Overseas FMCG brands slow down their expansion in China, and “domestic products” gradually emerge

According to Japanese media reports on May 4, Uniqlo plans to increase the total number of European stores to 100 by 2020, which is double the current number. In addition to increasing the number of stores in Russia, France and other places, it will also enter countries such as Spain and Italy.

Uniqlo previously planned to open 100 new stores in China in 2017 and increase global sales by 70% by August 2021, reaching about US$36.5 billion. Is UNIQLO, which originally focused on Asia and even China as its overseas market, considering the European market as its “new love”?

Overseas FMCG brands have slowed down their expansion in China, and “domestic products” are gradually emerging

The growth rate of the fast fashion market in China and even Asia is slowing down, and life is not easy for fast fashion brand giants.

In March 2017, Inditex, the parent company of Zara, announced its 2016 fiscal year briefing. Its gross profit was 13.279 billion euros, and its gross profit margin hit an eight-year low of 57%. Also announcing a decline in sales was its competitor H&M, which announced in March 2017 its first monthly sales decline in four years. Previously, H&M experienced its first total sales decline in China in 10 years in the second quarter of 2016.

In addition to closing a large number of stores in the North American market, the fast fashion brand GAP has also significantly reduced its number of stores in Japan: in April 2017, GAP and its two other brands, Banana Republic and Old Navy, closed 75 stores in Japan. Some overseas brands directly choose to withdraw from the Chinese market. British online retailer ASOS, which established a Chinese version of its website and Taobao store around 2014, stopped operating its Chinese office in April 2016. Competition among brands is fierce, store rents are rising, and the overall market situation is sluggish. Overseas fast fashion brands have slowed down their pace in the Asian market.

At the same time, some domestic local brands have adapted their strategies to successfully attract consumers’ attention and gradually gain a foothold in the country.

Take the local brand Urban Revivo (hereinafter referred to as UR) as an example. Since 2006, the brand has opened more than 150 stores in 60 cities across the country. When the brand was launched, it was once mistaken by consumers as a new product line under Inditex due to its high similarity in store display and product style with Zara and other brands. In recent years, the number of UR stores in first- and second-tier cities has rapidly expanded, and brand awareness has gradually increased.

Qin Yu (pseudonym), who is studying at Guangdong University of Foreign Studies, told the Economic Observer Network that the stable quality and high cost performance of summer clothes are the main reasons why she is more willing to consider the UR brand. Qin Yu likes to browse online and go to physical stores to try on clothes. She believes that Zara’s online pictures are better looking than UR, but this will also lead to situations where the effect after trying on clothes in physical stores is not as good as the display pictures. UR belongs to similar fast fashion brands, with “slightly better quality” and “slightly lower price than Zara”.

Local brands move towards the international market and meet overseas brands on a narrow road

Stable quality and high cost performance have also become the main competitive advantages for local brands such as UR to go abroad.

In January 2017, UR’s first overseas store was established in Singapore. In an interview with Singapore’s “Straits Times”, the brand stated that it would use Singapore as a springboard to gradually open up markets in countries such as Malaysia, Thailand and Indonesia. The brand also plans to open a new flagship store in London in the second half of 2017 – by 2020, UR will open at least 10 stores in Singapore, bringing the number of stores worldwide to 400.

In addition to UR, Chinese brands appearing in shopping malls in Singapore include Hotwind. This casual brand mainly sells shoes and bag accessories and has more than 900 stores in the country. Wang Huanzhong, vice president of Hot Air Brand, said in an interview with the Singapore media “The Straits Times” that despite the warning from partners, it should not expose its brand in Chinese in shopping malls in Singapore because Singaporean consumers “lack confidence in the quality of Chinese brands.”

“But Hot Air is a Chinese brand, and this fact cannot be avoided.” Later, the brands in the local 313 shopping mall still used Chinese and English side by side displays. Wang Huanzhong said, “Refeng does not do too much advertising in the domestic market. The spread of our brand awareness mainly relies on consumer word-of-mouth. In the Singapore market, we are equally confident in this.”

