Japan's Textile Importers Association revealed that import in price in the first half year of textiles in 2006 increased by 14.6% to 1,194.6BJyen. Volume increased by 4.3% to 488.039million ton. Japan imports about 90% of garments from China, followed by Korea. Japan's high reliance on China is due to low labor costs (formerly), speedier shipment time and low cost of shipment. Still many companies were becoming aware of their high-reliance on China and the negative influence due to rising labor costs. Whilst companies are finding ways out of China manufacturing, they are seeing China as the next big market to target.
With labor prices going up in China, and there seemingly lies the trend among the Chinese factories to favor American and European manufacturing than the Japanese due to larger volumes and less intensity on quality, Japan's industry is looking into other prospective areas of production. Going further away from China would increase shipment cost and time so the most focused area is Hunchun, near the border of Russia and Korea. There is hope that a new route of shipment will open in due time and already Japanese companies have plans on building factories in that area. Japanese factories are procuring employees from areas in the suburbs of China to keep the costs lower. They give bonuses to employees who can introduce workers from the outer areas.
Another strategy is to get out of China and most are looking at Vietnam as the next China. Onward Kashiyama and another apparel firm in Fukushima will jointly invest in building an apparel manufacturing factory in Vietnam. This new joint venture is a plan to lower reliance on China, where most of Onward Kashiyama's apparels are produced, and also to take advantage of lower costs in Vietnam. 60% of Onward Kashiyama's women's apparel is produced abroad, Labor costs in Vietnam is said to be 40% lower than that of China, and overall costs will be 10% lower.
In terms of launching their brands in China, department stores are not the only ones. Mitsukoshi will finish up their contract with their store in Hong Kong and concentrate on business in China. Even though they carry high priced goods, Japanese department stores are capturing the hearts of the wealthy Chinese population. Trading company Sojitsu will begin selling their McGregor brand in China from next spring through their subsidiary Nichimen Infinity. They target the wealthy Chinese population and will sell 70% of products sold in Japan. They will be sold in 3 Japanese department stores in China and hope to have 6 more stores by 2008.
Onward Kashiyama will be enforcing their brand Rose Bullet in China which was launched simultaneously as the launch in Japan, China, and South Korea. They will also be launching a new brand in China and increase the number of stores to 110 by February 2007 from the present 84. They project retail sales in China will increase by 50% this fiscal year to 3.3BJYen. They are putting strength on individual stores. Renown will be strengthening their position in the Chinese market with their brand D'urban and Kent & Curwen, both a high priced range. They will be bringing in other brands and in total be sold in 89 stores, from their 79 at the end of the year 2005.
So manufacturing is out and marketing is in. Of course there are alternatives in getting out of China manufacturing such as the Hunchun strategy, and also the down side in marketing in China as some companies are facing. But it cannot be denied that China is no longer a country to be relied on low costs. The Chinese consumers are as brand oriented as the Japanese making them as great of a opportunity market as Japan is. Some Japanese fear that China will take over Japan's position in Asia, and at the pace that we are going; such day is not too far away.