MATRADE MARKET ALERT REPORT 

      Fashion (Clothing) Industry Market In China

A market size of 1.3 billion, 260 million middle class population, GDP of US$ 1.3 trillion and per capita surpassing US$ 4,000 in major cities like Beijing and Shanghai.  China is the biggest exporter of garments/clothing in the world. In 2003, China exported 16 billion garments worth US$ 80 billion.  

Increasing Brand Conscious

China’s consumers are nowadays enjoying their modern lifestyles and have greater brand awareness. The clothing retail market used to be dominated by domestic players but now foreign players like PIERRE CARDIN, CARTIER, OMEGA, ESPRIT, ESCADA, ERMENIGILDO ZEGNA, DUNHIL and HUGO BOSS are appealing among the customers.  Foreign fashion brands are widely available at department stores, special boutiques and supermarkets nationwide.

Presence of Foreign Brands

Foreign fashion brands started to enter China in late 1970s where PIERRE CARDIN held its pioneering fashion show in Beijing in 1979. Several household names later followed suit including such popular brands as CARTIER and OMEGA. However, significant progress on the entry of foreign brands came after the Government lifted retails business restrictions in 1992. Since then, the number of foreign fashion brands entering China’s market increases. The increase is also in tandem with the increasing number of affluent Chinese middle class in the country.  

Foreign fashion brands have started to enjoy brisk business in China. It is noted that foreign brands, which establish their presence earlier in the market, enjoy greater recognition from the consumers as compared to newcomers. ESPRIT, one of the most prominent and successful high street fashion chains, established its China operation in 1992 and since then has established 300 stores in 70 cities. Another popular brand, Italian men’s wear retailer ERMENIGILDO ZEGNA, has invested in China 12 years ago with currently 43 stores nationwide. DUNHILL and HUGO BOSS both are operating 45 stores with the latter plans to set up additional 13 stores in the next five years. 

There is a tendency that Chinese consumers will continue to admire foreign brand fashion items. Since the market is huge, a small portion of market share means big to the producers. In addition to first class luxury brands, second line brands are also increasingly popular among Chinese consumers. Brands like CERRUTI JEANS and MAX & CO. are getting popular among young consumers. Another foreign brand, VISCAP, is experiencing brisk business and currently has 80 stores nationwide. 

Other new foreign players are also embarking on establishing their presence in China clothing and fashion market. A Spanish fashion brand, MANGO, which operates in China under the MNG brand, opened its first store in China in February last year and has since then opened up stores in Shenzhen, Dalian and Shanghai.

Babies and Children Brands  

It is estimated that 10 million babies born every year in China.  The ‘one-child’ policy and improving living standards lead to growing tendency by parents to spend more to purchase high quality and foreign brand clothing.   NIKE KIDS, TOMMY TIPPEE, CAKEWALK, PARROT, MINIMAN, MAXI-COSI, SAFETY FIRST, COSCO, QUINNY AND HUFFY SPORTS are some foreign brands for children fashion items that are already established their presence in China. These foreign producers established partnership with the local manufacturers and retailers of children’s products to secure access to the existing extensive marketing and distribution network that the local manufacturers and retailers already have.

Endure for Long-term Profitability

Despite the booming market and the increasing popularity of luxury foreign brands, most foreign fashion producers feels that their sales turnovers are relatively modest. This is due to the fact that luxury items cater for niche market, which limit the sales volume and the high import duties reduce the profit margin. According to a report by Morgan Stanley, foreign companies can expect profit return only after five years presence in the market, so the first five years are considered as the period to strengthen the market presence. 

In doing business in China, patience and endurance with continuous promotion is needed to ensure long-term profitability. The view is in line with the optimistic outlook by Morgan Stanley on China’s future luxury market. The market size of luxury items in China will reach 100 million, which is about 8 percent of the population. 

Local producers of clothing and fashion related items have started to feel the heat of competition from their foreign counterparts, especially for the upper and medium end items. Due to lucrative market for high quality items, the local companies are now competing with foreign counterparts by collaborating with them in upgrading their overall design and branding capability with their objective of producing their own brand.  

View from Matrade Beijing: Opportunities For Malaysian Exporters 

Malaysian exporters shall look at the present trend in fashion and clothing industry in China as an opportunity to gain access to the lucrative market. It is essential to undertake preliminary study on the market and to establish contacts with a trustworthy and reliable partner.  

Many of foreign brands producers, which have entered the market partnered with local companies that already involved in fashion and clothing industry as manufacturers or retailers. The reason is to capitalize on the existing marketing and distribution network that the local partners already have in the industry. Some foreign companies have also successfully entered China market through merger and acquisition (M&A) with local companies with similar purpose of capitalizing the market through the available marketing and distribution network and also to cater not only for upper and medium end market but also low end market, that occupies 70 percent of China market. 

  Back to Index of September 2004