Monday, February 24, 2014, 08:54
Big challenges and opportunities
By Ricky Sun

With world-renowned consumer goods magnates entering China, a series of problems has sprung up in the Chinese market for international fashion brands.

Famous international fashion brands, such as Zara, C&A, Uniqlo and H&M, are characterized by genuine similarities. Although they originated from different cultural backgrounds, the brands will inevitably confront difficulties that international fashion brands face in China.

Mango, a world-famous Spanish fashion brand, entered the Chinese market at an early stage but was forced to close stores after posting dismal sales figures, before gradually fading out of the market. Zara, H&M, Gap and other international brands are facing similar problems.

The first difficulty these companies are facing is unprecedented competitive challenges among international brands.

As a growing number of international fashion brands have entered China, several noted brands such as Esprit and Mango have experienced challenges in the Chinese market. Since 2009, Esprit’s profits have spiraled downward. During the first half of 2011, the company’s net profit dropped 98 percent and, in one day, its share price dropped $41. In response, the company began closing stores on the mainland.

Mango’s 2010 China Market Financial Statements indicate that the brand market share in China only accounts for 2.7 percent of the global market, excluding VAT. Mango owned 115 stores in China as of 2013, a 42.5 percent year-on-year drop compared with 2012.

Most Mango stores were forced to offer big discounts to alleviate inventory pressure. However, Mango still didn’t manage to eliminate its standing in the China market. On the other hand, when international fashion brands such as Zara and H&M make their debuts in China, they always try to label themselves as superior and high-end.

They want to utilize such eye-catching marketing strategies in the Chinese market, while hoping people forget about the brands’ approachable and amiable images in their local markets. However, the strategy failed when competing with real high-end brands such as Hermes and Chanel.

The second difficulty is more fierce competition from domestic fashion brands.

International fashion brands such as Zara, H&M and Gap have flooded the Chinese market in recent years, but domestic fashion brands are used to the competition. They have learned how to optimize their business models and are now taking advantage of their localization to narrow the gap with international fashion brands.

As the market becomes mature, the design and development capability of domestic fashion brands has almost reached the same level as international ones. Although there is still a gap in grasping fashion trends, many companies have gradually implemented relevant strategies and cultivated local Chinese fashion designers.

Me&City, as the representative for domestic fashion brands, recently cooperated with top international fashion trend forecasting agencies and renowned international fashion designers, keeping a close eye on international fashion week. Their Chinese and foreign designers have combined local and foreign elements of the brand and personally set foot in global fashion capitals to conduct related marketing research.

While some international fashion brands have achieved great success in the Chinese market, domestic fashion companies realize that they should not blindly impersonate them. It is essential for domestic companies to have a stable presence in the local market and efficiently integrate into the industry chain, toward international standards on technical aspects such as product design, supply chain and a marketing strategy based on the actual situation in China.

The third difficulty is whether product quality can stand long-term racket.

In 2013, the results of the Comparison Test of Apparel & Fashion conducted by the China Consumers’ Association attracted widespread attention. Several famous international brands such as Zara, M&S, Guess and Paul Frank were tested. More than one-third of the sample products did not meet national quality standards.

The authority conducted special tests for product identification, component content, formaldehyde content, PH value, color fastness, peculiar smell, biodegradable aromatic amines fuel, pilling and tear strength. It turned out that fabric is still the Achilles heel of international fashion brands, which is closely related to global sourcing and production.

Products of international fashion brands sold in one country are often from different regions in the world, which causes inconsistencies in product quality control. In addition, inadequate localization also generates substandard products.

For instance, domestic and international markets have different criteria for fabric, which leads to substandard products. However, customers still flock to international fashion brands because they believe there are no “fatal problems”.

However, that doesn’t mean international fashion brands don’t have issues. The quality problems that affect international brands are caused by a lack of supervision. Also, a gap between Chinese standards and the global sourcing and production model still exists.

Notwithstanding the popularity of international brands in China, especially in the initial market stage, once there is a “fatal problem” with material, brand image and customer loyalty will suffer. Even cheap and affordable international fashion brands will be regarded as low-quality and low-priced.

The fourth difficulty is a huge industry talent gap. A survey from RMG Marketing Research Center shows that the ages of fashion brand practitioners tend to be quite young. Most have a good education background, especially in the luxury field. However, the fashion industry still suffers from a serious lack of talent.

Although the fashion industry is a seemingly shiny and glamorous field, nearly 30 percent of practitioners regard their job pompous and rhetorical. Moreover, many professional managers find it difficult to advance when they reach a certain seniority level. What I mentioned above eventually resulted in the talent gap between the domestic and international fashion industries. Recruiters and headhunting firms have become the main recruitment channel in the fashion industry.

The China Talent Flow Survey 2013 conducted by RMG Selection reveals that approximately 70 percent of recruiting phone calls are from recruiters and headhunters in the fast-moving consumer goods and retail industry.

International brands must choose the right development strategy to succeed in the Chinese market, where both opportunities and challenges exist.

The author is fast-moving consumer goods consultant at RMG Selection. His views do not necessarily reflect those of China Daily.