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Victoria’s Secret Fashion Show Offers Unique Advertising Model (CBS, LB)

Victoria’s Secret Fashion Show Offers Unique Advertising Model (CBS, LB) | Etam | Scoop.it
Victoria’s Secret Fashion Show Offers Unique Advertising Model

By Brenda Barron | More Articles 
December 15, 2013 | Comments (0)

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The Victoria's Secret Fashion Show aired on CBS (NYSE:CBS ) on Dec. 10 bringing in 9.7 million viewers -- up a tick from last year. What makes this particular infomercial different from the rest, garnering it a primetime spot on a major network? Is it really just the allure of women in their underwear setting this hour-long promo spot apart from the likes of the Snuggie or Slap Chop?

The answer appears to be "yes." 

Source: Steve Rhodes

Owned byLimited Brands(NYSE: LB ) , Victoria's Secret is known worldwide for its lingerie and fragrance collections. But mostly, it's the underwear that people think of when referring to "Vickie's secret," and that's what makes the Fashion Show so interesting: how did a lingerie company wind up with an annual show on TV? They're by no means the biggest company on the planet, bringing in $6.12 billion in sales last year. 

When the show got its start back in 1995, it had a budget of just $120,000. In 2013, that budget went all the way to $12 million. It's no wonder with all the Swarovski crystals, fancy feathers, and musical performances by the likes of Fall Out Boy and Taylor Swift. And you can't forget the Royal Fantasy Bra -- a piece of lingerie encrusted with rubies, diamonds, and sapphires, all set in 18-karat gold. This year, the bedazzled bra was worn by model Candice Swanepoel. Tickets for the show cost upwards of $14,000, even!

All of the extravagance that is unique to this particular event aside, let's ponder for a moment what an informercial for another Limited Brands company might look like. Bath and Body Works is known for its lotions and soaps and made $2.67 billion in sales last year. Quite a bit less than Victoria's Secret, but still a sizable sum. What if Bath and Body Works wished to make a major marketing push around the holidays? TV advertising is always big -- people are looking for gifts to buy their loved ones, after all. And who doesn't like stuff that smells good? 

But there's a problem.

How would Bath and Body Works create a program around their products? How would the store convince major musicians and pop stars to jump up on stage? Lotion bottles on display, no matter how sparkly they might be, don't make for good television.

While Victoria's Secret does sell lotion and perfume products, its focus is on wearables. The particular sort of wearable that makes it perfectly acceptable to have women strutting down a runway in nothing but their skivvies on primetime television, apparently. And that is good TV. 

Plus, there's the cost factor. NCIS, the hour-long drama that aired just before the Victoria's Secret Fashion Show this year, commands $161,730 for a 30-second ad spot. That means an hour's worth of advertising (subtracting 20 minutes for, ironically enough, ads) costs $12.94 million. This is just a rough estimate, but that's a lot of money to sink into an ad that will air just once. 

When you factor in cost and presentation concerns, it seems the only kinds of companies that have a shot at succeeding by following in Victoria's Secret footsteps are other fashion retailers, jewelry manufacturers, and perhaps auto companies. The cars could sit on pedestals while bands play among them. It'd be great. 

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The evolution of China's luxury market

The evolution of China's luxury market | Etam | Scoop.it

With an estimated 2.5 percent growth rate for 2013, the Chinese luxury market is slowing down. However, the perception should be nuanced: a deceleration is not a crash. Although the Americas are predicted to see a higher growth rate than China this year, Chinese travelers are spending more abroad.

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3 Generations of Chinese Women Under One Fashion Roof - Jing Daily

3 Generations of Chinese Women Under One Fashion Roof - Jing Daily | Etam | Scoop.it
3 GENERATIONS OF CHINESE WOMEN UNDER ONE FASHION ROOF BY GENEVIÈVE FLAVEN 

China’s First Lady Peng Liyuan received worldwide attention when she was spotted wearing Chinese label Exception, a brand popular with an older generation of Chinese women.

Westerners studying the fashion preferences of Chinese women invariably report their penchant for rich ornamentation, like sequins, pearls, and embroidery, and disinterest in minimalism. The preference for cuteness is also rarely missed. Ruffles, laces, puffs, and sweet animals convey a sense of romance and playfulness that often surprise non-Asian observers. And what may at first seem a bold expression of sex appeal in the proliferance of high heels and leopard miniskirts is quickly revealed to be little more than a quest for height. Finally, observers often note a relative indifference to quality. But these observations, while relevant, do not constitute stable patterns shared by all women fashion consumers.

China’s fashion market has tripled over the past ten years, reaching $67 billion in 2012, and is expected to continue growing at an annual rate of 15 percent over the coming decade, according to a recent report by AT Kearney. And with this extraordinary economic development has come deep shifts in the emotional and cultural landscape of the country, which, in turn, have driven changes in style preferences. Once relatively monolithic, China’s women’s fashion market is fragmenting along generational lines into three discernable groups: the children of the revolution, the children of reform, and the children of the boom.

Children of the Revolution

Chinese label ZucZug, which is located in many high-end shopping districts.

Women in their late 30s and older belong to the last generation to remember growing up in a world without brand names, television, or shopping malls. The dress code was limited to uniforms, and consumers had little choice. Today, these women look for decent and comfortable fashions and steer away from excessive frivolity. They prefer formal dresses in jacquard fabrics from brands like Elegant Prosper and avoid taking risks. If they belong to the elite, they may opt for loose, Japanese-style forms offered by Chinese brands like ZucZug or Exception, affirming their status through distinctive cuts and intense colors, while staying loyal to their sense of communist frugality. There are 170 million women in China between 35 and 49 years of age, but surprisingly, they often fail to capture the attention of brands.

Children of Reform

The post-1980s generation did not endure the same political and economic hardships that their parents did. Products of the one-child policy, they were educated according to rigorous standards, but in a context of optimism, consumerism and entrepreneurship. A transitional generation, they are loyal to their family duties and jobs, but also have their own dreams, resulting in increased fashion spending. Indeed, the post-1980s generation spend around 10 percent of their income on fashion items, according to an estimate from the Boston Consulting Group, a consulting firm. They are also the biggest online shoppers in terms of volume of sales, according to the e-commerce platform Jingdong.

Fashion mostly serves this generation’s desire to be visible in a more fiercely competitive world and to adapt to a more demanding lifestyle that combines work, leisure and social activities. This group favors brands like Only, Vero Moda, or Zara. In this segment of 25- to 35-year-olds, style preferences are evolving quickly. The influence of Korean fast fashion—romantic, sexy, decorative, and cheap—is noticeable, especially as many Chinese merchandisers are finding inspiration and products in Dongdaemun, a famous fashion market in Seoul. However, the simplicity of European fashion brands, once considered “flat,” is also seducing an increasing number of female consumers of this generation. In addition, their attention to design details and material quality is growing and increasingly influences their purchasing decisions. In the luxury market, their passion for logos is progressively fading, as some brands become over-exposed. For this group, simplicity and quality will become increasingly important in the coming years.

Children of the Boom

Deeply rooted into technology and capitalism, these women view shopping as an entertaining and relaxing indulgence. They spend more on fashion than previous generations and their tastes fit their more impulsive personalities. They favor sporty high-street looks from Abercrombie & Fitch and Zadig et Voltaire over cuteness.

An expression of this newfound coolness is the popular Xiao Qing Xin (小清新) style, or XQX, which literally means “small and fresh”. Coming originally from indie pop music, the XQX wave now engulfs other cultural domains such as cinema, art, and fashion. It conveys a sense of self-expression, aesthetics, and simplicity, and one can expect more sophisticated inspiration and a more creative fashion mélange in this generation’s future.

For most Chinese labels, it is a challenge to stay in tune with the changing profiles of their target consumers. Established in 1989 and located in Ningbo, near Shanghai, Shanshan Group is an apparel manufacturer and fashion retailer listed in China’s Top 500 Key Enterprises. Its men’s classic suits, sold under the brand name FIRS, are well-known, but the Group owns 10 other brands in all market segments, including MGB, Elteno, LeTuTu, and Bellson, and manages nine licenses from French, Japanese, Italian, and Korean labels such as Le Coq Sportif, and QUA. It also runs nearly 3000 franchised shops at home and abroad. The total turnover of the group was 14.2 billion RMB in 2010.

A Zara shop with a Chinese New Year greeting.

Because of the multiple brands and international strategy of the Group, Shanshan designers and brand managers are have recently become conscious of the need to gain a better understanding of fashion branding and consumer intelligence. The recent proliferation of fashion looks have revealed their Achilles’ heel; being mostly opportunistic followers, they were insufficiently prepared to anticipate style updates.

Brand managers and designers sometimes desperately look for alternative routes to follow. As Roy Zhang, the Vice General manager of KAKO, a well-established mature women fashion brand expresses it: “which brands shall we copy?”

The demand for more quality and simplicity was counterintuitive to their engrained preference for quick wins and cheap sourcing, while the request for more creative designs conflicted with their habit of copying.

Chinese brands know they have little time to adapt to the massive structural changes of the local womenswear market. The question remains, will international brands be flexible enough to meticulously monitor the relevance of their products and meet the expectations of Chinese female consumers?

Style-Vision Asia CEO Geneviève Flaven helps companies identify future business opportunities by matching their product innovations with consumer expectations in China and globally. In China, her clients include leaders of the fashion industry such as Luthai (textile), ETAM group (China), KBNE, Decoster, and other lifestyle industries as well (Sephora, Audi, and Fotile). A graduate from ESSEC in Economics and Business Administration, Flaven has worked as an expert in project management for major companies such as Hewlett Packard and CSC Peat Marwick.

Category: Fashion / TrendsTag: china, china luxury, Dongdaemun, exception... , More
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Luxury Society - Who Are The Winners In China’s Luxury Slowdown? - Jing Daily

Luxury Society - Who Are The Winners In China’s Luxury Slowdown?  - Jing Daily | Etam | Scoop.it
WHO ARE THE WINNERS IN CHINA’S LUXURY SLOWDOWN? BY JING DAILY 

Chinese model Fei Fei Sun on the Bottega Veneta S/S 2014 runway. (WWD)

Recent data strongly suggests that China’s luxury market is still in slowdown mode, but while some companies are seeing a strong slump, a clear set of winners is making it through 2013 with solid sales.

Now in the fourth quarter, there’s no doubt that year-end growth rates in China’s luxury industry aren’t going to rebound to anything close to pre-slowdown numbers. A study released last week by Bain & Company predicted that 2013 luxury sales in China would grow by only 2.5 percent to 15.3 billion euros. There’s speculation that the slowdown may be long-term, as well: a recent luxury CEO survey byDepartures and Ledbury found that executives are more confident about the North American luxury market than about East Asia as a driver of growth over the next five years, and former Burberry CEO Angela Ahrendts said on-record last month that slowing luxury growth rates are “the new normal” for the industry.

When taking a look at individual brands, however, the slowdown rate is highly uneven, continuing a trend that has been going on all year. When it comes to fashion, “mega-labels” were not able to rebound from a first-half sales slump as they had hoped: Louis Vuitton experienced 5 percent growth, a number in line with the first half of the year, while Gucci saw “low single-digit” decline in China. It is likely that a main reason for the lagging growth has been Chinese consumers’ growing sophistication and shifting preferences away from logo-heavy designs, as these brands have made efforts to increase their number of logo-free products and worked to avoid overexposure.

This growing sophistication is emphasized in the fact that smaller niche labels as well as “masstige” brands have fared significantly better in both the third quarter and the previous first half of the year. While Kering did not earn much revenue from Gucci, its smaller brands posted double-digit Greater China growth for the third quarter, with Bottega Veneta bringing in 30 percent and Stella McCartney, Alexander McQueen, Balenciaga, and others collectively averaging 14 percent growth. Meanwhile, the more affordable “masstige” category has also seen success, as Coach saw a 35 percent jump in sales for the third quarter.

These substantial growth numbers are taking place because Chinese consumers are buying these products for themselves or for family and friends—not for corrupt “gifting” purposes. As a continued stream of new anti-corruption efforts demonstrates, Xi Jinping’s anti-graft crackdown is also still in high gear, and hitting many luxury sectors most associated with corruption or ostentatious displays of wealth that have been getting officials in trouble. For example, Swiss watch exports to China continue to decline, high-end liquor sales are still slumping, flashy car companies such as Ferrari and Lamborghiniare seeing lower sales, and banquet foods such as shark-fin soup are in trouble.

This downturn contrasts sharply with the aforementioned growth of successful fashion brands, as well as that of other consumer-oriented sectors such as beauty and mass luxury cars. Although LVMH was disappointed in its Louis Vuitton numbers, it said growth was strong in China for BeneFit cosmetics and Sephora sales. Meanwhile, China’s wealthy apparently aren’t worried about being too ostentatious if they drive an Audi or a BMW, as Volkswagen’s China sales rose 18 percent from the beginning of the year until September, and BMW’s grew by 20.8 percent.

The bottom line for the luxury sector is that the numbers show that even if China’s slowdown is long-term, brands with the right marketing strategies and an understanding of Chinese luxury consumers can still experience solid growth. According to the recent Departures/Ledbury survey, the Chinese growth rate was the third-highest factor in cause for optimism about the global luxury market. Additionally, luxury CEOs recognize that China’s expected GDP growth rate of 7.5 percent is still comparably high, and previously skyrocketing rates merely reflected unsustainable numbers.

