Luxury labels have thrived in China and now their cheaper High Street counterparts are betting that young, fashion-conscious shoppers will help them weather weak economies in their home markets in the U.S. and Europe. However, they’ll encounter stiffer competition from established local chains than their luxury forerunners, and with many brands expanding aggressively in China, they will also be vying with each other for customers.
Shaun Rein, managing director of China Market Research Group, says that fast fashion retailers like H&M and Zara that quickly churn out affordable copies of runway designs are most likely to succeed. He says mid-range brands will find it difficult to gain any traction in China because they fall into a middle-class image trap, where the product is fairly expensive for the local market, but carries little prestige. “The middle class in China – they trade up or trade down and anything in the middle will struggle,” he says. “That’s why I am very bearish on M&S as their DNA is very middle class. You buy our clothes because you want to present yourself as middle class – that’s not something that any Chinese person I’ve ever met wants.”
Shaun brings up some pretty good points that retailers should take into consideration for future store network planning. Although he thinks retailers that lie somewhere between cheap and luxury will have a tough time, it’s still possible for many of them to succeed.
China’s not the free-for-all market it used to be. It requires a much more strategic approach. Market research is extremely important in order to understand local concerns, likes, and dislikes. Profiling customers and segmenting the market is absolutely essential now that the market has reached a decent level of maturity. It’s really about understanding what customers want and where they are. That’s what it’ll take for retailers in the “middle” to gain an advantage in the market.