Established in 1996, high quality men's wear manufacturer and retailer Baoxiniao Group has seen steady 70-80 per cent year-on-year growth since its inception, and currently produces 800,000 suits per year. The company is now one of the top ten branded men's wear companies in China with sales of US$120 million per year. Niki Tait pays it a visit.

Although not attempting to compete at the Zegna or Armani level, Baoxiniao is positioned just below it, aiming at the 25-40 year old businessman looking for top quality in the high end domestic market.

Prices range from US$250-400 equivalent selling domestically. The company operates out of 550 retail stores throughout China; 80 are owned outright by the company and the remaining 85 per cent are franchised. The Baoxiniao brand is not sold outside these stores and all prices are non-negotiable.

From the outset Baoxiniao pioneered the franchise concept in China and sees this as the key to its expansion and growth over the past few years. The group claims to have China's largest men's wear franchise network, with more than 400 franchised stores operating in over 200 major Chinese cities including Beijing, Shanghai, Tianjin, Chongqing, Ha'rbin and Shenyang.

To manage this chain of stores, Baoxiniao has set up an advanced logistics flow system, covering inventory management, order feeding and delivery.
Hi-tech investment

Final touch up press -Baoxiniao Shanghai

In its quest to produce the best suits, the group has learned from the Italians. The machinery is modern and includes equipment supplied by Gerber Technology (USA); Dürkopp, Kannegiesser, Strobel, Schonenberger (Germany); Juki, Naomoto (Japan), Rotondi, Complett, Macpi (Italy), and Eton (Sweden).

Nearly all production is for the domestic market, though 10 per cent is made under contract for overseas customers (100,000 suits per year), almost exclusively for the European market, particularly Marks & Spencer, though other customers are based in Germany, Belgium, Spain and France.

In total the company has 3500 employees. There are two suit factories, one at the head office in Shanghai which, as well as producing the Baoxiniao brand, also makes corporatewear and all the export garments. It employs approximately 1000 people.

The second factory is in Wenzhou, approximately 800 kilometres from Shanghai. There is a third factory which produces casual wear and a fourth in Guangdong which produces shoes. Shirts and ties are also made under contract at other factories.

Suits, however, account of 70 per cent of total turnover and are regarded as the core business. The company has also identified high end casualwear as a growing and developing market and will invest more in shirts and casualwear garments going forward. Knitwear is outsourced and only accounts for small quantities.

Apart from Baoxiniao the company operates three further subsidiary brands, two of which - Baoniao and Nasel - cater for the corporatewear business servicing banks, insurance companies, airlines and the like; and one for casualwear, Fransition. These three brands account for 30 per cent of the group's turnover.

The cutting of checks and stripes at Baoxiniao

Around 10 per cent of the suit fabric is imported from Europe, mainly Italy and the UK. Baoxiniao is the only Guabello (a subsidiary of Marzotto) agent within China. The remaining 90 per cent comes from the main China mills such as Sunshine and Helan. The company has no plans to enter textile production itself, preferring to concentrate in the areas it knows best.

The length of style runs is flexible and could amount to as little as 100 pieces per style, though this depends on the total order quantity and value. Throughput depends largely on fabric delivery but could be as little as one month excluding shipping. Due to the nature of the product nearly all garments are dispatched hanging.
Shanghai production

The 24000m² Shanghai factory is divided into three jacket production units and one trouser line. To ensure top quality production, the company has invested more than US$10 million in new technology.

Sewing production at Baoxiniao

Gerber CAD is used in the design development and for the grading and maker making. A Gerber spreading machine and automatic cutter are used for laying up and cutting the plain fabrics, though the domestic markets prefer stripes for their suits and checks for their stand-alone jackets. These tend to be manually spread and cut by band knife.

Kannegeisser and Naomato provide the fusing machines. The main sewing machines are sophisticated Dürkopp Adler, although Juki, Strobel, Comlett machinery are all in evidence. Within the different sewing units different handling systems are used, with Eton being the main one. Pressing equipment is mainly supplied by Macpi and Rotondi.

Sewing production at Baoxiniao

David Zhang, international business department manager, attributes the company's exceptional growth to three main factors. The timing was exactly right for introducing the brand to the market; the products were positioned correctly at the top end of the domestic market, and franchising has helped drive fast and effective market coverage.

The company is involved in designing and furnishing the franchises so that all stores have the same corporate look. The management policy of allowing no discounting has also been beneficial in protecting the brand, since discounting is a common trend in most shops.

The main future expansion in the business, though, will be in the export market. As Zhang explains, China has the biggest clothing industry in the world and it is changing. In the past it was weak on design and fabric finishing, but these areas have improved and China can now match the world's quality.

Zegna, for example, has a joint venture company within China and Baoxiniao is currently in discussions to produce suits for several Savile Row tailors. In terms of Marks & Spencer production, Baoxiniao manufactures its top-of-the-range suits via Dewhirst.

Final inspection-Baoxiniao

Future exports though will not just be in terms of contract work, as at present. Baoxiniao is starting to take its own brand overseas, beginning with South Korea, Russia and South East Asia. These will be the same suits at the same market price as those selling within China. Eventually the company would like to see its brand selling throughout Europe but realises this will be a long-term goal. 

Shifting focus
The company's design capabilities are helping it shift from OEM (Original Equipment Manufacture, which in essence refers to contract work where the company is given the design it is to make) export to OBM (Original Brand Manufacture, where the company designs, manufactures and retails its own brand). Its main competition does not come from overseas countries but from other suit manufacturers within China such as Youngor, Sharmoon, Fapai and Gudger.

To compete, therefore, Baoxiniao has to employ top quality machinists and in the Shanghai factory an average machinist can earn between US$230-250 equivalent per month on piece work. This means the company can employ trained machinists and has no problems recruiting. Most of the recruits are found by word of mouth via existing staff, and because many come from outside the province on-site accommodation is provided.

Future exports though will not just be in terms of contract work, as at present. Baoxiniao is starting to take its own brand overseas, beginning with South Korea, Russia and South East Asia. These will be the same suits at the same market price as those selling within China. Eventually the company would like to see its brand selling throughout Europe but realises this will be a long-term goal.

Niki Tait, C.Text FTI, FCFI heads Apparel Solutions, which provides independent assistance to the apparel industry in the areas of manufacturing methods, industrial engineering, information technology and quick response.

Expert Analysis

Clothing Retailing in China

With a population of 1.3 bn, China's consumer market offers huge potential. Spending power in the country is growing rapidly as the economic boom continues. China's "wealthy"-those earning more than Rmb100,000 a year (US$12,080)-amounted to an estimated 2.8 mn households by 2000, representing a major market for upmarket brands.

To find out more about this report, download your sample or to order your copy, please follow this link

 
Expert Analysis

Clothing Retailing in China

With a population of 1.3 bn, China's consumer market offers huge potential. Spending power in the country is growing rapidly as the economic boom continues. China's "wealthy"—those earning more than Rmb100,000 a year (US$12,080)—amounted to an estimated 2.8 mn households by 2000, representing a major market for upmarket brands. Mass market brands, meanwhile, are being targeted at China's quality- and price-conscious middle and lower-middle income earners (Rmb10,000-30,000 per annum), who numbered a further 150.5 mn households in 2000.

To find out more about this report, download your sample or to order your copy, please follow this link