On March 25, H&M’s boycott of Xinjiang cotton continued to ferment on social network media.

The Better Cotton Initiative (BCI) of Switzerland also stood in front of the spotlight, saying in a statement that "BCI has decided to suspend the issuance of BCI cotton licenses in Xinjiang, so the cotton required for H&M products will no longer be obtained from there."

On March 24, H&M China stated that “H&M Group purchases more sustainable cotton through a globally certified third party. The purpose is to support cotton farmers around the world to adopt more sustainable methods to grow cotton. H&M Group does not directly Purchasing cotton from any supplier. H&M Group respects Chinese consumers as always. We are committed to long-term investment and development in China. Currently, we are cooperating with more than 350 manufacturers in China to provide Chinese and global consumers with sustainable development. Principle clothing products."

"This is not the behavior of a single brand. It is the organization of BCI, which has greater economic benefits. Behind it is the control of the pricing power and standard power of the cotton supply chain." Garment industry analyst Ma Gang told the 21st Century Business Herald reporter.

SUPPLY CHAIN DISPUTE

Ma Gang pointed out that as early as September 2020, H&M announced the suspension of cooperation with Xinjiang Huafu (a listed company mainly engaged in yarn manufacturing and sales) on the grounds of "forced labor."

Behind H&M's ban on Xinjiang cotton, there are brands such as Nike, Gap, Zara, and UNIQLO. The leader behind them is actually BCI. Behind it is the struggle for supply chain dominance, as well as the competition for pricing power and standards.

Ma Gang explained that BCI is a supply chain alliance that controls pricing power. BCI has five categories of members, namely: 1) Retail brand members, which are buyers, such as H&M, Nike, etc.; 2) Supplier manufacturers, mainly cotton merchants and yarn factories; 3) Growers’ organizations ; 4) Other categories, mainly companies that provide technology for the supply chain; 5) Social groups, mainly non-profit organizations related to cotton.

According to data released by BCI, in 2019, its retail brand members used more than 3 million tons of cotton, accounting for 10% of global consumption, while BCI's supply accounted for about 30% of the world's total. The BCI organization's procurement and supply are second to none in the world, and it controls the standards and pricing power of cotton, and its influence is self-evident.

Banning Xinjiang cotton is essentially repelling China's supply chain. China's cotton production accounts for about 22% of the world's cotton production, and Xinjiang's cotton production accounts for 80% of China. The target is not Xinjiang cotton, but Chinese cotton, and even China's textile supply chain.

"This is related to the global division of labor in China's textile industry. In 2018, China's total fiber processing was about 54.6 million tons, more than 50% of the world's total fiber processing; China's textile and apparel exports amounted to US$276.73 billion, accounting for 35% of the world." Ma Gang said that textiles exported from China are affixed with various brand logos in international brand fashion stores and sold at higher prices.

In 2019, the total global cotton production was 122 million bales. The main proportions of the main cotton producing areas: India accounted for 24.3%, China accounted for 22.4%, the United States accounted for 16.3%, Brazil accounted for 10.7%, and Pakistan accounted for 5.4%.

In 2019, global cotton consumption was 118 million bales. The main proportions of cotton consumption are: 36.5 million bales in China, 30.9%, 24.5 million bales in India, 20.7%, 10.8 million bales in Pakistan, 9.1%, 3 million bales in the United States, 2.5%, and 3.4 million bales in Brazil. Than 2.9%.

Cotton exporting countries are mainly the United States, Brazil, Australia and India. In 2019, more than 80% of U.S. production, about 80% of Australia's production, about 60% of Brazil's production, and more than 10% of India's production were used for export. The export volume of the four countries accounted for more than 80% of the world's cotton exports. Importing countries are mainly concentrated in Asia. China, Turkey, Vietnam, Bangladesh, and Pakistan all import more than 4 million bales of cotton annually, which together account for more than 70% of global imports.

"From the perspective of total output and total consumption, China's self-produced cotton is still unable to supply China's cotton consumption. This is related to China's large number of textile companies, which are suppliers of foreign brands, and the provision of manufacturing services requires a large amount of cotton." Ma Gang said, "Obviously, the beneficiaries are countries that export large amounts of cotton such as the United States and Australia."

In fact, the supply chain layout of international brands is essentially the pursuit of profit maximization. In 2012, Adidas closed its own factory in mainland China, which has a 15-year history in Suzhou. After withdrawing from Suzhou, Adidas chose Southeast Asian countries with lower supply chain costs.

CHANGES IN THE APPAREL INDUSTRY

Under the epidemic, due to the closure of offline stores due to the global epidemic, coupled with the sharp decline in social demand, the demand for related categories has fallen sharply, and clothing is one of the most affected consumer segments.

Oliver Wyman previously issued a report that 400 billion yuan will evaporate from China, the world's largest apparel market, in 2020, putting most apparel brands at risk. The epidemic has caused long-term structural changes in China’s clothing and footwear market: e-commerce has achieved further growth and accelerated penetration into high-income groups, market differentiation between different tier cities has intensified, and offline stores are facing more severe challenges. We need to change our thinking to adapt to the new normal after the epidemic.

Under the epidemic situation, foreign clothing brands have been greatly impacted globally. In 2020, the revenue of H&M, Zara and other groups have fallen sharply. H&M Group will be in the 2020 fiscal year (December 1, 2019 to November 30, 2020). ) Net sales amounted to SEK 187,031 million. In local currencies, net sales fell by 18%.

China is H&M Group's fourth-quarter sales market in the fourth quarter of 2020, second only to Germany, the United States, and the United Kingdom, and it is also one of the markets with the smallest decline.