their product range.
Hong Zhiye, a senior advisor at the International Fashion Brand Development Management Center, stated that the profit margin of the apparel industry this year is likely to shrink. Mere manufacturing companies will face even tougher conditions, while domestic brands are under greater pressure as more foreign brands flood into the Chinese market. This increased competition may make foreign brands less adaptable. Domestic companies should accelerate their self-improvement and seize market opportunities during this period of dissatisfaction with foreign competitors.
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