CHINA’S NEW STRATEGY: THINK OF HOME

Daily Edition October 9, 2018

Fashion. Beauty. Business.

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Eighties Revival?

Rating Hypefest

Flying In

Benetton taps JeanCharles de Castelbajac as artistic director to regain the brand’s Eighties and Nineties heyday.

The streetwear festival organized in Brooklyn by Hypebeast seemed to be the anti-ComplexCon.

Bally heads to Tokyo to unveil its latest collaboration, the Swizz Beatz x Shok-1.

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Just Relax

Casual with polish — a major message of spring.

Designers expressed it in various ways, including with a focus on knits. At Loewe, Jonathan Anderson gave the wholesome cable knit sensual allure.

For more, see pages 16 to 29. photograph By stéphane feugère

business

China’s New Strategy: Think of Home ● Domestic apparel brands

prove the “Made in China” label has forever changed.

By Nyima Pratten

SHANGHAI — The apparel industry in China is going through a period of transition at breakneck speed, with the perfect storm of increased labor costs, the U.S. trade war and international uncertainty. These changes, combined with an increase in domestic demand from the nation’s rising middle-class, have led to a momentous shift.

“This year, we have faced many challenges, such as consumption upgrading, and many key conditions of our production, such as labor costs, also changing. We are creating many innovations in our production technology and our commercial production patterns.

Continued on page 11

On Staff

Behind LVMH’s Start-up Initiative

The luxury group challenged its employees to think outside of the box.

By Kathryn Hopkins

With 70 brands and 150,000 staff worldwide, there’s no doubting that LVMH Moët Hennessy Louis Vuitton, the parent company of brands including Louis Vuitton, Dior, Guerlain and Bulgari, is a global giant.

But even a fashion force like LVMH can’t rest on its laurels when it comes to recruiting and retaining staff, especially at a time when unemployment in the U.S. is hovering at a near 50-year low of 3.7 percent and sales assistants are among the top-five hardest roles to fill.

“Recruiting right has always been difficult. You can ask governments.

You can ask any type of company.

The number-one obsession or Continued on page 10

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October 9, 2018

China’s New Strategy: Think of Home

continued from page 1

Also, the international market environment is changing. To put it simply, China’s clothing industry no longer focuses on the production quantity, but is now more quality-oriented,” said Chen Dapeng, president of Chic Shanghai and executive vice president of the China National Garment Association.

“Over the past half year, clothing quantity has not increased at all, but domestically, the retailer quantities are increasing and our export has realized a negative growth of 0.8 percent. So, you can see that even though our production quantity is not increasing, our production value is increasing,” said Chen. “Actually, we are still producing, but we are moving our factories to other countries. But I think technology will change the situation.

We are now moving the industry to be intelligent, more automated, and more information-oriented.”

Women’s wear sales in China increased by 5.7 percent year-on-year to 116.93 billion euros in 2017, according to Euromonitor.

The market research firm predicts that the market value in this sector will continue to increase to 139 billion euros by 2021.

“The clothing industry has put more focus on designing and innovations.

We have improved on our information technology combined with the development of the whole industrial technology. We have increased our production efficiency, which has improved our production quality as well as improved our commercial operation efficiency,” said Chen.

As the middle class rises in China, and becomes increasingly better educated with higher disposable income, consumers have begun to focus more on their individual style, quality and brand names of their clothing. “I think in the next five to 10 years, China’s clothing industry will put more focus on the expression of its design and fashion.

We will put more Chinese spirit into these products. The clothing industry is also a part of our culture, so I think in the future, what the Chinese people are wearing will have more of a Chinese spirit. I think the young people will love these kinds of designs. I think this will be the trend in the future,” said Chen.

As local brands strengthen their hold in the country, and gain more experience on the ODM side of the business producing their own designs, exporting their own brands might become a more popular option than simply exporting others’ products. “China’s domestic market is good, but the international market is not stable, and also the profit space for the export industry is very small. I think, in the future, some well-developed Chinese companies might adopt the strategy of their own brand internationalization,” said Chen.

Chinese apparel brands have already begun to outsource their production to other countries in order to remain competitive in the face of rising costs in the country. “We are a Hong Kong company, but we have different production units in China, Bangladesh and Myanmar. Right now, because of the high cost in China, we have had to open

At Chic Shanghai, Chinese brands focused increasingly on quality over quantity and more on the domestic market.

up in other parts. We do OEM and ODM, but right now we do more ODM and want to expand this business. Most of our customers are looking for designs from us, not their own design,” said Tommy Lee, sales director at Kei Lock Fashion.

