“Orders are scheduled to the end of April next year”

“Orders are scheduled to the end of April next year”

Source: First Finance

“It’s too late to make orders now. The orders we received at the end of September have been scheduled to the end of April next year.”

After experiencing a precipitous slump under the impact of the epidemic, Jin Chonggeng, the deputy general manager of Zhejiang Ginza Luggage Co., Ltd. (hereinafter referred to as “Ginza Luggage”), told China First Finance and Economics that the company’s foreign trade orders have rebounded strongly this year. Now there are about 5 to 8 containers sent out every day, while in 2020 there will be only 1 container per day. The total number of orders for the year is expected to increase by about 40% year-on-year.

40% is a conservative estimate of this leading enterprise in Pinghu, Zhejiang.

As one of the three major luggage production bases in China, Zhejiang Pinghu mainly exports travel trolley cases, accounting for about one-third of the country’s luggage exports. Gu Yueqin, secretary-general of Zhejiang Pinghu Luggage Association, told First Finance that since this year, more than 400 local luggage manufacturers have generally been busy working overtime to catch up. Foreign trade orders have maintained a growth of more than 50%. The export volume of luggage in the first eight months of this year has increased by 60.3% year-on-year, reaching 2.07 billion yuan, and 250 million bags have been exported.

In addition to Zhejiang, Li Wenfeng, Vice President of the China Chamber of Commerce for the Import and Export of Light Industry and Handicrafts, pointed out that orders from Guangdong, Fujian, Hunan and other major domestic luggage production areas have seen rapid growth this year.

The latest data from the General Administration of Customs shows that in August this year, the export value of cases, bags and similar containers in China increased by 23.97% year on year. In the first eight months, China’s accumulated export volume of bags and similar containers was 1.972 million tons, up 30.6% year on year; The accumulative export amount was 22.78 billion US dollars, up 34.1% year on year. This also makes the relatively traditional luggage industry another case of foreign trade “order explosion”.

Before the epidemic is expected to resume

Compared with ordinary cases and bags, travel trolley cases are more affected by the epidemic, which makes the rebound with the recovery of overseas travel market more significant.

“At the bottom of the epidemic, only one quarter of the local trolley cases were shipped.” Gu Yueqin said that in the tough times, more enterprises maintain their basic operations by reducing production capacity and transferring foreign trade to domestic sales. The strong growth of foreign trade orders this year has enabled them to regain their vitality, which is expected to return to the pre epidemic state throughout the year.

Different from clothing, the orders of travel trolley case enterprises have no obvious difference between low and peak seasons. However, at the end of the year, it is often a busy time for various manufacturing plants.

“I’ve been very busy recently. I’m busy trying to catch up with the goods.” Zhang Zhongliang, Chairman of Zhejiang Camacho Luggage Co., Ltd., told First Finance that the company’s orders had increased by more than 40% this year. By the end of the year, they need to pay close attention to the orders placed by customers in August and September. Among them, 136 containers have been delivered to their largest customers in the first nine months of this year, an increase of about 50% over last year.

Although the foreign trade order has been placed seven months later, Jin Chonggeng said that because the supply of the entire industrial chain and the workers on the production line of his own factory have shrunk during the epidemic, when the foreign trade market for luggage has picked up strongly, it is now at the stage of “production capacity and supply chain are still not matched”. In addition, the domestic market has not recovered to the pre epidemic level, so the overall production capacity of the enterprise has only recovered to about 80% of the pre epidemic level.

On the one hand, it is difficult to recruit workers due to the great increase of labor demand, and on the other hand, the supply of parts and components in the supply chain is in short supply, which makes the phenomenon of “no one does anything with orders” prominent.

In fact, Jin Chonggeng made preparations as early as the end of last year. He said that at the end of last year, the company expected the next market rebound. The production line and sales layout were prepared in advance, and it also communicated with the supply chain to increase the upstream production capacity and increase the inventory of spare parts. But the overall recovery obviously needs time.

