China’s largest underwear maker wants to lead a revolution, but it’s playing catch-up online

At a ceremony in Chongqing on Sunday, Cosmo Lady 都市丽人, China’s largest women’s underwear manufacturer and “top underwear stock,” jointly released a white paper on the domestic women’s underwear market with the Underwear Committee of the China Textile Commerce Association. The event had a clear message: The domestic market is entering a new and more advanced era, and Cosmo Lady is leading the charge with “comfortable and stylish” specialized underwear.

According to the white paper, the biggest problem for the women’s underwear industry in China is that women are not yet discerning enough to buy specialized underwear that is suitable specifically for them, and they are easily influenced by marketing campaigns, fashion trends, and recommendations. At the ceremony, Zhèng Yàonán 郑耀南, the chairperson of Cosmo Lady, stated that Cosmo Lady’s specialized underwear will lead the mainstream market and guide women out of “misunderstandings.”

Cosmo Lady’s underwear, Zheng pointed out, is based on five key aspects: molded cups, functionality, quality fabrics, research and development, and rigorous testing. China’s women’s underwear industry, according to Zheng, is about to be transformed, and he wants to lead women into an underwear consumption revolution based on Cosmo Lady’s specialized underwear capabilities, including:

• Pioneering 3D mold technology to create three-dimensional underwear.
• In 2019, Cosmo Lady became the first domestic manufacturer to open a national underwear laboratory in China.
• Since 2009, Cosmo Lady has obtained 457 patents, developed five core cup types, and annually produces around 300 bra models.
• Cosmo Lady claims to have selected 90 fabrics from around the world on the basis of stability and comfort.

The context

According to the China National Textile and Apparel Council, China’s underwear industry is growing by 20% annually (which is higher than the entire textile and garment industry), expanding from 139.7 billion yuan ($20.85 billion) in 2016 to 176.9 billion yuan ($26.40 billion) in 2021.

Cosmo Lady was founded by Zheng Yaonan in 1998, and gained the title of “Mainland China’s first listed underwear stock” when it was listed on the Hong Kong Stock Exchange in June 2014. By 2016, when Zheng had stepped back from leading the company, Cosmo Lady’s market capitalization reached a high of more than 16 billion Hong Kong dollars ($2.03 billion). But then, the company’s fortunes started to decline, and in 2019, Cosmo Lady announced a large first annual net loss of 1.29 billion yuan ($192.55 million). This prompted Zheng to step back into the leadership position, and in June 2019, he initiated a full review of the company’s products, repositioning the brand to focus on quality, comfort, and technology.

This process culminated in Cosmo Lady’s new white paper and marketing event in Chongqing on Sunday, and after opening thousands of new offline stores and making vast investments in research and development and supply chain management, all this has still not made the company profitable again: While revenue has been growing, in 2021, Cosmo Lady reported its third straight annual net loss of 496 million yuan ($74.03 million), four times larger than the 2020 net loss of 116 million yuan ($17.31).

The reason for Cosmo Lady’s lackluster performance is twofold: rising raw material costs and a wave of nimble new online competitors. The company put its 2021 net loss down to a 44% rise in the price of raw cotton, the most important raw material for apparel companies, while total domestic outputs of cloth and yarn have been declining from 2019.

But something even more concerning than this for Cosmo Lady is the fact that it is finding itself upstaged by a wave of new ecommerce businesses, such as NEIWAI 内外, Naitangpai 奶糖派, and Ubras, which are rapidly releasing novel and customized products such as steel-free and large-cup bras. For Cosmo Lady, with its thousands of offline stores, online sales in 2021 accounted for only 20% of total sales. Long the old lady of domestic underwear manufacturers, Cosmo Lady is trying to lead an underwear revolution with specialized products, but it’s playing catch-up in the new era of ecommerce.