SHANGHAI: Fashion retailers have piles of unsold stock in Shanghai, nearly a month after Shanghai lifted its COVID-19 lockdowns. As cautious shoppers stay away from the commercial hub’s glitzy shopping areas,
Shanghai, China’s fashion capital and largest city, was hit with a series of curbs in April and May to stop the virus. This left the city of 25,000,000 without clothing and beauty products in its stores, and left containers of imported apparel at port.
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The city’s reopening this month saw a surge of goods ship from warehouses and store shelves that were already laden with merchandise that was not sold during the two-month lockdown. Normally, around a fifth all imported goods into China pass through Shanghai’s port.
Larger quantities of COVID-19 curbs were lifted in the days following their removal. “sales”Signs were posted all over Shanghai by retailers from Lululemon and Victoria’s Secret, offering discounts to lure customers.
Even online retailers have struggled with a glut caused supply interruptions or lockdowns.
“This affected us a lot,”Josh Gardner, founder of China market e-commerce partner Kung Fu Data and chief executive, said that the company manages online shops for 10 fashion brands including G-Star Raw.
“In April, May on (China’s major e-commerce) platforms, there wasn’t a t-shirt to be found, we were sold out of summer stock and so was everyone else, there was just no product,”He said. “Now, everyone’s just bleeding and stuck with a lot of inventory they can’t move.”
Bain reports that China is a major market in luxury goods for individuals, with sales of $74.4 billion by 2021.
One consultancy estimated that sales would increase by 5% during the period. “618” – a major shopping event in China from May 31 to June 20 – across the main e-commerce sites, such as Tmall and JD.com, were flat year-on-year. Continue reading
Tmall data revealed that sales of men’s and women’s clothing dropped 22% and 4% respectively during the event’s inaugural week. However activewear sales rose 26% thanks to the lockdown’s increased focus on health.
Some retailers are warehousing inventory at the moment and will order less for the fourth-quarter when they will attempt to clear stock by November’s Singles’ Day.
“For the apparel category, due to the epidemic and sluggish consumption, there is a high level of inventory backlog of spring collections,”Lei Xu, chief executive of JD.com, spoke after the online retailer’s quarter-end earnings. “As a result, many factories are considering skipping their … summer collections.”
OnTheList, which offers flash sales for luxury brands such as Versace, Jimmy Choo, Lanvin, at discounts of up to 70%, has re-opened its Shanghai showroom with a sale from Salvatore Ferragamo.
The high-end Italian fashion brand and most other retailers in Shanghai shut down stores throughout April and May. Salvatore Ferragamo did not respond to our request.
Jean Liang is OnTheList’s China managing Director. He said that luxury brands are now more open for online sales as well as offline sales. Cosmetics brands, however, are looking to pro-actively hold sales to clear excess inventory.
“Before it was always us pitching asking them about their plans and now they approach us, which means they have inventory they need to clean out to have a healthy stock situation,”She said. Flash sales on OnTheList, which are held every few days, are already booked through September
Another solution is to send products abroad to be distributed in Europe and America. However, this is complicated by rising shipping and air transport costs. Benny Wong is the supply chain director at Peeba’s online wholesale marketplace.
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“Now the main hurdle is transportation … that creates a big problem for the inventory owner,”He said. “Inventory can kill (and) some product categories have huge inventory to move.”
According to retail staff, the retail sentiment in Shanghai is negative weeks after re-opening. Shanghai’s customers are yet to return to malls with significant numbers. Footfall in major downtown malls is around half of its usual levels.
People in Shanghai are reluctant about returning to indoor public areas because of China’s strict zero-COVID policies.
In-restaurant dining is still banned in malls. This means that they are unable to offer their usual food and beverage offerings.
China’s retail sales dropped 6.7% in May, an increase of 11.1% from the previous month. This was due to a slowerdown in China’s second largest economy, which discouraged consumer spending.
“In terms of inventory clearance there’s not really a good solution in China,” Kung Fu Data’s Gardner said. “I mean, what are you going to do that’s not going to destroy your brand?”