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Healthy margins drive exporters towards domestic markets
25
Feb '09
The production capacity of apparels is about 60 billion pieces per annum in China, of which 50 percent of the output is equally meant for domestic and export purposes. The slowdown is global markets is driving manufacturers to explore domestic markets, but experts opine that it will be difficult for the domestic markets to absorb this excess capacity in the long term.

In recent years, domestic clothing market sales have grown by a healthy 15 percent per annum and are expected to increase by 10 percent in 2009, taking in to account the weak consumer confidence since last September. Considering that more and more apparel companies are concentrating on domestic markets, the proportion of domestic and export sales ratio is expected to change from 50:50 to 70:30 in 2010.

The reduction in profit margins in export sales from a healthy 8-10 percent in previous years to just 1-2 percent in 2009, is driving the manufacturers to towards the domestic markets which are delivering margins of 3-4 percent. So other than shutting down their plants due to slowdown in export markets, they consider it prudent to switch to domestic sales, which also generates decent returns.

Fibre2fashion News Desk - China

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