Over the past three years, the overstock of Japanese apparel industry has been exacerbated by backlog.
From the perspective of two-way value exchange between sales and consumption, the core problem lies in the conflict between oversupply and inappropriate demand. The reality is that clothing circulation timely, suitable products, moderate supply and demand adjustment function has dropped rapidly.
1, attribution analysis
From the internal analysis of circulation system structure, the root is the transformation from vertical division of labor to horizontal division after rapid development after 1990s. Vertical division refers to traditional grading, wholesale and retail circulation, and horizontal division refers to integrated SPA circulation.
The traditional practice is to classify wholesale and retail circulation mechanism. The main way is to promote bulk ordering according to the preseason exhibitions and samples. Wholesalers can adjust the rhythm of supply and demand time and play the role of channel adjustment.
In view of the disadvantages of the traditional wholesale and retail mechanism which is not flexible and the grey interest trading zone is difficult to evade, the SPA system, which is highly regarded as a manufacturing and retail integration, arises at the historic moment. The main method is to buy lots of goods at a time in the first few months of the season.
But in recent years, the problems brought about by this mechanism have begun to appear, that is, all the things that are not selling well are all backlog, and there is no time to adjust and sell them in a classified way. The best sellers are imitated and processed by other businesses in a short period of time, and homogenization suddenly increases, resulting in the overheated backlog of similar products.
There are always two sides to things. The SPA system has two driving points: low price and large volume. These two driving points bring about new problems, such as mass expansion and long distance production, and long scheduled time to slow down, leading to a reduction in final digestibility.
In addition, the brand independent planning of individual categories and items increased sharply, resulting in the rapid growth of the overall apparel industry supply. Over the past 28 years since 1990, the number of clothing purchases in Japan has increased by 18%, but the supply of clothing has increased by 2.42 times.
2. Validation analysis
There are two data indicating that the SPA circulation mechanism is the main reason for the large number of unsalable stocks. One is the W/R ratio, the other is the stock turnover evolution of the big brand SPA operator. (see illustration)
First, the W/R ratio can show the efficiency of circulation. W refers to the volume of wholesale trading (B2B). R refers to the amount of retail transactions (B2C). From the direct relationship, the smaller the coefficient of wholesale sales divided by retail sales is, the less the intermediate circulation amount will be, and the higher the circulation efficiency will be.
In 1990, the W/R ratio of textiles, clothing and daily necessities was 2.54, that is to say, wholesale trading was about 2.5 times that of retail sales. This ratio was compressed to 1.842018 years in 2000 and evolved to 0.65 and 1.
Both OEM and ODM are representatives of the SPA system. With the acceleration of the development of manufacturing and retail integration, the efficiency of circulation seems to be greatly improved. However, the contradiction between supply and demand has increased and the efficiency of circulation has deteriorated. Because we did not fully consider the wishes of consumers, we neglected the objective reality of the decline of final digestibility.
Excluding the unhealthy factors in the middle circulation, the purpose is to improve efficiency and seize the opportunity. As a result, risks and opportunities are concentrated on SPA operators. After the omission of the wholesale function, there is no good substitute mechanism. SPA operators themselves can not solve the problem of their own circulation and the overall circulation of the industry well, but on the contrary, the efficiency of the large and medium-sized circulation links has been reduced, including the stock turnover of big brands.
From the perspective of consumer preferences, after the financial crisis in 2008, a number of surveys and studies have shown that Japanese consumers are more willing to "fade away" life, more sensitive to the price of clothing, and less in demand for purchases. In the past, symbolic clothing demand evolved into ordinary daily necessities, which cost a lot of money and rely on "dressing up" to beautify or fill the needs of their personality to cool rapidly.
At the same time, compared with the SPA low price commodities, the consumption of wholesale prices of wholesale brands is shrinking, and the bias of supporting high price brand consumption is polarized.
Second, the stock turnover of big brands is generally not optimistic. In the final accounts of UNIQLO in August 2018, the inventory calculation standard has changed, and the inventory turnover has decreased from 5.01 to 3.10 times in the previous period. By the end of August 2019, the same calculation method, the number of turnover turns down to 2.43 times. The general trend is deteriorating whether it is a warehouse or a manufacturer's warehouse. In view of other related factors, the actual turnover time is already close to 2.
The situation of Muji in Japan is basically similar. In February 2019, the number of turnover of goods was 4.95 times. After a comprehensive adjustment, it fell to 2.44 times, taking into account the inventory factors such as manufacturers and development and design, plus the backlog of stock and the scheduled production inventory in the previous season, which is also close to 2.
3, other factors
The circulation mechanism of large and multi brand SPA leads to lower efficiency and other factors.
First, shops are dispersed and multiple channels are taken into account, so we have to increase the volume of distribution. Due to the expansion of many stores, the scale of procurement has to expand, the inventory of shops is dispersed, and the opportunity loss and physical property caused by supply and demand gap are increasing. Reducing the inventory of single and item items and thinning the stock means reducing the vitality of the customers at the store. Considering the reserves of online sales, store inventory must be thickened.
Second, from the analysis of department stores in the main channel of clothing sales, it is very difficult to break the barriers of compound operation. That is suitable for the emerging consumption trend, and it is not yet seen through the profit management between the brand and category and the floor area. Due to the popularity of online shopping, outdoor leisure trends correspond to the differentiation of brand specialized shops, and the marketing ideas are gradually opened up in the roadside shops, the outdoor sports cross-country activities in the comprehensive commercial facilities, the outskirts of the city, and the casual consumption of urban outskirts. The consumption concept of compound choice has become popular. However, the department stores specialized brand stores are still sticking to their traditional ideas, unwilling to change substantially, and are unwilling to change their brands and other brands. Women's clothing and men's clothing are distributed on different floors. Although there are some combinations of lovers in sports category, the dominant perception impression is single sex or single category counters.
Beyond the category barrier, the best example may be Quixote and the drugstore chain. Their sales and gross margins continue to improve.
It is summed up in one sentence that the problem of Japanese apparel industry is not able to follow up the adjustment of consumption volume and consumption preference at the right time. Moreover, there is no good solution to this problem. With the continuous shrinking of population and the more consumption values, there will be more variables in the pattern of clothing production and circulation. From 2019 to October, Japan began to raise the consumption tax, until the performance trend of the clothing market in January 2020.
Source: Pan Yuming, member of the joint venture's senior advisory group.