Denim Searches for Growth in a Stable Market

After enjoying a solid market in 2016, mills are quite optimistic about 2017, despite the intensity of a highly competitive market.

“The market has been stable this year and from what I see it is going stay the same next year,” Marcus Fung, director at Unique Denim told Inside Fashion.

“The demand for denim fabric is steady, yet people keep looking for more cost-efficient products, and due to oversupply on the fabric side, it still is not easy,” added Andy Zhong, sales manager at Prosperity Textiles.

For the denim sector, the challenge is where to find growth. For many suppliers, there are few new markets so it comes down to grabbing market share from a competitor.

“The volume is there, but it is not growing,” said Rinze Koopmans, a consultant to US Denim Mills. “Traditional markets, like the U.S. and E.U. are not growing the way they used to. The only place you can find that level of growth is in Asia, and maybe in South America. If you want to do volume business, you have to find a way to grow your business in those market,” said he told Inside Fashion.

However it’s not only about growing sales, today suppliers are increasingly taking a more serious look at their bottom lines.

Growth must also come from developing profitable niche markets. Here the volumes are smaller, but the margins enable suppliers to breathe. This means greater product innovation and differentiation.

“We expect business to be better in 2017, however, the growth will come from production innovation. It is the new developments that help us win more orders,” said Mr. Koopmans.

On the Light Side

Lightweights are seeing growing demand. Lighter weights are perceived as more comfortable and are often cheaper than heavier weights. At Kingpins New York, many of the big mills, including Prosperity and Mou Fung, launched their lightweight collections and received good feedback from brands like Polo Ralph Lauren and Armani Jeans who are moving towards lighter weights.

“We believe lightweight fabric is going to be a big trend for next season. Brands are interested in lighter fabric. For bottoms, usually, it is below 10 oz. For shirts and tops, it is below 8 oz. It is not just us, many other mills are developing their light weight product lines,” Vincent Lai, director at San Shing Cotton Weaving (HK) Ltd.

“Even selvage denim is getting thinner and lighter," Mr. Lai told Inside Fashion.

Mou Fung has developed a series of new lightweight (below 8 oz) bi-stretch fabric using its Powerfree technology. With finer count yarn, mills are able to make fabrics even lighter.

US Denim also developed a new spinning technology that enables it to make lighter weight products without losing durability.

Japanese Denim Gains Momentum

Once a niche market, Japanese style denim is seeing growing demand. Buyers who are searching for ways to differentiate their collections are driving the interest.  Japanese style denim is becoming a popular direction.

Advance Denim and San Shing are leaders in developing the new Japanese style products.

“Rich textures and unique looks are the main selling points …buyer are not looking for basics. Something with a unique look is necessary to catch their attention. We take inspirations from traditional Japanese style denim, and then make our own interpretations of this style. For example, a lot of the old Japanese fabrics are using prints. We modified this and use jacquards instead to create similar looks,” said Mr. Lai at San Shing.

Mou Fung has developed a new Japanese-inspired paper yarn denim called Washi denim. It uses premium Japanese paper yarn in the weft and the final product has a dry crispy hand feel and offers enhanced moisture wicking.

Functional Fabrics Continue to Perform

Performance remains a key word for next season. At the moment, it is still a niche part of most collections, however since the athleisure trend is taking off in multiple markets, many mills are betting on the future growth of performance products.

“About 10-15 percent of our products have some kind of performance. It is still a small part of our business, but we expect its share to continue to grow in the future,” said Roy Yim, sales director at Mou Fung Limited.

“As part of our move into more functional denim, we have partnered with Hyosung to promote our new TRANS-FORM collection that features creoraFit fiber technology,” said Mr. Zhong at Prosperity.

Raw Materials Prices Put Pressure on Chinese Suppliers

One of the biggest challenges for Chinese denim suppliers is the increased price of cotton yarn in the domestic market. Cotton yarn prices started to rise in the middle of the year and continue to increase throughout the second half. Up to now (mid-November), cotton yarn prices have risen 20 percent from the price levels seen in June.

“There is a lot of speculation on cotton yarn…this has caused a lot of turbulence at upstream suppliers and the situation has not settled down yet,” said Mr. Lai at San Shing.

“Buyers want lower prices and won’t pay more when raw materials prices go up. If the yarn price goes up after they place the order we have to figure out how to make up for the difference. This forces mills to bet on the market and stock yarns before hand, which places all of the risks on us," he explained.                       

Crisis can also bring opportunity, and for some mills, increases in raw material prices actually gave them a chance to strengthen their position in the market.

“The best event this year was the increase in cotton prices, which gave us an opportunity to access the strengths of our supply chain and the relationships with our business partners. I see those that those who committed orders with us in June and July are now repeating their orders,” said Robert Deakin at Deyao Textile Industry Ltd.

Stretch Stays Strong

“People want a soft hand feel and more stretch. If you have competitive prices and power stretch, that’s a sure best seller,” said Mr. Fung at Unique Denim.

“For our volume business, our bestselling items are still stretch fabrics. Seven out of our top 10 products have 30-40 percent stretch. We also sell a lot of 100% Tencel fabric…it is a very good choice for lightweight denim,” said Mr. Zhong at Prosperity.

E-commerce brand: Still More Talk than Action

E-commerce is the talk of both mainstream and business media, however, mills say it is very challenging to work with e-commerce brands. The order size from online retailers is usually much small than from mass-market offline retailers. But the biggest problem is lead times. Mills can only work with online retailer if they have stock of the fabric that those buyers want. Most mills told Inside Fashion they will not develop new products for online brands.

“Online brands are placing small orders at a very high frequency. Their whole model is based on making a small quantity of various products, testing the market feedback, then place repeat orders for successful items. It doesn’t make economic sense for us to work on those orders. The only way for us to sell to online brands is through garment factories that can handle this kind of order,” said. Mr. Fung at Mou Fung.

Generally, online brand won’t source fabric directly; instead of buying finished products from garment factories.

“The lead time of e-commerce brand is usually 10 to 15 days. We worked with one e-commerce brand in the past, but their volume was just too small … our ideal order size is 5,000 to 8,000 yards. Those brand are far away from reach to this level,” said Mr. Lai at San Shing.