In this eventful autumn, the Dragon City Trading Center, located in the Thirteenth Row business district of Guangzhou, was suddenly ravaged by a fire. Conveniently, it is situated opposite the famous New China Building. It was learned that the part that caught fire was a warehouse area, where many shops and stalls from the New China Building stored their goods. The consequences of the warehouse fire were more severe than those of the shops, resulting in losses that were even harder to bear.

On social media, there were reports that the affected owners might face the result of losing all their properties. A reporter on the scene interviewed a stall owner who was severely affected by the disaster, his warehouse was completely destroyed in the blaze. Facing the reporter's questions, he did not look into the camera, but instead stared blankly at the scene being engulfed by flames, his eyes showing not pain, but a numb expression.

Not long ago, an event that shook the heart also took place in the Shahe clothing wholesale market in Guangzhou. A Taobao store named "Teen Kayla" suddenly absconded with the funds, taking away about forty million yuan worth of payments from many Shahe stall suppliers. This store had the title of five golden crowns and a fan base of over five million.

Guangzhou has always been known as the holy land of the garment industry, with the belief that "eighty percent of Chinese garments come from Guangdong, and a large part of them come from Guangzhou," and "for fashion, look to Shahe, when Shahe rises, the whole country rises." However, the recent fire not only devoured the city, but also pushed the plight of the industry insiders to the forefront.

A victim of the clothing industry, Zheng Bei, who was also one of the victims of the "Teen Kayla" case, owned his own online wholesale stall, specializing in low-end women’s clothing, and also suffered a loss of over forty thousand yuan. In fact, compared to his peers, his losses are not too large, but because his stall is not large and has a weaker ability to withstand risks, it resulted in a year's hard work being in vain, which is helpless.

It took him a full fifteen years to go from an initial garment worker to a small-scale boss. Throughout this lengthy period, he even experienced more instances of "being absconded with" than others. Once, a couple who managed two large Taobao stores absconded with up to seventy million yuan, and Zheng Bei was also unfortunately among the victims.

When talking about this incident, he said, "That time I lost nearly one hundred thousand yuan, I could not sleep at night, and my white hair increased substantially." Through this experience, he learned that even when faced with absconding cases, he would not lose sleep over the pain again. In the clothing wholesale industry, being deceived is the norm. A clothing businessman from southern Shanxi, Li Yuan, pointed out that in this industry, almost every business owner has experienced being absconded with, which is very common. Generally speaking, the more debt a business has, the bigger it can grow; without debt, it is difficult for a stall to expand. Moreover, the worse the business, the more necessary it is to offer credit to customers, which also increases the risk.

In the current wholesale clothing market, many suppliers have encountered difficulties in capital turnover. Take the well-known stores such as "Teen Kayla" for example, they usually agree with suppliers on a one-month billing cycle, meaning the clothes of the current month are sold, but the payments are not settled until the end of the following month, which is to say, the goods are sent out in advance, and settled after the capital is returned. Industry insider Zheng Bei points out that this business model is also very common in the real estate field, where payments to the construction contractors are settled only after the houses are sold. This method puts suppliers in a very passive position in the transactions, and the risks brought by those customers with greater influence are actually greater. As a metaphor by an industry insider says: "It’s like trading stocks, high potential profits often come with equally high risks."

In fact, many suppliers admit that, despite being fully aware of the risks of delayed payments or absconding with money, they still dare not give up these customers because of the tremendous sales volume brought by the influencers' clout. Zheng Bei mentioned that Taobao stores like "Ke Ke Li" and "San Mu Zi," with tens of millions of followers, are clients of the suppliers in Shahe market and operate in many similar ways. In the fiercely competitive apparel market, which is as competitive as a red sea, even if the daily shipment volume reaches 180 pieces, the profit per clothing item is only a few yuan.

Zheng Bei revealed that suppliers of their scale have almost no bargaining power when dealing with these influencer shops. After various expenses are deducted, the profits are negligible. If they don't supply to them, clients may turn to other stores or even collaborate directly with factories, a situation that is even more hopeless for the suppliers.

In this industry, cases of businesses absconding frequently occur, and in the past, there were always hit products that could improve earnings to offset bad debts. But now, hit products are increasingly rare, and with prices continuously falling, doing business in the industry is becoming even more challenging.