In addition, companies worried about China growth should take a look at the global picture: Chinese customers may not be buying as much luxury at home, but they’re certainly spending it abroad as the world’s largest-spending bloc of tourists. As a result, brands must focus on the Chinese consumer on an international level in order to truly cash in on the market’s high long-term growth potential.

Category: Business & Finance / Market Trends

Via C. Baillion & G. Bauer, A Beauty Feature
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C. Baillion & G. Bauer's curator insight, November 6, 2013 3:28 AM

Même si la croissance des ventes de produits de luxe a ralenti en Chine en 2013, le potentiel reste important pour les marques qui s'attachent à répondre aux nouvelles attentes des consommateurs chinois.

De plus, ces derniers sont à considérer au niveau international car ils achètent énormément lors de leurs voyage à l'étranger.

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Etam Développement: Net Sales of EUR886.9 Million to 30 September 2013 - Wall Street Journal

Etam Développement: Net Sales of EUR886.9 Million to 30 September 2013 - Wall Street Journal | Etam | Scoop.it
Etam Développement: Net Sales of EUR886.9 Million to 30 September 2013 Wall Street Journal In the third quarter of 2013, the Etam Group posted sales of EUR290.1 million, including a negative currency impact of EUR2.2 million mainly related to the...
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Luxury Travel and the great call of China

Luxury Travel and the great call of China | Etam | Scoop.it

Destinations such as Australia, UK and America need to understand how to service the premium traveller, if they want luxury travel business from any of China's one million millionaires.

 

"We simply don't understand how to service the premium traveller," said Thomas, who believes elite Chinese travellers need to experience better human 'software' when they visit the West.

"The Chinese traveller wants to be handled by people who understand their culture, not just language," said China Luxury Travel Network's founder, Lin Xu.

Xu said that there were in reality about 2.7 million US dollar millionaires in China as many exist "under the radar". And it is a group that averages about three foreign trips a year, creating a booming luxury travel demand of up to nine million trips per year.

Millionaires, the rising middle class and brand-conscious aspirational travellers from the mainland account for about 25% of all international luxury brand consumption. Xu told the audience the total spend was about US$102 billion in 2012 with online spend alone worth around US$57 billion.

 

"China is modernizing, not Westernizing".

 

"Affluent Chinese travellers simply won't travel in big groups any more," said Xu. "The key to success will be if travel experiences really suit China's new consumer needs and trends".


Via Jerome Goldberg (JMG-Research / ForwardKeys)
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Jerome Goldberg (JMG-Research / ForwardKeys)'s curator insight, September 11, 2013 12:17 PM

DIY Chinese travellers are expecting to be treated differently than group travellers. Also true in Travel Retail, as we highlighted in our 'Chinese PAX Focus' research...

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Etam's founders launch buyback program to take over - FashionUnited.co.uk

Etam's founders launch buyback program to take over - FashionUnited.co.uk | Etam | Scoop.it
tam's founders launch buyback program to take over

Two of the three families that founded Etam Développement group – Milchior and Tarica families – have launched a buyback program to take over the whole company. The Milchior-Tarica tandem is offering minor stakeholders 23 euros per share, aimed to gain control over the 18 percent of the company that remains in the hands of these shareholders.

The Milchior and Tarica families, which in total hold the 67.89 percent of the lingerie group, have joined forces to launch a bid to take over the company. The third founding family - the Lindelmann, remains in control of a 14 percent stake.

"Noting the lack of liquidity of its title, Etam Développement and control concert Milchior - Tarica have decided to offer shareholders the opportunity to sell their shares on the market by launching two bids" the company said in a statement last week.

The offer price reflects a premium of 28.5 percent over the last closing prices of Etam, in the region of 17-18 euros per share, as highlighted by the French journal ‘Capital’. Shareholders will not be obliged to accept the offer, still to be approved by the French market regulator, the AMF.

The concert Milchior-Tarica remains the majority stakeholders since 2009 and had already launched this type of offer in 2010, at a price revaluing action by 52 percent compared to its average rate over three months, as reported by ‘Les Echos’. The operation was then intended to provide shareholders with an output window at a time when the course already illiquid, had progressed.
Etam founding families launch shares buyback programControlling shareholders of Etam Développement announced in late August two buyback programs at a price 23 euros per share. The first offering will cover 17.7 percent of the capital as shareholders at the Lindelmann family do not seem keen on putting their 14 percent stake on offer.

The second offer, which is part of the Etam shares buyback program, will cover a maximum of 10 percent of the capital, explained the company after it presented its annual results.

Following these liquidity offers, Etam Développement and Finora (owned by the Milchior family) have stressed that they do not have any intention to fill in an offer for a public buyout yet to maintain the current listing of Etam Développement shares within the Paris-listed Euronext.

Laurent Milchior, co-manager of Etam, told Reuters that their main goal was to offer broader possibilities for profit to shareholders. "I do not want the shareholders to bear the risk of a potential lack of liquidity," Milchior said in reference to the difficulties the company has suffered in China, its main market as accounts for half of the company´s total sales.

“In recent years, the company has focused much of its efforts on China, where the first half has generated 200,000 euros, compared with 6.1 million euros in the same period last year," highlighted the group´s management. “The group has continued to suffer from structural problems such as the positioning of their brands and the need to seek new distribution channels," said Etam in a statement.

Sales for the first half of the year came in at 596.8 million dollars, registering a 7 percent increase on a yearly basis. Nevertheless, the company's operating income fell by 3.5 percent to 18.4 million euros.

Etam has an annual turnover of 1.2 billion euros and a market capitalisation of 138 million euros. The group´s debt currently stands at 134 million euros.

Bookmark or ShareShare on facebookShare on twitterShare on linkedinShare on emailShare on print|More Sharing ServicesMoreRelated NewsEtam Group net sales rise 0.7 percent in Q2Etam Q1 net sales up 0.7 percentEtam Q4 sales up 1.2 percentEtam Q3 sales up 9.6 percentEtam H1 net sales up 0.5 percentEtam Q1 sales down by 1.1%Etam net sales down by 2.1% in FY 2011Etam’s sales down 3.8% to 269.4 m EUREtam: UK’s loss is China’s gain
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Etam Développement : Net Sales of EUR596.8 Million to 30 June 2013 - Wall Street Journal

Etam Développement : Net Sales of EUR596.8 Million to 30 June 2013 - Wall Street Journal | Etam | Scoop.it
Etam Développement : Net Sales of EUR596.8 Million to 30 June 2013 Wall Street Journal In the second quarter of 2013, the Etam Group posted sales of EUR263.2 million, including a positive currency impact of EUR0.7 million mainly related to the...
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Chinese Malls Waive Rents as Vacancies of 30 Percent Loom - BoF - The Business of Fashion

Chinese Malls Waive Rents as Vacancies of 30 Percent Loom - BoF - The Business of Fashion | Etam | Scoop.it

Chinese Malls Waive Rents as Vacancies of 30 Percent Loom

BY BLOOMBERG 1 JULY, 2013

TaiKoo Hui Mall, Guangzhou, China | Source: Shutterstock

BEIJING, China —Chinese landlords are forgoing rent and paying to outfit stores for mass-market fashion brands including Zara and H&M, a bid to blunt the impact of a boom in shopping-mall construction that threatens to push up vacancies.

Preferential leasing terms were reserved until recently for luxury brands such as Louis Vuitton and Gucci, which are coveted because they bring shoppers into malls. Now moderately priced labels are being enticed with offers as landlords work harder to fill shops, according to Cushman & Wakefield Inc. and RET Property Consultancy Ltd.

Consumer demand is cooling as China’s economy slows and President Xi Jinping reins in lavish spending by officials. Big mall operators, including China Resources Land Ltd. and Hang Lung Properties Ltd., can withstand the slowdown at the expense of smaller ones such as Golden Eagle Retail Group Ltd., according to Credit Suisse Group AG and Haitong International Securities Ltd. Landlords focused on lower-tier markets will be under more pressure as smaller cities add retail space at a faster rate than larger ones.

“Competition in China’s commercial property market is very fierce, especially at those new malls at non-central locations in second- and third-tier cities,” said Carrie Liu, Shanghai- based general manager for development at Shui On Development Ltd., a subsidiary of Shui On Land Ltd. The company, which built the city’s Xintiandi restaurant, bar and retail district, has never offered subsidies such as free rents, Liu said.

Mall Building

Chinese developers built more malls and expanded into smaller cities as consumer spending and incomes grew, elevating China’s economy to the largest in the world after the U.S.

Half of the 32 million square meters (344 million square feet) of shopping centers under construction around the world are in China, according to CBRE Group Inc. About 21 million square meters of retail space is expected to be completed by next year, a 38 percent increase in supply, according to broker Cushman, which tracks 20 cities in China.

That’s setting up a test for developers as retailers including LVMH Moet Hennessy Louis Vuitton SA and Gucci-owner Kering SA respond to slowing growth by scaling back expansion plans in the world’s most populous country.

Second-tier cities, including Chengdu, Shenyang, Hangzhou and Qingdao, may be stuck with the highest vacancy rates in 2014, according to Cushman. The financial hub of Shanghai, the capital Beijing and the southern industrial cities of Guangzhou and Shenzhen are considered the first-tier cities.

Vacancy rates in some less affluent cities could surge to more than 30 percent by next year from as low as 6.8 percent in the first quarter this year, Cushman forecasts.

Large Developers

“The problem we see today in China is that there’s really no proper planning,” Sigrid Zialcita, Singapore-based managing director for Asia-Pacific research at Cushman, said in a phone interview. “There are really a number of cities prone to having periods of oversupply.”

Mall space in China’s four major cities will grow about 40 percent by the end of 2015, while in 16 smaller cities it will double in the period, according to Steven McCord, China retail research director at property brokerage Jones Lang LaSalle Inc.

Developers of some new malls may struggle to reach even 70 percent occupancy, forcing delays in opening, said Michael Zhang, executive director and co-founder of Beijing-based RET Property Consultancy.

Best Positioned

In developed markets such as Hong Kong and Singapore, vacancy rates are between 6 percent and 7 percent because of a shortage of supply, according to Cushman.

“Free rent can exist in any market where the tenants have the advantage,” McCord said. “China’s characteristics are that there’s a lot of new construction and there is so much new supply.”

Hong Kong-based China Resources Land has the best mall locations and highest internal rate of return on its mature malls at about 20 percent, among five major operators from outside the mainland, including Hang Lung and CapitaMalls Asia Ltd., according to Credit Suisse. It rates state-owned China Resources Land outperform with a 12-month price target at HK$29.80. The stock closed at HK$21.20, up 4.2 percent, in Hong Kong on June 28.

While “it may be debatable whether China’s housing market is oversupplied, there’s consensus that China’s commercial property sector is indeed,” said Jinsong Du, a Hong Kong-based property analyst at Credit Suisse. “Bigger mall developers definitely outperformed those smaller ones.”

Two calls to Annie Li, Hong Kong-based investor relations director at China Resources Land, weren’t answered.

Hang Lung

Hang Lung, based in Hong Kong, is investing more than $8.5 billion building malls in China, a bet by Chairman Ronnie Chan on an expanding middle class. Fifteen of 23 analysts recommend buying the stock, according to data compiled by Bloomberg. Elisa Fong, assistant manager of Hang Lung’s corporate communications, declined to comment.

Brokerage Maybank Kim Eng raised its earnings forecast for CapitaMalls Asia for the fiscal years 2013 to 2015 by 5 percent to 10 percent, and reiterated a buy recommendation in an April report, with a 12-month price target of S$2.57. The developer closed at S$1.795 yesterday. The Singapore-based company will continue to look for opportunities and expand in China to “leverage its market leadership,” analyst Wilson Liew wrote.

CapitaMalls Asia, the retail property unit of Southeast Asia’s largest developer, has 49 shopping centers in China. It opened a mall in Chengdu on April 28 with 90 percent occupancy, according to an earnings presentation April 25.

The malls in China had a “committed” occupancy rate of more than 96 percent as of March 31, Seng Jin Lim, head of corporate communications and marketing at CapitaMalls Asia in Singapore, said in an e-mailed reply to questions. The company doesn’t offer incentives to retailers to open in its malls because it can leverage its network of more than 102 shopping centers and 13,000 leases in Asia, Lim said.

Under Pressure

In contrast, Haitong Securities downgraded China’s department-store industry last year. Golden Eagle was the least favored to weather a boom in mall space because it’s “very conservative” in terms of its operation, said Elyse Wang, a Shenzhen-based analyst at Haitong who covers six Chinese department stores.

About 40 percent of 32 analysts who cover the stock recommend buying Golden Eagle, the second-largest Chinese department-store operator by market value, according to data compiled by Bloomberg.

Golden Eagle operates on a turnover rent basis with luxury brands such as Gucci and does not collect basic rents, Lily Xu, a spokeswoman, said in response to questions. Turnover rents are payments based on a percentage of annual sales.

Still, Carlyle Group LP, the world’s second-biggest private-equity firm, bought a 49 percent stake in two shopping malls in Suzhou and Hangzhou in May to take advantage of rising domestic consumption.

Empty Malls

At GuocoLand Ltd.’s Guoson Center, across from Shanghai’s Changfeng Park, about 13 kilometers (8 miles) from the historic Bund, most shops are boarded up. A few stores are scattered on the first floor of the four-story mall that houses a KFC fried- chicken outlet and a BMW car dealership. The upper floors are largely vacant. The Tasty Cafe has the only rented space on the third floor. Most staff were taking a break at dinner time on a recent visit.

