In 2017, Belle International was delisted due to the obstruction of online and offline development and the decline in performance year after year. Since then, Hillhouse Capital, which helped it complete its privatization, has led the spin-off and restructuring of Belle International's business, divesting its sportswear business, Tobo International Holdings Limited. In 2019, Topball International Holdings Limited was listed on the Hong Kong Stock Exchange.
Zhang Lei of Hillhouse Capital once said that the asset quality of Belle International's sports and apparel business is of high quality, but it is dragged down by the footwear business, and the overall market value is low, and it can obtain a higher market value after the spin-off and listing.
Another brand, Daphne, which was once known as the "king of shoes", also suffered consecutive years of losses. In 2020, Daphne announced the withdrawal of its mid-to-high-end brands from its brick-and-mortar retail business in Chinese mainland and Taiwan, and closed all other brand sales points.
The head of the enterprise is still like this, the new brand is undoubtedly more difficult to enter, and the fashion shoe fulfillment industry is difficult to do is the consensus of the industry.
Lengthy and expensive supply chain
"At that time, I was really fearless, and if I knew that it was so difficult to make shoes, I really wouldn't have considered entering this industry." Yu Qing, founder of designer brand last in ehco, said about interface fashion.
Founded in 2018, Lost in Echo is an already well-known designer accessories brand in the industry. Starting from the shoe category, lost in echo has also gradually developed two categories: jewelry and bags. Its footwear products are priced in the mid-to-high-end price band of 1,000 yuan to 3,000 yuan.
Yu Qing said that compared with the process of clothing patterning, the supply chain of shoes is more lengthy. Clothing samples can be modified and adjusted many times, but the last is more expensive as a mold to determine the shoe type, and the fault tolerance rate is small. Shoe shape is also related to foot comfort, which is more delicate and more difficult than the adjustment of clothing fit.
Lost in echo loafers
At the same time, shoes have a wider range of sizes than clothes. Each shoe size should be arranged with a separate last.
According to Wu Feng, the price of a set of women's shoe last mold is about 30,000 yuan, if you want to arrange the general six sizes (women's shoes 35 sizes to 40 yards), the mold cost of a shoe is 180,000 yuan. According to the general public brand MOQ 5,000 pairs of calculation, the mold cost of each pair of shoes apportioned is 36 yuan, plus a pair of basic, good quality soles, the cost is at least hundreds of yuan, so the total cost of the shoes that open the mold to make orders will reach more than 500,000 yuan.
This is still the large-scale shipment volume of commercial brands, for start-up brands, the total single volume is small, and the cost of single and double is bound to be higher. Wu Feng also said that in order to reduce production costs, some small-volume brands will use the production method of piece-sole shoes, that is, use a mold to form at one time. But such a production process can not meet some complex designs.
And the order volume is even more difficult for start-up brands. The small order volume that has just entered the market and tested the water means that it is difficult for new brands to quickly cooperate with factories that are accustomed to taking large orders.
Leading companies like Belle Fashion have their own supply chain to ensure production capacity. According to belle fashion group prospectus, the company has 89 footwear production lines, with an annual output of 17.7 million pairs of shoes. However, smaller brands obviously cannot reach the order scale of such large-scale factories, and need to gradually open up factory relationships on their own.
Yu Qing said that the first month of the initial launch of lost in echo placed seven or eight hundred pairs of orders, which is just in line with the MOQ of some boutique shoe supply chain enterprises. The cooperative customers of these factories include light luxury brands such as Calvin Klein.
However, with the steady growth of order volume, how to make the capacity and response speed of these boutique supply chains cooperate with the brand new has become a follow-up difficulty. "We asked for the first order to be delivered in two months and returned in 25 days, but there were various problems such as scheduling. For example, the first order has exceeded the production capacity of this factory, and the return order is handed over to the new factory to re-run in. She said.
