Dongguan: Apparel Textile Profits Only 3% Some Businesses Closed

The fabric trading market used to operate on a monthly billing system, but now cash transactions have become the norm. The typical profit margin in the textile industry is around 8% to 10%. However, when customers absorb the rising costs, this margin drops significantly to just 3%. Cloth traders are now pushing for cash payments across major shopping malls in Dongguan, especially for fall and winter clothing such as thick coats, light autumn wear, and down jackets. Last year, a thin down jacket could be bought for around 300 yuan in the mall, but this year, similar items have climbed to approximately 500 yuan, with some branded items even higher. According to reports from several brand counters, ONLY has increased its autumn and winter collection prices by 50 to 100 yuan per piece, while VEROMODA has raised prices by 100 to 150 yuan. Other brands have also seen price increases of about 10%. Rising prices are inevitable, but what’s the current situation for suppliers in the garment industry chain? In November, at the Humen International Fabric Trading Center in Dongguan, some businesses are choosing to temporarily halt operations rather than close down completely. Why? “Prices fluctuate daily, and some businesses are holding off on placing orders to wait for stabilization,” said Huang Yihong, a representative from the center. Previously, most transactions were done on a monthly settlement basis, but now everything requires cash upfront. Cotton prices have surged nearly 50% in just six months. Since March, raw material costs for garments have remained high. Cotton prices rose by 25% over half a year, directly impacting the textile and garment industries. Huang Yihong explained that cotton prices began rising gradually in October last year. By the first half of this year, secondary cotton was priced at around 17,000 yuan per ton, up from 14,000 yuan at the start of the year—a 25% increase. In August this year, cotton yarn was priced between 28,000 to 30,000 yuan per ton, but it has now jumped to 48,000 yuan. Cotton fabric, which previously cost 8.8 to 9.2 yuan per meter, peaked at 16 yuan in early November, and is now slightly lower at 15.5 yuan per meter. Ouyang Dudun, owner of London Textile Trade Co., Ltd., noted that from October last year to the first half of this year, cotton prices had risen by 40% to 50% across different types. The apparel and textile industry is now operating with a meager profit margin of about 3%. Cai Youzong, general manager of Dachangbuye Textile Co., Ltd., said that rising costs are making business extremely challenging. “Not only fabric prices are up, but zippers, hardware, and processing fees have all gone up. Many orders are being placed at a loss.” Cai recalled an instance where he signed an order with Wen Chung on October 30 for 15 yuan per meter of dyed fabric. The next day, when he tried to purchase the base fabric, the price had already jumped by 1.6 yuan to 16.6 yuan per meter. It wasn’t available at that time, and after waiting five days, it reached 17.5 yuan per meter. “This meant I was losing money on that order.” Because of such experiences, Cai no longer signs orders without first securing a quote. “We pass on the pressure to our clients, but we also bear part of it. For example, if prices rise slightly, customers will negotiate with us. Considering long-term relationships, we usually agree to share the cost.” He added that his usual profit margin is 8% to 10%, but after passing on the cost to the customer, it drops to just 3%. Although cotton prices have recently stopped their rapid ascent, suppliers are still cautious. “Cotton price hikes have slowed, but price cuts haven’t happened either because there are no stocks in the spinning mills, and prices can’t drop. New cotton won’t be available until April or May next year, creating a significant market gap. Cotton prices will definitely go up again. Don’t rule out the possibility of Wenzhou merchants manipulating the market by controlling the supply chain and hoarding cotton.” As one supplier put it, “Lower prices are better for us, but if we can’t make a profit, we won’t do it at all.”

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