GuocoLand, which gets almost a third of its revenue from China, opened the mall in 2010 as part of a development that includes offices, serviced apartments and a five-star hotel in the city’s west, according to the Singapore-based developer’s website.

The mall has an occupancy rate of only 40 percent to 45 percent because it was not planned or designed properly, Benjamin Han, who took over as managing director of GuocoLand’s unit in Shanghai six months ago, said in an interview.

Bund Square

The developer has started remodeling the mall to reposition it, including removing at least 10 tenants that don’t fit in, Han, an architect, said. The company plans to have the work completed in the next 12 months, he added.

“The reason why the mall is doing so badly is that it was so badly conceived,” he said.

At Bund Square, an outdoor mall operated by Shanghai Greenland Group Co. that opened at the southwestern end of the Bund last year, about half of the stores are occupied, including a Nike outlet. Empty shops are covered with boards featuring pictures of champagne glasses and slogans promoting a luxurious lifestyle. Some fourth-floor shops are still under renovation.

Though some stores are under renovation, they have been rented out, Shanghai Greenland spokesman Wang Xiaodong said in a phone interview. He declined to give the mall’s vacancy rate.

Collecting Rent

Worsening the problem, economic growth is weakening. The International Monetary Fund in May lowered its forecasts for China’s growth this year after a slowdown in the first quarter.

Retail sales in the first five months of 2013 grew 12.6 percent, slowing from 14.5 percent a year earlier, according to the Beijing-based National Bureau of Statistics.

Retail rents in the four major cities fell 6.2 percent to 2,090 yuan ($341) per square meter a month in the first quarter from the previous one, while in second-tier cities they declined 6.3 percent to 994 yuan per square meter, according to Cushman.

Deal Specific

Luxury brands such as Louis Vuitton or Gucci could receive about 25 million yuan ($4 million) in fees toward fitouts when they lease a 500-square-meter store, while fashion brands such as Sweden’s Hennes & Mauritz AB and Spain’s Inditex SA’s Zara typically get 5 million yuan to 15 million yuan in such fees, according to a Shanghai-based property adviser who has acted as a broker for retailers and asked for anonymity because he is divulging industry secrets.

Each rent deal is different. High-end brands typically pay lower turnover rents because of the prestige they bring to shopping centers, as well as obtaining free-rent periods. Brands with less of a cache pay a monthly turnover rent or a fixed rent, depending on which is higher.

Gucci and Inditex said in e-mailed statements that they don’t comment on lease contract conditions. Grace Zhao, LVMH’s Shanghai-based spokeswoman, declined to comment on commercial relations. H&M didn’t reply to an e-mailed request for comment on their leases in China.

Developers offering to help build storefronts or offer free rents are not uncommon in China, according to Piaget, the Swiss luxury watchmaker owned by Cie. Financiere Richemont SA.

“It’s part of the marketing strategies of different malls,” Dimitri Gouten, Piaget’s Asia-Pacific president, said. These shopping centers are usually “weaker malls,” he said.

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Tier 1, 2 & 3 Cities in China, Which Comes First for Brands? - Luxury Society - Prime Source

Tier 1, 2 & 3 Cities in China, Which Comes First for Brands? - Luxury Society - Prime Source | Etam | Scoop.it

Elizabeth Canon of Fashion’s Collective investigates retail expansion strategies in China’s growing Tier 1, 2 & 3 Cities

There’s been much industry talk lately about China’s growing Tier 2 and Tier 3 cities, and the decline of luxury spending in Tier 1 cities. Taken at face value, the data and reporting might lead a luxury brand to rethink and revise their expansion strategy. However, doing so without a deeper understanding of the market would be a costly mistake.

As is always the case with data, using it to make informed decisions requires a further level of analysis, in particular a look at people’s actual behavior. Digital Luxury Group, a international company helping brands form and execute digital strategies in key global markets (including China), has conducted extensive research on the search behavior within China.

Their findings indicate that in western China, largely comprised of Tier 3 cities, people are searching for luxury brands at an increased rate of 8.4%, compared with just 4.8% in the eastern Tier 1 cities including Shanghai and Hong Kong. This directly shows the growth of an aspirational consumer base in the west, compared to a slow down in the coastal region.

 

“ In Western China, largely comprised of Tier 3 cities, people are searching for luxury brands at an increased rate of 8.4% ”

 

However, to assume that modifying an expansion strategy to open stores in Tier 2 and 3 strategies, rather than the more costly Tier 1 cities, in order to test the market with a lower investment, would be a mistake.

When we look at the behavior of Chinese luxury consumers, they are a group that travels explicitly to make purchases. Not only are they seeking validation of authenticity and lower prices, but they are seeking the status that comes with travel.

In fact, in 2011 there were 70 million outbound trips from China, with nearly 75% of these travelers making luxury purchases abroad. For the current Chinese luxury consumer, traveling to Hong Kong, the United States and Europe (the most popular travel destinations for affluent Chinese), the swelling middle class Chinese will travel domestically at increasing rates to Tier 1 cities.

 

“ In 2011 there were 70 million outbound trips from China, nearly 75% of these travellers made luxury purchases abroad ”

 

This middle class is especially significant to almost all fashion and luxury brands. Research shows that this mainstream consumer, (identified as those earningRMB 106,000 – 229,000 per year, roughly $17,000 – $38,000 USD), will grow to represent over 50% of the entire Chinese population by the year 2020 (McKinsey). This, a group that is already trading up on luxury purchases and lives mainly in Tier 1 and Tier 2 cities.

If the brands these mainstream consumers have been influenced by are not present at the brick and mortar level in these destinations, a disconnect will occur, making it imperative for brands expanding into China to do so first and foremost in Tier 1 and Tier 2 cities before opening subsequent locations in Tier 3 cities.

For brands who entered first in Tier 1 and Tier 2 cities, and then afterwards in Tier 3 locations, it’s possible the Tier 3 locations might actually outperform Tier 1 and 2 locations.

However, for the brands looking to minimize short-term investment risk by opening first in Tier 3 cities, this strategy does not necessarily align with behavior and aspirations in China, and can therefore be a high risk strategy in the long term.

Ultimately, understanding the local consumer, how they think, behave and buy remains a paramount filter through which to perceive and analyze the growing amount of research on the Chinese market.




Via Gian Marco Saleri
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Gian Marco Saleri's curator insight, July 4, 2013 4:28 AM

Ultimately, understanding the local consumer, how they think, behave and buy remains a paramount filter through which to perceive and analyze the growing amount of research on the Chinese market.

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China Makes Way for Art Malls

China Makes Way for Art Malls | Etam | Scoop.it
Zong Qinghou, China’s richest: ‘Development of luxury in China is coming to an end’

Jul 1, 2013

With an estimated fortune of $13 billion, Zong Qinghou, owner of Wahaha Holding and China’s richest man has recently spoken about his retail development division and his intentions to invest in Made in Italy. In an interview to CorrierEconomia, Zong said ‘Expansion of luxury in China is coming to an end, especially due to the policies of the new government. Officials are no longer spending on luxury branded goods. In the malls I am developing, Chinese come more for entertainment than shopping’. As for potentially investing in Italian luxury brands, Zong said he is particularly interested in ‘soft luxury’ brands and companies which can manufacture items that cannot be made in China at the same standard.

Chinese billionaire Zong Qinghou and his daughter Zong Fuli

 

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5 Essential Tips For Digital Fashion Marketing In China

5 Essential Tips For Digital Fashion Marketing In China | Etam | Scoop.it

WeChat, e-commerce, and key opinion leaders were among the topics discussed at a recent Fashion's Collective event focused on creating a global digital strategy for the Chinese consumer.


Via Gian Marco Saleri
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Gian Marco Saleri's curator insight, July 2, 2013 4:18 AM

The discussion featured a wide range of topics related to digital fashion strategies in China and plenty of valuable advice on how to optimize social media and e-commerce strategies.

This article provides a nice summary of five digital strategy suggestions for fashion and luxury brands that were offered by Booker and Buchwald during their discussion.

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Apparel Dominates E-commerce Sales in China | News | Apparel Magazine(AM)

Apparel Dominates E-commerce Sales in China | News | Apparel Magazine(AM) | Etam | Scoop.it
Apparel Dominates E-commerce Sales in China

China once again leads the A.T. Kearney Retail Apparel Index. The Apparel Index also includes a number of countries from Latin America and the Middle East showing that these regions continue to offer compelling opportunities.

The Retail Apparel Index identifies the top 10 developing countries ranked in the A.T. Kearney Global Retail Development Index in terms of market attractiveness, retail development, and country risk for their clothing retail industries.

Michael Moriarty, A.T. Kearney partner and co-author of the study said, "Since the last Retail Apparel Index in 2011, Western apparel retailers have increasingly looked for growth from developing markets, where apparel spending remains strong as disposable incomes rise. E-commerce has also developed significantly for both local and international players."

Apparel Index results
China (#1) remains the top apparel market due to its market size and strong growth in clothing sales. Three trends have shaped China's apparel market: the rise of e-commerce, a boom in fast fashion, and the evolution of the luxury market.

Althea Peng, A.T. Kearney partner and study co-author said, "In most emerging markets, e-commerce is less than 1 percent of total sales: in China, it is 6 percent, which is higher than in the United States. More than three-quarters of online sales in China are in apparel."

Over the past year several fast fashion retailers have aggressively expanded in China. Uniqlo opened 65 stores in China in fiscal year 2012, bringing its total count to 145, and it plans to add 100 stores a year to reach 1,000 stores. H&M opened 52 stores in 2012 and Zara opened 37 stores. Gap has plans to open 35 stores in 2013.

China's luxury market remains strong -- it surpassed Japan to become the second largest luxury market in the world in 2012 -- but it is not growing as fast as in the past. A key reason is that a large portion of luxury purchases are made abroad, due to lower prices and a strong renminbi.

Latin America takes a strong position in the Apparel Index, led by Chile (#3), Brazil (#5), and Mexico (#9). Apparel retailers have aggressive expansion plans for the region. Gap, which currently has 36 Latin American stores (including 28 in Mexico and four in Chile), plans to open 30 more by 2014, including its first Brazilian store in 2013. Zara has 150 stores in Latin America (56 of which are in Mexico, and 39 in Brazil), including 12 new stores built in 2012.

Brazil is South America's largest apparel market, with $42 billion in sales, compared to $14 billion for Mexico. The Brazil luxury market is forecast to grow to more than $48 billion by 2025. An issue for Brazil is that 80 percent of luxury purchases are made outside of the country due to import challenges, including high tariffs that increase the cost of imported products by a factor of almost three times, relative to the United States and France.

The Middle East region remains an attractive retail apparel market with the UAE, Kuwait, and Saudi Arabia (#6) respectively ranking 2nd, 4th and 6th place in the Index. Many retailers are testing their operations in the UAE before expanding to other Middle East countries due to its ease of doing business, sizeable retail segment, large expat community, and tourism.

Several notable apparel openings occurred in the UAE in 2012, including Level Shore District, Prada, Muji, COS, Gap, Pomellato, Calvin Klein, Juicy Couture, and Destination Maternity. Bvlgari and Bloomingdale's plan new stores in 2013 in Abu Dhabi.

Read the full 2012 GRDI Report that includes the 2013 Apparel Index here.
                   

2013: The Retail Apparel IndexCountry 2013 Rank Market Attractiveness Retail Development Country Risk ScoreChina 1 40.2 10.8 11.8 62.8United Arab Emirates 2 39.1 7.2 16.0 62.4Chile 3 32.8 7.8 17.4 57.9Kuwait 4 38.8 5.5 12.8 57.2Brazil 5 33.5 9.9 12.1 55.5Saudi Arabia 6 36.2 5.6 13.2 55.0Russia 7 36.5 9.3 8.6 54.4Malaysia 8 30.4 6.0 15.7 52.1Mexico 9 26.9 11.8 11.7 50.4Turkey 10 28.4 9.3 12.6 50.3           
Source: A.T. Kearney analysis
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China once again leads the A.T. Kearney Retail Apparel Index. The Apparel Index also includes a number of countries from Latin America and the Middle East showing that these regions continue to offer compelling opportunities.

The Retail Apparel Index identifies the top 10 developing countries ranked in the A.T. Kearney Global Retail Development Index in terms of market attractiveness, retail development, and country risk for their clothing retail industries.

Michael Moriarty, A.T. Kearney partner and co-author of the study said, "Since the last Retail Apparel Index in 2011, Western apparel retailers have increasingly looked for growth from developing markets, where apparel spending remains strong as disposable incomes rise. E-commerce has also developed significantly for both local and international players."

Apparel Index results
China (#1) remains the top apparel market due to its market size and strong growth in clothing sales. Three trends have shaped China's apparel market: the rise of e-commerce, a boom in fast fashion, and the evolution of the luxury market.

Althea Peng, A.T. Kearney partner and study co-author said, "In most emerging markets, e-commerce is less than 1 percent of total sales: in China, it is 6 percent, which is higher than in the United States. More than three-quarters of online sales in China are in apparel."

