Shopping for name brands and high quality fashion apparel may be the trend for the modern Chinese generation, but how can “homegrown” and international apparel retailers prioritize their networks to fit this need? This is a high cost challenge facing retailers in China today.
In the past, shoppers could easily find Levi’s, Zara, Gap, and other big name apparel brands in shopping malls, but only in high tier cities like Shanghai, Beijing, or Guangzhou. Fast forward to a China whose retail landscape has changed dramatically from the not-so-distant past, and you’ll discover that these big brands have moved far beyond the confines of mainstream cities and deep into tier 4 and 5 cities like Zhangjiagang and Kunshan. The fashion hungry youth in cities that were once considered too small to matter now have equal access to the latest fashion trends.
Some apparel retailers are already penetrating the top 200 cities in China with around 500 to 600 locations. Jack & Jones (Bestseller A/S) and Teenie Weenie (E-land Group) are good examples of this kind of “far-reach” expansion. In 2013 there were already 3,500 shopping complexes throughout China with at least 200 new complexes in development with plans to enter the China retailing market by 2014. However, increased opportunity also increases the complexity of planning decisions for apparel retailers in China today.
In order to make the best decisions moving forward here are 4 things that every apparel retailer in China should do first:
1 – Understand Your Position
Understand what kind of customers you’re looking for, where they appear, and where they are shopping. This will start you in the right direction for deciding what kinds of malls are most suitable for you. For example, GXG may search for Grade B to C shopping malls, G-star may only focus on Grade A malls. The positioning for these two brands is very different when looking at their target customer base.
2 – Evaluate Past Data
Use logistic regression or other statistical analyses to discover which factors most influence sales. You can use this to compare your expectations to your current positioning which may lead you to review your network strategy again.
3 – Look for Positive Factors
Locate the most suitable malls and department stores based on your current market position. It’s helpful to use lists from developers whose brands have an identifiable relationship.
4 – Calculate Market Potential
Often, the sheer amount of possibilities at the city/trade zone level can create monumental challenges for those in charge of opening new doors. Cannibalization issues further complicate the process. Reviewing the market potential of a given city or trade zone will help you determine if an area has enough potential to support new doors in the first place.
After conducting this 4-step screening process, apparel brands will have screened potential expansion targets in a scientific and cost-effective manner. The result will be a list of high potential candidates with the right location and characteristics for a given brand.
Meeting the needs of modern Chinese shoppers will mean that apparel retailers will need to make much smarter decisions about how and where they open new doors. Making these 4 steps part of the process is a good place to start.