The boom of “light companies” opens a new business era for Chinese clothing

The boom of “light companies” opens a new business era for Chinese clothing

When PPG was founded in 2005, no one would have imagined that it would become a “catfish” that would change the operating model of Chinese apparel companies. It does not open any offline stores and only sells shirts directly through mail order catalogs and the Internet. Therefore, when PPG claimed in 2007 that sales were expected to reach 1.0-1.5 billion yuan and become one of the largest companies in the apparel industry, this astonishing growth rate undoubtedly caused a great shock to the Chinese apparel industry.

With lighter channels and quick-response supply chains, innovate business models to drive high efficiency of the entire industry chain – although the emergence of PPG has made traditional clothing companies feel the worry of losing weight, in fact, China’s clothing industry is asset-light The path of exploration in operations was not started by PPG. In the past 10 years or so, asset-light companies in the domestic apparel industry have gradually developed from outsourcing production and channel functions to asset-light operations throughout the supply chain. It was not until the light company model represented by PPG became popular that it symbolized Chinese clothing is ushering in a new era of transformation in business channels.
　
Behind the model debate

With the weakening of the international comparative advantages of the apparel industry and the upgrading of domestic apparel consumption, industry competition is shifting from the traditional low-cost competition model to multi-level competition based on brands and channels. Many apparel companies have gradually turned their attention to Channel model innovation.

In the domestic apparel industry, there are usually four channel models: agency, direct sales, franchising and e-commerce. It took PPG one and a half years to go from obscurity to rapid fame. This is not only because of the overwhelming advertising in people’s field of vision, but also because of the shock it has brought to the traditional clothing field – the introduction of the DELL computer direct sales model into the clothing industry. This company, which does not have any physical stores, factories or assembly lines, and has less than 500 employees, including more than 200 call center staff, uses the Internet, telephone and catalogs for direct sales, selling 10,000 men’s business shirts every day. The growth momentum is approaching that of Youngor, the leader in the traditional shirt industry, which sells an average of 13,000 shirts per day.

Do not open offline stores, outsource all production and logistics to reduce costs, connect the upstream and downstream industrial chains through IT technology and the Internet, use information flow to direct partners, and distribute inventory to partners to make their own inventory By reducing the volume to a minimum, these means construct PPG’s “light asset operating model.” Compared with the “shirt giant” Youngor, which has spent huge sums of money to build its upstream and downstream industrial chain, as well as huge investment in fixed assets and terminal construction, PPG’s figure naturally appears “light”.

Even though the emergence of PPG has inspired the apparel industry, the industrial background behind this phenomenon requires more in-depth analysis. Since the reform and opening up, many small and medium-sized enterprises, mainly OEMs, have switched from exports to domestic sales. This has directly resulted in continued excess domestic garment production capacity, and many garment manufacturers need to find new ways out. In this process, the asset-light operation of enterprises has become a very attractive direction, because not all enterprises can bear the heavy pressure from manufacturers to sales stores.

At present, PPG’s online direct sales model is not irreproducible, and due to its narrow product domain and thin service content, PPG’s experience is more of a supplement to the current business model and will not become China’s The mainstream model of the clothing industry.

Asset-light evolution route

Before PPG became synonymous with “light company”, when mentioning asset-light operations in the apparel industry, everyone would naturally think of Meters-bonwe. As early as 1995, Zhou Chengjian outsourced the production process of Meters-Bondwe to garment manufacturers, attracted franchisees through channels, mastered the high value-added design process himself, and vigorously promoted the brand image. This kind of asset-light operation This method has become a classic case of virtual management in the domestic garment industry.

Led by Meters Bonwe’s demonstration, many garment companies in Wenzhou have broken through the bottleneck of corporate development through asset-light virtual operations and become well-known domestic garment companies. Compared with Meters Bonwe, Heilan Home, ITAT and other asset-light apparel companies have chosen to become asset-light by strengthening management and control capabilities – leveraging management and information systems to outsource production and sales functions. , and then achieved scale expansion.

Heilan Home manages each franchise store in a model similar to direct operation, including product placement, store management, operation, store location selection, etc., all of which are standardized and managed by Heilan Home. Franchisees are responsible for communicating with local Liaise with industrial, commercial, taxation and other administrative agencies. To a certain extent, this is equivalent to the franchise store being responsible for capital investment and daily operations, while the real sales management is in turn outsourced to Heilan Home. Obviously, such an asset-light strategy makes Heilan House’s cash flow smoother.

ITAT (International Trader, international brand clothing membership store) , its founder – Ou Tongguo, chairman of the board of directors of ITAT, is targeting the domestic excess clothing production capacity and excess properties, and taking advantage of this general trendCome and outsource the financial pressure and run quickly. In the industrial chain of the apparel industry, ITAT is positioned as a branding channel, characterized by “zero payment, zero rent.” “Zero payment” means that ITAT sells products on a consignment basis to more than 700 upstream suppliers, and the inventory pressure and logistics distribution are all borne by the suppliers. Like Heilan Home, ITAT has also opened its IT system to upstream suppliers. Each supplier can check the sales status of its own products and allocate goods in a timely manner nationwide. Suppliers, ITAT and shopping mall owners follow 60:25 : 15 fixed ratio divided.

In fact, in the evolution process of asset-light companies in the clothing industry, what is outsourced is not important, what is important is what to master. From mastering brands, to mastering management operations, to mastering key data to shape accurate supply chains, the key points that companies control seem to be increasingly “virtual” and “light”, but these key points are getting closer and closer to the core of corporate operations. This also allows the new generation of “light companies” to achieve rapid growth faster than the previous generation.

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