Over the past year several fast fashion retailers have aggressively expanded in China. Uniqlo opened 65 stores in China in fiscal year 2012, bringing its total count to 145, and it plans to add 100 stores a year to reach 1,000 stores. H&M opened 52 stores in 2012 and Zara opened 37 stores. Gap has plans to open 35 stores in 2013.

China's luxury market remains strong -- it surpassed Japan to become the second largest luxury market in the world in 2012 -- but it is not growing as fast as in the past. A key reason is that a large portion of luxury purchases are made abroad, due to lower prices and a strong renminbi.

Latin America takes a strong position in the Apparel Index, led by Chile (#3), Brazil (#5), and Mexico (#9). Apparel retailers have aggressive expansion plans for the region. Gap, which currently has 36 Latin American stores (including 28 in Mexico and four in Chile), plans to open 30 more by 2014, including its first Brazilian store in 2013. Zara has 150 stores in Latin America (56 of which are in Mexico, and 39 in Brazil), including 12 new stores built in 2012.

Brazil is South America's largest apparel market, with $42 billion in sales, compared to $14 billion for Mexico. The Brazil luxury market is forecast to grow to more than $48 billion by 2025. An issue for Brazil is that 80 percent of luxury purchases are made outside of the country due to import challenges, including high tariffs that increase the cost of imported products by a factor of almost three times, relative to the United States and France.

The Middle East region remains an attractive retail apparel market with the UAE, Kuwait, and Saudi Arabia (#6) respectively ranking 2nd, 4th and 6th place in the Index. Many retailers are testing their operations in the UAE before expanding to other Middle East countries due to its ease of doing business, sizeable retail segment, large expat community, and tourism.

Several notable apparel openings occurred in the UAE in 2012, including Level Shore District, Prada, Muji, COS, Gap, Pomellato, Calvin Klein, Juicy Couture, and Destination Maternity. Bvlgari and Bloomingdale's plan new stores in 2013 in Abu Dhabi.

Read the full 2012 GRDI Report that includes the 2013 Apparel Index here.
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China's Luxury Market: Evolving, Not Declining - Jing Daily

China's Luxury Market: Evolving, Not Declining - Jing Daily | Etam | Scoop.it

With an estimated 2.5 percent growth rate for 2013, the Chinese luxury market is slowing down. However, the perception should be nuanced: a deceleration is not a crash. Although the Americas are predicted to see a higher growth rate than China this year, Chinese travelers are spending more abroad.

That luxury demand is not decreasing, but evolving was a conviction shared by the 80 Chinese luxury experts, brand professionals and designers participating in the sixth edition of Insight Shanghai on October 24th and 25th. The two-day conference and workshop provided firsthand insights on the evolving sense of luxury with Chinese characteristics. Here are some key findings.

The end of conspicuous consumption?

In 2012, the Chinese government obliged officials to limit certain practices like hosting lavish banquets and gift giving, and adopt less conspicuous lifestyles. The official ban came soon after the Chinese blogosphere expressed its anger with seeing government officials photographed flaunting luxury watches and bags. The newfound frugality of the China elite had a strong impact on a limited number of categories: watches, banquet catering, flowers, and teas, but it has found an echo in people’s minds.

Mr. Wang Hua (王华) from KEDGE Business School introduced his speech by saying “nowadays, being ostentatious is tasteless in China.” Fu Jiong, design professor at Jiaotong University confirmed this, saying that for him the “bad taste” of Chinese nouveaux riches provokes today more irony than envy. Meanwhile, sociologist Lu Xiaoming (陆晓明) emphasized the growing interest of well-educated intellectuals and the new middle class in the refined lifestyle of the scholars of ancient China. At that time, he told, playing music for oneself, drinking wine to speak to the Muses, and enjoying natural landscapes were considered the ultimate luxury pleasures. One can hardly imagine today’s Chinese executives playing guqing while looking at misty mountain landscapes or declaiming poetry, but the aspiration is on the rise.

Less logo, more quality

As luxury perceptions are maturing, consumers are placing more value on the soul and intrinsic qualities of luxury items. Thus, they are becoming a bit tired of amassing luxury brands and logos and pay more attention to quality, scarcity, and craftsmanship.

The “C” logo of Coach once personified the luxury aspirations of the middle class. In 2012, the brand introduced the Legacy Purse to Chinese consumers. With its simple lines, quality leather, and modest logotype, the handbag has become a discreet sign of recognition among Coach connoisseurs. Another example is the recent development of secondhand luxury boutiques such as Milan Station where luxury accessories can find a second life. Finally, Ms. Guan Yin, Design manager from Eagle Ottawa—a company which specializes in leather for the automotive industry—reported that the touch of genuine leather is increasingly valued.

Perhaps, the idealization of frugality and culture reveals a bit of snobbery from the new Chinese business executives and academics present at the event. Indeed, the best-selling iPhone 5 in China is gold-plated, and 59 percent of luxury consumers prefer brands to express their social superiority, according to Bain. Connoisseurship is growing, but the appeal of the status symbol is definitively not dead!

Younger and connected, here comes the new luxury consumer!

Demographics are driving another evolution of the luxury market in China. According to a survey published by Bocconi University in 2012, Chinese luxury consumers are 14 years younger than European peers and 25 years younger than American peers. In the next three to five years, consumers from 25 to 30 years old will be the main group in luxury consumption. Once dominated by the male consumer between 35 and 45 years old, the newest rising segments on the Chinese luxury market are women and the new middle class.

Younger Chinese luxury consumers are glued to technology and enter the luxury world through the gates of e-tailing. Bain research reported that around 70 percent of potential consumers search for luxury brands on the internet at least once a month, while 40 percent of the respondents consider buying online. In April 2012, Taobao reported a 100 percent increase in luxury spending over the past year on the Tmall business to consumer platform and reached 15 billion RMB (2011).

Digital luxury is growing fast and the mélange of luxury codes and technology values inspired new types of indulgence and niche: Introducing recent developments of online luxury, Fu Jiong mentioned Only Rose, an online flower boutique on Taobao which guarantees that rose bouquets can be sent to one person only. Mr Luo Zhenyu (罗振宇), a former journalist at CCTV, discussed online talks shows about literature, and provided book reviews and read extracts. He also discussed the rise of personal reader services: once the privilege of the emperors, today, such a services cost 500 RMB per year (around 60 euros) to club members.

Looking for Chinese luxury brands

Will Chinese brands emerge within this fast-moving luxury market? According to Chinese specialists, the development of domestic luxury brands is more likely to flourish in the product categories where China has heritage know-how to rejuvenate and to brand. Still, for Mr. Wang, MBA Professor at KEDGE Business School, the potential candidates have to enhance their competencies in design creativity, quality control, branding, retail operations, and management. A partnership with overseas luxury houses or foreign designers can accelerate the process. During the Insight Shanghai workshop, designer Claudio Colucci, who just landed in China after a great career in Japan, shared recent works for luxury brands. He showed a limited edition of armchairs and lighting installation inspired by the intricate patterns of windows from the historic pavilions of Suzhou. It was well received as a successful mélange of European luxury expertise and Chinese inspiration. The same day, participants were invited to play and develop their own potential brand concepts around traditional Chinese products such as furniture, medicine, porcelain, or tea. A few interesting ideas came to the fore: a modern tea house for the over-stressed elite of China; an exclusive Chinese medicine brand based on confidentiality and word-of-mouth; a tableware brand mixing Western and Eastern design influences, and, last but not least, a furniture brand customizing heritage furniture with a modern twist. The Chinese character used to brand this later idea, hui (回) was an auspicious metaphor for the event. The character means “to go back” but it has the appearance of a spiral. Looking back to shape the future of Chinese luxury, Insight Shanghai 2013 was the definitive search to define that future

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Bain Study Finds China’s Luxury Consumers More Global Than Ever

Bain Study Finds China’s Luxury Consumers More Global Than Ever | Etam | Scoop.it
bAIN STUDY FINDS CHINA’S LUXURY CONSUMERS MORE GLOBAL THAN EVER
BY JING DAILY

Luxury shoppers in Hong Kong. (myhsu/Flickr)

In the wake of China’s slowing luxury sales, a new Bain report predicts that North America will surpass China as the top region for luxury growth this year, a sharp turnaround for brands that have zeroed in on China growth over the past several years. However, this doesn’t mean that luxury brands can scale down their efforts to market to Chinese clients. Rather, they’re going to have to step up their global initiatives, since the study also finds that the Chinese traveler is still the most important global luxury consumer.

The report on the global luxury market released yesterday predicted that worldwide sales will rise 6 percent at constant exchange rates in 2013, with 4 percent growth in North America and only 2.5 percent growth in China, bumping China to second place. This isn’t the only recent study saying that North America will reign this year—a recent luxury CEO survey commissioned by luxury lifestyle publicationDepartures and authored by research firm Ledbury also found that brand executives were most optimistic about growth in the North America market.

The reasons for China’s move into second place include a slowing GDP, high tariffs on imported goods, a government crackdown on official corruption and extravagance, and shifting Chinese taste away from ostentatious luxury products. As a result of the diversity of these reasons, not all luxury brands are experiencing the slowdown in the same way: while the growth of low-key designers such as Bottega Veneta and lifestyle brands such as Coach has remained high in China, mega-brands such as Louis Vuitton and Gucci are striving to regain their high numbers from previous years.

However, Chinese tourists are still way ahead of the pack in terms of global luxury consumption, meaning a great deal of that North American growth is going to be driven by their purchases. The study finds that Chinese consumers represent 29 percent of all luxury consumers in 2013, and most of those purchases are made outside the mainland thanks to high tariffs on foreign luxury products. A recent report by A.T. Kearney also came to a similar conclusion, finding that 2 percent of Chinese consumersaccounted for about one third of the world’s luxury consumption this year.

On a practical level, these findings mean that brands will need to globalize their strategies in marketing to the traveling Chinese customer now more than ever before. Luxury brands should focus on features such as Mandarin-speaking staff, standardized product offerings, and Chinese payment options in locations across the world if they haven’t already done so. In addition, just because China is slowing doesn’t mean its store locations are any less important—Chinese consumers are able to develop brand awareness from them at home, even if they’re buying the non-tariff goods abroad.

Category: Business & Finance / Market Trends

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China Luxury Forecast: Expect Sophistication To Grow In 2014 - Jing Daily

China Luxury Forecast: Expect Sophistication To Grow In 2014 - Jing Daily | Etam | Scoop.it
2014 BY KAREN FONG 

Chinese customers are more demanding than ever in terms of luxury product quality and service. (KO/Beijing Eye)

China’s luxury market looks set to stabilize even as consumers become more discerning and sophisticated, according to the fifth annual Ruder Finn and IPSOS joint China Luxury Forecast released today, which also finds that Chinese customers are increasingly setting their sights on shopping overseas and online.

The 2014 Forecast polled 1,800 luxury consumers across China and Hong Kong, getting detailed accounts of the way in which they spend. The report covers China with 25 percent of respondents in first-tier cities, 32 percent from second-tier cities and 27 percent from third-tier cities, all with annual incomes averaging RMB 290,000.

Main signs of Chinese consumers’ growing sophistication are a high demand for unique items and expectation of better retail service, which are also major factors driving these shoppers overseas.

Authenticity, price, and, most interestingly, uniqueness were highlighted as the main reasons for shopping abroad, with the percentage of respondents looking for unique purchases rising from 41 percent last year to 49 percent this year. Executive Director of IPSOS Simon Tye notes this to be a major change in the attitude of buyers. “The last time we did this survey, Chinese buyers were looking for information. But now they are looking for connection,” he says. “They are more discerning, they discriminate a lot more, and they are asking for a lot more empathy. The Chinese are beginning to ask ‘do you really understand my needs?’” Managing Director and Senior Vice-President of Ruder Finn China Elan Shou adds to that, “Chinese buyers are no longer followers. They used to follow the brand and follow the trends and now they are saying, here is what I need.”

Another main reason many Chinese consumers are shopping overseas is the fact that poor customer service at home is not meeting their rising expectations for quality service. A staggering 92 percent of respondents in China and Hong Kong complained about luxury shopping services on the mainland, and preferred to do their shopping in Hong Kong for bags, jewelry and beauty, while Europe was the preferred choice for wine and watches. Another complaint was that advisors were not knowledgeable enough in their products.

This desire to find a brand and, by extension, products that resonate with them has also led buyers online. Top reasons to visit luxury websites now include learning about the brand’s history, news, prices, and manufacturing details.

There is also more shopping being done online. While brand boutiques remain the most popular channel of purchase for mainland Chinese and Hong Kong consumers, both groups now show greater confidence in making purchases online. Websites gaining in popularity include Nordstrom, Net-a-Porter, Taobao, Zhenping.com, and Yoox.com. A key factor to online purchases by mainland buyers include after-sales support, with 81 percent of respondents noting this as their top priority followed by easy returns at 43 percent. While Hong Kong buyers were more concerned with easy access, the key to online purchasing for Chinese buyers revolved around trust, with 52 percent noting the importance of word-of-mouth reliability.

The easy access to online information also translates into mobile platforms, with more buyers turning to brands’ apps for info on luxury. Forty-three percent of mainland respondents in the study stated that they have downloaded apps, while 38 percent intend to. These apps allow buyers to become more closely identified with the brand. Shou adds, “The social media side makes it pretty clear what the Chinese want. Just look outside and you’ll see everyone on their phone. You can see where the market is going and how they are open to it.” Ultimately, the report noted the need for more mobile support elements to strengthen e-commerce.

