Recovery in Specialized Market Sentiment Hides Profit Squeeze: E-commerce Becomes Key Variable

The June 2026 sentiment data for China's textile and apparel specialized markets shows overall confidence is emerging from the trough, but profit recovery at the merchant level remains incomplete. The manager sentiment index stood at 49.78, up 0.43 percentage points month-on-month, while the merchant sentiment index reached 50.07, up 0.34 percentage points. Both indices are hovering near or above the 50 boom-bust line, signaling a bottoming out of market conditions.

Market Operations: Foot Traffic and Store Openings Improve, but Total Turnover Stagnates

Examining sub-indicators from market management, the total turnover index remained flat month-on-month at 49.03, below the boom-bust line. However, the logistics dispatch volume index, foot traffic index, and store opening rate index all rose, by 0.64, 0.64, and 0.32 percentage points respectively. This suggests improved physical liquidity and merchant activity, but these have not yet translated into higher total transaction volumes. The rental index edged up to 50.65, indicating stable demand for commercial space and some easing of vacancy pressures.

A notable structural change is that the proportion of markets reporting declining foot traffic fell from 22.58% to 16.13%, while the share of markets with rising store opening rates increased by 6.45 percentage points. This implies continued market divergence: top-tier markets are aggregating more traffic and merchants, while weaker markets may still be losing ground. For buyers, this means sourcing destinations are becoming more concentrated, and traditional 'market-hopping' procurement is likely being replaced by more targeted channel selection.

Merchant Side: Sales Recover but Profits Under Pressure, Cost-Pricing Tug-of-War Intensifies

Merchant-side data reveals a more complex operational reality. The sales volume index recovered to 50.14, up 1.03 percentage points month-on-month, indicating tangible improvement in end-demand turnover. However, the average selling price index was only 49.30, down 0.22 percentage points, and the profit index was 49.86, up 0.89 percentage points but still below 50. This combination suggests that merchants have boosted sales by lowering prices, but profit margins have been further compressed.

Cost pressures are also intensifying. The comprehensive cost index fell 0.19 percentage points to 50.63—a reverse index where a decline means higher cost pressure. Combined with the inventory index rising to 50.00, merchants appear to be actively destocking, but rigid increases in raw materials, labor, or logistics costs are eroding already thin margins. For fabric and garment traders, the next pricing strategy will be critical: continue to trade volume for price to maintain cash flow, or modestly raise prices to protect margins, depending on downstream order stability and the strength of end-consumer recovery.

E-commerce Channel: From Supplement to Mainstay, Market Ecosystem Reshaping

The brightest spot in June's data comes from e-commerce sales. The manager e-commerce sales index rose to 51.61, up 0.64 percentage points month-on-month, while the merchant e-commerce sales index rose to 50.49, up 0.35 percentage points. More critically, 22.58% of specialized market managers reported increased e-commerce sales, up 6.45 percentage points from the previous month, and 9.79% of merchants reported the same, up 8.42 percentage points.

These figures indicate that e-commerce is no longer merely a 'supplementary channel' for traditional wholesale markets, but is becoming a core engine of growth. For specialized markets, this means accelerating the integration of online and offline capabilities. For merchants, deploying multi-channel sales strategies—live-streaming, community distribution, cross-border B2B platforms—has shifted from 'optional' to 'mandatory.' Those still relying solely on offline foot traffic may face greater operational challenges in the coming quarters.

Outlook Indices: Confidence Diverges, Managers Cautious While Merchants Optimistic

Forward-looking indicators show subtle divergence. Managers' forecast for the next-period sentiment index was 50.32, down 2.91 percentage points month-on-month, and their forecast for the next-period business environment index was 50.97, down 1.93 percentage points. In contrast, merchants' forecast for the next-period sentiment index was 50.84, up 0.70 percentage points, and their forecast for the next-period business environment index was also 50.84, up 0.77 percentage points.

This divergence reflects different risk perceptions between market roles. Managers (market operators) are more sensitive to macroeconomic and policy trends; their caution may stem from concerns about the sustainability of consumption recovery, rental stability, and policy uncertainties. Merchants, being closer to end transactions, are relatively more optimistic, likely driven by expectations of the traditional peak season (autumn/winter stocking, National Day promotions) in the second half of the year. The gap suggests that the pace of overall market recovery may be uneven—transaction volumes may lead, but profit improvement and investment expansion will likely lag.

Practical Recommendations

For Buyers - Focus on markets and merchants with strong e-commerce sales; they typically have better inventory turnover and pricing flexibility. - Leverage the 'volume-for-price' window period by locking in autumn/winter fabric and garment orders during the July-August off-season to secure better prices. - Prioritize markets with rising foot traffic and store opening rates, as they offer better supply chain support and product variety.

For Foreign Trade Companies - Overseas customers remain highly price-sensitive. Use data from China's specialized market e-commerce channels (e.g., e-commerce sales index) as a bargaining chip to demonstrate supply chain flexibility and cost control capabilities. - Capitalize on destocking opportunities indicated by the rising merchant inventory index. Consider small trial orders to test overseas market acceptance of new styles. - Given the improving merchant confidence forecast for July, consider increasing stock levels moderately, but lock in exchange rates and freight costs to protect margins from volatility.