Hong Kong's Intimate Apparel Industry

The intimate apparel industry has been playing a significant role in the local clothing industry, which has gained for Hong Kong the reputation of being a leading production centre and an international sourcing hub for textiles and clothing.

The growth of the local intimate apparel industry was phenomenal. According to available statistics, the total export of undergarments in 1960 was HK$174 million which rose to HK$3,326 million in 1984 and reached HK$28,553 million in 2003.

During the period from 1999 to 2003, despite a certain decrease in the number of undergarment and night-garment manufacturing establishments in Hong Kong and in the corresponding employment size, the intimate apparel industry recorded a 10% growth in exports and the share of intimate apparel exports (domestic exports and re-exports) in the total exports of wearing apparel (except footwear) remained in the region of 15% to 16%. In 2003, U.S.A. remained as the largest market for domestic exports, followed by the U.K., Germany, mainland China and the Netherlands.

Serving both genders and all age groups, the intimate apparel portfolio covers a diverse range of items such as brassieres, briefs and panties, body suits, camisoles, garter belts, corsets, girdles, men's underwear, vests, sleepwear, nightwear and swimwear. Among these, women's or girls' underwear, including brassieres, briefs and panties, constitute about 80% of Hong Kong's domestic and re-exports for undergarments, manifesting the predominance of women's lingerie in the intimate apparel industry.

Hong Kong's Competitive Advantages

Despite keen competition in the global market among key players in the intimate apparel industry, Hong Kong has gained a leading edge as a sourcing hub in terms of a well-established supply chain, provision of skilled and semi-skilled workers, short cycle time and speedy product delivery, implementation of international standards, investment in advanced technologies, and the development of brand names and private labels. To demonstrate their commitment in quality management and social responsibilities, there are local companies that have successfully obtained ISO 9001 certification, implemented the SA 8000 system, accredited with Worldwide Responsible Apparel Production (WRAP) and adopted the six-sigma concept. While quick response enabling technologies and product development tools such as 3D Scan Mill System, CAD/CAM systems and workflow management software, are widely adopted, there are companies actively engaged in developing their private labels in their progressive migration from original equipment manufacturing (OEM) to original design manufacturing (ODM) and original brand manufacturing (OBM).

Speaking on the strengths of Hong Kong, Mr Andrew Sia, founder and Chairman of the Hong Kong Intimate Apparel Industries'Association opined that similar to other apparel sectors, the undergarment industry possessed more comparative advantages than shortcomings. "First, some founders of the intimate apparel companies have entered into their 50s and provided a wealth of experience for the younger-generation entrepreneurs. Second, the enormous supply of workforce in the Pearl River Delta has helped solve the problem of labour shortage. Third, we are almost 100% self-sufficient in the supply chain infrastructure, i.e. from yarns to fabrics and trims, with importation restricted to the very few technical or niche fabrics. The major threats that the industry encounters are probably severe competition resulting from over supply as well as fierce price wars in the market," Mr Sia remarked.

Key Success Factors

Ms Annie Wong, Executive Vice President of MAST Industries (Far East) Limited and Asia Regional Production Director for Victoria's Secret Production pointed out that the adoption of advanced technologies and communication tools such as video conferencing facilitates the realization of design concept and shortens product development cycle time which are essential elements in the supply chain management.

As a long established sourcing company in Hong Kong, MAST Industries is headquartered in U.S.A. with production facilities in Cambodia, the Philippines, Thailand and mainland China, serving customers worldwide.

"We have been focusing on quick response to market needs with emphasis on 'right-first-time' concept through staff empowerment to eliminate unnecessary approval procedures for fit, colour, fabrics, etc., demonstrating at the same time our dynamic management style across the company," said Ms Wong.

Commenting on the requirements of a fashion designer, Ms Wong noted, "To add value to both the company and the industry, intimate apparel designers have to have an innovative mindset developed under a creative environment, be able to adapt to tough working conditions, and continuously upgrade their skillsets."

