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Garment suppliers leverage experience, start own labels

"South Korean company Hansae Co, boasts of global renowned clientele like Zara, Abercrombie & Fitch, Nike, Patagonia and many more. The company has been a front player in global apparel industry for years, making shoes and shirts in South Korea in the 1980s and then moving factories to China and other developing countries as labour costs rose. After gaining traction for three decades and mastering the art, the company now wants to focus on its own brand. As Anna-Karin Birnik, a brand consultant based in Singapore opines, it’s a highly commoditised market."

 

 

Garment suppliers leverage experience

 

South Korean company Hansae Co, boasts of global renowned clientele like Zara, Abercrombie & Fitch, Nike, Patagonia and many more. The company has been a front player in global apparel industry for years, making shoes and shirts in South Korea in the 1980s and then moving factories to China and other developing countries as labour costs rose. After gaining traction for three decades and mastering the art, the company now wants to focus on its own brand. As Anna-Karin Birnik, a brand consultant based in Singapore opines, it’s a highly commoditised market. A lot of firms see the opportunity not just to manufacture for others but since they have the manufacturing capability, to leverage that and develop their own brands and command a higher price.

Garment suppliers leverage experience start own labels

 

Hansae’s operating profit is also pointing towards the same. The company’s founder Kim Dong-nyung said 30 per cent of this year’s operating profit is expected to come from their own-label business and the number will rise. Hansae posted around $1.38 billion in sales last year. And as Na Eun-chae, a Seoul-based analyst at Korea Investment & Securities Co highlighted clothing OEMs have good cash flows, with few cash expenditures required once they have grown to a certain size, and are in stable financial condition, which helps them fuel dividends or make investments. They are more interested in investments, expanding their businesses for growth.

Similarly Sae-A, operating more than 40 factories in 10 countries, including Vietnam, Guatemala and Haiti, in 2007 took over South Korean women’s fashion retailer In The F Co, which owns labels such as Joinus and Compagna. Sae-A, which reported 1.9 trillion won in revenue last year, plans to expand the unit by launching a range of golf wear next year.

Close competitors

These famous Korean companies have competition from companies in China and Taiwan. Taiwanese producers Makalot Industrial and Eclat Textile, which produce clothing for brands such as Gap, Nike and Under Armour, have started making apparels for a new private-label line from Amazon.com Inc. On the other hand, China’s apparel giants Shenzhou International Group Holdings, developed their businesses during China’s consumer export boom. Added to this, marketing, distribution skills and the ability to anticipate the fickle tastes of the consumer pose a greater challenge.

While companies have been gaining muscle in their home turf, it’s equally tough once you venture in unknown terrains. For instance, Chinese clothing maker Bosideng International Holdings, which makes down-jackets for giants including Adidas AG, opened a 35 million pound store in London’s Mayfair five years ago. But it had to shut shops recently, despite being the most successful outwear supplier in China. The company seems to be concentrating on restructuring its domestic business, at the same time it is also keen on acquiring foreign labels to expand in China and is negotiating with a Japanese kids’ wear label. Benjamin Durand-Servoingt, a Paris-based partner at McKinsey & Co, highlighted that moving to regional countries or even going global, OEMs don’t have the necessary understanding of how to operate in different markets, how to do retail and marketing to different types of consumers. The easiest way is to acquire existing players.

 
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