The international air freight and logistics companies in Asia are seeing a boom in business due to a surge in demand from American and European consumers for fast-fashion products from Chinese e-commerce platforms like Shein and Temu, as China reshapes the global online retail market.
In the first half of 2023, the most popular Chinese fast-fashion brands exported around $155 billion worth of e-commerce goods, according to the Financial Times. Industry reports suggest that on certain days, at least 80 percent of air freight cargo originates from China’s fast-fashion companies.
Analysts attribute the success of Chinese fast-fashion brands in the US market to three key factors. Firstly, their competitive pricing, aided by the absence of significant tariffs on small parcels valued at less than $800. Secondly, aggressive and widespread price promotions that are unparalleled in the US market. Lastly, the reliance on low-cost suppliers and designers in China contributes to their cost-effectiveness.
Moreover, to beat the competition, these online retail brands are willing to pay elevated prices to air freight carriers to ensure that customers in the US, UK, and elsewhere get the goods they have ordered in the fastest and most efficient manner.
In November 2023, a surge in e-commerce cargo from China to the US and Europe led to a 5 percent increase in worldwide demand compared to November 2022. This surge in demand was reflected in elevated air cargo rates.
Furthermore, International shoppers are more at ease than ever buying an expensive designer handbag from an online seller on eBay or purchasing a $5 top from Shein. But all will have the expectation that their goods will be delivered to their doorstep in a couple of weeks or less.
These online retail brands have rapidly outpaced established European brands like H&M, Primark, and Zara by targeting the younger demographic through direct marketing and social media campaigns.
The essence of these businesses lies in offering runway-inspired looks at more affordable prices to fashion-conscious consumers, particularly the younger, social media-savvy demographic.
Chinese companies’ ability to quickly adapt to trends and make prompt decisions, along with their efficient manufacturing capabilities, is identified as a key factor in their dominance. The speed and efficiency of Chinese e-commerce giants are facilitated by building a connected supply chain with the shortest distance between manufacturers and customers.
For instance, Shein strategically changed its headquarters from Nanjing to Shanghai and relies on Guangdong province in South China, a garment manufacturing district in the Pearl River Delta with 25,000 apparel shops.
The Pearl River Delta is famous for generating 40 percent of all Chinese exports. It is near the shipping ports of Yantian and Hong Kong and the airports of Hong Kong and Guangzhou. That helps Shein take just days to transport goods to a distribution facility to ship them to customers worldwide.
Shein’s sales are almost entirely online, which enabled the retailer to generate $23 billion in global revenue in 2022, according to research firm Coresight. The company’s overhead is also low, as it doesn’t operate any stores full-time. Ruthless efficiency is also a key factor that contributes to their success.
In the run-up to the Christmas season, data from air freight provider TAC Index showed that rates continued to rise on goods flown transpacific from Hong Kong and Shanghai.
Willie Walsh, director general of the International Air Transport Association (IATA) said: “November air cargo demand was up 8.3 percent on 2022 — the strongest year-on-year growth in almost two years. That is a doubling of October’s 3.8 percent increase and a fourth month of positive market development.”
In conclusion, the winning formula for Chinese fast-fashion brands over their Western counterparts lies in their ability to offer rock-bottom prices for trendy fashion in small quantities, emphasizing a focus on affordability and rapid adaptation to consumer trends.
Source: https://www.logisticsinsider.in/chinas-strategic-shift-in-fast-fashion-supply-chain-leads-to-boom-in-international-air-freight/
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