California Apparel News

HONG KONG—The word out in the vast halls of Hong Kong Fashion Week, where mostly Chinese manufacturers set up booths, is that competition is tapping at their doors from northern Chinese factories and volume business is gravitating toward Bangladesh, Cambodia and Vietnam.

In the last two years, labor shortages, rising prices and delivery problems have haunted Chinese factories, forcing many U.S. and European clothing companies to reboot their sourcing strategy.

With more competition around the world, attendees at the Spring/Summer 2012 show felt there were fewer buyers roaming the two exhibition halls. The July 4–7 event was held at the Hong Kong Convention Centre.

Still, participation by apparel and textiles factories at Hong Kong Fashion Week inched up slightly this year to 1,313 exhibitors, compared with 1,294 last year.

Despite the slower traffic, exhibitors felt there were more-focused buyers. “I think the show is good because the customers are very sincere,” said Danny Lo of H2C Clothing Limited, a Hong Kong company that does denim and chino pants for such clients as Billabong, Baby Phat and Miss Me. He said the company’s prices are up 5 percent to 10 percent over last year, but wholesale levels still are a bargain at $9 to $15 a pant. The company’s factory, 35 minutes across the border from Hong Kong in Shenzhen, has 1,200 workers, down from about 2,000 three years ago.

Parminder Sandhu, of denim maker Success Time in Hong Kong, believed the show’s ambience was quieter than in years past. “There are fewer buyers, but the ones that do come are serious,” he said.

Meena Ahuja, founder of Ahuja’s Web Pvt. Ltd., in New Delhi, India, has been coming to the show for 10 years to sell her tops and dresses. She perceived the show to be slower than in previous years and filled with price-conscious buyers.

Alice Xu, a merchandiser for Ningbo Yungdu Knitting Garments Co. in Ningbo, China, was disappointed. “I think customers have taken a holiday,” she said.

Kapil Mago of Kack India, which makes dresses and blouses in India, has attended the show 14 times. “Not so many people are coming to the show, because they are buying from other countries,” he said.

Maggy Chuan, trade manager for Tong Xiang Boer Garment Co., near Ningbo, China, was waiting for buyers to wander by. “I don’t think this time it is a good show because there are fewer customers and people aren’t ordering as much, she said.”

But Mukesh Sharma of Shree Dayal Exports from Jaipur, India, was more upbeat. “The response to our dresses and skirts has been good,” he said. “We have gotten good new clients from Europe and the United States.”Sourcing 2.0

While many Chinese factory owners say production problems have stabilized, sourcing managers are looking down the road and seeing a burgeoning domestic market in China that will be their competition in filling clothing orders. With more industries opening up in the hinterlands, Chinese workers are staying closer to their hometowns instead of migrating south, where the bulk of the apparel industry is located.

“The young [Chinese] people don’t want to work in factories but [like] shopping malls and restaurants,” said Kevin Gardner, head of Stingray Worldwide, which sources custom promotional apparel and other products from its Addison, Texas, headquarters. “The biggest problem is the volatile price increases, edged on by the declining value of the dollar; higher cotton prices; and soaring labor rates.”

Gardner is moving some of his production to Bangladesh. Still, 80 percent of his orders are done in China.

For Jing Xu, director of sourcing and production for Shennel Trading Group in Ontario, Calif., China has always been the spot where she and her colleagues go to source artsy apparel items, such as colorful shawls, sold to Chico’s, the U.S. retail chain that caters to the misses client. “We are just beginning to do business in India,” she said.

China started to lose its luster two years ago when labor rates shot up 20 percent and many workers didn’t return to the factories after Chinese New Year. This year, wages are up 10 percent to 15 percent, but that still hasn’t kept workers from snatching up jobs in other industries.

With an eye on resolving this problem, the Chinese government has been encouraging businesses to open up apparel factories in northern China, where labor is more abundant and cheaper but farther away from urban centers.

“Our biggest competition right now is in northern China,” said Parminder Sandhu, sales manager for Success Time Ltd., a denim maker based in Hong Kong that operates factories in southern China. He was standing in the middle of a booth plastered with blue jeans whose back-pocket designs were encrusted with rhinestones or metal studs. The company does business with importers who supply mid-tier department stores such as Kohl’s and JCPenney.

Vincent Fang, chief executive of Hong Kong–based The Toppy Group, admitted that a lot of the volume business was drifting to other Asian countries with cheaper labor. But, he said, you can’t beat the workmanship found in Chinese factories. “The Chinese currency is appreciating, labor costs are high and there is a labor shortage, but you cannot replace Chinese workers. They are very good with their hands,” he said.

His company has a factory in southern China with 2,500 workers—down from 4,000 a few years ago. The factory makes T-shirts and tops for Polo Ralph Lauren and helps to supply Toppy’s more than 400 Episode, Jessica and Weekend Workshop stores in China, Hong Kong and other parts of Asia. The company also has a factory in Nicaragua with 1,000 workers.