Another key for local brands to improve consumer favorability and loyalty is price. Take the daily miscellaneous brand MINISO as an example. This brand, which focuses on “Japanese design” and most of its products are made in China, has expanded to 1,400 stores at home and abroad within two years of its establishment.

Zhou Yue (pseudonym), who works in media in Hong Kong, said that Miniso has “a lot of stores” in Hong Kong and “the business is pretty good.” Take a silver round cosmetic mirror that sells for 10 yuan in mainland stores as an example. The price in Hong Kong Miniso stores is 15 Hong Kong dollars, while the same type of product may be sold in local Youcheng home furnishing stores in Hong Kong. to 20 to 25 Hong Kong dollars. Although the price difference is not large, with the same quality and appearance, lower prices are more likely to be favored by savvy consumers. Miniso currently has more than 50 stores in Hong Kong.

If you want to compete with overseas big names, Chinese brands are moving from imitation to transcendence

Chinese brands are gradually going abroad, and global consumers’ stereotypes of “Made in China” are gradually changing. However, the shortcomings of some local brands are still obvious. When Miniso was founded, its product quality was only higher than that of ordinary “10-yuan stores” and its product design was similar to that of multiple brands. It was criticized for its problems. Whether it can establish a long-term foothold in markets such as Hong Kong, Indonesia, and Thailand, and expand from Southeast Asia to Asia and even the global market remains to be tested. Compared with Zara, H&M and other brands, although UR can achieve more stable overall quality, its designer system and operation cycle are still lacking compared with fast fashion giants Inditex and Hennes & Mauritz.

A Singaporean consumer said in an interview with the media that the reason why he spent 15 Singapore dollars (approximately RMB 74) to buy a pair of sunglasses in Hot Wind is because the brand attributes of this type of product are not strong, and people have a desire to buy a certain brand of sunglasses. Not intensely. “Many things are made in China now, so as long as the goods don’t look so cheap, I think it’s okay.”

Another positive example is PEACEBIRD, which was listed on the Shanghai Stock Exchange in January 2017. Although the brand’s main business target is still in the domestic market, its international level of operation and promotion is not inferior to fast fashion brands such as Zara. For the 2017 spring and summer series, the brand invited new supermodel He Cong and new generation model Molly Bair for promotional photography. Supermodel Ruth Bell, who appeared in the 2016 autumn and winter advertising, was the opening model of the 2017 Dior spring and summer conference. In addition, Peacebird has also established a subsidiary in France and invested in French high-end fashion brand Alexis Mabille. The local clothing giants are in line with the top echelons of international fashion, which shows their intentions.

Zhang Jiangping, chairman of the group, said in an interview with BoF: “We did not take some shortcuts and hire some famous or foreign designers. Instead, we absorbed young people from fashion schools across the country and even internationally and insisted on cultivating our own design team. , I think that to build a good fashion brand in China, we need talents who are rooted in the local area and are familiar with our enterprises and consumers.”

Promotional posters shot by models Natalie Westling, Ruth Bell and Sora Choi for PEACEBIRD

LED’IN, a brand owned by Peacebird that specializes in girls’ clothing, has a design team of more than 500 people and designs more than 8,000 products every year. Zhang Jiangping also said: “We need to be more flexible and responsive, and we can’t just design blindly. Consumers like immediate and fashionable things, which require us to respond immediately.”

Compared with Chinese consumers who blindly pursued Western fashion trends in the past, today’s consumers are more rational, have gradually higher quality requirements, and are more friendly and tolerant of new local brands with high cost performance and high quality. In addition, the dissemination of information on social platforms and e-commerce platforms has given people a clearer understanding of products and fashion trends. The learning and decision-making between local brands and consumers are influencing each other. (Author: Ren Fangyan)

Source: Economic Observer Network