Private Label Clothing Brands in China | Daxue Consulting

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PRIVATE LABEL
CLOTHING BRANDS
IN CHINA
SEPTEMBER, 2015
Daxue香港上海北京
Consulting

TABLE OF CONTENTS
1.0 PRIVATE LABEL CLOTHING BRANDS
• KEY HIGHLIGHTS: THE APPAREL MARKET
• WHAT IS A PRIVATE LABEL BRAND?
• PRIVATE LABEL CLOTHING BRANDS IN CHINA
2.0 DISTRIBUTION CHANNELS
• DEPARTMENT STORES & SPECIALTY STORES
• HYPERMARKETS & SUPERMARKETS
• ONLINE RETAILING
• E-COMMERCE, O2O & OTHER OPPORTUNITIES
3.0 WHAT THE MEDIA SAYS
• CHINESE MEDIA
• CHINESE SOCIAL MEDIA

Private-label growth
requires strategies
that are tailored to each market.

KEY HIGHLIGHTS:
THE APPAREL
MARKET
Chinese culture places great emphasis on the
much-discussed concept of “face” – it is a cultural
desire to behave and look appropriate in front
of others. This is why brands are so popular in
China’s fashion industry, allowing consumers to
easily publicly identify themselves. If we have a
closer look at brands in the apparel market, this
market can be subdivided into three segments:
the non-brands, the luxury brands and private
label clothing brands. Non-brands costumers
care about practical aspects of clothes: they
are searching for the lowest price and therefore
do not place value on brand identity or quality.
Normally these consumers are low-income
individuals.
On the other hand, luxury brands will continue
to play a crucial role in China. These clothes
represent a social status and high living standard.
SOURCE: http://chinaculturecorner.com/2013/10/10/face-in-chinese-business/

The customers of luxury brands in China are
perceived to be stars or come mainly from the
upper class. Only a part of the upper middle class
can afford luxury brands (though middle income
individuals are also known to save up for months
for a handbag). The consumer group for luxury
brands is relatively small compared to the whole
market. Only 1.11 million out of 1.4 billion people
are part of the upper class who can afford to
regularly purchase luxury brands.
The consumer group
for luxury brands is
relatively small
compared to
the whole market.
“

The third category of brands on the apparel
market is private label. Its customers are mainly
from the middle class. These individuals care
about their image but cannot or are not willing
to pay the high prices for luxury brand clothes.
They do care about quality and the price and are
therefore about cost-effectiveness. However,
the clothes also have to be individualized or
personalized in some way to appeal to their
desire to present a unique face to the world. It is
not easy for the manufacturer to find this balance
but the middle-class in China represents a
huge potential.
In the year 2000, only 4% of the urban population
was classified as middle-class. In 2012, this ratio
moved to 66% and is expected to rise to a level
of 75% by 2022. As a consequence, there is a
huge demand for private label clothing brands
in China.
SOURCE: http://www.theglobalist.com/6-facts-chinas-growing-middle-class/

WHAT IS A PRIVATE LABEL
BRAND?
A private label brand is not
owned by the producer but
by the retailer or supplier.
The retailer or supplier
normally gets its products
by creating a contract with
the manufacturer under its
own label.

PRIVATE LABEL
CLOTHING BRANDS
IN CHINA
A private label brand is not owned by the
producer but by the retailer or supplier. The
retailer or supplier normally gets its products by
creating a contract with the manufacturer under
its own label. The most important advantage
of private label clothing brands in China is the
greater margin. Another positive effect is the
exclusivity of the brand as it is supplied only by
one retailer.
The giant Chinese global supply chain manager
Li & Fung, for example, is forming a joint venture
with two prominent department retailers in China
inordertodeveloptheirownprivatelabelclothing
brands. In the first three years of new cooperation
they aim to develop three private labels and six
licensed brands in the field of fashion and home
design.
SOURCE: http://www.lifung.com

