Socks:two steps of consumption upgrading

China is the largest exporter of socks

Datang Town, which has developed for less than 30 years, produces more than 70% of the socks in China and 1 / 3 of the socks in the world every year. Therefore, it is said that “Datang socks machine rings, and the world has a pair of socks”. China’s OEM factories also provide OEM services for Adidas, puma, Okamoto, Decathlon, UNIQLO, Muji and other international brands.

Based on such a perfect industrial cluster, socks have already become a fully competitive market in China. From each price band to the subdivision of materials, patterns, design sense, functions and specific groups, it covers the consumption characteristics and needs of almost all groups.

Socks at the stall: 5 ~ 8 wool / pair, 10 yuan / tie, 10 yuan / 8 pairs, 2 yuan / pair, 10 yuan / 3 pairs;

Traditional clothing stores and underwear stores: 5 yuan / pair, 6-8 yuan / pair, 10 yuan / pair;

 Home life centers such as minisor and Muji: 10 yuan / pair, 20 yuan / pair;

Sports brands and UNIQLO: 27 yuan / pair, 39 yuan / pair; 20 ~ 30 yuan / pair, 60 yuan / pair;

Emerging household brands (such as sakiya, body.ing, tutuanna): 99 yuan / 4 pairs, 99 yuan / 3 pairs, 20-30 yuan / pair;

Sock specialty stores (such as happy socks and stance): high end 100 ~ 300 yuan / pair, low price 160 yuan / 3 pairs, 80 yuan / pair, 120 yuan / 3 pairs

Different consumption channels correspond to different consumption demands and groups.

01. Socks, two steps of consumption upgrading

And the consumption upgrading and population segmentation of socks are earlier than other consumer goods that are widely concerned today.

As early as 2015, China’s per capita consumption of socks was comparable to that of Europe and the United States.

In 2015, Japan’s per capita sock consumption reached 37.3 US dollars per person, Europe and the United States’ per capita consumption was 20 US dollars per person, and China’s was 15.1 US dollars per person. If a pair of socks is calculated at 5 yuan, the Chinese people only replace 6 pairs of socks less than the Europeans and Americans every year.

(considering that it’s extremely embarrassing to expose broken socks when you go in and out of some places in Japan, the quality and replacement requirements of socks in Japan are much higher than those in China and Europe and the United States. It’s more appropriate to compare the per capita consumption of socks in Europe and the United States.)

The direction of consumption upgrading is no more than faster replacement frequency or higher single and double prices, which are factors that promote the growth of industry scale (sock demand = quantity * price). When consumers wear worn socks from mending and then wearing them, to throwing them away now, such changes have given birth to low-end brands such as Antarctica and Longsha. Until today, hundreds of thousands of socks are sold every month on Taobao and pinduoduo, and the prices are all concentrated at 1-2 yuan / pair. This is the first wave of sock consumption upgrading – the frequency of replacement has increased.

As the largest sock consumption market in the world, China’s market space is undoubtedly huge and diversified. Demand and per capita consumption of socks in China from 2009 to 2016

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Demand and per capita consumption of socks in China from 2009 to 2016

However, when we look for socks brands that can be named in the huge market, we hear most about tutuanan, thick wood, under boots house, happy socks and stance, all from Japan, Europe and the United States.

Japan’s tutuanna opened its first store in Shanghai Jiuguang Department Store in 2009, and the number of stores in China increased to 73 in 2013; In 2014, it increased to 160 stores with sales of 369 million yuan; Up to now, there are more than 400 in China.

Similarly, happy socks opened its first store in Shanghai in November 2016 and expanded to 42 stores in three years; Stance also officially entered tmall in 2016, and has successively opened stores in Shanghai, Qingdao, Changchun, Changsha, Hangzhou, Chongqing, Jinan, Nanning, Nanjing, Shenzhen, Taiyuan and other places. So far, it has opened 17 stores. They reaped the second wave of dividends from the upgrading of sock consumption – the price of a single pair increased.

The second wave of dividends is represented by higher price sock specialty stores & shopping malls and home clothing stores 

02. New sock model ①: Inspiration from street stalls → sock stores

From the previous stall to the supermarket, and then to the current online low-end market, in the battle field of socks, businesses basically only fight a little: low prices.

In the first quarter of 19 years, Datang’s sock industry had an output value of 4.1 billion yuan and a total profit of 100 million yuan, with a profit margin of only 2.44%. This is the case with meager profits.

Online sock enterprises with a cost of 1 yuan / pair mostly focus on 80 cents / pair. Enterprises that are limited by low prices will be eliminated in two or three years, and any enterprise fluctuations or changes in the wind direction can not be borne.

The directions for many sock enterprises to break away from low price competition are basically divided into three categories: ① increase product differentiation and increase product added value; ② Derived to personal clothes and other categories; ③ Attract specific groups, assign special personnel for special use, and deeply cultivate the source market.

Most of the differentiated innovations in socks are based on happy socks.

