1 April 2000
COUNTING ON QUALITY (HKTDC Fashion - Fabrics & Accessories, Vol 01,2000)
Vol 1 2000
HONG Kong textile manufacturers are calling on all their resources to stay ahead at a time when prices and margins are being squeezed and several traditional markets are shrinking. Supplying products that are in demand, such as twill, Lycra and other stretch fabrics, they offer a wide range of high-quality textiles, as well as decades of manufacturing and exporting experience.
The SAR's manufacturers sell primarily into the upper and middle range of the market, says Raymond Yuen, research officer for textiles and fabrics at the Hong Kong Trade Development Council (TDC). Much of Hong Kong's strength lies in the variety available. Although NAFTA has meant more basic fabrics are being sourced for the important North American market, from Mexico in particular, manufacturers in Central and South America do not produce high-end products, says Yuen. Blended fabrics from both natural and synthetic fibres, which are popular now, are an example of this and an area where Hong Kong companies are quite strong.
While overseas buyers are, increasingly, dealing directly with fabric manufacturers, there is still a large market for fabrics coming from Hong Kong-based sources, which might be manufacturers or agents, says Yuen.
TDC figures show that as of December 1998, there were 1,495 textile manufacturing establishments within Hong Kong itself, which collectively employed 18,533 people. The numbers for Hong Kong-owned factories within mainland China would likely be considerably greater, although the precise figures are unknown.
The mainland offers both an opportunity and a challenge to Hong Kong companies. Bill Walker, director of Coles Myer Asia, based in Hong Kong, notes that the quality of the mainland's textile manufacturers is improving, especially in northern China. "But at the moment," he says, "the bulk of the quality production is in Guangdong province", and much of that, he acknowledges, is Hong Kong-owned. In addition, Hong Kong manufacturers are very flexible. "They appreciate the need for supply side management, and they're au fait with the marketing demands in western markets. That's very important to retailers."
Walker believes that, apart from the demise of denim, there is no really clear trend in fabrics, although there is an increased use of twill, for items such as cargo pants, in demand by the Generation X buyers, and more stretch fibres, such as Lycra.
Goretti Lau, director and general manager of The Quicken Textiles Ltd, agrees that flexibility and quick response are what maintains the competitive edge of Hong Kong suppliers. It is the value-added element that local manufacturers can offer. Because Hong Kong prices are not cheap -- "our weaker side", she says -- the product range tends towards the upper end. However, with the recession, wages have levelled off and raw material costs are down.
Lau deals mostly with the brand buyers directly, enabling her to see exactly what their demands are, at first hand. For Quicken Textiles, she finds that stretch denim is doing quite well and has a lot of potential. The company is also offering wider-width products, as an example of a value-added service. Its markets remain quite wide-ranging, including the US, Europe, the mainland and Pakistan.
Flexibility and efficiency are themes echoed by Lydia Chu, general manager of sourcing for VF Asia Ltd, the Hong Kong-based buying office for leading US brands such as Wrangler, Lee and Jantzen. Chu says the company does not have any preference for buying from locally owned companies, but that Hong Kong businesses have been exporting for a long time and have built up great expertise in this field.
Hot items right now are stretch products generally, such as Lycra, in the view of Robin Chong, sales manager for Po Cheong Industries Ltd, a company with a 30-year history of selling to the US, Europe and South Africa. "Everyone is asking for this," Chong reiterates.
Chong says that times are difficult and may not pick up anytime soon, but he believes Hong Kong manufacturers can continue to offer the service, delivery and quality that customers demand. He finds that clients are still split evenly between those representing the brand names, and traders or buying offices based locally.
Hong Kong Non-Woven Fabric Industrial Co Ltd's executive director Peter Lee explains that his sector is quite limited and although there are new applications, the non-woven market remains very small. However, he notes that one advantage Hong Kong-owned companies have is their financial standing and expertise. That can be useful within the mainland where local Chinese companies have to apply for foreign currency, in a procedure that is both rigorous and bureaucratic.
"Most of the mills prefer payment of L/Cs in US dollars," says Lee, and this is especially the case because Hong Kong manufacturers that cater for the higher end of the market usually need to source from overseas. "Their relationship with the mills is better too," Lee points out, and that can help when time is of the essence. In general terms, Lee thinks Hong Kong firms offer a better service and wider range of products than others.
Nonetheless, Lee believes the days of the middleman are numbered, except for very small orders. Buyers, he says, are increasingly going direct to the manufacturer.
Few would be complacent. The managing director of one large buying office located in Hong Kong says they never look at the ownership of a particular supplier. They deal with whoever can offer the service they demand. It is, he observes, a totally global business.
This might perfectly suit Hong Kong firms. Kenneth Fang, managing director of Fang Brothers Knitting Ltd and head of the TDC garment advisory committee, says SAR firms have considerable advantages when they set up the manufacturing process overseas.
If they manufacture in Hong Kong, costs are against them, Fang says, but if they do so overseas -- and it could be in places such as Thailand or the Philippines, not only the mainland -- then they have lower land, labour and energy costs. As a result, "With their knowledge of world markets and their management teams, they are well able to compete".
High costs have forced much of Hong Kong's manufacturing industries to relocate to the mainland and elsewhere. But the brains of the operations -- sales and marketing, quality control, logistic arrangements and clothing designs -- remain firmly within Hong Kong. It is a transition that has proved remarkably smooth and efficient.
Written by Alan M Abrahams
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