Chinese Exports Too Expensive For Wal-Mart

In the Face of Wal-Mart’s Cheap Orders, Chinese Firms are Saying “NO” [Xinhua News]

In late July, amidst Wal-Mart’s sluggish performance, the retailer announced extensive price reductions to boost sales.  More than 16,000 items will be discounted 10-50% for American consumers.  Meanwhile, some suppliers in China (where Wal-Mart sources the majority of its products) including Zhejiang Province’s Langsha Group are expressing that they are incapable of continuing to supply Wal-Mart’s extremely cheap orders.

Business analysts think decreasing such cheaply priced orders to the U.S. might be beneficial for long-term growth

This year, Wal-Mart, the world’s largest retailer, topped Fortune 500’s list of businesses.  Since Wal-Mart entered the Chinese market in the 90s, domestic firms’ relationship with Wal-Mart has gone from love to hate.  Wal-Mart sources 80% of its total merchandise from China and many of the domestic firms initially benefited from Wal-Mart’s huge orders which enabled a great deal of growth.  However, Wal-Mart’s incessant push to keep prices down means low profit margins, sparking fierce competition between Chinese firms.  In order to survive, some firms sacrifice profits and workers’ benefits.  Due to exchange rates and export regulations, some companies even take a loss.

Langsha’s Wal-Mart Woes

As recent reports detail rising raw material costs and an appreciating Chinese yuan, China’s largest hosiery firm, Langsha Group, announced it will no longer accept Wal-Mart’s cheaply priced orders. 

“China is already incapable of continuing to provide Wal-Mart’s low prices,” Langsha’s foreign trade director Cao Guoshun told reporters.

According to Cao, in the last two to three years, Langsha Group has filled more than $500 million dollars worth of Wal-Mart orders.  Since January of this year, Langsha Group had received over $200 million of Wal-Mart orders, but from August on, Langsha will no longer fill Wal-Mart orders.  The company’s total number of orders will not decrease as Langsha Group has already increased orders from the European Union.

When Wal-Mart places an order, it’s rarely with the same provider – they will submit an order to several firms allowing the competition to cut prices even further.  Because China’s raw material costs, workers’ pay, and value of the currency have all increased, export prices will inevitably go up also. 

Because of these rising prices and quota restrictions on Chinese goods, Wal-Mart is also sourcing from Central and South America, Pakistan, Bangladesh and other countries.  These countries textile products are 10% cheaper than those sourced from China.

Chinese firms have started to say “no”

Fortunately, Chinese companies, used to succumbing to Wal-Mart’s demands for low prices, are starting to say “no” to Wal-Mart.  From Zhejiang to Hangzhou, more and more Chinese firms are looking away from Wal-Mart orders.

Last year, Hangzhou Danyi Bags Company became a Wal-Mart supplier.  Despite Wal-Mart’s large orders and completing their factory compliance process, the company will start refusing Wal-Mart’s orders. 

“Wal-Mart’s prices are too low.  Last year we accepted their orders, but this year we will no longer supply them,” Zhi Junshen, general manager of Danyi Bags told reporters.

Three years ago, a Wuhan Company passed Wal-Mart’s authentication and factory inspection processes.  However, the firm hasn’t accepted any Wal-Mart orders.  “A few years ago, the domestic garment industry’s profit margin was 18-20%, but with Wal-Mart’s orders, the profit margin has decreased to less than 5%,” the firm’s foreign trade director said.

Central Finance and Economics University director, Guo Tianyong, told reporters “for domestic producers, exporting products for Wal-Mart will become more and more challenging.  Innovation and establishment of new brands is the answer to competition.” Otherwise Wal-Mart will shift production to Vietnam, Bangladesh, or other countries.

Commerce Department researcher, Mei Xinyu, told reporters that with the rapid expansion of the Chinese economy, production costs have gradually risen.  Multinational sales will decrease the value of Chinese goods as more and more production shifts to peripheral countries.  Yet a large-scale shift is unlikely, Mei reasons, as it would be impossible to substitute China’s relatively intact infrastructure and skilled labor in another developing country.