In the coming year, fashion and beauty are the categories that consumers most plan to spend more on in the next 12 months, with 50 percent expressing plans to spend more on beauty and 52 percent more on apparel. According to Shou, beauty has become more popular because in China’s gift-heavy culture, “beauty products make great gifts.” In addition, “Men’s cosmetics in particular is also a booming market—and they make for great gift options as well.” She adds, “The key is [the beauty industry’s success] is the feeling of luxury at an affordable price. When you look at makeup or cosmetics it’s more affordable than apparel but you still have that feeling that it’s a luxury item.” According to Tye, “Beauty has been very clever in terms of making you feel like you can have a slice of luxury.”

While the report demonstrates the stabilization of the luxury market, Shou and Tye both note it still won’t be a simple climb to the top. “One of the things [brands need to do] is to stay very, very true to their heritage. Case in point, Chanel. Their story is so strong and really resonates. There’s truth and a lot of clarity about where the brand stands. So you have to be very clear, whether you are a heritage brand or a contemporary brand.”

Category: Business & Finance / Market Trends
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Sham Kar Wai on China's Changing Fashion Landscape - The Business of Fashion

Sham Kar Wai on China's Changing Fashion Landscape - The Business of Fashion | Etam | Scoop.it

On the occasion of the launch of Galeries Lafayette in Beijing, Divia Harilela sat down with Sham Kar Wai, one of Asia’s most powerful fashion moguls and the founder of Hong Kong-based fashion group I.T Limited, to talk about China's changing fashion retail landscape.

HONG KONG, China — At Comme des Garçons’ Spring/Summer 2014 show last month, Sham Kar Wai quietly took his front row seat, completely unnoticed by the press. Unlike many of his peers, he prefers to keep a relatively low profile and is often dressed casually in jeans and a simple jacket. But despite his humble appearance, Sham is one of Asia’s most powerful fashion moguls, who, as founder and chairman of Hong Kong-based fashion group I.T Limited, sits atop a large multi-channel business that includes several multi-brand concept stores (I.T, i.t, ete! and double-park) and an array of mono-brand boutiques for under-the-radar fashion brands like Comme des Garçons, Gareth Pugh and Maison Martin Margiela. The group also operates ten brands — some licensed, some developed in-house — including b+ab, 5cm and Izzue, which recently launched at Selfridges in London.

Sham started the business in 1988 with a tiny 200-square foot boutique stocking edgy brands like Doc Martens in Hong Kong’s popular shopping district of Causeway Bay. It was an immediate hit with young locals, who would later prove to be I.T’s core customer. And, over time, I.T gained a solid reputation for its cool edit of fashion forward labels, including Gareth Pugh, Ann Demeulemeester and Isabel Marant, differentiating it from other local luxury stores, like Lane Crawford and Joyce.

Although I.T issued a profit warning in May, as of February 2013, the company still recorded an annual turnover of HK$6,543.1 million (about US$843 million, at current exchange rates), a 14 percent growth over last year, driven in no small part by the group’s in-house and licensed brands.

The mainland China market, too, has played a significant role in the group’s expansion. While many Western brands have been struggling in China, I.T’s fortunes remain on the rise. In fact, mainland China now accounts for 31.1 percent of I.T Limited’s turnover (compared to 26.9 per cent last year).

The mainland has also proven to be fertile ground for testing new retail concepts for the group. In 2011, they opened  I.T Market in Beijing in partnership with Comme des Garçons’ Dover Street Market division. And, today, the group celebrates its latest venture, the opening of Galeries Lafayette in Beijing. The 47,000-square metre space is a joint venture with Galerie Lafayette France and a completely new concept for China.

On the occasion of the launch, BoF sat down with Sham to talk about China’s changing retail landscape, the luxury slowdown, opening Galeries Lafayette in Beijing, bringing Chinese brands to the international arena and finding a Chinese McQueen.

BoF: When it first launched, I.T was a pioneer in the way it championed more edgy labels. Has that mission remained the same today?

SKW: My philosophy for I.T is essentially the same. I wanted to bring something I was interested in to Hong Kong, so that translated into importing merchandise and brands from outside of Asia. Since then, it has evolved — initially, we were focusing on brands and categories, but now we are doing new things like pioneering retail concepts. It is still the same philosophy, which is bringing something new about fashion to Hong Kong, but we offer more.

BoF: As the marketplace becomes more crowded, how do you continue to differentiate I.T from other retailers?

SKW: We have always been unique. People think that what we do overlaps with Joyce and Lane Crawford, but there is a distinct difference. We have our in-house labels and brands, first and foremost. We are also focusing on bringing in fashion from other parts of Asia, like Korea and Japan — this is something we’ve been pursuing strongly for the past year. While our competitors are all about luxury, we want to appeal to everyone. When I started my business I was 21; I couldn’t afford luxury brands. What I wanted to buy was fashion that was cool and different. Today, it’s still important that we are able to offer something to everyone, not just the privileged.

BoF: I.T rides on a multi-brand, multi-layered business model with multi-brand stores and mono-brand shops, plus licences and in-house labels. Which of these businesses has been the most successful and why?

SKW: Each category has a different audience and approach, so I cannot say which is more successful. Some brands may make more money than others because they are more commercial, but they are not respected in terms of creativity. In terms of money, our own in-house brands are the most profitable because we have higher margins. But our roots are in multi-brand concepts. Both are important. One is more profitable, but can generate more cash to develop the other categories.

BoF: As one of the first multi-brand fashion retailers in China, how do you think the retail landscape has changed since you opened your first store 11 years ago?

SKW: When we started, China had no multi-brand store concepts. Now, the whole world’s economy is struggling and everyone is looking at China, because its one of the few markets that is still growing — and it’s more open: there are new locations, more shopping malls, more young people. The Chinese have been travelling and this benefits retail too. They know brands, the concepts; they are worldly. Thanks to the Internet, they can get so much information.

BoF: The Chinese customer is maturing very quickly. What changes have you seen? What challenges and opportunities does this rapid maturation present? 

SKW: While Hong Kongers have a good sense of fashion, the Chinese seem a lot more open and avant-garde. So while the average Hong Konger may have more sophisticated tastes, the Chinese are more stylish. They are willing to take risks, while local customers [in Hong Kong] are more conservative. In China, they are now leaning towards the more avant-garde labels. You can even see it on the streets now. The general market in China, however, is still behind and we still want to reach the masses before targeting the ultra-sophisticated, although we do have brands that appeal to them. We are more focused on educating the general market about fashion.

BoF: I.T helped pioneer the edges of China’s fashion market, bringing avant-garde labels like Comme des Garçons, Raf Simons, Rick Owens and others to the country. What is the emerging opportunity today?

SKW: I think there is still a strong demand for the high-end. When a country becomes wealthy, people are always looking for luxury, because it shows your status and what level you have achieved. But some of the young people are beginning to crave something different, usually within the contemporary realm. And those that are familiar with luxury goods now want highly unique brands.

BoF: What about lower-tier cities, specifically?

SKW: We started opening multi-brand stores in second and third tier cities a few years ago. After two years, business has grown 100 percent. We’ve also been online for two years; when we started, business was quite small, but it’s grown significantly. At this moment people are still looking for bargains online. In the future, online is an important platform for retailers, but still people enjoy the art of shopping, the environment, the experience of shopping. It’s like magazines: you need an online and a print presence.

BoF: Growing up, you were inspired by youth culture magazines like i-D and The Face. To what extent is Chinese youth culture creating new fashion business opportunities?

SKW: There are a lot of young people in China and they love fashion. It’s the youth who want to dress up and impress each other. This is a new category that is emerging.  The older generation still has spending power, but the second generation of the already wealthy are spending too. I can also see the middle class rising. In the coming 10 years, this segment will be more important for spending power with apparel especially.

BoF: This year you issued a profit warning.

SKW: We are still experiencing a slowdown, much like Western brands. Areas like Beijing aren’t growing so fast. As such, we are slowing down our expansion and waiting to see how the economy develops. Now we are trying to open only important stores. We are also looking to consolidate stores and focus on making sales per square footage higher. Making each shop more profitable is more important that opening new stores. The economy is not like three years ago, so our pace has slowed. We may open important locations but concentrate on making them more efficient. Also integral is good merchandise (which is number one for the Chinese), service and experience. We still have a lot of room to improve, as service in China is still behind Hong Kong.

BoF: Despite this you have recently opened Galeries Lafayette in Beijing. What makes this project special?

SKW: In China, we have really seen a demand for new retail concepts and it’s an area that has done very well for us. We have always done multi-brands, but we have never developed a department store. It was important that we found a model that was outside China. Local department stores are very similar — you can go in blindfold and it still feels the same. I wanted to bring something new and set a benchmark for the market. Galeries Lafayette is important, not only in France but in the world. So many Chinese shop there and they recognised the name. I myself have been shopping there for 24 years.

The trade mix is also different, as well as the look of the store. We have a lot of exclusive brands for Beijing and China. Lafayette also wants to tell the local customers that we are not about luxury — we are a fashion store.  We want to bring in European tastes, in addition to more affordable and contemporary brands. Variety is important. We also have lifestyle element. For example we are bringing in [restaurant] Angelina to China for the first time.

BoF: Recently you have launched initiatives in Europe, including amping up distribution of your in-house brands. Is the West now your target?

SKW: No! China will still play a big role, but it’s a long journey. Also, another of my dreams is to bring Chinese brands to the international arena. Our in-house labels are a great way to do this. After our project with Selfridges, we are going into discussion about permanent space with them, so there is potential. It’s about getting the right partners who are open to introducing Eastern brands. They can see that these brands are quite different — it’s fresh for them and the aesthetic is very easy. The items still have an HK twist, usually in the way the line is designed. Hong Kong is more a mosaic of East and West. This gives us a unique perspective on fashion.

BoF: You have been quoted as saying it’s your dream “to find a figurehead for Chinese fashion who is as important as McQueen was to London or Nigo is to Japan.” Is this still something you are pursuing?

SKW: This is my dream. I want to try to achieve this in my lifetime, but it’s really in the initial stages. I think China should have at least one or two brands that can be recognised internationally, but up until now it hasn’t happened. For now, we are encouraging young designers in China to go after more opportunities, to see the world and how the fashion business is run. We recently launched an initiative with Tsinghua University in Beijing to organise a fashion design competition. It was open to students from international fashion schools including The Hong Kong Polytechnic University, Parsons The New School for Design and London College of Fashion. The finalists had to create a design using old fabric from our in-house brand Izzue. We took the winners to Paris which was exciting. It’s a good opportunity to mix different cultures.

BoF: Many have said the future of fashion lies in the East. What do you think?

SKW: You always need a balance. Most of our daily fashion is from the West. How can the East dominate? But at the same time we have the spending power, but the West has the creative side. It’s all about balance and working together.

MORE ARTICLES INGLOBAL CURRENTSSham Kar Wai on China’s Changing Fashion…Vietnam, a Lucrative Market to Approach with Caution…The China Edit | Upside to Slowing Growth, Lululemon&…The China Edit | Golden Week, Macy’s Halts Online…

TAGGED BOF500 | CHINA | HONG KONG | I.T. LTD. | SHAM KAR WAI

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Etam: un troisième trimestre plombé par la Chine

Etam: un troisième trimestre plombé par la Chine | Etam | Scoop.it
Etam: un troisième trimestre plombé par la ChinePARIS, 17 oct 2013 (AFP) - Le groupe de distribution textile Etam a annoncé jeudi une baisse de ses ventes au troisième trimestre de 1,1%, à 290,1 millions d'euros, plombées par le recul de ses ventes en Chine et des taux de change défavorables, alors que l'Europe reste en croissance.

 

A surfaces et taux de changes comparables et en incluant l'activité internet, l'activité du groupe progresse de 1,1%.

Sur neuf mois, Etam enregistre un chiffre d'affaires de 886,9 millions d'euros, quasi stables (+0,1%) en publié (+1,3% en organique).

L'activité européenne a continué de progresser. Visuel Etam.
L'activité du distributeur en Europe a continué de progresser entre juillet et septembre, à 199,7 millions d'euros (+2,6% en publié, +4,5% en organique).

 

"Depuis le début de l'année, le chiffre d'affaires a été en croissance dans la plupart des pays d'Europe où le groupe est présent", signale Etam dans un communiqué.

Sur le trimestre, la France voit ses ventes croître de 2,4% à 175,4 millions d'euros, soit une "performance commerciale supérieure à celle du marché de la consommation d'habillement et de textile", explique Etam.

En revanche, la situation du groupe en Chine reste difficile, avec un chiffre d'affaires qui chute de 8,3%, à 90,4 millions d'euros.

Cette baisse est due en partie à un impact négatif de changes de 2,2 millions d'euros, mais résulte également des difficultés du groupe sur ce pays "lié au positionnement de son offre et à la structure de son réseau de distribution", est-il précisé.

Etam a déjà réduit son réseau de points de vente en Chine de 166 magasins depuis le début de l'année.

Mais à changes et surfaces comparables, les ventes du groupe en Chine se replient encore de 8,1%.

Par marques, 1.2.3, qui enregistrait pourtant de bonnes performances depuis le début de l'année, recule cette fois de 2,7% sur le troisième trimestre. La marque Etam progresse en revanche de 3,7%.

Le groupe ne donne aucune perspective ni prévisions chiffrées pour la fin de son exercice.