Outsourcing some manufacturing from China to its other factories has the added bonus of helping the company avoid tariffs from the U.S. trade war, although this wasn’t the reason for the openings.

“Consumers used to spend money on many different styles at Zara, H&M or Uniqlo, but now their business is also going down. Consumers are looking for more quality and style, not pricing. The [international] textile industry is changing.

Before, customers were looking for cheap prices and fast fashion. Now they are not — they are looking for quality and more personal style. That is why we have developed our workshop in the front-end and more in design,” said Lee. Chinese consumers increasingly value high-quality products and trusted brand names, especially after numerous counterfeit product scandals online. Local buyers from newer Chinese brands at the Chic Shanghai fair tended to handpick quality products and the latest styles.

Many valued the opportunity to meet suppliers face to face.

“Our brand has only been established for one year. Our customers believe in our products. They are older customers and when we get new products, they buy them immediately. We can’t have them doubt our quality and we need time to build our reputation,” said Zhang Shan Shan, owner of a Zstylles, a chain of luxury womenswear boutiques in Hunan province.

Many local booths at the fair were designed to attract attention, with blaring pop music, mini catwalks and even a female model riding a plastic horse. The clothing designs were eye-catching, and exhibitors were turning away buyers who hadn’t booked an appointment. There was a buzz among exhibitors that this was the

“I think in the next five to 10 years, China’s clothing industry will put more focus on the expression of its design and fashion.”

— Chen Dapeng, Chic Shanghai

new “Made in China” label and that it was here to stay, thanks in part to trade being bolstered by strong domestic growth.

“We are looking for foreign brands. We are very competitive. We have our own fabric, factory and designers, so we can produce all our products by ourselves.

There are so many brands in China now that we are doing business in China first, and when we do this business better, then we can extend to the overseas market,” said Zhu Hai, founder and chief executive officer of Shanghai apparel company Yi Shang.

Another exhibitor that was attracting a lot of attention throughout the fair was Fujian Fucheng Network Technology and its “global supply chain professional platform,” which was also celebrating the launch of its English language platform.

This platform facilitates communication between small- and medium-size enterprises within China by utilizing information technology and leveraging data analytics. It allows these types of companies, which have suffered the most as low-cost manufacturing has moved away from the country, to connect with international buyers and share capacity and resources, therefore remaining competitive on the global market.

The company claims to have over 200,000 small- and medium-size Chinese businesses on the platform, all of which are manufacturers or individual business entities that sell or engage in business in the apparel, footwear, or bags and luggage industry. “The idea is to facilitate the whole supply chain, especially for you Americans, who come over here trying to find who can sell you ribbons or buttons. You can find them on our platform,” said Simon Lam, chief operating officer at Fujian Fucheng Network Technology.

“On the Chinese side of it, we have many of these small- and medium-size companies that seem pretty ignorant about how to use the Internet [for business]. So, we are basically going through the whole education process trying to bring them onboard so they can start to get themselves utilizing the IT and get all the data they need to manage their business. Right now, they don’t try to manage their business with data,” said Lam. Production and operational efficiency has been key to keeping demand within China, along with maintaining high production standards. New technology and big data is one low-cost way of achieving this. The

peer-to-peer-based sharing that Fujian Fucheng Network Technology provides follows the sharing economy trend in the country of carpool companies, shared bicycle schemes and many other concepts.

“They haven’t invested that much in technology. We help to organize what we call the micro factories. There are a lot of little factories, 20-person factories. What we do is a whole food chain, or what we call the quick order supply chain. We try to organize different micro workshops.

Then you have, on top of that, a facility that takes the orders and does some part of the automation and dishes out the other stuff to other workshops. Then they come back together and ship it. From that sense, we can have a quick turnaround within 10 days, which is quicker [compared to other countries] to a large extent,” said Lam. “Part of the big issue for [other countries] is if they get an order of some latest fashion, they have to find the material. Today, I have the advantage of finding the material in China, not over there.”

Big data can also be used to help some buyers and suppliers navigate the trade war with the U.S. by circumventing the U.S. tariffs through sharing information and outsourcing some production capacity to Chinese-owned factories in foreign countries. “Some [Chinese factories] invest in Bangladesh, Pakistan or India. Their factory could actually ship the product to the U.S. without the additional tariff because they do it from there,” Lam said.

