The interested audience at the 1st China Fashion Business Conference
31 Oct. 2012
How to do Fashion Business in China
Yesterday, Sportswear International hosted the First China Fashion Business Conference in cooperation with partner publications TextilWirtschaft and Fashion. In the headquarters of Deutscher Fachverlag (dfv) in Frankfurt/Main, around 100 guests had the chance to follow six inspiring talks about the characteristics of doing (fashion) business in China.
During his welcome words, dfv’s CEO Holger Knapp clarified the reasons for establishing the publishing house’s latest event concept: “We realized China is becoming an increasingly market for the readers of our magazines”.
After that, Sabine Kühnl, Sportswear International’s Editor-in-Chief who hosted the conference, introduced the first speaker, Prof. Dr. Helmut Merkel of consulting company Prologue Asia Pacific, Hong Kong.
In his talk “Understanding the Chinese consumer”, he reported on the market environment, customer behavior patterns and the general retail atmosphere in China.
In 2012, the Chinese government expects to register a GDP growth of 7.5%. This is a rather low number compared to previous years, but still shows how the China’s economy is prospering. Merkel explained the slow down by the currently weak US economy and a wear European market at the same time.
He continued with further numbers: There are 1.4 trillion people in China, 1 bn of them own a mobile phone and 1.2 million of them can be defined as super rich. 92% of the Chinese GDP is generated in the 22 regional clusters that one can distinguish and there is an economic concentration in the Eastern coastal cities.
Prof. Dr. Helmut Merkel about the Chinese consumer
As another property of Chinese behavior patterns, Merkel stated that customers in China tend to pay cash and have high saving rates (the individual or household savings amount to around 22% of the people’s income).
Booming business can be generated during the numerous Chinese holidays. During the last golden week (a semi-annual 7-day national holiday in China), about 7.2 bn Yuan (around 890 mio. Euro) were spent by Chinese customers for luxury abroad, especially in Europe, the US, Hong Kong, Macau, Korea and Australia. But despite the continuous interest for luxury, there seems to arise a “new modesty” amongst the Chinese consumers. In Merkel’s opinion, this new orientation is a result of the strong force that bloggers and their attitude have on the market.
Summarizing, Prof. Dr. Helmut Merkel underlined how China is a very interesting market with lots of opportunities to earn money, but that there are services and habits that brands from Western countries first have to get familiar with – and many competitors. “If you decide to go there, you are not alone!”
Afterwards, Chen Dapeng of the China National Garment Association (CNAG) from Beijing, China, held his speech – in Chinese and live translated into the audience’s headphones.
Chen Dapeng about China - a market with significant potential
That seems to be even more of an advantage, as Dapeng stated that in the past, Chinese consumers have especially been focusing on quantity and now rather attach importance to quality and general on the value-for-money factor.
Even the super-rich people’s behaviour has changed so that they do not simply buy big brands, but expect to find true value in their garments: “The consumers’s awareness has risen!” Herein, Dapeng also sees the reason why certain lower-price concepts, such as Zara, have had a very successful start in China.
Dapeng further explained how the income of the Chinese population is increasing simultaneously with the urbanization of the country. By 2030, the urbanization will have reached 60% and by every 1% that it rises, the Chinese’s spendings for fashion will increase by 1.3%.
Additionally, the speaker underlined the importance of the online segment: 140 million people in China do buy clothing online, which equals 1/10 of the total Chinese fashion sales.
At the end of his elaborations, Dapeng appealed to the audience: “China is a very multiple market, it is not easy, it is international and the Chinese consumers are becoming more and more mature with their preferences changing. If you ignore Chinese culture and behavior, you cannot do business in China!”
Jing Yin about multi-label retailing in China
While Beijing is more of a cultural capital with a rather avant-garde, edgier sense of fashion, Shanghai was identified as more logo-driven. All in all, Yin was sure that those two cities were always the best locations flagship stores and to boost a brand image nationwide.
In general, multi-label stores are far less common in China than mono-label shops.
The ones existing can be categorized in the following concepts: Major multi-label retailers from Hong Kong, large mainland-based multi-label distributors/retailers, small mainland-based mulit-label retailers and department stores (ofter from international origins).
In order to reach these retailers effectiveley, Jing Yin advised the brands to target them in China directly, as most of the Chinese retailers rarely came to Europe to purchase on a wholesale basis there: “Be pro-active! The Chinese retailers will most likely not come to you!” Also, she called the audience to select appropriate targets, consider promotion and be ready for tough discussions. According to Yin, Western brands should best enter the Chinese market via a representation at a trade show and then work with a local agent to promote the brand and locate attractive opportunities.
After the lunch break, Guilherme Faria from Shanghai’s Novomania trade show explained “How to develop your sportswear/denim/premium urbanwear business in China”.
Guilherme Faria of Shanghai's trade show Novomania
He additionally advised expanding brands not to change their product for the Chinese market. According to Faria, Chinese customers are willing to pay a little extra to get an original, European product other than a product by a China-only sub-brand. Contrary, special colorways, fits or other customizations for the Asian market only could be promotional.
As an example he took a pink Ferrari: still the original product, but in a color which is very China-specific.
The trade show organizer also warned the audience that you cannot go to China competing on price, as there will always be cheaper competitors. Therefore, Western brands have to set themselves apart via fit, style or fabrics.
Norbert Lcok held a colorful talk on Marc Cain's strategies in the Chinese market
With the help of his photo collection, he gave insight on the differences between Eastern and Western cultures which he slowly learned when doing business in China. Opinions are not always expressed straight, problems are avoided and the boss rather than his team is one to address to. Also retail conditions are different: The decoration and merchandize standards are unlike European ones and renting contracts are usually only closed for one instead of five to ten years.
As ways to success, Lock informed the audience that to make contacts and get a feeling for the market demands, it’s requisite to attend and have a presence at Chinese trade shows, be equipped with brochures and info material in Chinese (rather than English only), learn about the Chinese mentality and the social, legal and fashion rules and maintain good partnerships with agencies, importers and customers. Marc Cain has moreover made good experience in working with magazines and press-effective Chinese celebrities.
The last lecturer of the day was Piergiorgio Dal Santo of PGDS Consulting, who reported on “Understanding the purchasing behavior of the Chinese luxury consumer”. He has been one of the coordinator of The 2011 China Luxury Report, a collaborative report between international luxury brand leaders, Chinese media and research institutions. One of its interesting findings was the enormous importance of gifting in China. Of the total luxury market revenues, business gifting steadily makes up for 20-30%.
Piergiorgio Dal Santo on the Chinese luxury consumer
Remarkable is also the point that the richer the Chinese luxury customers are, the less the emphasize on brands and their reputation and instead attach greater importance to personalization and service. In general, the high-end customers in China seem to have a low luxury brand loyalty, but a high level of impressive consumption.
In terms of e-business, the majority of respondents showed open to purchase luxury goods online with the main concerns not to do so being the doubted authenticity of the products and their quality.
Terminatory, Dal Santo highlighted an outstanding customer relationship management as the most crucial factor for the success of luxury brands in China.
All in all, the engaged and clearly interested audience was able to take home a lot of surprising facts and numbers on China's economy, in-depth inside views, instructions, best-practice examples and last but not least essential contacts and potential business partners.
We thank all speakers and attendants for their time and interest and whish everyone a successfull start or continuation of doing fashion business in China - a tricky but doubtlessly promising market.
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