A woman at work in a sportswear factory in Jinjiang. (Photo/Xinhua)
The city of Jinjiang in Fujian province is a major center of the Chinese garment and sportswear industry, but many of the businesses there are struggling to stay afloat owing to the heavy burden of excess inventory, reports the Beijing-based China Entrepreneur magazine.
Six leading sportswear producers, including Anta, 361 Degrees, Xtep, Peak, Li Ning and Dxsport have been forced to close more than 3,000 outlets across the country since last year, with heavy losses arising from their excess stock worth more than 3.72 billion yuan (US$594 million), said the magazine.
The situation among the city's other garment producers was not much better in the first half of 2012, with 17.7% of clothing companies suffering losses, up 5.3 percentage points from the same period in 2011, according to information released by the Ministry of Industry and Information Technology.
Leading producers Lilanz, Septwolves and Joeone seemed to be faring better than the rest last year by posting growth in both revenue and profit, although the upward trend slowed during the third quarter, said the report.
The industry overall has unsold inventory worth 38.2 billion yuan (US$6 billion), which accounts for three years of total sales revenue.
Septwolves chairman Zhou Shaoxiong has played down the negative reports, however, saying that suppliers normally keep a year's worth of supplies in store in addition to six months' of merchandise. He added that the inventory levels for men's casual clothing are normal for the time being.
It is widely believed that the issue of heavy surpluses will trickle down from sports clothing to casual wear before it affects the broader men's, women's and finally children's clothing markets. Many believe that discount sales being held in Jinjiang are designed to clear out inventory, with some vendors offering discounts of up to 90%, said the magazine.
Another problem plaguing garment makers in the city is that they have made very similar products without distinctive styles, and therefore failed to build brand loyalty among customers.
In order to establish its own style, Septwolves tried to promote the image that its products are sturdy and tough. The company originally specialized in men's pants, but the company expanded its operations to shirts, coats and leatherwear while targeting a more sophisticated market.
Zhou told the China Entrepreneur that the company was trying to figure out what customers want before designing their products. At the same time, they are refurbishing their stores and improving services for shopkeepers to bring the brand in line with the new image of selling gents' styles.
Although the company has not generated a proportionate return on its investment thus far, Zhou was not disappointed, saying "it is easier said than done."