Mark Tanner
13 August 2014 0 Comments

Few industries are a barometer for what consumers consider to be “cool” quite like the fashion industry.  Over the past 12-18 months, some interesting fashion trends have been occurring in China that are worth taking note of.

It wasn’t long ago when foreign brands had a ‘monopoly’ on high-end fashion. In October 2012, research from the World Luxury Association found that 86% of Chinese consumers refused to buy luxury products “Made in China” due to the country’s reputation for cheap goods.

Enter popular role models such as China’s First Lady Peng Liyuan, who wear nothing but Chinese fashion, and that perception has swiftly changed. Mintel research in March this year found 40% of Chinese believe local luxury clothing and shoes provide the same quality. 

At the other end of the value curve, the opposite is happening.  Foreign fast fashion brands such as H&M, Zara, Uniqlo, Topshop and Gap are flying high, whereas local players are shutting shops all over the Mainland.  For most segments in China, from smartphones to medical equipment, Chinese brands a becoming savvier while keeping prices lower than foreign brands, allowing them to gain large market share for low-mid range price points.  But in fast fashion, many local brands are struggling to keep up with international players who are constantly releasing styles and ranges that tap into Chinese consumers’ insatiable demand for fair priced new and trendy fashion, whilst playing on their foreignness.   

The takeouts from the trends are relevant across many product segments.  Firstly, higher price points are no longer achieved just by foreign players.  Secondly, for low-mid priced products which Chinese brands generally dominate, foreign players who continually innovate and release new lines at a pace that they can’t be copied, have a good shot at doing well in China.  We hope you enjoy this week’s Skinny.

Consumers,: Chinese Consumers

China’s Malls Add Snoopy Parks, Playgrounds to Attract Big-Spending ParentsChina’s shopping malls are focusing on children to attract shoppers. A Snoopy park added to a mall in HK attracted an additional 3 million customers over the past 18-months. In the Mainland, they’re busy adding Snoopy parks, penguin-themed parks, the world’s largest Disney store, even an entirely kids-themed mall. In 2007, one-fifth of families’ household spending was on their children, it is now one-third.

Infographic: The 2020 Chinese Consumer60% of Chinese consumers will be living in cities in 2020, 200 million more than in 2010. Their incomes will double over the decade, seeing ‘value consumers’ drop from 82% to 32% of the market.

Quality Problems Top Chinese Consumers’ ComplaintsPoor quality products accounted for 43.2% of shopper’s complaints in the first half of the year according to the China Consumers’ Association. Mobile phones, clothes, cars and auto parts, footwear and food were the goods most commonly complained about. Dissatisfaction with after sales service accounted for 20.4% of complaints.

China Increases Pricing ScrutinyChina is calling on its 6-year old anti-monopoly law to put increasing pressure on foreign businesses as they charge more in China than overseas. Businesses as diverse as Audi, Mercedes, Starbucks, Apple, contact lenses and baby formula brands have all been targeted. A little puzzled how cars, mobiles, coffee brands and even milk powder can be considered monopolies.

Gay Friendliness is Important to LGBTI Chinese ConsumersBisexual and lesbian women in China are much more likely to be open about their sexuality compared to Chinese men. 5% of women are completely out, with 80% out to some friends. 3% of gay men are fully out and 30% of men are completely closeted.

High End Fashion

Six Takeaways From Gap and Old Navy About Brand-Building in ChinaGap’s brand awareness is around 75% in first Tier cities and sales reached $300 million in 2013, 3-years after launching, with expectations of hitting the $1 billion mark in another 3-years. Their secret to success: 1. Care about local customers; 2. Work brand roots, in this can American; 3. Build on what works; 4. eCommerce isn’t an afterthought; 5. Customer relationship management; and 6. Promotions, promotions and promotions.

The H&M Effect: Foreign Fast Fashion Outpaces China’s Homegrown LabelsWhile fast fashion brands H&M, Uniqlo, Zara and Topshop have been expanding furiously in China, many mid-low homegrown brands haven’t managed to keep up with the fiercely competitive marketplace and eCommerce’s influence in the industry. Semir and Meters/Bonwe, two leading local brands established in the late 90s, have closed 700 and 200 stores respectively nationwide in 2013. China’s Feel 100% closed its factory and 400 stores in May this year after 18 years. HK-based Baleno and Giordano closed 388 and 54 stores in the Mainland respectively.

Online: Internet, Mobile, Social Media & eCommerce

Xiaomi Usurps Apple to be No.2in Sales RankingXiaomi’s popularity soars to become the number 2 smartphone brand in China’s major cities with a 21.4% share, closing in on market leader Samsung’s 23.1%. 70% of Xiaomi’s customers were upgrading from another smartphone, with 17% trading in their Samsung, and 5% their Apple. 20% were loyal Xiaomi users returning for more.

China B2C Online Retailer Market Share in Q2 2014B2C eCommerce platforms accounted for 40.4% of online retail in Q2 2014, and are expected to surpass B2C in 2015. Tmall’s share of transactions soared from 50.6% in the first quarter to 57.4% in the second.

Chinese Consumers Push for Discounts Amid E-Commerce BoomMost consumers have come to expect price savings when shopping online in China. Social media’s importance for driving customers to online stores shouldn’t be underestimated, with 40% of Chinese consumers using social media on a daily basis, versus 12% of Americans. 190 million Chinese social media users accessed from their mobile in May this year, up 32% since 2013.

Brands Need to Convince Chinese Consumers on the Value of Online Shopping: Chinese consumers feel that online shopping brands are not providing the value they expect.

Premium Food & Beverage

Chinese Bakery and Cereals Market to Hit $47bn by 2018The average Chinese consumer eats bakery or cereal products on 92 occasions each year – Germans, by comparison, eats them on 731 occasions a year on average. Cakes, pastries and sweet pies are the most popular with Chinese consumers accounting for 44% of the market. On-the-go single serve packaged options are expected to see high growth with busy urban consumers.

Chinese Online Grocer Womai.com Raises $100M, Catering to Consumers Amid Food ScaresOnline food retailer Womai has just raised $100 million funding, and is planning to use some of the funding to sell more food sourced from outside the Mainland following more consumer concern about the safety and quality of local produce.

Shark Fin Vendors Report 82% Drop in Sales After Anti-Corruption Campaign85% of Chinese consumers say they’ve given up shark fin soup in the past three years, with prices dropping 47% in the past two years. 64% gave up because of campaigns such as Yao Ming’s. 61.7% want to protect sharks, 55.3% believe it is a cruel way to kill sharks, 42.6% believe it is because many are fakes, 30.8% are worried about mercury levels and 28.2% because of the Government banning the dish at state banquets.

Overseas Chinese Tourists

Thailand Starts Offering Free Chinese VisasThailand is waiving visa fees for Chinese tourists for three months to help bolster tourism following its recent political issues. 4.7 million Chinese visited Thailand in 2013. In the meantime, Chinese visitors to Sri Lanka grew 172% from July 2013 to July 2014, albeit from a low base.

That’s The Skinny for the week!  We’d love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

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