The editor chatted with a cloth boss two days ago and asked him about the market situation.
Boss Bu was also very talkative, so he started talking. Their business is divided into two parts. The big boss is in charge of the factory, and the small boss is in charge of the trading company. Just two departments of the same company have experienced a series of ups and downs in recent years.
Orders and profits should be kept large and small?
In the beginning, their family only made gray cloth. When the young boss just graduated, he worked in his own factory, preparing to inherit his father’s business and continue the factory.
But since 2019, the gray fabric market has plummeted, the fabric is no longer easy to sell, and profits have also been declining.
The young boss was also a thoughtful person. He felt that it was difficult to survive by only making gray fabrics, so he started to start an independent trade. Because I have been exposed to it since I was young, I have support from my family, and there is a factory behind me, so I am doing well. Especially in 2021 and 2022, foreign trade has exploded, and coupled with a wave of exchange rate dividends, factories have become fiercely competitive. Instead, it suffered a slight loss and largely relied on profits from trade to subsidize the factory.
But this year’s market situation has happened to be reversed. Foreign trade is sluggish, and there are not many orders in the market. The income from the trade part has dropped sharply, but for the factory part, even if the profit is very low, at least the goods can always be shipped and can maintain At a break-even level, you can even make a little profit because there is enough work to start, and you can make small profits but quick turnover to dilute the costs. Of course, you can only make a little profit. After all, in the current textile market, you can only guarantee one order and profit.
I may not be able to protect anyone in the future.
The current situation seems to have saved the weaving factory’s order. Although there is no profit, the factory can still operate. Although there are fewer orders in trade, the main costs of trade are labor and sales department rent. If there are fewer orders, the hard expenditure of this part of the cost is still acceptable. But this situation is only temporary. In the long run, trade orders represent downstream demand, and thus represent the final consumption of produced cloth.
Although many weaving companies now say that as long as the price is low enough, there will be enough customers to get the goods, it is obvious that this phenomenon is difficult to last.
If you want something to sell easily, one way is to create demand, and the other way is to expect the price of the thing to increase. Now the demand cannot rise, and it will be difficult for companies to buy it if they speculate on prices when the demand cannot rise.
No matter how low the price is, the amount that middlemen can purchase is limited. If the terminal cannot deliver the goods, they cannot collect unlimited amounts.
At this stage, taking advantage of the low prices, many autumn and winter fabrics have begun to be shipped in advance, which has indeed brought a wave of orders. However, total demand is limited. Future orders are now made in advance, and the stock of future orders is reduced.
How will the market recover?
In general, it is necessary to have market confidence.
Although this thing sounds simple, what is lacking most in the current market is confidence. Both domestic and foreign countries are experiencing the process of “paying off debt” after rapid development. When a company has money, the first thing that comes to mind is to reduce liabilities and reduce risks, rather than investing in expanding production.
The same is true for residents. In the past, they were willing to spend when they had some money. However, the current economic situation is not good, and they are more willing to save when they have money. Among the basic necessities of life, although clothing ranks first, scarcity is not the most important. If life is really difficult, people can choose not to buy new clothes and wear old clothes, and textile consumption will not increase. If everyone thinks so, there will be no shortage of orders.
If you want to solve this problem, you need to repay the “old debts” from previous years. It is easy to owe debts, but you can only pay them back slowly. Therefore, it will take some time for the overall market confidence to recover.
The good news is that from a global perspective, China is indeed the most promising country to get out of the predicament first because of its solid manufacturing foundation.
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