Can’t Beat Them, Sell To Them

CHINAS low labour costs may have crippled Australias manufacturing industry, but in an ironic twist, the worlds fourth-largest economy could now provide a lifeline to Australias struggling clothing manufacturers.

Industry experts say the voracious appetite for international designer brands in Chinas burgeoning middle class could provide "unlimited opportunities" for Australias fashion designers and, in turn, boost its manufacturing industry.

"The opportunity for Australian designers is enormous," says Simon Lock, managing director of IMG Fashion, Asia Pacific. "An Australian designer that gets the right investment partner in China can, in three or four years, have 60 or 70 stand-alone boutiques and be a major international designer in that marketplace.

"Because if you think about the size of the Chinese population and the percentage of that population that now has significant amounts of disposable income and an appetite for status brands, then the opportunity is unlimited … and, of course, that can only mean good things for our local manufacturers," says Lock, the founder of Australian Fashion Week, now based in Hong Kong.

Ken Phillips, director of the work reform unit of the Institute of Public Affairs, says an increase in fashion exports to China could save Australias diminishing textiles, clothing and footwear manufacturing industry.

"The future of Australian clothing manufacturing is in that niche, high-quality, designer sector and it is going to be driven by Chinas middle class and millionaires who are snob buyers, who dont want Chinese-manufactured stuff but high-quality, high-branded products," he says.

Since 2001, manufacturing output in Australias textiles, clothing and footwear industry has dropped by 43 per cent, with competition from China, a stronger dollar and lower tariffs driving production offshore to countries such as China.

"The truth is Australia cant compete with China when it comes to selling socks and jocks but in terms of this high-end ready-to-wear fashion, thats where the future of Australian clothing manufacturing is," he said.

China is now the third-largest consumer of luxury goods in the world and, according to the China Brand Association, about 13 per cent of Chinas population, or 170 million people, now buy high-end luxury and designer goods. This spending is being driven by Chinas 100 million-strong middle class and the growing number of millionaires, of whom there were 320,000 at the end of 2005.

With retail sales for clothing up 22 per cent last month compared to the same time last year, and an economic growth rate of 11.1 per cent in the first quarter, spending by Chinas growing rich list isnt expected to slow any time soon.

Melbourne womens wear label Amar is one Australian company that has its sights set firmly on China.

"We believe there is a huge opportunity for us in China because at the moment there is the cheap, Chinese-made, lower-end labels and then there are the luxury labels like the Guccis and Pradas, but there is not a lot just under those luxury brands," says Michael Adams, who runs Amar with his partner, Kerri Raymond.

They now have a stockist in China as well as a handful in Singapore and Korea but plan to add at least 10 more when they return to China next month.

"What weve started to see is that the consumers are becoming more savvy and theyre starting to look beyond the Louis Vuittons and thinking, What can we get thats a little bit different that will really make us stand out from our girlfriends?, and thats where we come in."

While Adams and Raymond plan to move some manufacturing to Shanghai this year, they will continue to manufacture in Melbourne to cater to the Asian market. "We will have parallel manufacturing in Australia and China. That way we can keep producing here for China because theyre just not interested in anything at that designer level thats made over there."

"What were starting to see in China is a more sophisticated customer," agrees Lock. "Theyve got into the luxury brands and are now starting to say, OK, what is the next new hot up-and-coming designer that not everyone has? And this is where I see the huge opportunity for Australian designers."

But most believe it will be a slow boat to China for Australian designers.

Sydney designer Jayson Brunsdon, who showed at Shanghai Fashion Week last October and sells his cocktail gowns to one Shanghai boutique, believes a more receptive market is still a few years away.

"Fashions always a gamble, and with a market like this, its not like going into the States where you know theyre materialistic, theyre fashion-hungry, you know somethings going to sell," he says. "Chinas still a bit of a mystery."

Ashley van Krieken, executive director of the Council of Textile and Fashion Industries of Australia, also believes there are still obstacles to overcome.

"There are certain sectors of the industry, particularly that high-end fashion area, that do see huge potential in China but at the moment are being held back by tariffs, for one; and two, because of the myriad non-tariff barriers, such as getting licences to sell product, getting access to distribution and transport networks and in relation to pricing and competition policy. And this is something we are talking to the Government about as they continue their Free Trade Agreement talks with China."

In the meantime, Lock continues to urge designers to "Go to China."

"Hey, if you want to become famous go and show in New York but if you want to become a billionaire go to China."

Tailoring a new future

■Clothing exports to China were valued at $2.7 million in 2002/03

■Australias textiles, clothing and footwear manufacturing output has dropped 43 per cent since 2001

■China is the third-largest consumer of luxury goods

■By 2015, China is expected to buy about $US11 billion ($A13.4 billion) a year of such goods

■Chinas 100 million-strong middle class will climb to 650 million by 2015

■Chinese clothing sales were up 22 per cent last month compared to last year

SOURCE: National Bureau of Statistics of China, Goldman Sachs.

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