Facing the rebound of the market, the supply chain is also accelerating the recovery of capacity. The head of a new material science and technology company in Pinghu City, which produces pull rods and other accessories, said that this year’s orders increased by 60%~70% year on year. Last year, there were only more than 30 workers in the factory. This year, there are more than 300 workers in the factory.

Gu Yueqin predicted that the overall case and bag export orders in Pinghu City this year are expected to recover to the pre epidemic level. Jin Chonggeng also believes that the rebound in the export market should last at least until the first half of next year; In the long run, the luggage market will also recover to the double-digit growth rate before the epidemic – before the epidemic, their domestic and foreign orders grew at a rate of about 20% every year.

Transformation response under “double circulation”

As the world’s largest manufacturer of luggage, China’s top two export markets for luggage products are the European Union and the United States. With the rebound after the epidemic, the demand of the foreign trade market is polarizing towards the high-end and low-end, and Chinese enterprises have made efforts at both ends.

Gu Yueqin said that the bags produced in Pinghu are mainly exported to three major markets: the EU, the United States and India. They are mainly medium and high-end, and most of the styles are independently developed by enterprises. Under the policy dividend of RCEP (Regional Comprehensive Economic Partnership Agreement), orders from relevant regions are also increasing significantly. Among them, the export of Pinghu bags to RCEP countries was 290 million yuan, up 77.65% year on year, exceeding the overall growth rate. In addition, orders in Australia, Singapore and Japan have increased significantly this year.

According to the financial report, the net sales of New Xiuli (01910. HK) as of June 30 this year was 1.27 billion US dollars, up 58.9% year on year.

We also have our own brands of Ginza bags and suitcases, which are OEM products for brands such as Xinxiu. Jin Chonggeng said that the overall positioning of the company is middle and high-end, focusing on the European and Southeast Asian markets. This year, orders in Australia and Germany rose most significantly. For orders exported to the United States, Jin Chonggeng suggested that they are also considering transferring part of their production capacity to Southeast Asia to mitigate the risk of trade friction.

As the low-end market demand has increased, a luggage enterprise in Zhejiang added a factory in March this year to meet the low-end demand in more regions.

The resilience of China’s supply chain is also reflected in the dynamic balance between domestic sales and foreign trade of these enterprises under the “double cycle” pattern.

“In 2020, we will focus on domestic trade, which will account for 80%~90% of sales. This year, foreign trade orders will account for 70%~80%.” Jin Chonggeng revealed that before the epidemic, their foreign trade and domestic sales accounted for about half respectively. Flexible adjustment according to changes in the global market was an important basis for them to usher in the recovery of the overseas market, and also benefited from their efforts to start the layout of “export to domestic sales” as early as 2012.

As one of the second batch of provincial domestic and foreign trade integration “pacesetters” enterprises announced by Zhejiang Provincial Department of Commerce, Jin Chonggeng has transformed from the original OEM based processing to a model of co development with ODM centered on brand building and self built sales channels.

In order to gain greater competitiveness and profits in the uncertainty, more and more enterprises are also transforming to the high-end through innovative design and building their own brands, and actively embrace e-commerce and plan to “go global”.

“The sales volume of our own brand accounts for about 30%, and the profit margin will be better than that of OEM orders.” Jin Chonggeng said that no matter cross-border e-commerce or domestic live broadcast platforms, they have begun to use their own brands to make efforts to the C end, and have also accumulated some experience.

Xinxiu Group, a tourism luggage enterprise, established a provincial key enterprise design institute in Pinghu several years ago. Zhao Xuequn, the person in charge of the design institute, said that the export sales of their self-developed products accounted for about 70% of the total exports, and the profit margin of their own products would be 10 percentage points higher than that of ordinary products. The weighing luggage launched by the company through independent research and development has sold millions of pieces, and this new product has really promoted the development of the enterprise.