DEPARTMENT
STORES &
SPECIALTY STORES
Department stores and specialty stores remain
the main channels for apparel distribution in
China. In 2013, these channels accounted for
36.3% and 29.7% of market share, respectively.
Various types of retail formats like discount stores,
outlets, and multi-brand stores have also attracted
more attention than before. Meanwhile, internet
retailing recorded a high growth.
SOURCE: http://www.funggroup.com/eng/knowledge/research/industry_series25.pdf
SOURCE: http://news.fznews.com.cn/fzjj/2014-3-7/201437BviGvkANss2228.shtml
Department stores account for half of the total
revenue coming from apparel sales, remaining
the primary channel for mid-to high-end apparel.
However, some department stores have recently
reorganized their merchandise assortment to
reducetheirdependencyonapparelsales. Oriental
Department Store, a domestic store in Fuzhou, has
reduced the number of apparel products to focus
more on education products.

Department store
Intime Department Store
Ito Yokado Department Store
As department store operators launch and develop their private apparel label brands, they are seeking to
increase their profit margins and build customer loyalty by offering a comprehensive range of products.
Just Intime
pbi
Private label brand
Wangfujing Department Store FIRST WERT
Golden Eagle Department Store Aquila D’oro
IVREA
LISALEN
Antonghui
Women’s apparel
Apparel
Product category
Men’s apparel
Men’s apparel
Men’s apparel
Women’s apparel
Kids’ apparel

MARKET SHARE OF APPAREL BY RETAIL FORMAT
Department stores
Apparel specialist retailers
Grocery retailers
Leisure and personal goods specialist retailers
Non-store retailing
Other non-grocery retailers
36.3%
29.7%
5.6%
12.0%
11.0%
5.4%
2013

Apparel brand owners
and manufactures in
China choose self-
operated stores and
franchised stores to
sell their products.
“
Specialty stores are becoming increasingly
favored by apparel brand owners. Growth in
the number has been fast, already reaching
584,800 in 2013. Apparel brand owners that sell
through retail stores (specialty stores and outlet
stores) maintain control over price and other
activities related to their image. They still have
the opportunity to convey their brand’s image
and engage Chinese consumers, communicating
their values. Apparel brand owners in China
generally manage the most profitable stores or
strategic areas, handing over secondary locations
to franchisees as distributors.

Department stores are
the primary channel
for mid-to high-end apparel
distribution.
Hypermarkets and
supermarkets target
middle-income and
lower-middle-income groups.
“
SOURCE: Fung Business Intelligence Centre 2014

HYPERMARKETS
&
SUPERMARKETS
Hypermarkets and supermarkets are gaining
popularity in China as retailing channels for lower-
pricedapparelthatareusuallyunbranded(ordon’t
have enough brand recognition).
Interestingly, some hypermarkets have recently
launched their private clothing label brands
tailoring them a mass customer base with
affordable prices. For example, Auchan, a French
hypermarket chain, introduced a low-priced
private women’s wearbrands(Grey,Monochrome,
Pretty and Blue Jeans) in selected stores in 2014.
Wal-Mart, a hypermarket chain from the U.S., also
offers a comprehensive range of private label
brands tailored to meet local tastes in China.

Internet retailing
is the fastest growing
non-store sales channel
for apparel in China,
and currently represents
plenty of opportunities.
“

China’s
showrooming effect:
shoppers browse in
stores but buy online.
“
ONLINE
RETAILING
Online retailing is the fastest growing channel in
China for selling apparel products. In fact, more
and more Chinese consumers are choosing to
buyapparelproductsonline.Thetotaltransaction
value of China’s online apparel market reached
RMB 434.9 billion (USD70.75 billion) in 2013, with
a YoY increase of 42.8%, accounting for 23.1% of
China’s entire online shopping market.
However, Chinese consumers still research and
shop in store. Experts call this popular method of
shopping “China’s showrooming effect”.
SOURCE: http://www.chinainternetwatch.com/8942/online-apparel-market-2014/