Mr Paul Tsang, Vice Chairman of HKIAIA and Director of Pacific Textiles Ltd., which is a manufacturer and supplier of fabrics with its production base in Panyu, China, said, "We need to nurture more quality designers, in particular home grown designers for upstream underwear as well as accessories, in the industry. It is our belief that 'talents, innovation and technology' are the major success factors of our company," he said.

According to Mr Tsang, the local intimate apparel industry grew by approximately 5 times over the last decade and the upward trend is anticipated to continue despite the economic downturn in 1997 and the tough business environment related to the outbreak of SARS (Severe Acute Respiratory Syndrome) in 2003. He went on to highlight the advantages that Hong Kong possesses over its competitors - its proximity to the vast manufacturing hinterland in the Pearl River Delta, pricing strategies, service quality, flexibility, and quick delivery which normally takes about 4-5 weeks turn-around-time from order to delivery.

"By working closely with sourcing companies, local manufacturers and suppliers will be able to facilitate innovative product development and provide sophisticated materials for the markets in Japan, the U.S. and EU, thus reinforcing Hong Kong's status as a sourcing hub and fulfilling its support and co-ordination function," Mr Tsang added.

People Development

People development has always been an issue for the intimate apparel industry. The industry has a long history of global shortage of fashion designers for its manufacturing and retail activities.

In August 2004, The Hong Kong Polytechnic University (PolyU), with financial support of the ACE Style Intimate Apparel Limited, established the Asia's first ACE Style Institute of Intimate Apparel. Headed by Dr Winnie Yu, Associate Professor of the Institute of Textiles and Clothing in PolyU, the ACE Style Institute of Intimate Apparel comprises a design studio, occupying 120 square meters and equipped with advanced computer systems and special equipment for intimate apparel studies. It will provide a platform to promote exchange between local and overseas experts, support teaching and research related to intimate apparel, and offer consultancy services to the industry. The Institute will offer a Bachelor of Arts (Hons) course in Intimate Apparel with its first intake scheduled for September 2005. When asked on the importance of training as a means to enhance the competitiveness Hong Kong's intimate apparel industry, Dr Yu said, "Drawing on the expertise of the local workers, with many of them having acquired over 30 years of experience through traditional apprenticeship, as well as their low turn over rates, the industry enjoyed fairly stable development in the past few decades. However, with the increasing demand for innovative design and application of advanced technologies, there are definite needs for both academic and on-the-job training on all aspects of intimate apparel business ranging from merchandising, quality control, design, production, packaging, shipping, marketing, wholesaling and retailing to customer satisfaction." "The introduction of formal education to the young generation will ensure sustainable development of the intimate apparel industry," Dr Yu added.

Opportunities and Challenges

As an integral part of Hong Kong's clothing industry, the intimate apparel industry in Hong Kong has to stand out in this dynamic market place by tapping the Mainland market through opportunities offered by the Closer Economic Partnership Arrangement (CEPA) on the one hand, and overcoming challenges posed by trade measures that affect exports of clothing on the other hand.

Signed between the Mainland and Hong Kong, CEPA came into effect on 1 January 2004. Its implementation opens up a window of opportunities for Hong Kong intimate apparel manufacturers to develop Mainland as their domestic market since eligible products made in Hong Kong conforming to the rules of origin could have tariff free access to the Mainland. CEPA also has the potential for attracting more high value-added manufacturing activities in Hong Kong, and promoting development of brand products made in Hong Kong to the affluent consumers on the Mainland. Following the signing of supplementary agreement (CEPA II) to further liberalize trade in goods and trade in services in the Mainland for Hong Kong in Mid 2004, an additional list of textiles and clothing products covering pajamas, swimming suits and underwear has been included for implementation of zero import tariff by the Mainland, thus creating a more favourable business environment for the Hong Kong manufacturers. The abolition of textile quotas in January 2005 and the rapid regionalization of trade through bilateral and multi-lateral agreements [e.g. NAFTA (North America Free Trade Agreement), AGOA (African Growth and Opportunity Act), CAFTA (Central America Free Trade Agreement), CBTPA (Caribbean Basin Trade Partnership Act), ATPA (Andean Trade Preferences Act) and expansion of EU membership to Eastern European countries] dictated by trade policy changes and pressures to reduce lead times are exerting increased pressure on Hong Kong clothing enterprises for the need to sustain their competitiveness in the upcoming quota-free world.