Happy socks, founded in 2008, is a star enterprise in the sock innovation industry, focusing on creativity, color, art and design sense. Socks can be sold for tens to hundreds of dollars per pair. However, pure imitation cannot create a Chinese version of happy socks.

Most of the innovative sock enterprises focusing on Design in China can not raise their prices upward; It is also trapped in hundreds of new SKUs every year in order to attract the most consumers. But it ignores two points:

① Changes in competition pattern: Happy socks, as the pioneer of flower socks, has become a fashion brand. It can use the brand as a barrier to compete with many imitators, and the target consumer group can identify “happy socks” and “non happy socks”. The emerging domestic sock enterprises, facing the sock industry with strong imitation and short sampling cycle, can only cope with a large number of new products and high-intensity inventory management every year, and are labeled as low matching versions.

 

② Channel model: the high customer unit price of happy socks is enough to support the offline exclusive store model, and the tens of thousands of offline sales outlets and online channel marketing are also difficult for hosiery enterprises in the start-up stage to imitate.

 

It is difficult to increase the price. A pair of fashionable socks with a price of 10-20 yuan will establish a special sock store. According to the industry practice, it is difficult to achieve a profit and loss balance when the gross profit is 50% – 60%.

03. New sock model ②: top three tutuanna, sakiya, body.ing

For most people, spending tens or even hundreds of yuan to buy a pair of socks may be hesitant, and socks with slightly lower prices can not support single store profits.

Thus, after tutuanna settled in China in 2009, a model of “pajamas, underwear, home clothes and socks” was derived. Such a store can be regarded as an upgraded version of “urban beauty” or an expanded version of “sock specialty store”. Socks are no longer the only main stream of stores.

This mode has made the demand of socks return from design to comfort, and the price has also been reduced from hundreds to tens of yuan 

Tutuanna, sakiyoya and body, the top three enterprises that have opened up and expanded their territory with this business model Although ing is developing rapidly, it also inevitably encounters bottlenecks. It is hard to avoid a small number of high-end customers, but it can be bought everywhere at low prices.

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The three brands tend to be consistent in positioning and even price. Socks are generally more than 20, and pajamas are generally more than 150. In terms of product characteristics, it also focuses on skin and home; There is a slight difference in product structure. 60% of tutuanan’s revenue comes from socks; Sakiya’s sock sales account for more than 50%, and body.ing’s home clothes account for a higher proportion.

However, these three seem to be in a situation where the high cannot be achieved and the low cannot be achieved. There are more professional or cheaper brands for buying socks, pajamas and underwear; “Skin friendly” positioning is unable to attract more passengers; And the extremely low passenger flow results in that only high gross profit can wipe out the fixed cost. vicious spiral 

The final result is that even in the first and second tier cities where high consumption groups gather, the average income of such stores is 1.3-1.5 million yuan / year.

For the third way – focus on more segmented markets.

Such as sports socks, deodorizing socks, antibacterial socks, baby socks, diabetes socks, etc. These demands are neither rigid nor easy to be replaced, and are not easy to grow. China’s per capita sock consumption is less than 100 yuan / person / year, and only a few people need to deodorize and antibacterial socks. This part of the demand can be fully satisfied by the full range of sock brands.

04. What kind of sock enterprises are we looking for?

In terms of the new mode of sock sales, the exploration of sock specialty stores and household clothing stores does not seem to be suitable for China’s national conditions. The imitation of tutuanan and happy socks has blinded many sock companies 

In 2018, 28.9 billion pairs of socks were sold from Datang, with 1 million sold every day. According to the fact that Datang’s sock production and sales account for 60% of China’s domestic market and 50% of exports, China’s sock scale has reached 60 billion. In such a market, a successful enterprise needs the following elements: 

1) Depth: focusing on socks, with its own unique product system and supply chain.

Socks themselves are a category that is easy to be covered and has randomness in consumption. Home stores, clothing stores, shoe stores, jewelry stores, underwear stores, supermarkets, and online stores can randomly divide up some of the market. Without differentiation, most products end up in distance and price competition. Such differentiation is difficult, but it is very core.

 

2) Width: the product series covers all groups and functions. Men’s socks, women’s socks and children’s socks; Functional socks, business socks, sports socks, ship socks; Stockings and socks shall be covered. Taking the mass market, we need to seize the share from the extremely dispersed sock market, and there is no need to reposition in a more segmented market.

3) Facing the mass market. Retail prices should not be too high, so as to reach the broadest consumer group.

High prices raise the purchase threshold, which is also destined to be a niche market. And consumption upgrading is not only better products and higher prices; It is also the same price and better product. In the mass market, the perception of product power is more and more obvious.

4) Both online and offline work together. Only a single e-commerce or offline channel can not form a brand closed loop in the hearts of consumers. In particular, we should pay attention to offline channels, which can be supplemented by traditional circulation channels; When opening counters and stores in business circles with large offline traffic, the model can be made lighter, and the atrium or smaller stores with less rent can be selected.

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Post time: Sep-07-2022