A few issues in the Chinese socks industry

A few issues in the Chinese socks' industry

High degree of product homogeneity

The high degree of product homogeneity in China's socks industry has deterred producers from employing branding strategies to increase sales, so price cutting is still the chief means for market competition. The rising cotton socks market in the past few years had attracted a large number of brands entering the market, resulting in market competition imbalance. Therefore, how to increase innovation and launch differentiated products has become a focus for socks companies in China.

Fashion socks became the bright spot in the Chinese socks industry last year. Several fashion socks producers in China had registered increasing sales in 2007. This also proves that in such a highly homogenous market, product differentiation would be an important breakthrough for producers. On the other hand, Chinese consumer demand for socks is now evolving, from basic needs of warming, comfort and brand, to fashion, seasonality and clothing style matching.

The three major socks centres

At present, China's socks production is concentrated in three regions, namely Zhejiang Province (Yiwu, Zhuji and Haining cities), Guangdong Province (Nanhai City) and Jilin Province (Liaoyuan City).

Yiwu City is still the biggest socks production and wholesale base in China. In particular, due to brand building and marketing efforts, socks from Yiwu have captured 60% of the domestic market. On the other hand, producers from Zhuji City are also leading the socks exporting market in China. Some Zhuji companies are now turning to domestic trades, but their long term mindset of "sample-based processing" for foreign trades has somewhat impacted their domestic market strategies.

In recent years, under the support of local government, Liaoyuan City of Jilin Province has been growing fast and become China's "cotton socks hometown". But there are still issues associated with product quality improvement, brand building and market expansion. Nanhai City of Guangdong Province is yet to effectively expand its domestic market shares. Although there are some brands on the market, most Guangdong socks companies, which have technological and product development advantages, are still actually further processing socks for Yiwu socks producers.

Lack of marketing team

Licensed wholesale distribution is still the dominant model in China's socks industry. It is common for a single distributor to distribute several or even more than ten socks brands, resulting in fragmented sales channels. Therefore sales channel building is the weakest spot for most Chinese socks companies, and marketing rights of 99% socks producers are controlled by distributors. Without owning a marketing team and managing distributors effectively, most producers' products will have difficulties to reach end customers and achieve sales. It could also offset a producer's economy of scale.

Neglecting market development

For most socks, putting them onto shelves of supermarkets and shops will be the end of the sales process. By relying on cost advantages in logistics, customer traffic and store location, socks producers and distributors are still engaging in price wars.