Chinese are rapidly catching onto the idea of fashion, brands and shopping as a part of their lifestyle and over recent years consumers have been drawn to the big international brands operating in either the luxury or lower-end (including fast fashion and sportswear) segment of the market.
As the mid-end ( also called premium, contemporary, niche, etc.) sector is still building momentum it creates an opportunity for smaller, independent brands to stake out a space. For any new entrant, a large amount of time and money will have to be invested in order to grow a brand in China. The trick then, is to determine exactly when the timing is right.
To get the best deals on retail space and have time to build your brand up and perfect operations before the market explodes, its important to be an early mover. However, risks of entering too early also exist and no retailer wants to be stuck with unsold inventory due to lackluster demand.
This leaves China’s mid-end fashion segment stuck in a catch-22 situation. Brands need the market to mature further and show returns on investment before their fears of entering will be alleviated. Yet, without a critical mass of brands, the sector will not build enough momentum. Luckily your everyday fashion consumer doesn’t think like this.
Chinese consumers are starting to enter the mid-end space and demand chic, independent, yet well-designed and high quality fashion products whether they are readily available or not. When they cant find these products available in China they go online to Taobao or turn to the growing cache of hip Chinese brands emerging in Beijing and Shanghai such as those stocked in stores like Brand New China.
Those consumers who have spent several years residing in the low priced, fast fashion and sportswear end of the market are trading up and can now afford more expensive and premium goods. Meanwhile in the luxury spectrum, many shoppers have already proven their ability to lead lavish logo-driven lifestyles. These people are increasingly interested in showing their own unique personality and sophisticated fashion sense through chic designer brands.
By nature, the scale of independent designer labels prohibits them from opening networks of their own stores. In other countries this leaves department and multi-brand stores as the prime stockers of independent brands, but in China the choices are far more limited. Department don’t do their own retailing, merchandising, or buying at all – they just act as landlords and just rent out space. This leaves multi-brand stores as the only option for small brands in China.
Several of the large multi-brand stores from Hong Kong including IT, Joyce Boutique, Lane Crawford and Novo have been making forays into China for years. They already have well-established brand equity and a loyal customer base and are now extending their presence beyond Beijing and Shanghai into the fashion ripe second tier cities such as Chengdu, Shenyang and Tianjin. International multi-brand stores have generally been slow to enter China, but that will change in a big way in 2013 when Galleries Lafayette opens a 10,000 square metre site in Beijing.
Consulting companies McKinsey and the Boston Consulting Group both report that in 2015 China will become the biggest world market for luxury goods and e-commerce respectively. With mid-end brands already registering a strong pulse in Beijing and Shanghai and second tier cities now also on the map, perhaps the tides have already turned. While not at a full boil just yet, it certainly feels as though the sector is starting to simmer and 2015 could well be the year mid-end and premium brands explode onto the China scene.
All independent brands will have to assess their own positions and clearly define what they want to achieve in China. Rushing in is definitely not the way to go. For fashion companies and brands with China on their radar, its now time to map out your entry strategy and look to execute it in the next one to two years. Beyond that it may be too late, for once things gain momentum in China they move exceptionally fast and the market wont wait for anyone.