Global Fast-Fashion Retailers in China(2)

Not only traditional strong European retailer brands are rushing into China, also players from America and Japan eye on the country’s growing consuming power.

In 2010, the American clothing and footwear retailer Gap Inc., owner of Banana Republic and some other famous brands, moved its first step to enter China with opening four flagship stores both in Beijing and Shanghai within one year. Meanwhile, different from its competitors mainly focused on on-site retailing, Gap started up its online sales website along with the store opening, targeting more than 420 million Internet users in China.

Uniqlo brand, Asia’s largest fast-fashion retailer which entered Chinese apparel market in 2002, also targets China as its first consideration overseas market. According to what the CEO said, the company is planning to open 1,000 stores in China during the next 10 years. It even expects China to grow to be the largest market to do business instead of Japan. Similar with Gap, eyeing on the huge number of Chinese Internet users and their rising consuming capability, Uniqlo opened its online shop in 2009 through a partnership with TAOBAO, a shopping site of Chinese largest e-commerce corporate Alibaba. Specifically, it opened two online stores at the same time, one is Uniqlo’s own website, the other one is set up on TAOBAO. Uniqlo offered approximate 500 items on both sites with weekly mail magazines and sales campaigns to reach a wide range of customers as well as to increase its brand awareness. Fierce competition among the global clothing retailers turned more white-hot. The growth rate of Uniqlo overtook Zara and H&M in China in 2010, showing its strong potential drive to expand through Chinese market.

Why China is becoming a so important battlefield for global fast-fashion retailers? The reason I think should come as No.1 is the China’s rising middle class and their rapid growing consuming power. In fact, international luxury brands have taken Chinese upscale fashion market for a while like Louis Vuitton, Prada, Channel. They enjoyed their success with high profits, targeting up-wealthy class and celebrities in China. However, with more and more consumption from China’s middle class, the fast-fashion apparel market is incredibly booming. By 2010, the market sector reached to about $58 billion or more, with speedy 10% market growth rate every year. That is because besides luxury brands, on the other hand, there are cheap low quality clothes without branding. While, customers are willing to buy chic, fashionable, good-quality clothes with affordable price, which is what fast-fashion apparel market offers to China’s middle class.

Global Fast-Fashion Retailers in China(1)

H&M, the second largest fast-fashion clothing retailer headquartered in Sweden, founded in 1948 followed up a surge from foreign popular clothing retailers such as Zara from Spanish retail giant Inditex, Japanese brand Uniqlo to start its exploration in Chinese booming apparel market as it opened its first flagship store in Shanghai, mainland China in April 2007, just one month later with its first store opening in Hong Kong.

Compared to its global competitors, H&M is not the first mover to dig out most potential development when China opened up its retailer market to global players. For instance, in 2004 Zara already successfully tested water in Hong Kong Territory as opening its first store there while two years later in 2006 caught up the trend and opened its first store in Shanghai mainland China, sitting on the city’s most trendy and prosperous district as its 2,700^th store on the world.

Besides mentioned above Zara brand of Inditex Group sitting in Shanghai and expanding to other Chinese metropolises and wealthy second tie cities, this company was reported have introduced its four brands, including Zara, Stradivarius, Pull&Bear and Bershka into Chinese market. Referred from a local media, Inditex Group is planning to open 120 new stores in China by the end of 2011, among of which are three new stores to offer Zara and other brands.

Mango group, positioning itself as Spanish second largest textile exporter, was founded in 1984 with shops over 68 countries. Early in 1990s, Mango set shops in Hong Kong. In 2002 it entered Chinese fast-fashion market soon it was fast driving to Chinese market with second shop opening in Shanghai financial and upscale district in 2003. Following an aggressive expansion strategy, by the end of 2011 it plans to add up to 220 stores in China. According to a director saying, Mango is aiming to expect 10% of sales profits will come from Chinese market by 2013. The company witnessed incredible growth of Chinese fast-fashion retail market and even built up its own distribution hub in Shanghai in 2006, which prompted the expansion. Mango targets both in Chinese first and second tier cities but with high volumes. Extracting around 3% of annual turnover to put into marketing, Mango’s advertising campaign goes well with the new opening of stores. Plus, the brand regularly advertises on fashion magazines, street boards, shows and events.

Chinese government required a joint venture from global retailers entering market with local companies. For Mango, it is franchised with local companies, mainly asking from $70,000 to $90,000 dollars outlay to be a franchisee with the multinational retailer.  

Google and its Hong Kong Site in China

It is not a new thing for us that has been a fact for a while, which is Google shifted its service site to Hong Kong in 2010 instead of staying at mainland China after two-month negotiation with Beijing on opening web freedom broken down.

This bold move incident was being reported too much since last year so I will not explain in detail here. A vedio here very clearly explained the whole incident.

