Chinese Fashion Industry

By: Olivia Llagostera, Barbara Van Stigt and Maria Eugenia Errobidarte

Market Overview

- China Reached in 2005 a Growth of 10.2% and in 2006 an Increase to 10.7% Became the fastest growing economy in the world

- China’s Clothing Market Today Stands as the Main Monetary Flow in the Country It has grown to 7% It’s now a $40 billion cost industry

- Reduction of Barriers - Changes in Governing Investment in Retailing Sector Opportunities for medium size retailers New generation of growth and commerce

- Global Brands are Undertaking a Multichannel Approach Franchising, own stores and department stores

- Increasing Income in China and Government’s Encouragement to Consumption Rise in domestic consumption

514 stores 644 stores

Market OverviewPast:

1. Low priced - Basic Apparel Sold Under Local Names Chinese department stores, foreign hypermarkets, small family owned speciality chains2. Luxury Brands Which Sold in Either Franchises or High End Department Stores

Today:

1. Middle Level Apparel is Developing Quality brands (Chinese and Foreign) Sold in deparment and speciality stores

Examples

- Affordable Middle Class - “Price Wise”

- Retail Market

Shangai

Beijing

Guangzhou

Mature MarketsStill main cities of influence for fashionHighest population and GDP

Market Overview

Secondary Cities

Chengdu

Nanping

Tianjin

Market Overview- Retail Market

Most Important for Bags

Ningo

Market Overview- Manufacturing

Guangzhou

Most Important for Garments

Consumer Behaviour- Size of the Chinese Market - 1.2 billion potential costumers - Exceptionally Brand Conscious

- Purchasers - Growing Professional Class Well educated Discrete purchasing power Aspire to a better life

- Window Shopping and Searching for the Best Product are Common Activities

- Chinese understand shopping as an education Fashion Industry

- Enjoy Shopping Freely

- Brands in America and Europe are more Value

Consumer Behaviour

- Availability to Browse in Search for the Products that Satisfies their Needs Technology advanced + Higher expectations in product quality

Consumer Behaviour- Young Generation See more than any other generation - luxury products as a status symbol - superiority Youngsters spend on fashion more than ever before - increased 7.2% by year Encouraging fast fashion - retailers willing to sell affordable clothes for this target

Rise in teenage fashion conscious groups - China’s one-child policy and economic reorganization

Consumer BehaviourPast:

1. Consumers would usually leave the label stickers on their suits or sunglasses.2. Brand as a symbol representing money.3. They used to be tricked by superficial characteristics: logo and advertising.

Today:

1. Shifting behaviour - Brand as a symbol of style, quality, colour, fitting and cut, price, image and service.2. Retail Market has switched from a product-orientated to a consumer-orientated philosophy.3. Importance given to product, costumer service and extra values.

Luxury- The Economic Downturn Impact on Chinese luxury consumption - specially Hong Kong

- The Gap Between Tier 1 and Tier 2 Luxury Markets are Being Reduced Consumers in Tier 2 cities are becoming more mature regarding to perceptions, behaviours and usage.

- Traditional Media Remains Essential for Chinese Luxury Although new rapid and universal use of internet technology is changing many rules.

- Adult Consumers are Showing a Balance Between Rational and Emotional Factors when Choosing their Most Preferred Brand. Louis Vuitton and Cartier today remain on the top even though they are facing a competing market. Chanel is ranked top too - due to it’s clear image and iconic branding.

- Meawhile, Regarding Youngsters, Results are the Opposite

China Embraces Luxury Brands: http://www.youtube.com/watch?v=ZUfrSqMhni4

Luxury

Source: Interviews within young shoppers (17-) in Shangai, Beijing, Hong Kong and Nanjing in October and November of 2008.