Etam a également annoncé jeudi le remplacement du président de son conseil de surveillance, Hervé de Carmoy, qui a démissionné "pour raisons personnelles", par Rachel Milchior.

La famille Milchior est l'actionnaire majoritaire d'Etam, de concert avec la famille Tarica. Tous deux ont récemment renforcé leur participation dans la société à l'occasion d'une offre publique d'achat simplifiée (OPAS) clôturée le 2 octobre.

Le consortium Milchior-Tarica détient désormais 81,14% du capital d'Etam et de 76,52% des droits de vote.

Conformément à ce qu'avait annoncé le groupe le 29 août, une seconde OPAS-rachat d'actions a été ouverte le 7 octobre pour permettre aux actionnaires minoritaires qui ne souhaiteraient pas rester au capital d'Etam de se désengager au moment où la société s'apprête à revoir en profondeur ses activités en Chine.

Cette seconde offre sera close ce vendredi et les résultats en seront publiés "au plus tard le 31 octobre", indique Etam.

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Etam Développement: 2013 First Half Results: Operating income of ?18.4 million vs ?19.0 million in the first half of 2012

Etam Développement: 2013 First Half Results: Operating income of ?18.4 million vs ?19.0 million in the first half of 2012 | Etam | Scoop.it
Etam Développement: 2013 First Half Results: Operating income of ?18.4 million vs ?19.0 million in the first half of 201208/29/2013 | 01:35pm US/EasternRecommend:0 

PROPOSED LIQUIDITY OFFER TO SHAREHOLDERS

Regulatory News:

The Etam Group's (Paris:TAM) financial statements to 30 June 2013 were approved by the Managing Partners on 29 August 2013 and were subject to a limited review by the statutory auditors on 29 August 2013.

?m 30.06.13 30.06.12** Change Net sales 596.8 592.7 0.7% Like-for-like and at constant exchange rates     1.6% Gross income 344.1 346.8 -0.7% Gross margin 57.7% 58.5% -0.8 pt         EBITDA* 41.1 40.3 2.0% Operating income 18.4 19.0 -3.5% as % of sales 3.1% 3.2% -0.1 pt EBIT 18.2 17.7 2.6% Net income (Group share) 8.8 8.0   Net debt 137.8 146.2   Gearing 42.5% 46.4%   

* Operating Income before depreciation, amortisation and income from asset sales
** The operating financial statements to 30 June 2012 were adjusted retrospectively to take into account the application of IAS 19 R.

SALES AND GROSS MARGIN

The Etam Group generated net sales of ?596.8 million during the first half of 2013, including a positive currency effect of ?1.6 million relating mainly to the appreciation of the yuan against the euro. This represents an increase of 0.7% relative to the first half of 2012 or 1.6% like-for-like and at constant exchange rates.

Gross margin fell to 57.7% compared with 58.5% in the first half of 2012, penalised by less favourable purchasing conditions in US dollar and the increased number of promotions, in Europe in order to counteract the effects of the decline in store footfall and unfavourable weather conditions, and in China to sell collections that lacked appeal.

EARNINGS

The Group generated current operating income of ?18.4 million in the first half of 2013 compared with ?19.0 million in the first half of 2012, a fall of 3.5% or 0.1 percentage points of net sales.

In Europe, the Group confirmed the solid performance of its activities, generating current operating income of ?18.1 million compared with ?13.0 million in the first half of 2012, in a declining market affected by unfavourable weather conditions for the sale of spring-summer collections.In China, the Group continued to suffer from structural problems such as the positioning of its brands and the need to shift towards new distribution channels. Current operating income totalled ?0.2 million in the first half of 2013 compared with ?6.1 million in the first half of 2012.

The Group also continued with the streamlining of its store network, reflected by a non-recurring net expense of ?0.2 million (compared with ?1.3 million in the first half of 2012), resulting in operating income of ?18.2 million in the first half of 2013 (compared with ?17.7 million in the first half of 2012).

Net financial charges for the first half of 2013 totalled ?5.1 million (compared with ?3.2 million in the first half of 2012) and the tax charge for the first half of the year was ?4.0 million (compared with ?3.8 million in the first half of 2012), relating entirely to Europe.

Consolidated net income totalled ?9.0 million, in line with the first half of 2012. After minority interests of ?0.2 million compared with ?1.1 million in the first half of 2012, net income (Group share) came to ?8.8 million compared with ?8.0 million in the comparable period in 2012.

FINANCIAL STRUCTURE

EBITDA reached ?41.1 million in the first half of 2013 compared with ?40.3 million in the first half of 2012.

At June 30, 2013, change in working capital requirements vs. December 31, 2012, was a cash outflow of 48.6 M? against a cash inflow of 15.9 M? between these two dates in 2012, mostly due to a reduction of payables. After capex (17.1 M? in the first half of 2013 vs. 14.9 M? in the first half of 2012), interest and taxes paid (4.9 M? and 7.6 M? in the first half of 2013 vs. 5.4 M? and 5.7 M? in the first half of 2012, respectively), the Group generated negative free cash flow of ?37.8 million in the first half of 2013 compared with a positive amount of ?35.4 million in the first half of 2012.

The Group's net debt, stood at ?137.8 million as at 30 June 2013 compared with ?146.2 million as at 30 June 2012.

OUTLOOK FOR H2 2013

Despite an encouraging performance in Europe in a challenging economic climate in the first half of 2013, the Group remains cautious about the outlook for the full year in view of the ongoing structural difficulties it faces in China and uncertain economic conditions in Europe.

PROPOSED LIQUIDITY OFFER TO SHAREHOLDERS

Noting the lack of liquidity in its shares, the Etam Group and its controlling shareholders Milchior-Tarica have decided to offer shareholders the option of selling their shares on the market by launching a liquidity offer comprising two successive public offers at the same price of ?23.0 per share, both of which will have similar tax treatment:

First, a simplified tender offer initiated by Finora (owned by the Milchior family), a member of the company's group of majority shareholders Milchior-Tarica acting in concert (32.11% of the share capital), for all shares not held by them at a price of ?23.0 per share (the Finora offer). Shareholders tendering their shares to the offer are not exposed to any risk of reduction and will also benefit from settlement-delivery three trading days after each order is placed.Secondly, immediately upon the closing of the Finora offer, a simplified tender offer initiated by Etam Développement within the framework of its share buyback programme authorised by the general shareholders' meeting of 30 May 2013, concerning a maximum of 10% of its share capital at a price of ?23.0 per share (the share buyback offer). As there is a maximum limit on this offer, shareholders will be exposed to a risk of reduction and settlement-delivery may take place up to 10 trading days after the close of the offer.

Finora is committed to retain at least 5% of the capital of all Etam Développement shares it will acquire in the course of the Finora offer. All Etam Développement shares acquired by Finora in the context of its offer exceeding this 5% threshold can be tendered by Finora to the share buyback offer within a maximum limit of 10% of the share capital.

This liquidity offer is therefore structured in order to offer shareholders maximum liquidity, respecting the limits set by the general shareholders' meeting of 30 May 2013 while preserving the Group's financial structure.

Following this liquidity offer, Etam Développement and Finora intend to maintain the listing of Etam Développement shares on Euronext Paris. There is no intention of seeking a squeeze out or filing an offer for a public buyout.

The price of these offers presents a premium of 28.5% to the closing share price of 29 August 2013 and a premium of 31.3% to the weighted average share price over one month.

In accordance with applicable regulations, an independent appraiser has been appointed by the Company to provide an assessment of the proposed price.

The Etam Développement shares bought within the framework of the share buyback offer will be cancelled in accordance with the targets of the share buyback programme authorised by the general shareholders' meeting of 30 May 2013.

The draft prospectuses ("notes d'information") for the two public offers that make up this liquidity offer will be filed with the Autorité des Marchés Financiers on 3 September 2013. The terms of these public offers will remain subject to the approval of the Autorité des Marchés Financiers.

International retailer of women's ready-to-wear clothing, lingerie and accessories
4,376 sales outlets at 30.06.2013

Etam Développement will report its third-quarter sales on 17 October 2013 (after market close)

2013 Half-Year Financial Report and Presentation of Half-Year Results 2013 are available on the website www.etamdeveloppement.com

Etam Développement

 


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Adidas Gains on Nike in China By Balancing Performance With Fashion

Adidas Gains on Nike in China By Balancing Performance With Fashion | Etam | Scoop.it

Sports brands may be going strong in the U.S., but in China market leader Nike is expecting sales to fall in the next two quarters, marking five straight quarters of declining revenue there. Local brands are similarly slumping.

 

Adidas, however, is bucking the trend. The company is gaining on Nike's top spot, reporting 6% revenue growth in Greater China in the first quarter of 2013, following 15% growth there in 2012. Analysts credit Adidas fashion apparel like high-heeled sneakers coming from sub-brands such as Originals, NEO and Y-3.

 

Jens Meyer, VP-marketing, sport performance for Adidas China, said that's just part of the story. It's true that fast-fashion retailers like H&M and Zara are grabbing sales, and Chinese consumers don't play as much sports as their Western counterparts. But he said its success comes from striking a balance between fashion-forward appeal and staying true to its roots. "The challenge for us is 'How do I, as a sports brand, capture a part of the leisure market without compromising my positioning in sport?" Mr. Meyer said. "If we move too much into the fashion side ... the consumer will say 'I don't see Adidas anymore as a sports brand, I'll go to others who just do sport.'"


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Russ Merz, Ph.D.'s curator insight, August 14, 2013 10:49 AM

There is an interesting #brand battle shaping up in China between Nike and Adidas.Here's the story with #video.

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Etam a trouvé sa gagnante... et comment faire le buzz

Etam a trouvé sa gagnante... et comment faire le buzz | Etam | Scoop.it
Etam a trouvé sa gagnante... et comment faire le buzzMission accomplie pour Etam. Le 11 juillet, Manon, 22 ans, s'envolera vers Hawaii avec assez de maillots de bain de l'enseigne dans ses valises pour exercer pleinement ses fonctions de testeuse. La jeune éducatrice en institut médico-éducatif est donc la grande gagnante du concours du "Meilleur job d'été", lancé par Etam en mai dernier. Une réussite pour la candidate... et pour l'enseigne française.

Manon, heureuse gagnante du concours Etam
Ce concours original proposant un CDD de trois semaines idylliques a en effet réussi à créer le buzz sur le Web. Le site spécialement lancé par Etam a ainsi accueilli 2 millions de visiteurs en un mois et demi, 30 000 candidatures qui ont remporté en tout un million de soutiens sur Facebook, 200 vidéos de postulantes qui ont permis de sélectionner les 10 finalistes desquelles Manon s'est extirpée après une journée d'entretiens.

Ne lui reste plus désormais qu'à prolonger un peu plus le buzz en partageant sur le site de l'opération et les réseaux sociaux les "résultats" de ses tests en conditions réelles: tourisme, sport, bronzette et farniente.
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Le marché du luxe dans les griffes des frères Fung

Le marché du luxe dans les griffes des frères Fung | Etam | Scoop.it
Le marché du luxe dans les griffes des frères Fung

Par Arthur Henry, publié le 30/03/2012 à 18:58

Après Sonia Rykiel, tombée dans l'escarcelle de cette dynastie asiatique, richissime et séculaire, à qui le tour ? Le groupe, basé à Hongkong, entend bien profiter de l'appétit des Chinois pour les marques occidentales. 

 

Désormais propriétaire de Sonia Rykiel, Fung Brands entend doubler le chiffre d'affaires de la société française d'ici cinq à six ans.

REUTERS

Au train où ils enchaînent les acquisitions dans le luxe, ces Chinois-là ne resteront pas longtemps des inconnus. En moins d'un an, les frères Fung s'étaient déjà offert la maison franco-italienne Cerruti, le chausseur drômois Robert Clergerie et le maroquinier belge Delvaux. Le 20 février, ils ont mis la main sur 80 % de Sonia Rykiel, l'une des dernières griffes françaises encore indépendantes. A qui le tour ? 

Victor et William Fung, milliardaires hongkongais, ont manifestement de grandes ambitions. Et des moyens. Leur fonds d'investissement, Fung Brands, est géré par leur partenaire Jean-Marc Loubier, un Français. Cet ancien de Louis Vuitton, dont il a contribué à la réussite en Chine avant de prendre la tête de la maison Céline, connaît bien son affaire. "Nous amenons notre connaissance de l'Asie, précise-t-il, un soutien opérationnel et une perspective de développement durable. Si les propriétaires de ces marques ne nous appréciaient pas, s'il n'y avait pas une communauté de vue, ils ne vendraient pas."  

Si prestigieuses et médiatiques soient-elles, ces opérations ne représentent pourtant qu'une des activités des frères Fung. Le clan a fait fortune ailleurs, dans le "sourcing", et pour l'essentiel dans le textile - le véritable socle de l'empire. Li & Fung est un géant du négoce. Une maison de commerce, présente dans plus de 40 pays, dont la majorité des 27 000 employés approvisionne les grandes enseignes internationales comme le n° 1 mondial de la distribution Wal-Mart ou les chaînes H&M et Zara. En 2010, son chiffre d'affaires s'élevait à 15 milliards de dollars, dont les deux tiers dans l'habillement.  

