The new trend for european mid-range clothing brands set up business in China.
Zara in 2006, H&M this spring and C&A this summer…They want to seduce the 300 million Chinese mid-class . It represents as much potential consumers as the American population. The Shanghai urban area which presents a two figures growth, is more populated than Netherlands. It attracts and stirs up professionnels needs.
“But brands are setting up carefully” said François-Marie Grau, general secretary of the French federation of women clothing. “First, they open a shop, kind of like a preview. Then, they wait to see what happen.“ This is how the Spanish brand, Zara, proceeded. According to Inditex, owner of Zara, “It’s about starting from a small amount of shops which help to explore the possibilities of a particular country in order to gain lots of critics from clients”.
In May 2004, Inditex launched its first shops in Hong Kong. “We received a warm welcoming from clients” noticed the board of directors. Thus, we decided to enter China in 2006.” Today, Zara possesses 9 stores around the country whose 5 are located in Hong Kong.
The “attention” mostly helps brands to adapt to the demands of this particular market. The Swedish giant H&M learnt it at its expense. In April, the brand opened its first store rapidly in Shanghai. But it forgot to propose clothes articles under size XXS. However, the Shanghai women average size is 4XS. Since this problem resolved, H&M unveiled two more stores “in those regions with quick growth and lots of purchasing power. We see in them a huge potential to expand” assumes the board of directors.
What to do to succeed
1. Same prices.
“If companies want to succeed in China, they have to move upmarket” said Marie-Chantal Piques, chief of the consumption goods sector at the Shanghai economic mission. To reach that, few of them, like Zara, apply the same prices than in the West. But they all invest in fashion. According to Gildas Manville in charge of the Economic Observatory at the French Fashion Institue, “That is the only added value that brands can afford. There is a real potential. Young Chinese are very westernized.”
2. Selling products in the country where it’s made is difficult.
“Selling clothes in China, it’s like selling beer in Munich,” said Mrs. Piques. Indeed, how to sell clothes in this worldwide industry ? At the same place where today most brands produce almost all their products. That is the real challenge which fashion professionnels have to face.
Thus, for the French group Celio, it is out of the question to set in China for the moment. “There are other habits, other cuttings,” said Christian Pimon, President of the board. It is true that today, for Chinese men, to dress up well is not yet a priority. “Which added value do we provide ? I can’t sell to Chinese people something that I produce on their country,” he added. Nevertheless, a reflexion team has been created to think about “a new Celio” in order to enter this market within 3 to 5 years but still keeping the same “DNA”.
3. Create brands just for the Chinese market.
The women clothing brand Etam had already adopted this strategy 10 years ago. It has been created specifically for the Chinese market Etam Sport and Etam Week-End. Within the 3.417 stores of the group worldwide, 2.317 are located in China et realize more than 20% of its total revenue (202 million euros). According to Christian Pimont, “It’s needed that in China, consumers understand our brand. If it’s just to sell T-shirts, they didn’t wait for us to do so”.
The CEO of French brand Cache-Cache, Roland Beaumanoir doesn’t share this idea. In two years, this French company (its brand has been created in 1985) opened 60 stores. “Just like McDonald’s, we can buy our steak locally and bring an american taste,” he said. According to him, the main advantage is the know-how of the French fashion that his stylists brings to the Chinese people’s morphology.
China needs fashion
Chinese with collar middle class have an increasing need for stylish, yet affordable cloth. Why is that? Simply because of the social pressure and the growing life costs for this social category. It couldn’t be truer for young career driven young women whose aim is to climb the corporate ladder rather than raising a family. European middle market brands answer well this need.
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