Bra Exporter Turn to Domestic Market

YANBU, China is the town that bras built: More than 200 underwear manufacturers have thrived for decades here, just west of Guangzhou. The industry provides more than 20,000 jobs.  Underwear is serious business here in Yanbu.

But a cutback in consumer spending worldwide, part of the global recession, knows no bounds: shoppers are even scrimping on underwear now. That means manufacturing centers across southeast China that depend upon exports are struggling, and so is Yanbu.

"Big buyers who used to buy top quality underwear are now buying in the mid-range," explains Chen Weiqiang, a leading manufacturer who also chairs the local industry association. "And those who bought in the mid-range have now moved down to the lower ranks."

Revenues are down, profits are slipping and a handful of local companies have even gone bankrupt. As a consequence, says Chen, manufacturers are now busy re-examining their business plans and developing new strategies to survive and thrive when the worst is over.

He hopes that comes soon – likely early next year.

But he's not waiting until then.

With the bottom falling out of the Eastern European market for example – including Russia – he's re-focused and redoubled efforts aimed at developing China's domestic market. He won't be able to market bras in China that normally retail for as much as $150 to even $300 in select European shops.

But greater numbers of less expensive bras sold domestically can help. After all, China has more than 600 million female customers.

"The damage was so extensive to our Eastern European market, my view was: let's just focus as much as we can on extending our domestic reach."

So far, so good, says Chen. If all goes well, estimated increases in the domestic market this year, could "almost equal" losses in Eastern Europe, he says.

"Overall, I fully expect our sales to drop 10 to 12 per cent this year – and our net profit probably even more. But still, our company remains stable and I remain optimistic about the future," he adds

Chen runs his factories and production lines for three main markets: European Union countries – his biggest customers are France and Italy, Russia and eastern Europe, and the Chinese market.

He also markets to Canada and the United States, he notes, but less now than in previous years.

Chen says he first felt the tremors in the market about this time last year.

"U.S. orders started to cut back," he said. "We had an inkling something like this could happen."

But the EU market held steady until the end of the year.

The eastern European market, however, started to collapse about the same time.

With declining demand, those buying began to clamor for a 15 per cent price cut.

Chen says his companies obliged, helped by a decline in oil prices.

"We could offset about 6 or 7 per cent due to price declines in oil. But the rest we had to eat," he says.

For now, his strategy is to absorb short-term pain to maintain and protect the potential for long-term gains.

"I have to protect our EU market," Chen says. "I'm confident I can keep it, even if it means temporarily not making a profit. We'll weather this storm."