“But if they do it from here and ship it over there, they would probably now have to incur the additional tariff. We help them to be more efficient, whereas in the past there was a gap of information.”

In total, 719 exhibitors with 825 brands from 14 countries and regions converged on Chic Shanghai’s autumn edition. This year, the biannual fair was moved forward from its normal mid-October timing, as the autumn-winter buying season has increasingly been pushed forward.

This was in line with the concurrent Intertextile Shanghai Apparel Fabrics fair, both of which were held at the National Exhibition and Convention Center. The Chic Shanghai fair organizers registered 58,400 visitors, which was similar to last year’s figure. Although, it was noted that footfall might have been lower this season as the fair fell between two important holidays in China — Mid-Autumn Festival and Golden Week.

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Exhibitors at Intertextile Shanghai expressed worries over the impact of the brewing U.S.-China trade war.

business

Sustainability, Performance Key for Chinese Textile Producers ● At the Intertextile Shanghai

Apparel Fabrics fair, apparel fabric brands discussed the features of innovative and sustainable textiles.

By Nyima Pratten

SHANGHAI — Performance fabrics and sustainability were a focus at Intertextile Shanghai Apparel Fabrics fair here as the growing middle class in China continues to fuel demand for ath-leisure fashions.

The popularity of healthy living and maintaining an active lifestyle has continued to open up a huge market for performance fabrics, with the latest innovations coming to the fore and ecofriendly, sustainable products resonating with the target demographic. At this edition, the fair’s functional lab had a 92 percent increase in space and a 111 percent increase in exhibitors in the product zone.

The rising middle-class’ higher disposable income and level of education also continues to drive demand. “Actually, the trend in China started three years ago. There were a lot of new brands, they focused on yoga, sports bras and activewear. Also, JNBY, a fashion brand in China, they have an individual line, it’s called River. It is an activewear line where they use a lot of recycled fabric,” said Jason Wu, sales manager at Carvico Trading Shanghai, an Italian company that produces technical fabrics such as Econyl, made from regenerated nylon that offers a muscular compression function.

Although these fabric innovations and sustainability measures are a positive step for the industry and the environment, there is still a long way to go. Companies are betting on the fact that this shift is part of the industry’s progression, and not a short-term trend, investing in research and development to upgrade their product offerings. “At the moment, [recycled fabrics] are just a selling point.

For example, our nylon comes from fishing nets, but when we make it into fabric with elastic, you cannot recycle it. This will come in maybe four or five years. We do not use any bad products like oil to make the new nylon yarn, so it’s good, but could be better,” said Wu. Judy Wang, manager of Swiss brand, Klingler Asia, which produces Pure Cool apparel fabric, a technology that works by embedding recycled jade into fabrics resulting in a cooling effect that lowers the body temperature, agreed there is increased demand for functional fabrics with sustainable features. “In the past few years, more customers are asking about recycled materials — recycled polyester or nylon.

They are getting more embracing of this and therefore we have developed more of these fabrics. The jade stones are natural, so we use these natural materials in our fabrics.”

Domestic manufacturers producing eco-friendly, sustainable fabrics are seeing growth within China and overseas. “I think that everybody, no matter which country they are from, knows the importance of health and they know there is the technology to protect the environment.

Chinese consumers are interested, definitely. I can feel that more and more people care about the environment and being healthy. Maybe our colors are not very bright or not very fancy, but they know about our product dyeing and they are willing to help. Chinese people get a higher education, have more knowledge about social responsibility, and are getting rich. After they get more money, they will consider more about the environment.

They will come back to nature,” said Leon Van of Shanghai Skeco Textile, a manufacturer that specializes in ecofriendly plant and vegetable dyeing.

“This [sustainability focus] all started from 2013, so about five years ago. And we believe we do have a future for China, but it really takes time,” said Wilmet Shea, deputy general manager at Messe Frankfurt Shanghai. “It seems like the domestic brands

are getting an interest for this [sustainable] section. This is from our exhibitors’ feedback, that they are getting more and more inquiries from the domestic brands.”

Some believe that the trend toward sustainable fabrics and leading a healthy lifestyle is only recently catching on in China, after first becoming popular in the West. “Normally, it is just kind of a concept.

