LOS ANGELES — In yet another link between American and Chinese apparel industries, Dallas-based Market Center Management Co. has signed a 10-year deal to manage the ShanghaiMart, Asia’s largest international trade mart.
This story first appeared in the July 19, 2002 issue of WWD. Subscribe Today.
MCMC, which already operates the Dallas Market Center and the California Market Center, is expected to announce at a news conference here today that it will oversee leasing, marketing and business development for the 3 million-square-foot ShanghaiMart campus. The three-year-old complex includes a 30-story office tower, two exhibition halls and a 2,000-unit showroom facility. The facility will continue to be owned by the Hongqiao Economic & Technical Development Zone United Development Co. and real estate holding company Continental Land Development.
MCMC executives declined to estimate the project’s cost, but Bill Winsor, president and chief executive of MCMC, pointed out the building does not need significant renovation. Observers speculated that ShanghaiMart’s owners, however, are likely to plow millions into the project, a chunk of which will be the 10-year management contract with MCMC.
MCMC executives said their primary goal is to facilitate sourcing by consolidating factory representatives, textile companies, brokers and other service providers in one location.
“With trade barriers coming down in 2005, retailers are really stepping up their efforts to produce overseas,” noted Winsor. “Many have offices in Hong Kong, so going over to the mainland to visit a number of factories is extremely time consuming.”
In fact, MCMC hopes to capitalize on the booming industrial city’s proximity to apparel factories. In recent years, production has flourished in Shanghai, while Hong Kong’s factory base has dwindled, industry sources said.
The Shanghai deal is similar to one MCMC inked last February to manage operations at CMC, formerly CaliforniaMart, but the Chinese deal has a crucial difference. In an effort to woo major retailers like Target and Wal-Mart, MCMC management will hire compliance experts to certify factories before they are allowed to lease space in the mart.
“What we heard from retailers is they really wanted the mart to qualify factories — to be compliant with OSHA, but also to have their [capacity] and production capabilities examined,” noted Winsor, referring to a three-month survey MCMC conducted.
MCMC also hopes to use ShanghaiMart to introduce American labels to the rapidly westernizing Chinese market through Shanghai editions of trade shows they already host in Dallas and Los Angeles. U.S. companies can also open showrooms in ShanghaiMart.
In the next several months, MCMC plans to hire a general manager for ShanghaiMart, either from China or the U.S. ShanghaiMart staff are already attending training sessions at the DMC. The mart is just over half occupied with vendors of textiles, apparel, accessories, gift, furniture and building supplies.
Cindy Morris, MCMC’s chief operating officer, said the company will be “restacking” these existing tenants to clump related industries together, following the Dallas model. She said they will also pursue toy vendors, since there are many plush-toy factories nearby.
Winsor said he expects to sign a first lease for a buying office of a large, hard-goods retailer in the next week.
Industry executives were positive about the project, citing it as potentially invaluable for U.S. companies piecing together strategies for tackling China, the world’s most populous nation with 1.3 billion people. Shanghai alone is home to 14 million people.
With imports of Chinese fabric and apparel rising steadily and competition for reliable factories intense, everyone is eyeing the nation as a sourcing center — and an untapped consumer market. In 1998, the latest year for which figures are available, the volume of retail sales of consumer goods in China was $353 billion, according to the U.S. State Department.
Ron Martin, director of factory compliance for Greensboro, N.C.-based VF Corp., said he was “shocked” at Shanghai’s sprawling growth in recent years.
“It’s going to be a major economic center,” he said. “Everyone is waiting as we approach 2005 to see what categories will be non-quota. Everyone is trying to position themselves.”
VF currently operates a sourcing office in Hong Kong, but Martin said he believes staff there would find a Shanghai market center worth checking out — especially if it helped clarify the link between agents and the factories they represent.
The Chinese marketplace is “still daunting, even for many retailers that have been there years,” observed Morris. “They’re working with a handful of suppliers they know they can trust and not getting the broad exposure to the industry.”
For small- to mid-sized companies that can’t afford full-time staff in China, that’s particularly true.
“I think the greatest advantage will be for people who are new at it,” said Ed Redding, executive vice president of sourcing for moderate sportswear producer John Paul Richard. “The way it works now is word-of-mouth. You kind of stumble into finding a manufacturer and then you hold on.”
Vera Campbell, owner of junior and tween manufacturer Knit Works, recently returned from a sourcing trip to Shanghai. With labor costs rising in Caribbean Basin Initiative nations like Honduras, Campbell just decided to shift 25 percent of her production to China. She said she was “overwhelmed with” the scope of the city and its garment industry.
“It would be tremendous for all of us who travel to the Far East to have one central place to go,” she said. “But people shouldn’t go there blindly. You should still do a lot of checking on your own.”