A woman scans racks of clothing at a shopping mall in Beijing July 29. Costs in China have risen so much that Chinese fashion brand Vancl has decided to outsource part of its production.Andy Wong/The Associated Press
Vancl, one of China's best-known fashion brands, has started shifting production overseas in an effort to cut labour rates and beat the country's rapidly rising production costs.
The company, China's largest independent online clothing retailer by sales, has started sourcing a small part of its production from Bangladesh on a trial basis, and plans to increase the proportion made outside China.
A Vancl official said the company is contacting manufacturers in Indonesia, Cambodia and other southeast Asian countries as part of the outsourcing effort.
Vancl said the main incentive for the move was cheaper labour costs. "One Bangladesh worker's monthly salary would be Rmb500 to Rmb600 ($80 to $95), while one Chinese worker now costs at least Rmb2,000 per month," it said, noting that even after paying higher transport and other costs Vancl could save five to 10 per cent of total costs by outsourcing.
According to a report released Tuesday by the National Population and Family Planning Commission, China's average monthly pay for migrant workers under the age of 35 was Rmb2,513 last year, up almost 30 per cent since 2009.
Difficulty recruiting workers was another reason, Vancl said, noting that the "new generation" of Chinese workers did not like factory jobs. Manufacturers across China in labour-intensive industries say younger migrants – many of whom have grown up in cities – aspire to service or white-collar jobs rather than assembly-line labour.
Vancl has not yet decided how significant a proportion of its production it will source overseas. "The production cycle can be as long as four to six months [in Bangladesh]," a company official said, while domestic suppliers are required to deliver in 30 to 45 days. Vancl said it also felt "proud of its traditional 'made in China' label."
"Vancl only sells to the China market," said Shaun Rein of China Market Research in Shanghai. "One of the reasons they win is they can introduce new products, tailored specifically for China, very quickly." Sourcing from Bangladesh could jeopardize that, he said.
Still, more and more Chinese brands will outsource in this way, as domestic labour costs continue to soar, said Shao Ligang, of Beijing-based Jiupai Yixian apparel consultancy.
Torsten Stocker, head of the Asian consumer goods practice at Monitor Group, said: "But this is far from the end of textile manufacturing in China.
"A host of other factors influence sourcing decisions: labour productivity … training-skill level, degree of automation, degree of worker loyalty … and speed-to-market," he said. "China will still have a significant role to play."