Note: These data reflects 627 responses

Major Local CompaniesGUO PEI

-Turned down Milan Fashion Week in order to show domestically-She created designs for Kunqu Opera Two Belles in Love

-China’s premier fashion designer

-Haute Couture in the China fashion sector

MA KE

- Creative director of Exception- Created Wuyong label and showed it in Paris- Considered most important young fashion designer in China- Sold to 60 stores across 30 cities in China

HE YAN-Shanghainese designer

-Worked for large Shanghai fashion companies

-2003 went solo, 2007 launched her first shop

-Compared to Raf Simons (Belgian fashion designer)

QIU HAO

-Graduate of Central Saint Martins

-Winner of Woolmark Prize

-Experiments with concepts, shapes and fabrics in his

avant garde women's apparel

-Inspired in chinese opera

METERSBONWE

-China’s leading casual apparel company

-Opened their first store in 1995 in Wenzhou

-1800 stores in China

-In 2006 the Group’s retail sales exceeded RMB 4 billion

Major Local Companies

LU KUN -Chinese fashion designer-Selected best Young Designer of 2004 by Shanghai Fashion Federation

-Nickname of “China’s own Galliano”-Aroused interest of distributors and retailers in Europe and US-His designs are worn by Hollywood stars such as Paris Hilton

ALEXANDER WANG

-Chinese heritage

-Distributes worldwide

-Won $200,000 prize

as the CDFA/Vogue

Magazine Fashion

Award

VERA WANG

-Chinese heritage

-Known for wedding gowns

(designed them for many

celebrities)

-Worked as senior fashion editor

for Vogue US

-Stores worldwide

Major Global Companies

GIORDANO

-Popular fashion brand from Hong Kong

-Established in 1981 in the former British colony

-Created market shares in over 30 countries in Asia, Australia and

the Middle East.

-Plans to open 2000 stores worldwide by 2010 in countries like

India, Eastern and Western europe as well as north America

SHANGHAI TANG

-First luxury brand emerging from China

-39 boutiques, including Shanghai, New York, Paris, London,

Tokyo and Madrid - present throughout the world

- Opened boutiques in Macau, Dubai, Madrid, Frankfurt and Las

Vegas, relocated its New York flagship store on Madison Avenue.

Major Global Companies

Fashion EventsIntertextile Pavilion Shenzhen 2010 (May)Exhibits a wide range of fabrics, finishes and textile related technology. Organized by One of Europe’s oldest and largest trade fair organizers.

2010 China (Qingdao) Garments, accessories, Home textiles & fabrics exports fairTakes place in Qingdao China, where all different textiles an garments are displayed for all different classes and garment ranges. It has an international attraction and is sponsored by the China Council for the Promotion of International Trade.

Beijing Fashion Week Shanghai Fashion Week (Shanghai Festival)

Fashion EventsShanghai International Textile Expo“The international rendez-vous for the textile industry. Nothing can match the value of meeting with your customers and prospects in person, and Fashion Shanghai show will deliver thousands of decision-makers to you” Mode Shanghai.

The asian version of Premier Vision as part of shanghai International Fashion Cultural Festival organized by Shanghai Municipal City Government.

Fendi 2008In 2008, Karl Lagerfeld decided to have a “majestic” fashion show for Fendi at the Great Wall in China. Estimated to have cost $10 million.

ChanelIn 2006 Chanel had a Spring Summer fashion show in an airplane of China Airlines followed by a fashion show in Shanghai in December 2009.

Coco Chanel was known for having a passion for Asian antiques and an interest in Chinese culture, which is what inspired Karl Lagerfeld to create a collection called “Terracotta Army”,

“the urban romanticism of Chinese cinema, the glittering decadent-chic of 1930s Shanghai and the opulence of the imperial court.”

Fashion Events

VersaceVersace showed its Spring/Summer 2009 collection (which had previously debuted in Milan) in Beijing.

Donatella Versace and Chief Executive Giancarlo Di Risio revealed some interesting thoughts on their perception of the Chinese market. “Versace expects to make Asia its second biggest market in terms of turnover after Europe by the end of next year. China is a strategic country for the company, Chinese women love fashion” Versace invested $56.09 million to strengthen its presence in Asia.

Fashion Events

+ 400 million Chinese are aged in between 20 and 39 against 110 million in Europe+ Young adults are extremely motivated, educated and open minded

* High - End fashion is dominated by big overseas firms while low-end market is dominated by national firms+ Young designers can set up national High-end+ Overseas low-end fashion can invest/import

+ Population of 1.3 billion

Market Business Opportunities

Predictions for 2020

+ China’s increasing interested in independent designers creates opportunities domestically

+ China slowly moving from their logo obsession giving space for local and young designers.

