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Could China’s local fashion players dominate the market?

Could China's local fashion players dominate the market?

China’s colossal size and dynamism makes it a top priority for any global business, but it remains opaque to many in the fashion industry. It has either already overtaken the US as the world’s largest consumer of fashion or will do so in 2019.

SEE ALSO : European luxury brands : nervous about China

While China is often touted as the world’s largest consumer nation when it comes to luxury goods, the latest figures take into account the broader fashion market, from low-cost apparel to the top of the high-fashion pyramid.

According to The State of Fashion 2019 report, “Greater China will for the first time in centuries overtake the US as the world’s largest fashion market next year.”

The report surveyed more than 270 global fashion executives and compares the performance of individual business against their peers by category segment and region.

Figures from market research provider, Euromonitor International, meanwhile, estimate that Mainland China has already overtaken the US as the world’s largest fashion market this year. Their figures put China’s total apparel and footwear market at $372.66 billion in 2018, compared with $354.72 billion for the US.

One of the forces driving the growth of the fashion market here is the government’s long-touted “consumption upgrade” (an official phrase used to describe the growing demand for high-quality, higher-priced goods and services) which China’s domestic brands have rushed to fill alongside their international counterparts.

According to Chen Ke, partner and vice president of Roland Berger Greater China, domestic fashion brands in China are responding not only to consumer demand, but also market forces that have seen wages rise and apparel and footwear manufacturing largely move off-shore, forcing manufacturing powerhouses to shift gears and become brand builders.

“China’s value in the fashion industry is gradually shifting from the relatively low value-added OEM (original equipment manufacturer)  in the middle of the industrial chain to the relatively high value-added brands,” he says. “At the same time, China’s leading brands have significantly improved in terms of international expansion, mainly via brand acquisition, and design.”

SEE ALSO : Super-fast fashion: Who will be the new China?

The other major driver of fashion growth in China is e-commerce, with consumers in outlying areas of the country gaining enhanced access to a remarkable array of fashion items, both branded and not, due to the ubiquity of platforms such as Alibaba’s Taobao, which “unlocked the ability of Chinese… to become consumers,” according to Zak Dychtwald, founder of Young China Group and author of the book “Young China.”

Taobao was followed in quick succession by other major players like Tmall and, as well as social and niche fashion platforms — Mogujie and Xiaohongshu to name two — focusing on bringing fashion trends to a population of more than a billion people spread over a country roughly the geographical size of Europe.

Today, e-commerce accounts for a greater proportion of retail sales in China than anywhere else on earth. Online retail totalled 7.18 trillion yuan ($1.15 trillion) in 2017, an increase of 32 percent year on year, according to China’s Ministry of Commerce.

By comparison, US commerce department figures put online sales in the country at $453.46 billion last year, at an annual growth rate of 16 percent.

SEE ALSO : China’s cross-border e-commerce turnover

Both of these trends — along with a pause in trade hostilities between China and the US, which halts major increases in tariffs set to be implemented January 1 and is likely to have at least a short-term positive influence on Chinese consumer confidence — are good news for China’s domestic fashion brands.

The picture is slightly different for international players, however, with increasing competition from local enterprises big and small — especially in the mass market sector — with better design, faster turnaround and an advantage in local knowledge.

International luxury brands are still somewhat insulated by the lack of credible domestic alternatives, but on the high-street, international brands will have to work harder and experiment more aggressively with local digital and omnichannel strategies in order to reach the growing base of fashion consumers blooming in China’s lower tier cities.

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