Sales in China’s apparel market have reached over CNY 2,077 billion in 2018, growing at 7.8% YOY, which is the fastest growth rate since 2014. It is predicted that in 2019, China will replace the US as the world’s largest apparel market. However, despite the promising growth of the apparel market in China, the fast fashion market in China is facing the challenges of both domestic competition and quality-oriented consumption upgrade. The rapid evolution of the fast fashion market in China is not without casualties. One of the most notable is the US fast fashion retailor Forever 21, which withdrew from China in 2019.
In 2015, sales of the fast fashion industry in China reached CNY 534.7 billion, up 7.4% from 2014 and with a 14.5% CAGR growth from 2010-2015. Fast fashion in China accounted for most of that growth, as international brands continued their aggressive expansion and gained more share of the market. Unlike luxury brands, fast fashion houses do not follow traditional seasons timeline for design. Instead, they design, manufacture, and release new products whenever a trend appears. The low prices, new fashionable designs, and perceived quality keep customers coming back more frequently than traditional brands. This article will provide an overview of the fast fashion industry in China and the expansion strategies in China of multiple international brands. As competition in China’s fast fashion market in 2019 has become tighter, we analyse both the success and the shortcomings of foreign brand strategies.
Emerging and trending industry in the Fast Fashion Industry in China
The fast fashion industry in China is in significant growth. The three major fast fashion brands in China are Zara, Uniqlo, and H&M. Uniqlo opened its first fashion store in China (Shanghai) in 2002, followed by Zara and H&M, which entered China fast fashion market in 2006, 2007, respectively. Despite a deceleration of the economy, the fast fashion industry in China is still flourishing as young Chinese are increasingly willing to spend more on apparel. Betting on the world’s largest market, Gap followed suit in 2010 with other American clothing retailers. Other companies with ambitious expansion plans include European company C&A Mode, which has more than 40 stores and plans to have 150 in 2016. The Japanese brand Uniqlo, one of the first entrants into the scene of the fast fashion industry in China, plans to open 100 new fashion stores in China and already holds 2.4% of all apparel and retail footwear values. For European fashion brands, it is also a precious opportunity, especially for French and Italian groups that have already a strong brand identity.
Fast fashion in China is also emerging out of tier-1 cities and opening up shops in lower tier cities. So far, Chinese brands have a leg-up on low-tier competition, but as the economic situation all over the middle kingdom improves, inland and low-tier city consumers purchasing power in increasing. This opens up a new frontier for fast fashion in China.
Growth of retail space and decline of luxury
Western luxury retail declined 1% in 2014 as shoppers flocked outside China to purchase luxury items, rendering the luxury retail space as mere showrooms. Now retail space owners are looking to fast fashion brands in China to fill the space that luxury brands left. They hope that trendy brands like Zara, Uniqlo, and H&M, all who have been rapidly increasing their fashion stores in China, will lure customers back to the mall. There were 496,600 outlets for specialist apparel and footwear retailers in 2015. Retail space is rapidly growing, with a 6.8% increase in 2015 with a CAGR of 11.0% from 2010 to 2015.
This boom was mostly fueled by fast fashion brands as they aggressively opened new stores and refined marketing strategies. The apparel and footwear market is projected to grow by 22.5% by 2020 to reach CNY654.9 billion and have 653.9 billion outlets. The rapid growth rate of the fast fashion industry in China provides a great opportunity for affordable, fast fashion brands. Brands are looking to increase individual store productivities, promote their e-commerce platforms, and boosting social media campaigns to attract the younger populations with increasing incomes.
Fast fashion brands in China: Beyond Fashion
Recently apparel specialist retailers have also begun offering a wider range of products beyond fashion, to take advantage of their existing large customer base. Stores like Zara also offer costume jewelry, footwear, and bags. Others such as Forever 21 have also expanded into beauty and personal care to offer their customers a one-stop shopping experience, where they can complete an entire outfit with bags, jewelry, and shoes in one store. In addition, some fast fashion brands in China have established kids wear sections such as Gap and Uniqlo, tapping into China’s nascent child clothing market.
Do not underestimate domestic fast fashion brands in China
While some international fast fashion brands in China have high brand awareness and fast-changing collections, domestic brands have been gaining market share.
Chinese brands under the umbrella company HLA Corp has not only succeed in China’s fast fashion market, but also expanded overseas to Singapore, Malaysia and Thailand. In 2018, HLA Corp had a total of 6,673 stores, including 5,097 HLA brands, 1,281 EICHITOO brands, and 295 other brands. HLA Jean brand’s target market is post 90’s generation with a variety of styles ranging from ‘party’, casual to business apparel. Zhou Jianping, HLA’s founder, claimed that HLA will become China’s Uniqlo, with an aggressive business model of not doing design work, but ordering directly from design suppliers and not paying them until their products have been sold. HLA also has comparatively more stores in lower tier cities, where there is less competition from foreign brands like Uniqlo and Zara.
Belle International and Daphne International have two of the highest amount of fashion stores in China, with 4,432 and 3,989 in 2015, respectively. However, Belle has shut down 122 stores in 2014, and fell from holding 8.8% of retail value in 2011 to 7.8% in 2015. Meanwhile, Daphne has shut down 247 stores and dropped from representing 1.9% of retail value in 2011 to 1.2% in 2015.
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