La saga a commencé en 1906. Cette année-là, Fung Pak-liu - qui a mis quelques sous de côté en enseignant l'anglais - crée à Canton, en partenariat avec un ami, M. Li, un commerce de porcelaines et de soies qu'ils expédient vers l'Amérique. En 1937, les deux compères transfèrent leur entreprise à Hongkong. Le port international de la colonie britannique est alors déjà une plaque tournante des affaires en Asie. Un choix judicieux : bientôt, la Chine communiste empêchera tout commerce. L'entreprise Li & Fung, elle, ne va pas cesser de prospérer.  

Aujourd'hui, ce sont Victor (né en 1945) et William (1949), les petits-fils du fondateur, qui dirigent le groupe. Le magazine Forbes estime leur fortune à 8,6 milliards de dollars. Ce qui les classe au 5e rang des familles les plus riches de Hongkong et leur a valu d'être qualifiés, en 2009, de "grande dynastie chinoise" par la créatrice de mode Vera Wang. Pourtant, les frangins sont du genre discret. Ces deux taiseux vivraient toujours dans un immeuble que la famille possède rue Magazine Gap, sur les hauteurs de l'ex-colonie. Tout au plus apprécieraient-ils d'aller régulièrement séjourner dans l'île de Phuket, en Thaïlande.  

Des "chefs d'orchestre" qui ne laissent rien au hasard

Tous deux ont grandi à Hongkong, mais c'est aux Etats-Unis qu'ils ont fait leurs études et leurs premières armes. L'aîné, Victor, a décroché un diplôme en sciences au MIT avant d'obtenir, en 1971, un doctorat à Harvard, où il a enseigné la finance. Le cadet, William, diplômé de Princeton, a également fréquenté la prestigieuse université de Cambridge, où il a suivi un MBA. 

Durant l'été 1972, leur père leur demande de venir étudier l'entreprise familiale comme s'ils avaient à plancher sur un cas d'école. Leur diagnostic est sans doute convaincant car, dès l'année suivante, il leur passe le témoin, et la société est cotée en Bourse. A présent, Victor et William détiennent respectivement 30,9 % et 31,7 % du capital et jouent chacun leur partition. A William, la gestion au quotidien ; à Victor, la stratégie. Tous deux savent cultiver les "guanxi" - ces connexions sociales essentielles dans la culture du monde des affaires chinois. Leur réseau s'étend à la politique. Victor est membre de la Conférence consultative du peuple, une assemblée aux fonctions largement symboliques de la République populaire, mais qui donne accès aux dirigeants de Pékin. En 2008, il fut de ces personnalités consultées par le chef de l'exécutif de Hongkong, Donald Tsang, pour réfléchir aux moyens de surmonter la crise.  

Un groupe centenaire

1906 Création par Fung Pak-liu d'une compagnie d'import-export à Canton avec l'aide de son partenaire M. Li. 

1937 Li & Fung transfère son siège social de Chine continentale à Hongkong pour profiter de l'activité du port international. 

1973 Victor et William Fung, petits-fils du fondateur, prennent les commandes. La société est cotée en Bourse. 

2010 Rachat de la maison Cerruti via Trinity, une des filiales du groupe. 

2011 Lancement, avec le Français Jean-Marc Loubier, de Fung Brands - un fonds destiné à investir dans des sociétés de luxe européennes. Premières acquisitions. 

Février 2012 Prise de contrôle de Sonia Rykiel. 

Mais, à la base de leur réussite, les Fung peuvent avant tout se targuer d'une organisation irréprochable. Commentaire de Jeff Yeung, directeur du Centre de recherche sur la gestion des chaînes d'approvisionnement à l'université chinoise de Hongkong : "Ils peuvent mettre en marche des dizaines de producteurs à la demande du client. Ils savent trouver le meilleur fabricant de boutons dans un pays, le leader des fermetures Eclair dans un autre. Là est toute leur puissance, ils sont chefs d'orchestre sur l'ensemble du processus." Ce n'est pas tout : ils s'appuient sur une prouesse technique. Chaque producteur est relié en temps réel au réseau informatique du groupe.  

Une nouvelle cible : le marché des jouets

Etendre ce succès est aujourd'hui la mission de Bruce Rockowitz. Nommé PDG de Li & Fung en 2011, ce manager brillant est arrivé dans la maison à l'occasion du rachat de Colby, une des sociétés concurrentes des Fung, qu'il présidait. A Hongkong, Rockowitz n'est pas non plus un inconnu depuis qu'il a épousé Coco Lee, une pop star née aux Etats-Unis, qui fit ses premiers tubes à Taïwan. Ce Canadien gère aussi - à temps perdu ! - une chaîne de restaurants branchés et de salles de yoga, baptisée "Pure", qui surfe sur la quête de bien-être.  

Les frères Fung auront besoin de tout son talent alors qu'ils cherchent à se diversifier. Non contents de multiplier les acquisitions dans le luxe, ils ont également entrepris de se renforcer dans la distribution. Ils gèrent déjà neuf magasins Toys R Us en Asie et ils viennent, en janvier dernier, de racheter (pour 41 millions de dollars) Roly, une marque de jouets et de vêtements pour enfants. Les Fung sont bien décidés à profiter de la soif de consommation des Chinois. 

Chine : l'empire du shopping

Gucci, Dior, Cartier, Chanel, Hermès... Les Chinois sont de plus en plus friands des marques de luxe. En 2011, qu'importe la crise, les ventes ont encore progressé de 25 à 30 %, selon le cabinet Bain, contre + 8 % aux Etats-Unis, + 7 % en Europe et + 2 % au Japon. Les montres ont été les articles les plus recherchés (+ 40 %) tandis que les achats de chaussures, de produits de maquillage et de parfums ont augmenté d'environ 20 %.  

D'ores et déjà, la Chine représente 17 % du marché international du luxe, avec 23 milliards d'euros de chiffre d'affaires, dont 60 % réalisés hors du pays, d'après le consultant Roland Berger. En 2015, l'empire du Milieu devrait devenir le premier marché mondial. 

Nombre de Chinois sont prêts à se serrer la ceinture pour consommer du luxe - marqueur social et symbole de réussite - mais, dans leur majorité, les clients sont de nouveaux fortunés. Selon Roland Berger, les deux tiers ont moins de 40 ans. Ils sont chefs d'entreprise, cols blancs ou descendants d'officiels... et ce sont les hommes qui dépensent le plus. l A. H. 


En savoir plus sur http://www.lexpress.fr/actualite/economie/le-marche-du-luxe-dans-les-griffes-des-freres-fung_1099039.html#ezRTXrfve7XApEgT.99
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China's middle class keeps luxury brands on their toes|Across America|chinadaily.com.cn

China's middle class keeps luxury brands on their toes|Across America|chinadaily.com.cn | Etam | Scoop.it

Black-and-white-themed Coco Chanel's taste and legacy has created a new fashion trend in China - one of the world's fastest growing markets for luxury brands - according to the new World Luxury Index on China.

Chanel overtook Louis Vuitton - both French - thanks to a rising interest in various product segments, particularly beauty, according to the report done by the Digital Luxury Group, a luxury industry market intelligence firm.

"Chanel is benefiting from an important level of interest in China, mostly emanating from strong interest from Chinese consumers in its beauty products, which Louis Vuitton does not have," said David Sadigh, founder and CEO of Digital Luxury Group.

But, he added, Louis Vuitton - originated mainly from the fashion segment, which accounts for almost three-quarters of total interest in the brand - remains the best example of a high-end brand that became "mainstream".

"You can link this approach to other massive high-end brands that had a strong development in China with affordable product at an entry level, such as Gucci, Tiffany, Dior and Chanel," said Sadigh.

Louis Vuitton's parent company LVMH in April posted lower-than-expected earnings, due to weaker sales results in China for the first quarter. But its competing brand, Burberry, No 21 on the index, caught up, posting a 16 percent increase in its China sales for the same period.

"Louis Vuitton has reported a disappointing first quarter, while brands from different segments ranging from Chanel to Coach or Burberry are continuing to grow," said Sadigh. "In order to stay ahead of the game, brands must have the ability to adapt quickly, thus reducing the risk of brand saturation.

"Louis Vuitton has been pushing very hard in the Chinese market, suffering from saturation," noted Sadigh. "LVMH understood this very well, reacting immediately, announcing price increases and production of higher end leather products."

Leading products that shape the Chinese luxury market include cars - which account for 54 percent of all luxury items - beauty products, watches and jewelry, all dominated by European and American brands.

The brands that sit on the Top 50 most sought-after list in China include Audi, BMW, Chanel, Estee Lauder, and Louis Vuitton (six car brands are in the top 10).

"The market is dominated by heavyweights, but it's actually less and less the case," Sadigh said. "Small and niche brands are reporting a more positive growth than the big players."

Some brands new to this year's Top 50 list include Elizabeth Arden (No 43) and Rado (No 50), while Salvatore Ferragamo and Moncler dropped out of this year's rankings. The index also ranks hospitality, with Sheraton, Hilton, and Intercontinental topping the list as most sought-after hotel brands in China.

"Many brands expected that an increase in Chinese sophistication would reduce the cultural gap with their overseas consumers," said Pablo Mauron, general manager of Digital Luxury Group's China office. "In some cases, it actually contributed to the development of unique local preferences, independent from Western tastes, thus challenging luxury brands in terms of product offering, but also opening up the way for new opportunities to grow in the Chinese market."

China's growing middle class has been a main driver for the consumption of foreign luxury brands. By 2022, China's middle class is expected to triple to 630 million, an increase from 230 million in 2012, according to a recent study by the China-United States Exchange Foundation.

China's affluent shoppers have average annual earnings of between $19,500 and $90,000 and are expected to be the driver for the future growth of luxury markets, according to Exane BNP Paribas, an equity research firm.

"The growing middle class is getting more and more sophisticated, as a consequence, there is a will to distinguish themselves from the crowd, leading the consumers to more exclusive brands," Sadigh said.

Despite the potential in the Chinese luxury market, the level of competition is high, noted Sadigh, adding that foreign brands should come up with strategies that increase their local presence and create a better connection to the consumers through, for instance, social media such as Sina Weibo, a popular Chinese micro-blogging site similar to Twitter.

"There will be more competition and more fragmentation," said Sadigh. "Some brands may be failing in China since the market doesn't mean double-digit growth for everybody anymore."

Contact the writer at yuweizhang@chinadailyusa.com

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China: This Week In Digital Luxury Marketing

China: This Week In Digital Luxury Marketing | Etam | Scoop.it
China: This Week In Digital Luxury MarketingBy Jasmine Lu
Published: July 02, 20131 likes7 tweets  

A roundup of new and ongoing campaigns in China through July 9, featuring Bomoda, Bayankala, Starbucks, Guess, Sephora, and Kiehl’s.

Bomoda and Bayankala

This past weekend, luxury shopping newsletter site Bomoda launched a marketing campaign featuring Bayankala skincare products on WeChat. Participants were asked to enter keywords describing their skin problems (e.g., sensitive) and Bomoda would send them back a tailored product list. Participants would follow the directions of the product sheet they received and replied with their email addresses plus the keyword “detox” (paidu 排毒) to win a Bayankala skincare box set valued at RMB 3,286. Winners were announced on Monday.

Starbucks

As people are soaking themselves in the rays of summer, Mid-Autumn Festival is in fact approaching faster than anyone had anticipated. Starbucks China kicked off the preparation for the season of family reunions early, with a promotion entitled “The Art of Giving.” The campaign features the My Starbucks Rewards program and Starbucks Mooncake gift boxes. For participants who registered for My Starbucks Rewards on June 24 or earlier, surprise mooncake rewards were loaded onto their accounts. New participants who successfully register a new card (or add an existing account) from June 25 to September 18 receive a 10 percent off coupon for a mooncake gift box.

Guess

Guess celebrates the Class of 2013’s achievements and invites them to post their heartfelt graduation messages on Weibo while donning caps and gowns. From now through July 12, participants who retweet the post “speak from your heart this graduation season” (#你想在毕业季大声说#) and leave their graduation messages hashtagged “graduation quote” (#毕业语#) are eligible for an opportunity to win a prize. Twenty participants will be selected and awarded a black patent leather bag from Guess.

Sephora

Sephora has launched a campaign on Weibo entitled “Do Your Makeup Like a Star.” Between now and July 9th, participants are asked to choose their favorite celebrity makeup looks and apply them with the help of a clerk at any participating branches in Shanghai. Participants are encouraged to snap pictures of the finished makeup looks and upload them with hashtag #SEPHORA美力掠影# on Weibo.  Three top participants will model for a fashion photo shoot; each of the thirty participant selected will be awarded a pair of movie tickets to Wanda Cinemas.

Kiehl’s

American skincare company Kiehl’s invites its fans to join the “Rescue Heroes for Pandas” campaign on its official website and post message of support on its campaign post on Weibo (#科颜氏携手赵又廷,释放青春正能量#).  Each participant is eligible to enter a drawing for a limited edition of the Rare Earth Deep Pore Cleansing Masque and a stuffed panda signed by Kiehl’s spokesperson Mark Zhao.

Category: Social Media / Techby Jasmine Lu
Via Gian Marco Saleri
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Winning Chinas Apparel Market

Winning Chinas Apparel Market | Etam | Scoop.it

Even in the face of an expected economic slowdown, the growth of China’s apparel industry—an estimated 14 percent—is likely to outpace the nation’s projected 7-8 percent growth in gross domestic product. The population’s ongoing migration to urban centers and its increased levels of disposable income are major forces driving growth in all apparel categories (see figure 1). A closer look reveals more details about the development of these categories over the years.