Original Article Text:

习惯于逆来顺受的中国企业，在沃尔玛的廉价订单面前，终于主动说了“不”

７月下旬，业绩增长乏力的零售业巨头沃尔玛公司宣布在美国开展大规模降价促销活动，共计１．６万多件商品将以１０％到５０％的折扣向美国消费者推出。与此同时，在沃尔玛全球最大的采购基地中国大陆，包括浙江省浪莎集团在内的一些企业表示无法继续承受沃尔玛低价策略，他们将不会再接沃尔玛的订单。

业内人士分析认为，从中国企业的角度看，减少向美国消费者提供廉价产品可能更有利于它们的长远发展。

浪莎们的沃尔玛之痛

沃尔玛在《财富》杂志今年世界５００强中排名第一，也是世界上最大零售企业。自上个世纪９０年代沃尔玛进入中国以来，国内企业对它经历了一个由爱到恨的过程。

９０年代以来，为了进一步压低成本，沃尔玛将大部分订单转向亚洲，中国一跃成为沃尔玛最大的供货来源地。在沃尔玛全球６０００家供货商中中国占８０％。许多从事出口的国内企业受益于沃尔玛的大订单。前几年，能够接到沃尔玛订单无疑是国内企业发展的大喜讯。

然而，没过几年，原先的好事就快成了坏事。随着沃尔玛不断压价，企业利润越来越薄，沃尔玛挑起了国内企业间恶性竞争。为了减低每一分一厘的报价，沃尔玛会把国内厂商全部召集在一起，让大家面对面地杀价。一些企业为了生存只能牺牲利润和工人利益。由于汇率和国家出口政策调整，一些企业甚至出现亏损。

中国国内近日有媒体报道，随着企业员工收入、原材料价格的提高和人民币汇率的上升，中国“袜业大王”浪莎集团不再接受沃尔玛的低价订单。

沃尔玛转移廉价订单

由于中国原材料涨价以及工人工资上涨，再加上人民币大幅升值，出口商品的价格正在进行一个重新定价的过程。在这个过程中，中国商品逐渐涨价是必然的，但是涨价了，国际买家就有逐渐转移订单的冲动。

事实上，沃尔玛已经开始寻求更廉价的采购来源。目前，沃尔玛的全球供应链已经延伸到７０多个国家和地区。在美国的沃尔玛里，除了大量的中国产品，产地来自中南美国家、巴基斯坦、孟加拉等国的产品也开始逐渐增加。

由于中国出口到美国的服装、棉纺类产品有配额限制，对沃尔玛来说，将更多的订单下到越南、印度、巴基斯坦、土耳其等国家更划算。中国业内人士表示，上述国家的服装、棉纺类产品生产成本比中国大约要低10%。

中国企业开始说“不”

可喜的是，习惯于逆来顺受的中国企业在沃尔玛面前终于主动说了“不”。从浙江的浪莎集团到杭州丹仪箱包公司，越来越多的国内企业将目光从沃尔玛转向了全球。

中央财经大学中国银行业研究中心主任郭田勇向《国际先驱导报》表示：“对于国内企业来讲，通过沃尔玛出口产品这种模式将遭遇越来越大的挑战，通过创新、提高产品科技含量和创立品牌效应将是企业应对竞争的必然选择。”否则，当沃尔玛将采购基地从中国转移到越南、孟加拉或者其他地区之后，国内出口企业的处境可能更为艰难。

中国纺织品工业协会会长杜钰洲在纽约曾向《国际先驱导报》表示，在目前在全球产品过剩的情况下，国内企业需要培养人文价值领域的创造力，树立自主品牌，提高品牌对产品的贡献率。 （记者 陈刚）

Posted by Michael Mignano on Tuesday, October 30, 2007

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