The point I want to highlight is that even though Google moved its search engine to Hong Kong, residents in mainland China are still blocked by government’s filtering system when they use google.com.hk while google.cn is already gone. Therefore, the search result for Chinese residents seems to be no difference. The search information is blocked, censored, filtered, as always, until now.  That is what is happening in mainland China.

While, the only difference for Google HK is that in HongKong the company doesn’t need to censor and filter the search results by itself and is totally open to all users though some sensitive results will still be blocked on the way to reach residents in mainland. Since the search result will not be much different from previous time, especially for mainland users, a question here is why Google finally chose to move to Hong Kong to add up a simplified Chinese language search service with a traditional language already being there for people in HongKong. From the perspective of economy, compared to a tiny HongKong territory, mainland China holds a huge internet market potential for Google, and they can’t get any benefit after standoff with Chinese government. The below speech from an insider may explain the motivation supported behind:

"China is a very desirable market for anybody and Google has been growing there for the past couple of years, even though it is still well behind Baidu on usage. They could very easily have taken the short-term view and said 'we'll play the regime's game'. But they have decided not to and they should be congratulated on that."

Which is more important? Is it the economical benefits in a short time or the long run perspective following up the company’s principle which is respected not only in business world but also valued generally over the world. The shift showed the company’s attitude that Google didn’t and will not give up Chinese internet market but on the other hand Google insisted to be a free and open-up search engine company. 

Chinese Garment Industry in Globalization

As the largest consumption and production country on garment industry, China has the potential market for further development to be a real advanced and sophisticate garment industry country while the challenges and opportunities come together, especially during the fierce global competition.

Chinese Garment Industry and Current Situation

With 5000-year-old history, garment culture is deeply rooted in Chinese culture. However, the modern garment industry hasn't been in contemporary China for a long time. In terms of well-known brands, there are only a few brands to be recognized abroad, lack of real competitive worldwide strong brands. Basically, and generally, Chinese garment manufacturer is trying to lower the cost and price to compete with famous multinational brands like Prada, Channel these first-line design brands, instead of improving its design and brand strategy, which could never reach a real brand success in current global garment environment.

When I am shopping in US, the made-in-China clothes are easily seen everywhere, from girl-brand like Urbanoutfitters, middle-class-favorite Zara, H&M, to some upscale design brands. Apparently, China has been a strong power in garment manufacturing, as well as one of the largest outsourcing countries as its cheap labor force and skilled factory-hands. Whereas, more and more made-in-China clothes and garments produced and sold around the world doesn’t mean Chinese garment industry has been able to launch its own strong brands to influence the world. On the contrary, there is a long way to go for Chinese garment industry if it want to be one of the most influential fashion countries.

Take the Local Advantage

Without doubt, China has experienced in garment manufacturing and processing since it is the choice of many famous brands for outsourcing, which shows skilled manufacturers and factory-hands are available within the industry. Therefore, if Chinese garment brand is aiming to compete globally, it should never forget to seize this handy advantage to fulfill and advance its manufacturing capability. And at front, the brand design and strategy must be the first consideration when it is not only doing business domestically but also internationally.

License from Multinational Brands

It takes time to establish a successful brand but license from a multinational brand shorten the time at the same time beneficial to the company to increase the early-day profit capital and accumulate related experience on how to launch and run a brand. So license could be a choice for some Chinese garment companies when they first enter the global garment industry. 

Globalization and Value Creation

Globalization as an issue is not that brand new for people live in 21 Century. Every day the newspapers, radios, TV news are rolling to talk about international companies are expanding their business to other countries or how inter-related among different economies over the world, don't mention such overspreaded information on the internet. While expanding stores or increasing distributors in other countries might be an obvious signal for globalizing the business, a deep value created by the corperate under the successful global chain should not be ignored because of which a company is esbalished, a product distrubuted, and a message conveyed to beyond host country to other places in the world. When I read the cases such as KFC and Dell's global expansion I noticed that how much people paid attention to the number of stores opened in China or how much market share they took in Chinese market but few discussion about the value the company created and conveyed to international market. Though companies' global expansion is always driven by interest and business opportunities, the value along with this kind of expansion is also important enough to be targeted. What this multinational want to bring to the customers in China, Brazil, or Japan? The company undountedly is aiming at selling product and service however what about the value and corporate culture contained within the product and service. The value even varies when the company is targeting different foreign markets in order to   adpat to local business and cultural environment. A case reflected this is KFC China, which is a fast food chain in US changed their brand image to establish a healthy diet food restaurant chain in China with the value to offer healthy food and initiate leadership of healthy lifestyle in food industry in China. The case of KFC China is extremely succussful, even surpasses their original goal. The reason here is that they created and conveyed value to Chinese customers not just simply copy the business model in US.