World Accessory Market Feels Global Pinch

Linda Zhou, board chairman of the Neoglory Holdings Group in Yiwu in eastern China Zhejiang Province, saw tough times were coming as long as seven months ago.

I visited one of my client's shops in the United States in April and was told that there were only about 40 customers a day with daily sales of 4,000 to 5,000 U.S. dollars in April. In normal times, that store would have more than 200 customers a day and sales of more than 20,000 U.S. dollars, said Zhou.

As soon as I got home, I stepped up our product design work and market diversification drives.

Newglory is a major world accessories and ornament wholesaler, with some 2,400 staff and a 300-member research and development team that designs more than 100 new products every day.

WORLD'S MARKET FEELS GLOBAL PINCH

Newglory, like other enterprises in Yiwu, has a wholesale shop in the Yiwu international trade market. The market is a microcosm of the global economy, with more than 60,000 shops selling accessories, ornaments and toys, and it's considered to be the world's largest commodity wholesale market.

The sprawling mall covers 4 million square meters. A shopper who spends eights hours a day in the market, and three minutes in each stall, would need a year to visit every booth.

Companies based in Yiwu, elsewhere in Zhejiang Province and in the rest of China each account for 30 percent of the market's shops. Foreign firms comprise the remaining 10 percent.

SHRINKING PROFIT MARGINS

Zhou said her sales are evenly divided between the domestic and foreign markets. Among foreign markets, the United States and Europe account for 20 percent of sales, while emerging markets, such as Russia, Mexico and Ukraine, account for the other 80 percent.

Our capacity for innovation and our market structure make me confident of surviving the financial crisis, she said.

But Zhou predicted that Neoglory's profit margin might drop 20 percent this year, reflecting higher raw material and labor costs and the impact of the global financial crisis.

I am lucky enough to still be making a profit. Many small companies in the industry may close amid the global financial turmoil, Zhou said.

Zhou said the business of her Yiwu wholesale shop has been affected by the crisis. Some foreign clients who formerly visited eight times a year have cut their visits in half.

A staff member in the wholesale shop of Bumjin Accessories, Zhou Yuxi,estimated that the outlet's sales were down 10 percent compared with the same period last year, as the number of U.S. customers had dropped.

Feng Jiangyiang, manager of Yiyuan Arts and Crafts, said her company has shifted its focus to the Middle East and Africa, since the number of customers from Europe and the United States is down.

NECESSITY SPURS INVENTION

To survive the global financial crisis, shops in the Yiwu trade market are turning to new markets and products.

Take toys, for example. Yiwu used to export only 10 kinds of toys to Russia, but now, market officials say, toy enterprises are designing and exporting more than 100 kinds of toys to Russia.

Yiwu does business with 200 countries and territories, selling about 30 billion U.S. dollars worth of goods each year. Foreign customers from 83 of those overseas markets have established 1,899 representative offices in Yiwu city.

Hu Zhilong, the manager of the China Commodities City Group market development service center, said export volume to the United States has dropped by 0.45 percent year-to-date amid the global financial crisis, while export volume to South America is up more than 40 percent.

But the percentage changes in volume don't fully indicate the relative importance of the respective markets, because the U.S. market is many times larger than the South American market.

An Iranian customer who would only give the name of Mahmoud said he had been coming to Yiwu for four years to buy vases in bulk at wholesale prices. Despite the global financial crisis, I still come, because commodities here are really very cheap.

As the world's largest commodity wholesale market, Yiwu's business has not been affected too much, but we are closely observing what will happen next year, Hu said.

Source: CRIEnglish