Bricks and Mortar stores will always exist, however...
Lihua Zhu, Chief Executive Officer of Dishang Group, talks about the current scenario of the textile and garment industry in China and rest of the world, in an interview with Fibre2Fashion Correspondent Ilin Mathew.
Synopsis:
Founded in 1993, Dishang Group is a large comprehensive and diversified group of companies that traces back to the Weihai Textile Group Import and Export Co., Ltd. Taking import and export as the core area, the company also focuses on garment trading, garment manufacturing, domestic sales and overseas brand agency, overseas investment, etc. Dishang group owns over 40 subsidiary companies and 45 international trading divisions.
Zhu started his career in the clothing industry as a garment designer at the Weihai Garment Factory and gradually he was promoted to senior management positions. In 1998, he became CEO of Weihai Textile Group Import & Export Co., Ltd, and since 2006 he is also the CEO of Dishang Group Co., Ltd.
Excerpts:
Textile sector wages in China have risen by 125 percent from 2001 to 2011. What is its impact on the Chinese apparel industry?
The impact of the increases in cost of labour has already been absorbed and has forced a restructure of apparel business in China in a number of ways:
-Manufacturing has become more efficient to reduce the labour content
-Production of simple garments have in some cases been exported to lower labour cost -countries such as Bangladesh, and
-Many small and medium size Chinese manufacturers have gone out of business.
Despite China’s global dominance, the rising production costs have led many low-margin fast-fashion brands to exit the country in favor of cheaper manufacturing countries. Do you think that it will have a negative impact on the Chinese apparel sector? How?
We have seen a number of only marginally profitable Chinese producers closing their business in recent years. For Dishang, this has presented opportunities rather than problems. Also, fast fashion businesses have typically produced their garments much closer to the point of sale as lead times have been a bigger consideration than price.
Dishang Group is the first Chinese company to purchase a South Korean clothing company. What are the major factors that attract the global clothing industry to South Korea?
The market in South Korea is very strong and vibrant. We already have strong relationships in the region and expect to learn a lot from this experience. For us it is a natural evolution of our original design manufacturer (ODM) business model.
Your company has more than more than 20 years of experience in developing technical fabrics and apparel solutions. What technological advancements have taken place in this sector over the years?
For us, the production of garments in reality is not so different now as it was even 20 years ago. However, the use of computers for the development and specifications, patterns and general communication has greatly speeded up the development cycle.
Countries like Cambodia and Myanmar are expected to take a greater share of shift in low-margin production away from China. Do you see these countries competing with China in the apparel business in the longer run?
Countries like these have a very small population and low capacity relative to China. We expect that their wages will rise very quickly in the next 2 or 3 years due to demand pressure.
Besides China, Dishang Group has its presence in the US, Europe, Japan and the Middle East. How will the upcoming trade partnerships like the Trans-Pacific Partnership (TPP) and the Asean Economic Community impact your business?
The key for Dishang is the potential free trade area between China, Korea and Japan. This represents an important and significant part of existing Dishang business, which will continue to strengthen and grow, particularly in light of recent acquisitions in Korea.
Do you think that womenswear segment is shifting from labour intensive to knowledge intensive segment? Can you elaborate on it?
For us, this is true. We are focusing on understanding trends and developing designs and fabrics which meet the customer needs more quickly each season. This is important as customers are constantly looking for new products and fresh ideas; if we can provide them we can grow.
How will e-commerce affect the entire textile-apparel value chain in future? Will it change the way business is done at present? Will it mean an end of bricks and mortar stores?
Bricks and Mortar stores will always exist, however they will become a showcase for the brand experience and less a place to make purchases.
Do you agree that a new generation of highly affluent, knowledgeable and discerning Asian consumers has emerged over the years? How can the garment industry ensure satisfying their demands?
Of course. The Chinese middle class is now a real engine of growth for the whole Asian economy. You can see this in the rise of Asian brands and also in the growth plans of the existing European and American retailers, which are predominantly focused on store openings in the Far East. This is supporting the domestic garment production industry and there are lead-time and tax advantages in making the garments within China.
What prospects do you see for the Middle East garment industry in near future?
The current instability in the Middle East is very bad news for the region. We are currently receiving a number of enquiries from potential customers who are looking to transfer production to China in order to guarantee continuity of supply.
What is the importance of transparency in sustainable production for textile supply chain?
This is becoming more important every day. We are working with a number of customers to find ways to improve the sustainability of our production facilities and are happy to make these necessary changes – but it takes time and must be supported. In order to improve the transparency of our supply chain we have also worked hard to consolidate the number of suppliers we use and become an important customer who can influence their standards and compliance.
You have once said, "It was not an easy decision to say I will give up everything and start my own business." What is your message to the new entrepreneurs who would like to enter into apparel business?
When I started in the apparel business, the beginning was hard, but starting today would be even harder, so I would say 'Prepare for The Challenge!’
