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As costs rise, is China's manufacturing heyday near its end?

  1. Chinese importing
    iStock_Narvikk
    Francois Badenhorst

    Francois Badenhorst Deputy Editor Staff Member

    Posts: 91 Likes: 18
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    Importing goods from China isn’t as cheap as it used to be thanks to the weaker pound, rising Chinese wages and increasing material costs. And British retailers and Chinese manufacturers alike have started to feel the pinch.

    A Chinese factory deputy director summarised the issue for Bloomberg recently: “There’s just no possibility for me to cut prices anymore because costs are already pretty high and I don’t see any possibility they’ll go down, I’m seeking opportunities to raise prices a little bit.” In China’s textile industry alone, wages there have been rising at an annual compound growth rate of more than 12 percent.

    The rising costs in the Far East have trickled down to wholesalers. UKBF member BlackMagicX has noticed the hike in price. To address the issue, he now wants to cut out the middleman and source directly from China. But, he wonders, is China’s position as the factory of the world over? Is it time to look elsewhere?

    Maple Sourcing, who works in the Chinese manufacturing scene, offered the following advice: “Although overall cost in China is rising … China is still the main manufacturing hub in the world.

    “There are ways to cost down, the key is the order quantity. If you can afford to order a larger quantity, the suppliers will be happy to offer you significantly better prices. A way is to place a big order and pay a little deposit (say 10%-20%), and then ask suppliers to ship in multiple batches and only pay balance against each shipment. We're doing this all the time.”

    GraemeL agreed, suggesting BlackMagicX should make the trip to China to find the best deal for himself. “There are still enormous opportunities in China,” he counsels.

    But for some small retailers, the spike in prices has been severe enough to already prompt a change in tactics. Jacqui Ma is the founder and designer of Goodordering, an East London bag company. According to Ma, “the rising costs have made it approximately 20% more expensive to buy the stock and this cost cannot be passed onto the end customer”.

    “So in effect, our profits are down and we are forced to look at different, more creative ways to sell our bags other than through wholesale (where the margin cut is hurt the most).” The “creative” ways Ma refers to are through marketplaces like Etsy, Amazon and Not On The High Street. Thanks to higher import costs from China, she now aims for 70% direct sales.

    “As well as through apps such as Depop, most of my website referral traffic comes from Instagram. I also gain more face to face exposure through markets such as 'hipster' Broadway Market near where I live, as well as bike festivals such as Ride London.”

    But if the costs in China are causing a headache, is there an alternative? As BlackMagicX asks, “Now that the bubble is bursting, where is the next manufacturing hub?” There are alternatives like Vietnam, India and Cambodia. Countries, as Ma says, “that have less infrastructure” but lower costs. The Far East still maintains its Achilles heel: the expense of importing goods from far away.

    For Ma - and many like her - destinations closer to home have become attractive. “I wouldn’t switch to Vietnam or India: if anything I'm investigating manufacturers closer to Europe in places like Turkey and Spain/Portugal,” she says. “I would look to make my product more premium. For example, earlier this year I raised the price of my bestseller by £5 and no one blinked an eye. In fact, sales increased.”

     

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  2. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    Posts: 8,033 Likes: 1,654
    Many items of Workwear are now made in Europe in the smaller states to the East. also Morocco and Malta, Not massive quantities compared with China but growing all the time
     
    Posted: Aug 24, 2017 By: Chris Ashdown Member since: Dec 7, 2003
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