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Cashmere exporters shift focus to domestic sales
Sep '08
After gaining a global reputation for being a leading cashmere manufacturer, China now boasts of having over 2,000 established companies engaged in the industry. However, due to unsatisfactory payback from the international market, the cashmere industry is now shifting its focus from expanding exports to increasing domestic sales.

The change although gradual, is perceptible from the strategies being adopted by large-scale enterprises like The Erdos Group, who has already slashed its initial export plan from 4.5 million garments to 2.5 million his year. On the contrary, it has plans to invest 800 million yuan in domestic market over a period of five years to set up 100 flagship shops.

Xinjiang Tianshan Wool Tex Stock Co Ltd, combined for the first time its international and domestic order fairs into a single event, hoping to boost domestic sales to equal its exports.

Statistics have revealed that China supplies more than 75 percent of the world's cashmere and 90 percent of the high-quality goat cashmere and after about 20 years of development, the country's manufacturing system can churn out 40 million items annually. Last year, China's cashmere garment exports amounted to 20.37 million garment pieces worth US $623 million.

From being a major exporter of the raw material, the country in the preceding years has strengthened its production base for finished products. But what has been concerning entrepreneurs is that the international market did not offer China benefits equaling its abundant resources and robust production system.
The value of expensive material did not reflect in export prices. The average export price of a cashmere garment was only $30.58 in 2007 which did escalate but to a mere $32.5 in the early months of this year, but only due to the strong currency.

Over a period of time, it was observed that profit margins in export-oriented processing trade was less than 10 percent which was definitely not enough for sustaining operations. However, it was realized that the figures could be pulled up to 40-50 percent by enhancing domestic sales.

A survey conducted on the market showed that a cashmere garment sold in domestic market would reap profit four times higher than if exported. On the flip side, a section of market observers held strongly that domestic market may not be large enough to consume all the products actually meant for being exported, besides, perpetuating inflation has dampened the willingness of consumers to buy expensive luxury goods.

This was amply borne out from the fact that domestic sales of cashmere and woolen sweaters sore by only 4.3 percent during the first four months of this year, while garment sales grew by 15.2 percent.

In a bid to resolve this paradox, the industry has been recommended to shift from quantity to an emphasis on higher value-added products and branding as only this would help achieve a stable growth and create strong brand identities.

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