It happens in some Western country, like North America or Europe, or some other area and then it will come to China,” said Ding Hongliang, president of Hemp Fortex, producers of organic, biodegradable fabrics. “Right now, we have some demand from the local brands, some big brands like Exception [de Mixmind]. They started to use hemp or natural fibers about 10 years ago, but they used it as a normal kind of textile product, not as a sustainable product. They didn’t promote that part, they just wanted the texture and unique hand feel for the line. But now, everybody is talking about sustainability. If you don’t get involved with sustainability, you will become an outsider.”

There has recently been a crackdown in China on polluting manufacturers in the textile industry, with many being closed. However, there are still no firm regulations in place for environmentally friendly practices. “If you’re talking about the textile industry, our partners in CNTAC, China National Textile and Apparel Council, have set up an alliance to do more about sustainability. So maybe later they will work on regulations on the textile industry,” said Shea.

Van, whose company produces in northeastern Liaoning province, also believes that regulations might be on the way. “Currently, the situation for chemical dyeing is still very strict, so it gives us a better chance to sell green, eco-friendly products. We dye the products under a normal temperature, not high temperatures, and also there are no chemicals, so no pollution. [The local authority] tests our products and they are trying to build some standard for the green products. Currently there is no official standard because it is quite a new project,” Van said.

Due to the increase in the cost of labor, and more stringent controls on manufacturing in the country, Chinese manufacturers have been forced to move up the value chain or risk going out of business. As other economies around the world have taken up the mantle of lowcost production, Chinese producers have had to shift toward innovative, high-end, sustainable products.

“In China, there is no space to make cheap stuff. This is something you can never change, with labor costs rising and all other things. About 20 or 30 years ago, labor was

the biggest advantage, and now it is not. It no longer exists. It is now in other countries like Bangladesh or India. I think people have to change. All the manufacturers have to change to face the pressure and the situation that our stuff is no longer cheap,” said Ding.

“You have to make your stuff so unique you don’t have to compete with anybody else that can offer the cheaper stuff. This is our only advantage.”

The escalating U.S. trade war was also on the minds of Chinese manufacturers at the fair. “We are going to do more business in Europe. I don’t think Europe will ever have the same issues with China like [President] Trump. And also, we are expanding our business to Australia,” said Ding. “We are trying as much as we can to keep the U.S. business, because so far, the garments still have not been taxed.

We do spinning, weaving, knitting, cutting and sewing, we are quite vertical. Fabric has just been taxed 10 percent more.

For example, for hemp fabric it was 0.6 percent, it was nothing, but now it is 10 percent. We can still work with it, and our customers have already asked for 5 percent support, so we agreed to share it.

I want to support my customers. The next step will be 25 percent. It will definitely put everybody out of business. It hasn’t happened yet, but there is $200 billion still waiting. I don’t think [we could share 25 percent], nobody could bear 25 percent. “[The trade war] is definitely causing trouble for us. The textile area just announced a trade war. So, I think maybe after the national holiday, if we have new shipments to the U.S., the import tax will be higher,” he continued. “This is not good news to our buyers. It will make our customers suffer, so then we will suffer.

We have actually started to sell more in the domestic market and non-U.S. market like the Australian market and the European market.”

The exhibition at the city’s National Exhibition and Convention Center drew 4,479 exhibitors from 33 countries and regions. Around 78,000 trade buyers, including buyers from the concurrent CHIC and PH Value fairs, attended from 110 countries and regions.

This year, the timing of the fair was brought forward from mid-October to late September. At the time this change was revealed, the organizer said, “The autumnwinter sourcing season has steadily moved earlier in the year, and this change in timing is necessary to ensure Intertextile Shanghai remains the leading business platform for both suppliers and buyers in the global apparel fabrics and accessories industry.”

However, there was much discussion at the fair about whether this was the right decision. Golden Week, China’s weeklong national holiday, is held from the Oct. 1 to 7 every year, when factories across the country shut down for a week, making the timing inconvenient for buyers who wished to visit suppliers after the fair. Others believed that the date change was still not early enough, with many buyers already making their decisions at European fairs during the summer.

“After the expos in Paris would be better,” said Irfan Boran, owner of Turkish apparel fabric company Erka, who was visiting the fair. “We have already made many decisions. Right after PV [Première Vision, held in Paris in July] is better. That is when we decide and give the orders.”

The organizer confirmed that this new September date will continue next year, however. “We think it was the right decision to move to this date. You don’t always get 100 percent positive response when you change something, but maybe to international companies and to Chinese as well, it was the right decision because October was too late,” said Olaf Schmidt, vice president of textile and textile technology at fair organizer Messe Frankfurt.