Mr Andrew Sia observed, "China's WTO commitments will definitely provide a favourable business environment for local entrepreneurs operating on the Mainland. However, the elimination of textile quotas has been backfired by the U.S. trade unions and manufacturers' associations and pressure is being exerted by such bodies on the U.S. Government to invoke safeguard measures against imports of textile products from China. In sum, there will always be trade barriers for us to overcome and the need for us to diversify our manufacturing base, even in the foreign lands."

Market Trend

The increasing perception of intimate apparel as a mix of fashion and function has become a development trend in the international and regional markets.

In a 2003 study on women's lingerie, world lingerie sales were estimated at US$29.5 billion with 56% of the market in value for brassieres, 32% for briefs and 12% for bodywear, daywear and shapewear.(1) A total of 6.4 billion brassieres and briefs were bought during the year, and of these, the developed world has 84% of the world market by value, deriving from 16% of the population of women of bra wearing age. The study also indicated that in the U.S.A. and Europe, the average woman owns six brassieres and eight pairs of briefs and buys two brassieres and five pairs of briefs per year.

In Japan, it is amazing to discover that the average young female in Japan is estimated to have 30 brassieres and 65 pairs of briefs in her wardrobe.

As for men's underwear, a study highlighted that although French and German men's underwear is far more adventurous and diverse than elsewhere, there is plenty of room for expansion as the average Frenchman buys only three pairs of underpants a year, against six to eight in the U.S.A.(2)

Product Trends

Key factors dominating the future outlook of the industry are the development of markets and product trends.

While the U.S., EU and Japan are the most important markets for brand name products, the emerging markets, namely the Indian sub-continent, mainland China and Southeast Asia, are considered as the star performers.

As regards product trends, there are always manufacturing demands for technology and processes upgrading to improve comfort, fit, functionality and fabrication in meeting customer satisfaction. The application of microfibres and seamless and moulded technology is therefore useful in achieving fit and comfort for the increasingly demanding consumers.

Similarly, the adoption of superlight materials for lingerie, in particular brassieres and briefs, has been able to address customers' concern for comfort. The air brassiere and gel brassiere are looked upon as trendsetters and brassiere stripes of different shapes, colours and materials as well as accessories are often meant for 'wear-to-be-seen' and 'mix and match' purpose.

Without open admittance but with universal acceptance, the plus-size market has been and will be an area of growth. It is estimated that 65 million women in U.S.A. wear size 14 or above, representing one-half of the female population in the country.(3) Both clothing and the intimate apparel manufacturers are reportedly offering merchandise of larger sizes.

When it comes to men's undergarments, which are broadly categorized under 'basic classics', 'more seductive lingerie' and 'in-betweens' are less glamourous than that of the women's. Similar to women's lingerie, men's underwear has increasingly become a fashion item in itself with innovative design and marketing strategies.

The Road Ahead

The elimination of textile quotas in 2005 will no doubt present both challenges and opportunities to the intimate apparel industry worldwide. To gain a leading edge in the increasingly competitive global market, the local industry has to move up to higher value-added manufacturing and branding through the adoption of advanced technologies, deployment of effective management tools as well as to focus on nurturing quality designers.

Above all, enhanced capabilities in strategically integrating the marketing, design and manufacturing activities in the local industry to meet the ever-changing market needs and expectations will be essential in reinforcing Hong Kong's status as an international sourcing hub for undergarments and accessories.