Apparel mogul Luo Xi, drawing on her own experience, did the math on the business and pointed out the difficulty of making a profit. According to her analysis, even if monthly sales reach 2.8 million yuan, the actual income is only 800,000 yuan. After deducting costs such as promotion and courier, the net profit is minimal. Luo Xi concluded that one would need to achieve at least 7 million yuan in monthly sales to possibly make a profit. Faced with inquiries about whether it's possible to enter the apparel industry with an initial investment of 3 million yuan, she jokingly suggested selling pancakes instead.

One of the major challenges in the current apparel industry is the rising rate of product returns. The average return rate for women's clothing has now reached an astonishing 70 to 80%, and although other categories are lower, the numbers have been observed to be increasing this year. In such circumstances, only enterprises with strong capital and supply volumes can withstand the pressure caused by high return rates.

In information about the apparel industry on social media platforms, high return rates have become a common problem for merchants. This phenomenon reveals the real plight of the apparel industry and highlights the intangible pressure in real-world operations.

In today's e-commerce platforms, freight insurance has almost become a necessary option, primarily to strengthen price competitiveness and user experience. Despite this, for merchants, the costs associated with returns are far more than just the added freight insurance. Various hidden costs, such as investment liquidity, logistics fees, labor costs, operational expenses, and storage fees, are all issues that merchants need to consider.

Especially in the women's clothing e-commerce platform field, competition has reached a very intense level. For example, it is very difficult to reach the rank of a five-metal-crown store, which industry insiders estimate would require at least 10 million positive reviews, meaning the corresponding transaction volume would be in the tens of millions. From this, it is evident that "Young Girl Keira" did not start with the intention to defraud. After the incident, the store owner also expressed her helplessness: the original business model is no longer applicable. Despite investing six years of effort, it is still difficult to prevent the looming economic collapse. The owner promised to try her best to repay the debts.

Where does the root of the problem lie? Industry insiders generally believe the issue lies in its low pricing: for example, "Girl Kayla" sells a clothing item with a purchase price of 30 yuan for 35 yuan, making only a 16% profit. As Li Yuan mentioned, the profit margin for most online clothing retailers is around 60%, and anything below this threshold could lead to losses. For large storefronts like "Girl Kayla," profit margins should also be over 40% in order to ensure profitability. He pointed out that the increasing return rate exacerbates the risks of operating low-priced products, leading to a serious erosion of actual profits. Once a merchant faces any small financial problem, the capital chain may break quickly, leading to bankruptcy or evasion.

The current state of the clothing industry is like a new business model. It does not survive by deceiving consumers but by squeezing the supply chain. The difficulty of obtaining traffic is almost directly proportional to the price of goods. Most e-commerce platforms provide price-comparison features, and for the same product with different prices, the system often directs traffic to the cheaper option. At the same time, it also reminds merchants how much potential traffic they have lost due to pricing, thus forcing them to lower their prices. If the pricing is too high, there will be no traffic; too low, and there are no profits. To profit from low prices, supply chain management must be optimized, which is beyond the reach of many small and medium-sized merchants.

Rossi, a major retailer in the clothing industry, stated that small and medium-sized merchants with insufficient capital, tight supply chain resources, and lack of their own brands are at a disadvantage in price wars. However, the experience of merchant Zheng Bei reflects the contradiction of the entire industry: on the one hand, he advises his peers to raise prices and increase profits to improve the survival environment of the industry on short video platforms; on the other hand, he himself has to participate in price wars. The advice of commercial giants seems difficult to implement in the reality of the online clothing market, as price wars may lead to companies being unprofitable despite selling hot products.

Taking the rental of stalls in the Shahe wholesale market as an example, these shops average in size from 5 to 18 square meters, with annual rent ranging from 100,000 to 2 million yuan, depending on the size and location of the storefront. In the Thirteen Row area, it's even more expensive, with monthly rents ranging from 100,000 to 600,000 yuan. This means that clothing merchants have to face a daily loss of fixed costs ranging from 300 to 20,000 yuan as soon as they open their eyes each day. Their only way out is to keep selling goods to maintain cash flow.

Not long ago, two female entrepreneurs, Wangzi and Beibei, decided to exit the clothing industry and announced this news to their fans on short video platforms. Although their live broadcast data were outstanding and their business operations seemed good, they still faced the dilemma of "not making money with overstocked goods," which ultimately prompted their decision to give up. One triggering factor was a message from a supplier: a top merchant in a category could sell seven or eight million in one sale, and sales of a single item might even reach a hundred million. Still, they suffered millions in losses last winter.

