Inventory: The Ultimate Paradox Of Apparel Retailing

Roland Bart, a French philosopher, describes the value and significance of clothing in the popular system - semiotics and costume code.

The sophisticated computing industry must nurture consumers who do not know how to calculate. If clothing producers and consumers share the same awareness, clothes will only be purchased and produced at a very low loss. Fashion fashions, like all popular things, depend on the gap between these two consciousnesses and strangers. In order to passivate buyers' computing consciousness, we must create a virtual image of a veil on the cover, namely, the veil of image, reason and meaning, making it a consumption image.

In this consumption environment, clothing is essentially a product of constant upgrading. In the process of upgrading, clothing inevitably produces inventory.

These inventories will actually bite the clothing retailers and bring heavy cost burden to the enterprises. The paradox of culture and commerce is almost impossible to escape, especially when consumption is cold.

A set of data released by China Merchants Securities in June 17th this year. In May 2019, the growth of total retail sales of consumer goods continued to slow down. Consumers in the current environment, consumption is not enough.

This situation has further affected the situation.

In the contradiction between the renewal logic of production and the expected decline in the consumption of money, the clothing retailers in 2019 are just in a dilemma.

One

Apparel retail crisis

Everbright Securities in June this year released the "textile and garment industry in the second half of 2019 investment strategy" gives such a set of data.

Since the two quarter of 2018, the overall growth of the industry has slowed down due to the sluggish demand for the terminal. The profitability index (net interest rate) and operating capacity index (inventory, accounts receivable turnover) and the index of withdrawal have been weakening.

Industry revenue growth slowed down, net profit fell. Statistics apparel retail industry is divided into ten sub sectors of the 38 companies, the industry in 2018 total income of 128 billion 695 million yuan, an increase of 10.76% over the same period, the first quarter of 2019 total income of 33 billion 166 million yuan, an increase of 5.55% over the same period.

Compared with the historical growth rate, the growth rate of the industry in 2017 was significantly faster than that in 2016, and the growth rate of revenue increased from single digit to 14%. In 2018, the income growth rate slowed down to 11% compared with 2017, and slowed to 6% in the first quarter of 2019.

Part of the reason for this is clothing inventory.

In terms of operational capacity, inventory turnover has accelerated and slowed down since 2018, and accounts receivable turnover continued to slow down.

After 2012-2016 years of adjustment and digestion, inventory turnover improved in 2017, and the trend continued to 2018, indicating that the industry's efficiency in operation and control of goods has been improved.

With the increase in external demand weakening since the two quarter of 2018, inventory turnover has slowed down in the first quarter of 2019, and the weakness of terminal demand has increased the difficulty and interference in the industry, and the number of turnover days has continued to slow down.

This set of data illustrates several problems.

1, under the general trend of cold consumption, it seems that the relatively small impact is also affected. Domestic clothing consumption demand is weak, and few people are willing to buy clothes.

2, clothing enterprises are facing the problem of inventory turnover due to the lack of demand, and the number of days of inventory turnover is prolonged.

It can be said that the apparel retailing industry is in a great crisis. The crisis can even be seen as structural.

In 2018, there was a case of debt default by famous clothing retailers. High debt and high inventory will be enough to drag enterprises into bankruptcy and reorganization.

If we look at this dimension from the cycle stage, the domestic situation is very similar to that of Japan in 90s.

At that time, Japan's economic downturn, the traditional clothing leader Nwad, Sanyang chamber of Commerce and so on are generally facing the situation of declining revenue.

At that time, these enterprises were mainly supermarkets, department stores and wholesale mode, and the rate of increase was high. Enterprises paid more attention to the rapid expansion and occupation of the market. They did not pay enough attention to fine operation, and the retail efficiency was relatively low, and the price of products was high.

This is basically the same as the current situation of most apparel enterprises in China. But later, UNIQLO and other brands enhance the efficiency of supply chain, shorten the retail links, provide cheaper price performance products, meet consumers' needs, and gradually open up the situation.

Although the situation of high inventory and high profit can be maintained at the moment, but with the gradual spanparency of the industrial chain, how long this kind of non health condition can last is actually a problem.

Two

Inventory problems

It would be more direct to see a set of forms of Orient Securities.

Most of the apparel enterprises have more than 150 days' stock days, and very few enterprises can control the stock days in less than 100 days.

The problem is that inventory has become a major cancer that affects profits and production.

What is interesting is that in June 13th, Semir clothing issued a notice on investor relations activities.

In response to questions raised by investors about controlling inventory risks, Semir said in its announcement that the problems faced by Semir brands are mainly to take account of high-speed development at the same time, to accurately predict market demand, to balance the relationship between production plans and actual sales needs, and to keep inventories within controllable range.

