How Chinese Fashion Labels are adapting to their rapidly changing market
Until the late 1990s, the notion of fashion brands was an empty shell for the majority of Chinese consumers. A brand was considered to be a “famous name”, a mere expression of status but nothing really specific. In the early 2000s, the living standards of Chinese people dramatically changed: they become more affluent, enjoyed more social occasions, and discovered more leisure activities. Their wardrobes expanded according to their new lifestyles, and they started to see fashion as a way to reflect their aspirations and identity. As brands resonated more personally to them, leading Chinese fashion groups expanded their brand portfolios to seize these new market opportunities.
The case of La Chapelle (拉夏贝尔), a major women’s fashion group in China with around 1,400 stores across China and a turnover of 2 billion RMB (2011), illustrates this evolution. Xing Jiaxing, the label’s founder, typified the Chinese retail heroes of the new century. Born in Fujian province, Xing finished school at 16 years of age and spent six years farming and fishing. When he was 21, his family borrowed money to send him to a fashion institute in Beijing for six months. When he returned, he worked as a sales agent for a Taiwanese clothing company for a couple of years before creating his own apparel factory.
In 1998, he plunged into retail, opening his first store with an original investment of 20,000 RMB. The brand was baptized La Chapelle by a French textile agent and started to sell clothes to young office ladies between 24 and 30 years old—this segment represents 50 million women in China. An injection of cash in 2008 accelerated the opening of stores and the proliferation of sister brands. First came La Chapelle Sport, which focuses on women’s casual style, then Candie’s, which is a license of the Iconix Brand Group Inc., targeting college girls. Finally, seven new brands were added to the portfolio in less than three years to tap into different market niches—from romantic girls to male youngsters, as well as babies and children—7.Modifier, La Chapelle Homme, Laetia, La Babité, Pote, La Chapelle Kids, and La Chapelle Mini.
The brand names denote a certain dose of semantic innocence, but La Chapelle’s brand expansion is driven by solid opportunism. La Babité is an attempt to corner the market of young Chinese women’s dreams for the style of Korean celebrities. This trend is known as the “Korean wave.” The one-child policy has intensified the spending on every child: La Chapelle Kids and La Chapelle Mini target parents’ most precious asset. Pote, a French equivalent to the word Buddy, is attempting to seize the male youngsters who increasing tend to follow their tribe and shop with their peers.
More generally speaking, brand expansion in China seems to be driven by two factors: international deals and demographics.
On the one hand, many international fashion brands deployed aggressive plans to conquer the Chinese market over the past few years, especially after the global financial turmoil of 2008. Looking for local resources, they often found in their long-lasting manufacturing partners natural candidates for distribution. ITOCHU, a Japanese giant which has a market value of US $18.15 billion and operates around 150 brands worldwide including Converse, Fila, Lanvin, Paul Smith, and LeSportsac, signed an agreement with the Shanshan group to develop store networks for such brands as ELLE and StompStamp in 2009.
Created in 1980, Shanshan played a leading role in the garment industry of China. Famous for its classic men’s suits, the group diversified towards casual wear and women’s wear in the 1990’s. The ITOCHU deal enabled Shanshan to gain more experience in fashion branding and retail with limited risks. Today, Shanshan has a portfolio of around 10 licensed and 10 in-house created brands.
On the other hand, the in-house creation of domestic brands reflects the conventional marketing wisdom that brands should give priority to young consumers and accompany them in their progression through life until they have greater revenues.
The majority of Chinese fashion retailers were founded in the early 2000s and grew with the generation of consumers born after 1980. Ten years later, most brands are afraid to age with their current consumer bases, but are reluctant to lose them as well. Creating a teen fashion brand seems to solve their dilemma: rejuvenating the customer audience while staying loyal to their existing consumers.
The development of kids’ fashion is more recent. Perhaps, the upcoming relaxation of the one-child policy, which will go into force during the first quarter of 2014, enticed Chinese fashion groups to pay more attention to baby and children’s wear. However, as most demographists agreed, China does not bank on a future baby boom. The money spent by parents to educate and dress their unique children already offers fruitful perspectives and attracts an increasing number of Chinese fashion groups.
Recently, the PEACEBIRD Group (太平鸟集团), which has 3,000 stores and an annual turnover of 8.5 billion RMB (2012) shifted from women’s wear to teen wear. Their new brand LE’TEEN (乐), created in 2011, targets 18-23-year-old women, while the brand MINI PEACE focuses on the 3-11 year old kids. Both brands reached 200 stores in 2013.
Semir, one of the most important fashion groups in China – 7,728 stores in 2012 and a turnover of 7.63 billion RMB – recently purchased 71 percent of the brand GXG for an estimate price between 323 million USD and 368 million USD. One of the reasons behind this acquisition is that GXG recently launched GXG Kids, which sells via various e-commerce platforms and 1200 retail outlets in China.
However, most Chinese brand architectures remain fragile and often crackle prematurely.
First, most Chinese multi-brand retailers fail in defining and coordinating clear design strategies for their different brands. Each brand is responsible for the execution of its strategic focus, but is often unable to generate a stream of distinctive products. Collections visibly overlap, and the lack of distinctive style signatures is also reinforced by the usage of similar materials, copying from the same inspirational brands and weak design organization.
For instance, when Shanshan Group launched FIRS, its first women’s wear brand in 1997, they successively appointed four Chinese famous design directors Zhang Zhaoda (张肇达), Wang Xinyuan (王新元), Wu Xuekai, and Fang Yong (方勇) who were all unable to give a unique style to the brand. The group finally sold the brand in 2003 after six years of disappointing performance.
Secondly, the age criteria seems no longer sufficient to segment consumers in China. Age used to be a convenient variable for local marketers. The generation factor was easy to observe and founded an overused marketing mantra. New brands should target new generations of consumers coming to age. However, today, the risk exists that age insufficiently captures the change of emotional values, shopping behaviors or situational needs. Those factors increasingly shape fashion preferences across generations. For instance, most Chinese brands still describe Chinese adult women with a limited vocabulary: shy, follower and outrageously romantic. They deny that those women have a new found confidence and can show some audacity in fashion. Similarly, they neglect that the shift from department stores to street boutiques, shopping malls and e-tailing induce differentiated shopping behaviors among consumers that do not uniquely coincide with age.
Over the past decade, Chinese fashion retailers have quickly and successfully expanded their fashion portfolio. Nowadays, these expansive brand architectures are being prematurely threatened by obsolescence. No doubt that 2014 will be a decisive year for many Chinese fashion retailers to launch renovation work.
Genevieve Flaven is CEO of Style-Vision Asia, a trend agency based in Shanghai.