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Vancl looks overseas to further cut costs

Vancl looks overseas to further cut costs Source:
Date: 16-08-2012
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Chinese online apparel retailer Vancl is relocating part of its garment production to other Asian countries such as Bangladesh in a bid to further cut costs, a company spokesman told the Global Times on Wednesday.

"Labor costs have been greatly reduced (by moving part of the production to Bangladesh)," said Chen Chu, public relations director at Vancl, noting that the new move could cut 5-10 percent of the cost for each item.

Chen noted that at present labor costs in Bangladesh stand at $75-$80 per person per month, while the cost in the domestic garment industry has surged to some $400.

China's garment producers are also seeking to take advantage of lower costs in other Asian countries. Jiangsu-based garment producer Newtop Printing & Dyeing Co, the subcontractor of Vancl in Bangladesh, said that it is considering setting up a factory in Myanmar.

In addition, Newtop is also talking with other online apparel retailers for overseas production, Dai Linlin, an employee at the company's trade department, told the Global Times.

China's leading position in the global manufacturing sector is being undermined by rising costs in the country. German sportswear maker adidas AG announced in July that it would shut down its only self-owned apparel factory in East China's Jiangsu Province in October.

Nike, adidas' major competitor, closed its self-owned shoe plant in Taicang, Jiangsu Province as early as in 2009.

Chen from Vancl said that currently the company is also eyeing such opportunities in countries like Indonesia, Cambodia, Vietnam and Pakistan.

So far Vancl has only moved the production of some basic clothing items to Bangladesh, such as Polo shirts, which do not require a quick turnaround or high production expertise.

"The cost advantage is still not obvious given that overseas production only accounts for a small part of the company's product line," said Chen Shousong, an e-commerce analyst at consultancy Analysys International, noting that a significant reduction in the costs will require production relocation at bigger scale in the future.

Chen from Vancl noted that problems like unstable political situation and inefficient infrastructure in the foreign countries may also create uncertainties for the company's overseas plan. Vancl aims to develop itself into a "fast fashion" company, posing high requirements for the production cycle.

"But overseas production cannot meet such requirements. And despite higher costs in China, domestic factories still enjoy higher production skills and shorter production time," Chen noted.

"Domestic garment industry is facing the pressure of rising costs, but still has its own edges like a complete industrial chain and advanced expertise," said Wang Zhuo, president of the China National Garment Association.
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