Inventory pressure is difficult to solve
Inventory is another source of stress. Due to the non-standard shoes, coupled with the large volume of shoe box packaging, and the need to prepare goods with different shoe sizes, their inventory requirements are higher than those of clothing and cosmetics.
Moreover, the seasonal and regional nature of fashion footwear sales is very strong. Wu Feng said that the general winter boots are sold first from the northeast region, and the summer sandals are the first to start from south China, and they will be ready for sale two months before the seasonal change.
How to dynamically adjust the ratio of head orders and supplementary orders not only tests the brand's response speed to different regional markets, but also challenges its inventory and capital chain management. In the event of an emergency such as the epidemic, poorly sold stockpiles will become seasonal inventory, which may also affect resources such as funds for the development of new products.
How to grasp the stock volume has also become the reason why it is difficult for new brands to open stores offline and choose to start online.
However, all respondents acknowledged that having an offline experience where multiple pairs of shoes can be tried on repeatedly is crucial for footwear brands. However, an industry insider pointed out that for reasons of cost control and risk control, new brands often have less than one store in SKU shops. These have not yet taken into account the actual costs of offline rent, manpower and so on.
Yu Qing is also considering opening the first offline store in rest in echo, but it is mainly to convey brand image and content, not sales-oriented. Whether the supply chain can dynamically follow the pace of offline supply is the most urgent difficulty to be solved. "Even if you wait for the goods online, the offline goods will affect the consumer's experience of entering the store." She said.
What can be seen is that all aspects from production to sales have set a threshold for new brands to enter the market. The characteristics of traditional manufacturing mean that shoe brands can only dilute costs and seek further development if they are scaled up.
So, the question ultimately boils down to, how can new footwear consumer brands quickly scale?
Can the digital transformation of Belle's recent opening of its first flagship store in Chengdu become a new opportunity?
The hotly discussed "flexible supply chain" in the apparel industry has made rising stars such as SHEIN a challenger to zara, H&M and other fast fashion giants that have been established for many years. At present, the record of the shortest time from response to order to delivery of products has reached 5-7 days.
The concept of flexible supply chains also affects those working in the footwear industry. However, according to the above-mentioned industry insiders to Interface Fashion, the fastest shoe production cycle still takes 20 days. The complexity of the supply chain and the length of the production cycle make it difficult to achieve the path of explosive iteration and user co-creation advocated by new consumer brands.
In fact, the idea of digital transformation has emerged among the top companies in the footwear industry.
Hillhouse partner Li Liang has publicly stated that since the privatization of Belle in 2017, more than 120 employees of Hillhouse's digital post-investment empowerment team have entered Belle to help its digital transformation.
Belle Fashion's prospectus says that it has equipped an intelligent production management system and a product lifecycle management system to automatically convert product orders for different SKUs and priority levels into requirements for raw materials and capacity, provide real-time information about material parts in the manufacturing process, and create a data-driven and traceable production environment to improve manufacturing efficiency.
In addition, Belle Fashion has developed a proprietary merchandise management system that covers the entire merchandise lifecycle, including purchasing, merchandising, replenishment and restocking systems, with a central order dispatch system that handles orders across all sales channels.
A similar vision of digital transformation has also made progress on other listed shoe companies. In March 2020, Tianchuang Fashion introduced Beifeng Capital as a long-term partner through the transfer of equity agreements, which held 5% of the shares of Tianchuang Fashion. From the perspective of public information, the intelligent transformation of the supply chain is the main direction of cooperation.
But for start-up brands, it is still difficult to find a supply chain production similar to digital transformation, let alone spend huge costs and efforts to build a digital production line of its own, or persuade cooperative factories to cooperate with the transformation and upgrading.
It is worth noting that these attempts at digital transformation are still the exploration of head enterprises in their own production lines, and they have not yet become successful cases that can be replicated by the entire industry. To some extent, this also indicates that the supply chain upgrade that new footwear brands are looking forward to is still far from the future.
(At the request of the interviewee, "Wu Feng" is a pseudonym)