There is a very important message: the ultimate challenge facing Semir is how to spanform the advantage of the content into the potential energy of the brand so as to "solve the inventory problem thoroughly".

There are two reasons why Semir would disclose such information:

1, since 2018, the number of stock days is rising, which has affected the rapid development of enterprises to a certain extent.

2, we have reached the turning point of the industry. Under the condition of insufficient consumption, we can only reduce costs and increase profits through meticulous management of inventory.

From these two points of view, Semir may have realized the problems existing in China. And I hope to find a breakthrough through the way of self - change.

You know, Semir is still a better company in which the inventory turnover is better, and the problems facing other companies are actually more serious.

In fact, compared with Japanese enterprises, the inventory capacity of Chinese apparel retailers is generally relatively low.

Japan's professional investment relations website IRMAN has exposed a data in September 2018. From the days of inventory turnover, the good plan is 81 days, that is, all goods in the store are replaced on the 81 day.

You know, it also includes life products, which are relatively long stock cycles.

That is to say, the number of days of apparel inventory cycle for the good plan may be less than 81 days - or even about 70 days.

From 2015-2016 years to the 2018-2019 annual report this year, whether it is clothing, daily necessities or food, the plan of good quality is very small. Although we can see that the amount of stock is rising, if we calculate the yen inflation rate by 2% in 2018, the inventory of the good plan has hardly increased.

According to its "mid-term business plan of 2017-2020", the company intends to reduce inventory by 50% by 2020. The meticulous management ability of Japanese enterprises is most vividly reflected in the good quality plan.

In contrast, there is too much room for improvement in China's apparel enterprises' inventory management capability. The cost of Chinese enterprises generally over 150 days of inventory turnover is alarming.

1, warehousing costs, along with the manpower and spanportation costs, will directly bring down profits. This is also a major reason why domestic apparel retailing has such a high profit margin. High profit is actually for cover inventory risk.

2, clothing will gradually reduce the price cut, the inventory cycle extended every 1 years, will lead to clothing can not sell prices, eventually leading to a decline in profit margins. Finally, if the clothing inventory cycle is too long, it will even face the risk of burning.

Three

Qualitative change of supply chain

From the experience of Japan, domestic apparel retailers may need to seek qualitative change in the supply chain. Product positioning, individual management and coordination of all links should be reorganized.

1, product positioning: brand positioning, once positioning is accurate, customer groups determine, cost is not a problem, procurement of suitable raw materials, production process control, can produce and positioning corresponding products.

At present, clothing retail enterprises often take pictures in the process of clothing production, and design directly according to their own preferences. Lack of research on subdivision. Take women's clothing as an example, domestic clothing retail is often divided into luxury, high-end, less ladies dress and other categories.

But foreign clothing companies will even continue to subdivide under the big category, such as small flowers, lace, beige and pink lady design, which will continue to differentiate and provide different products for each group.

2, single management: we can see the company's inventory management from the 2018 annual report published in February 2019.

As a matter of fact, this is only a part. The tracking of Muji's stock situation started five years ago. The company will look for a consulting firm to conduct a comprehensive analysis of the company's past five years' operating conditions (including inventory turnover) and formulate plans for each year. Then rectify the inventory according to the actual situation of each year.

In the face of the inventory problem, the Muji technology has surpassed most of the domestic enterprises.

3, connecting upstream and downstream efficiency: for domestic apparel retailers, we should pay more attention to the upstream and downstream connections. Inventory management can also rely on social networking providers and other supply chain management techniques.

The S2b2C social business model, like love inventory, is much more concerned about finding high-speed and effective solutions to inventory. The efficiency of connecting upstream and downstream is becoming the lifeblood of garment enterprises. Love inventory can enhance the control capability and flexibility of the whole chain of supply chain.

This is also the most unique advantage of Chinese enterprises compared with foreign enterprises. In China, WeChat and other social networks have become one of the important channels for clothing sales. The third party electricity supplier based on WeChat ecosystem can empower the brand clothing enterprises and bring about reshaping of the supply chain. The real advantage of social business is socialization, data and systematization. Enterprises can also achieve inventory management capabilities.

The inventory problem of apparel retailing is a paradox of culture and production.

On the one hand, clothing retailing enterprises need to stimulate production and profit through updating and upgrading. On the other hand, updating will inevitably bring about inventory problems, and inventory is likely to backbite enterprises.

Vance ckard's garbage maker said: the way to change the mass society, counter cultural rebellion, has accelerated our fashion outdated cycle, which is under the banner of personal expression.

But technology is likely to alleviate this "fashion obsolescence" process, allowing enterprises to maintain a relatively healthy balance in this paradox.