China’s fast-growing consumer class is giving business owners new reasons to set up shop abroad. China’s consumer market explodes as tens of millions of people join the middle class every year (that’s 300 million and counting). Today, China shifts its entire economic paradigm from the “factory of the world” to the “mall of the world.”
The most difficult problem for a fashion brand entering China is the choice of the Channel. China lacks the wholesale retail model. Instead, there are two key channels for the apparel and accessory brands to consider selling through: department stores and shopping malls. The other choice is to set-up a standalone store. Here you establish your own real estate deal allowing more control over the brands, sales and inventory. Demographic and consumer behavior is critical to understand with this channel and fierce competition means the brand has to perform or else it will be dropped.
Luxury brands sold either in franchised boutiques or upscale department stores. Due to the rapid growth of China’s middle class a new category has emerged, involving quality brands, both Chinese and foreign, being sold in department stores and specialty stores. Consumers in China’s middle class are increasingly sophisticated, demanding higher quality, variety and innovation from their retailers. The new category is highly fragmented and is dominated by specialty casual brands from Hong Kong, such as Esprit (514 outlets), Giordano (644 outlets), Baleno (980 outlets) and Glorious Sun (1,076 outlets). The new segment has significant growth potential as it is affordable to the middle class but positioned at a price point slightly higher than local brands. Prices in Clothing have dropped slightly in 2006. This is due to the increased competition in the fashion industry in China.