This supplier, who already owns his own factory, designers, and an established live broadcast team, decided to give up his main business of many years and turn to the business of closeout goods, which does not accept returns, after hearing the above information.

In any industry, there will always be successful people, but when merchants lament: "We haven't succeeded for a reason, but there's no point in staying in this industry anymore." It can be foreseen that the industry might already have a problem. Just as the old saying goes, "Draining the pond to get all the fish will leave no fish for the next year; burning the brushwood for farming will result in no animals for the next year." What is often not realized is that the bad habits of some industries have already produced adverse results.

In 2017, CCTV's talk show "Dialogue" invited several industry tycoons, including Dong Mingzhu, Yu Chengdong, and fashion entrepreneur Li Ning, to discuss whether "brand" or "quality" is the most important element in China's manufacturing industry. Except for Li Ning, other guests chose "quality". Li Ning explained the reason for his choice of "brand", stating that a brand actually includes quality, but more importantly, it encompasses product experience. Seven years later, the current state of the fashion industry shows that product experience has gone against the direction of industry development.

Although merchants and platforms are committed to meeting consumer needs, the internal competition within the industry ultimately falls on consumers, and not all of it is positive. Take the presale model as an example, consumers generally report that for clothes ordered in spring, they have to wait 30 days due to presale, and by the time consumers receive the items, the season has already transitioned into summer. The presale system to some extent contributes to a trend of high return rates.

According to Wangzi and Beibei, the current presale is not as people understand it, where merchants start producing clothes after receiving an order. In reality, merchants already have the goods in stock, but they need time to alleviate inventory pressure. Considering an 80% return rate for women's clothing, if merchants sell 1000 units, only about 200 might actually be final sales. Merchants will only produce these 200 units and ship them in the order of purchase time, while subsequent customers have to wait for earlier customers to return items before their turn comes up.

Another example is the perversion of the "price comparison" feature. Its original purpose was to help consumers find the best value for money, however, many consumers find that the clothes they buy online do not match the pictures, in large part because some merchants use "price comparison" to compete on costs by using cheap materials and reducing craftsmanship to attract consumers with low prices.

In the fast development and fierce competition of the clothing industry, some producers, in pursuit of speed, sometimes rely solely on a picture and intuition to produce clothing, and this type of quick-profit approach ultimately leads to the loss of quality products within the industry.

Overview of Guangdong Province's Clothing Industry: According to the latest statistics from the Guangdong Garment and Apparel Industry Association, in 2023, clothing manufacturers in Guangdong are facing significant challenges. Specific data shows that larger enterprises have completed the production of 3.174 billion pieces of clothing, accounting for 16.36% of the national share, yet this figure has decreased by 12.8% compared to the same period last year; the industrial sales production value reached 230.28 billion yuan, a decrease of 8.3%; and the industrial added value was 59.891 billion yuan, with a decline of 7.4%.

In terms of financial data, these above-scale garment enterprises have a total asset of 175.903 billion yuan, with an annual growth rate of 0.9%, while the total liabilities amount to 88.893 billion yuan, with a growth rate of 3.5%; the main business revenue is 228.807 billion yuan, which has decreased by 7.1% compared to the previous year.

Challenges faced by the industry chain: The apparel industry chain is currently in a difficult cycle of upgrade. Due to limited profit margins, garment factories face the problem of offering high salaries, which directly leads to recruitment difficulties; similarly, due to cost and technological constraints, processing factories often only select orders with simple patterns and easily available fabrics, and shy away from products that require fine workmanship and complex materials. This model keeps the industry hovering in the lower-end market, making it hard to break through.

In wholesale markets such as Shahe, Shi San Hang, and Si Ji Qing, many operators also feel the fluctuations. Some choose to sell at a loss for freedom, while others, like Zheng Bei, choose to persevere. He, along with many others in the industry, is actively looking for new sales channels on social platforms in search of a breakthrough.

As for the issue of payment terms, many small business owners have returned to the traditional cash-on-delivery model after experiencing crises. Rather than expanding the scale of business, the primary goal of more people now is to ensure survival.

Industry observation: Regarding the "Runaway Girl Keira" incident, industry insider Rossi has a different view. He believes that although runaway incidents are not uncommon in the industry, runaways that break through circles like "Runaway Girl Keira" are not that frequent. In his view, a runaway is not necessarily a bad thing; it may signal a new opportunity—waiting for the platform to revise rules under the impact of a significant event, thus achieving a balance in the relationship between buyers and sellers. Many are holding onto this hope and waiting for a turning point in the industry.