Changing patterns

Garment makers in Dongguan, like Sanflag, need to realign resources and readjust capacities to avoid financial risks caused by global economic uncertainty. [Photo by Zhong Nan / China Daily]

"I am not saying that we are not interested in the domestic market, but there are still some rosy spots in the international market worth tapping. But for that, companies need to come up with new growth strategies and prior knowledge of market segmentation," she says.

Lianhing initially focused on selling knitted underwear, night-wear and jogging suits in overseas markets. Like many others, the company also faced problems like stiff competition and price wars.

"I realized that my company needs to find a new channel to improve the financial conditions," Ye says. "Therefore we decided to change our main product from knitted underwear to polyester swimming suits and sports wear. There is less competition now and a growing demand for our products in the US, Europe and South America."

In 2009, swimming and sports wear accounted for just 15 percent of Lian-hing's OEM business, far behind other low profit products like underwear and night-wear. Buoyed by orders from the US, the UK, France, the Netherlands, Brazil and South Africa, the company's exports of swimming and sports suits was about $18 million last year, and accounted for 90 percent of the total exports.

To attract more international clients, Lianhing has spent $500,000 on a new English company website. It has also procured OEM orders from big international brands like Disney, Quelle, Karstadt, Neckermann, E.Leclerc and Mothercare.

Some garment makers in Dongguan are shifting their focus to markets in South America, North Africa and South Asia as the economic growth in these regions offer prospects for a higher intake of garments.

Joneaa Jeans Co Ltd, a Dongguan based garment company, was one of the major exporters of OEM jeans to Europe and realized a turnover of 80 million yuan in 2008. However, its overseas sales declined in 2010, and exports dropped to 24 million yuan due to the global economic crisis.

"The financial crisis has had a negative effect in the US and European markets. We can no longer rely on them for orders, as there is no sign of a pickup in demand," says Xie Qundi, president of Joneaa Jeans.

Xie says the reality has prompted her company to look for new partners in emerging markets.

While many garment factories are vying to gain market share through the OEM business, Joneaa Jeans has added a 25-member team to design new-style jeans for the needs of various foreign clients in an attempt to lessen its dependence on OEM production.

It expects to tap into the growth in developing nations by introducing more jeans under its own trademark. The company had bagged overseas orders worth 17 million yuan by February this year with most of them from developing countries.

The company has also spent 4.7 million yuan on advertisements in magazines and the Internet to promote its products in countries such as Russia, Iran and Brazil. "Our products have benefited from the stringent European standards of the past several years. With proper branding and promotion, we don't see any difficulties in selling the products in developing nations," Xie says.

To diversify its product categories and strengthen its market popularity, Joneaa Jeans is planning to sell more products like jeans skirts, jackets and shirts in emerging markets this year.

However, Xie is worried that rising raw material costs may push up prices and in turn affect buying patterns.

Chen Yaohua, chairman of Dongguan Association of Textile and Garment Industry, says garment factories in Dongguan should focus more on creating independent brands and high value-added products.

"They are too focused on the OEM businesses or in making copies of well-known foreign brands. They have no brand building or capital enhancement plans up their sleeve. There are also no efforts to improve the design capabilities or to set up global, regional sales networks," Chen says.

You may contact the writers at zhongnan@chinadaily.com.cn and liwenfang@chinadaily.com.cn.