Sportswear: maturing. The early entry of global giants such as Nike dates back to the early 1980s, and spurred three decades of tremendous growth. Today the industry has emerged from its adolescence and reached early maturity. The sportswear market has grown to about $11 billion, with five players capturing about half the market. By 2011, Li-Ning, the eponymous leading domestic company founded by China’s former Olympic gymnastics gold medalist, had more than 8,000 sales outlets, leaving limited potential for opening more new stores. (That same year the company experienced its first top-line shrink since its 2004 initial public offering.) Recently, overstocks of obsolete inventory have troubled some leading companies, especially local ones, as competition gets stiffer. The trend today is for companies to grow by optimizing existing stores’ performance rather than by opening new stores.

Casual wear: scaling. The 1990s brought more personal freedoms to China, and that was reflected by middle-aged Chinese abandoning their work uniforms in favor of formal wear. Today’s consumers spend more on casual wear as they embrace a more liberal lifestyle and enjoy a wider range of brands and styles from which to choose. Within the category, fashionable casual wear accounts for two-thirds of the casual-wear market and is projected to grow at a 15 percent annual rate over the next three to five years. The smaller business casual-wear subcategory is likely to experience even higher growth—about 20 percent annually—thanks to a larger customer base and wider range of choices. 

The women’s casual-wear category is more developed and competitive than men’s casual wear. Entry barriers are lower than those for sportswear, due in part to the smaller marketing investment required up front—in other words, expensive endorsements and sponsorships aren’t needed to impress casual-wear consumers. Metersbonwe, a leading domestic casual-wear player that opened its first specialty outlet in 1995, now operates more than 4,500 stores to sell its two brands. However, brand life cycles for casual wear are shorter than for sportswear, and success is achievable within a relatively short period of time. For example, GXG, a domestic menswear brand launched in 2007, already ranks among the top-selling brands in many shopping malls.

Baby wear: scaling. As urbanization continues and the one-child policy loosens up, China’s urban baby population, defined as children up to five years, is expected to grow at a steady 2.1 percent annually. Together with expanding middle-class income levels and household size, this growth is driving baby-wear market growth at a 20 percent annual rate. The baby-wear category is extremely fragmented, with the top five companies sharing just 7 percent of the market. Competition, obviously, is fierce. A few international players, including Gap, Zara, H&M, Uniqlo, and even luxury brands such as Armani and Burberry, have joined the many domestic brands that compete mainly in the middle and low-end segment, where a piece of winter outwear sells for less than $100. There’s also a large group of non-branded competitors that garners a 30 to 40 percent market share. The children’s-wear market, targeting children up to 13 years old, is also experiencing excellent growth, with forecasts of about 20 percent annually over the next three to five years. The network size of companies differs significantly, depending on segment coverage and price positioning. For example, Balabala, the largest baby-wear and children’s-wear player, has about 3,000 retail outlets, while Yeehoo, another leading baby-wear player, has more than 650 stores.

Outdoor: opening. China’s outdoor-wear market is in its infancy, with only about 5 percent of the population engaging in outdoor sports (compared to 50 percent in the United States). But the popularity of outdoor sports is growing steadily, and consumers also buy outdoor apparel for everyday use, favoring their comfort and functionality. Demand, then, is up, and companies are stepping up their efforts to meet that demand. In 2007, there were 377 outdoor-wear brands in China—that number doubled by 2011. Most of the new players have limited market shares, while five brands have cornered about half the market. Over the past decade international brands such as The North Face, Columbia, Jack Wolfskin, and Northland have been competing in similar price ranges with Chinese brands that include Ozark and Toread. All leading players are actively expanding their sales network—Toread had about 1,200 stores in 2012, while Columbia’s numbered about 600. The network size is still small for the vast China market.

Despite the differences in stages of development, competition is heating up in every apparel category. Many leading players have announced ambitious expansion plans:

Nike aims to double its sales in China by 2015Among its global business regions H&M expects to realize its highest growth rate of expansion in ChinaThe North Face is expanding its retail outlets from its current 500 stores to 1,000 by 2015The Challenges

A study undertaken by the Chinese Apparel Association shows that from 2000 to 2005 the average life cycle of the top 500 domestic brands in China was just 1.5 years. This is a result of fierce market competition combined with consumers’ fast-changing tastes. Companies adopt different growth models, reacting to different generations’ varying tastes in apparel, especially casual wear. For example, people born in China in the 1980s enjoy more disposable income than those only 10 years older, and had wider choices in their childhood and teen years as China’s economy opened up. Meanwhile, the highly individualistic post-1990 generation is even more aggressive in pursuing stylish dress.

The moral of the story is this: As time goes by, loyal consumers can outgrow a brand’s target age ranges and forsake it in favor of new entrants, especially fashionable international brands, that offer identities and styles. To meet this challenge and capture growth opportunities, companies often launch multiple brands to cover different age groups and designs. It is important to carefully plan and execute investments to build new brands and realize synergies in management resources, brand awareness, cross-selling potentials, supply chains, and negotiations with landlords.

Top players in more-developed categories have established large sales networks. For example, Anta’s 8,000-store network reaches into tier 3 and 4 cities. Other leading sportswear players, such as Nike, have more than 6,000 stores, top casual-wear players Metersbonwe and Semir have more than 4,500 outlets each, and Only and Vera Moda can be found in nearly every shopping mall in China. Once the saturation point is reached, expanding the retail network to grow sales is no longer effective; moreover, rapid network expansion, if not managed properly, can result in both a fragmented, hard-to-control distributor base and—when eagerness for growth exceeds customers’ willingness to spend—inventory problems. For example, the failure of some large sportswear companies to balance aggressive growth plans with their stores’ ability to sell has led to channels overstocked with hard-to-sell off-season products. As China’s macroeconomy slowed, many apparel companies suffered sales decline in 2012, making overstocking a prevalent issue in multiple categories. Unless the lessons of the recent past are absorbed, history is likely to repeat itself.

Boosting Brand Visibility

It is never easy to spread a brand’s presence across a national market, let alone one as heterogeneous as China’s where disparity of spending power and brand awareness persists. Nevertheless, multinationals are trying to penetrate tier 3 and 4 cities, where local players compete at lower price points (see figure 2). Adidas and H&M, for example, have announced plans to increase their presence in lower-tier cities by 2015. At the same time, several domestic brands are striving to reposition themselves at higher price points to attract consumers in tier 1 and 2 cities. In 2010, Li-Ning planned to open upgraded flagship stores in tier 1 cities, part of a series of repositioning moves to compete with international brands. The battle will be fierce when income levels and brand awareness in smaller cities catch up with those in megacities.

In megacities, higher rental and labor costs are squeezing retailers’ margins and making it more difficult for low-performing brands to survive. Penetrating lower-tier cities brings with it other challenges, of which the most obvious is site selection (see figure 3). There are often fewer well-developed high-end commercial areas offering desirable retail formats and a good mix of brands in tier 3 and 4 cities. Leading brands often leverage their ability to attract customers as a bargaining chip to secure good locations with favorable lease terms.

In the era of the Internet, of course, e-commerce is an alternative means of reaching rural areas and smaller cities, not to mention savvy consumers seeking bargains—a natural for clearance sales. Companies that launch online sites need to determine a supply-chain setup for covering target geographic areas and meeting customers’ service and cost needs to mitigate negative impact on sales at brick-and-mortar stores.

Finally, the rapidly expanding fast-fashion segment has not only piqued consumer interest in affordable, edgily fashionable clothes but is also challenging the way mass-brand players do business. Giant fast-fashion retailers Zara and H&M have entered first-tier cities and are looking to grow quickly. Zara is well on its way to doubling its 2012 roster of more than 120 stores, with most of the new ones to be located in cities other than Beijing and Shanghai. The company also plans to launch an online retail channel.

A well-controlled self-owned supply chain and retail channel help Zara keep time-to-market to as short as two weeks. The retailer’s marketing strategy stresses in-store experience, and consumers visit Zara stores more often than they do traditional mass-brand outlets. Some leading domestic companies are trying to copy the Zara model. Metersbonwe, for example, operates on a Zara-esque philosophy of quality fashion at an attractive price. It employs a combination of trade-fair (70 percent) and current-season ordering (30 percent) to ensure fast response to the latest sales trends. Similar to Zara, Metersbonwe maximizes its supply-chain efficiency by investing heavily in logistics and information technology.

So far, however, most players’ attempts to imitate Zara have fallen short, mostly due to below-runway-standard fashion products and sales that are too low to support large, trendy stores in prime locations and a powerful supply chain. Some domestic companies are attempting to switch to a pull operating model, increasing their number of annual trade fairs to follow trends more closely. Others are increasing their percentage of same-season replenishment or even same-season designs, requiring more robust supply chains to reduce inventory risks.

Dressed for Success

As consumer preferences change, the shrewdest companies carefully review their product design and positioning, then reposition their brands—or launch new ones—to:

Attract next-generation consumersAddress brand life-cycle issueCover different segments to enlarge customer baseIncrease growth potentialMinimize risk

Esprit offers an excellent example of successful repositioning. Realizing loyal customers were beginning to associate its brand more with purposeful dressing and less with fashionable, Esprit repositioned itself back to its heritage of offering more self-expressive elements. New brand campaigns, a dedicated design hub in China, and changes at the executive level, including a new head of product and design and a new China chief executive officer, support the turnaround plan.

Conversely, Li-Ning’s repositioning has been less than successful. In an attempt to make its brand more appealing to the post-1990s generation of consumers the company changed its logo and slogan, a move that analysts say alienated many loyal customers.

While many companies choose to reposition existing brands, others launch new ones. Ochirly, a leading women’s casual-wear company, launched Five Plus to target younger consumers that eschew the more mature Ochirly brand. Adidas has introduced its NEO line, targeting teenagers with casual products more affordable than the flagship brand. Anta, a leading local sportswear company, has acquired FILA to capture first-tier consumers and, in the process, learn how to operate a leading international brand.

So we see that there are three keys to launching a new brand successfully:

Finding new customer segments that have synergy with an existing brandDetermining the right positioning in those segments, including product characteristics that are differentiated from the mass market and that target customers will welcomeAssembling an experienced, knowledgeable management team

Where to invest the always important marketing dollar is another crucial factor. Leading players often use celebrity endorsement and mass-media marketing to strengthen brand awareness and create attractions. Typical marketing expenses range from 1 percent to 5 percent of sales. Some international retailers, such as Zara, seek to impress consumers with best-in-class shopping experience in the best locations. Zara invests heavily in store design and decoration, and carefully manages in-store merchandising, such as displaying men’s, women’s, and children’s clothes in the same store, a trend being copied by shopping malls and mass-brand players. Many brands have also started marketing themselves on social media and other online platforms.

Diversified channels help not only to capture sales but to ease inventory pressures. Backed by data-analysis tools, a multiple-store network can share stock and adjust in-season merchandising to meet local market needs. Suburban outlets and online channels selling off-season products at discounted prices are helpful for clearing obsolete inventory. Given their mushrooming popularity and low cost, online channels are particularly promising for inventory cleanup—online sales account for as much as 10 percent of sales for some leading casual-wear brands. It is important to note that careful site selection of factory outlets and a clear merchandising strategy for various channels are crucial for avoiding cannibalization.

Finding the Perfect Fit

Depending on a brand’s development stage and local context, companies need to select the right country model and the right mix of store ownership and operating mode (see figure 4). The chief-agent model is typically employed by leading international brands entering a local market with which they’re unfamiliar. As business grows, companies typically will take over to increase control and improve performance. At the store level, companies choose different levels of equity ownership in their distributor base for various strategic reasons, and the models can evolve as business grows and the competitive landscape changes. A typical strategy is to rely on distributors initially, then gradually increase the percentage of self-owned stores by replacing low-performing distributors, especially in core markets.

To smooth transitions, some companies form joint ventures, sign franchise agreements with phasing-out terms, or hire agents in remote markets. Bestseller, which owns women’s casual-wear brands Only and Vero Moda, leveraged its distributor base early on to expand rapidly and increase awareness and market share. It eventually phased out distributors and took back the retail network on its own to gain more control and maximize financial returns.

In addition to equity links, brand companies use various tools to guide operations of distributor-owned stores. Leading players have installed unified IT systems at almost all retail outlets to ensure sales and inventory transparency. These companies analyze transaction and inventory data to facilitate stock-pooling and help decide on the next season’s designs and discounts.

We’re also seeing another trend in China’s apparel industry. Traditionally, brands have allowed distributors and subsidiaries to order whatever they expect to be best-selling items. Leading brands have started to provide guidance in ordering, such as bundling stock-keeping units to build consistency in different outlets by displaying a complete set of merchandising, a move that also eases supply-chain planning pressures.

Truth be told, there is no one-size-fits-all strategy for success in China’s apparel market. Its unprecedented growth over recent years is expected to double over the next decade, but of course that doesn’t guarantee that every player will succeed. Established and aspiring players that rethink their strategy, and perhaps reinvent their brands, will be best placed to win a share of China’s burgeoning apparel market.

May 2013

- See more at: http://www.atkearney.com/consumer-products-retail/ideas-insights/featured-article/-/asset_publisher/KQNW4F0xInID/content/winning-chinas-apparel-market/10192#sthash.ljyVgbdj.dpuf


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