+ China is a consumerism society so attractive for all high end fashion brands

+ China’s luxury sales up 12% while down 8% globally (2008)

+ Chinese are incredibly ambitious and want to increase fashion export of domestic brands

Market Business Opportunities

Young Fashion Designers Make Their Mark in Beijing: http://www.youtube.com/watch?v=KyNd7nORqe0

+ Continuous movement of production provinces attracts more investment

+ Increase in GDP + Rise in domestic consumption attracts investors.

+ In 2008 China’s number of wealthy households reached 1.6 million which is interesting for foreign investment.

+ Shanghai World Expo 2010 is expected to have more than 70-100 million visitors.

+ Increase distribution of goods, this is very weak at the moment.

Market Business Opportunities

Industry Future - Challenges- Overcapacity, poor investment efficiency, low national income per capita, flagging

domestic consumption, expanding gap in personal incomes.

- A big problem is their dependency on overseas markets China’s economy is based on: Export and Investment Meaning that they are very sensitive to the global economy.

- The Chinese decreasing care for brands challenges overseas High end brands

- Chinese new independent designers have to create and maintain a brand image in order to be strong in the competitive market

- A change in regional product life cycles.

- Manufacturers are starting to create their own-label brands and offering their designs to brands producing in China. These companies have a lot of industry know how and capability threatening the big companies.

- Increasing cost of production due to keeping up with technology

- Factories closing due to drop in export demand creating unemployment.

. Foreign investment has dropped because of global downfall in profits, rise in unemployment, global decrease in consumption and corporate operational difficulties.

- Company profits decreasing due to rise in production cost.

- India, Bangladesh and Eastern Europe are becoming strong manufacturer countries.

- Water Shortage, Drought and floods affecting people and destroying buildings.

Industry Future - Challenges

Air Pollution is a serious issue in China

- 16 of the 20 most polluted cities in the world are in China.

- The air quality in Beijing is 16 times worse than NYC

- Only 1% of the 560 million Chinese people living in cities breath air that is considered safe by EU standards.

Why is this a problem?1. Increase in illness of employees = decrease in production efficiency

2. Alternative energy used in other countries may attract companies to move for a better future perspective.

3. China could decide or be forced to cut production of certain materials/products causing production to stop -> A threat to companies that rely heavily on China

4. Increase interest of ethics and clean work space.

Industry Future - Challenges

What does China need to become an important fashion country?

1. An increase in domestic fashion companies, especially in the high-end market.

2. Cleaner production processes and an increased use of alternative energy and sustainable resources.

3. Make investment process faster and safer through an improved legal system and decrease in corruption, counterfeiting and fraud.

4. Increase export of Chinese fashion companies, not solely being an exporter for low end and an importer for high-end.

5. Help its young generation with their ambitious goals of putting China on the fashion map regarding design.

Industry Future

SWOTStrengths-Large young adult population -Cheap labour-Good fashion schools and domestically known designers with the ambition to grow-Motivated young generation-Continuous foreign investment-World’s biggest exporter of textile and man-made fibres-Technology

Weaknesses- Depend on overseas brands for high end luxury market- Economy depends on foreign investment and export- No added value to fabrics produced in China - Out-dated man-made fibre manufacturing units- Distribution is a problem for retailers, There is no nationals freight carrier, instead of the 5 million truck operated by hundred of thousands of businesses.

Opportunities-Big population can attract many foreign investors for all different fashion level brands-Shanghai World Expo 2010-Foreign Companies - joint ventures-Large amount of fashion events to be promoted globally to attract foreigners-Piracy: China could create 2.6 million new jobs in information technology if reduced, giving an opportunity for website programmers-Young population’s interest in fashion-Create stability by investing in emerging Chinese designers

Threats- Air pollution getting worse- If global economy becomes weaker china’s economy will collapse- Water shortage affecting population / as well as drought and floods.- Fraud and Counterfeiting problems.- Corruption- Legal System- Dropping dependence on labels by Chinese is a threat to brand-logo related brands.

SWOT

Conclusion

If China ensures a stable fashion market with a rise in domestic designers and fashion events, it could not only be known for manufacturing but also for its own design. This

would create a more economically resistant market and create new opportunities for export of Chinese design as well as a

more constant income of money.

Thank You