The New China Strategy

October 9, 2019

“Getting out of China” seems to be all the rave these days. Costs have been rising every year and the recent tariffs have been the straw that broke the camel’s back for many companies now accelerating their rush to start manufacturing outside of China. But at The/Studio, we’re taking a somewhat contrarian view. 

In theory, we agree with most supply chain strategists: every company should have a strategy to supplement a large portion of their production out of China. It’s true that China is becoming less competitive. However, for small batch and quick turnaround time manufacturing — which happens to be retail’s safest chance at competing with Amazon — we believe that China will still be the most competitive manufacturing market for at least the next 10 years.

Of course, if you want to do 300,000 jackets and you don’t need production done for more than 6 months, you should not consider China. Countries like Bangladesh will give you the ability to produce for less than 50% of the costs of China. In other words you should be thinking about Bangladesh, India, Vietnam, and even Ethiopia for your more stable conservative collections. Styles that you know will sell year after year and you can easily predict the sellthrough. However, if you need to get 300 limited edition backpacks to your warehouse in 6 weeks, then China remains the perfect solution — and really the only solution. 

After all: when you are doing a large production run of 300,000 pieces, it’s almost guaranteed that at least some of the raw materials are coming from China. This is one of the reasons that although other countries offer much cheaper prices than China, they are much slower — they’re importing raw materials to their low-cost labor. But when you need speed, you should stay close to the raw materials — and that’s China.

Additionally, the country has the most advanced capacity to quickly manufacture products. And because of the pressure on factories in China, they’re increasingly more willing to leverage their strengths that other countries can’t compete with. This feeds perfectly into the hands of any brand looking tom do small batch and quick turnaround manufacturing — and that should be virtually every brand.

For almost any modern ecommerce brand, 20% to even 80% of your items should be tests, limited editions and trendy offerings to attract new people to your brand. It’s absolutely imperative that your brand is constantly exploring new ideas and communicating to your customers that you’re on top of trends. We see this every week. Recently, one of our customers had a huge unexpected hit seemingly well outside their usual offering: reusable straws. While nothing like their other apparel and accessories often, the product was in fact a completely logical sell for their environmentally conscious community. Reusable straws were a great way of conveying that and truly inspiring their community to do better for the environment, but it took a quick, dynamic test to prove that.

So should you be moving out of China? Yes and no. For the sake of a stable and affordable supply chain, every brand should develop sourcing strategies outside of China. But for quick turnaround time, and specialized manufacturing, China will be relevant far into the future. Seeing is believing — try a quick, small-batch order with The/Studio’s intuitive Create tool to experience exactly what I’m talking about. 

 

The New China Strategy