E-COMMERCE,
O2O & OTHER
OPPORTUNITIES
For the past 10 years, China’s GDP increased
rapidly and people’s purchasing power grew with
it. With increased spending power, expectations
were also raised: a lot of Chinese consumers
are no longer satisfied with basic needs, they
expect higher quality, better service and a
reasonable price.
As consumers of private label clothing brands in
China are growing middle class, this sector has
sector has huge business potential.
O2O commerce (Online to Offline) is a new and
popular trend and often applied to private label
clothing brands in China.
SOURCE: http://daxueconsulting.com/o2o-business-in-china/

Meters/bonwe, China’s leading casualwear
apparelcompany,usedaQRcodethatwasprinted
on each product in their store. With a smartphone,
customers could read the QR code and visit the
official website of Meters/bonwe to get additional
information about the product they bought.
Zara established an online store (www.zara.cn) in
China in September 2013 to directly encourage
consumers to collect online purchases from their
physical outlets.
Apparel retailers are
exploring
O2O business
models to reach more
customers.
“

China’s apparel market
remains one of the fastest
growing markets in the
world.
The rise of e-commerce
and fast fashion
have further encouraged
its growth.
“

The booming e-commerce market in China is
indeed another opportunity for apparel retailers.
Some customers prefer to try clothes on in stores
and then buy them later online. Clothes in stores
are more expensive than online due to rent, labor
costs, costs for maintenance, management fees
etc. The whole e-commerce trend was a shock
at first for traditional department retailers. But
at the same time, e-commerce offered serious
advantages for other market players to grow.
Private label clothing brands in China have
experienced an upward trend as some
customers suffer from aesthetic fatigue for top
luxury brands and prefer new, customized,
personalized brands that appeal to their desire
for something exciting and unique.
Selling private label clothing brands in China can
also be a challenge for the management of the
retailer: it requires higher labor quality to deal with
complex situations, including sales analysis, brand
promotion, commodity display etc.
The transition from retailer to designer is not
easy though, and maintaining the quality of the
product is a challenge. This is a crucial point to
doing business in China as quality is increasingly
important to the Chinese consumer.
SOURCE: http://www.metersbonwe.com/

Overseas apparel brands or retailers
are also selling to Chinese consumers.
Some choose to enter the market via
onlineplatforms,andnotopeningphysical
stores. Miss Selfridge, for example, a
high street brand from the UK, entered
the Chinese market in September 2014
openinganonlinestoreonShangpin.com.
Other brands choose to reach Chinese
consumers through overseas online
shopping platforms called “haitao”. A
number of overseas apparel e-commerce
players establish partnerships with local
third-party online payment providers, to
be able to accept payment in RMB on
U.S. websites.
As the quality in China’s
apparel industry varies
greatly, private label
brands may be the
solution addressing
a growing
consumer segment
in the market.
“

CHINESE
MEDIA
“Over time many e-commerce enterprises have
entered the private label clothing sector. Clothing
products have a relatively high profit in traditional
industries. However, in e-commerce industry, most
brandsgainpopularitybutnotmuchprofit.Theimpurity
of purpose, lack of business model innovation and
so-called “light asset” e-commerce companies are
the main causes of the current situation.
Source: http://finance.eastmoney.com/news/1355,20120912250604754.html
“Since Wal-Mart launched its private label clothing
brand, it has won many customers due to its
competitive prices. Recently, Wal-Mart launched
nearly 200 “Autumn 2015 private brand clothing”
products, greatly expanding product segment
categories in order to hold more than 50% of the
price advantage compared to clothing in the market
with the same materials and quality.
Source: http://roll.sohu.com/20150828/n419991515.shtml

CHINESE
SOCIAL MEDIA
[Wuxi: Vanguard, Carrefour and etc. launched private label
clothing brands] Previously people used to go to the mall
or clothing stores for clothes, but recently many people
find clothing in supermarkets. Supermarket clothing are no
longer primarily for the elderly, but are getting more youth-
oriented and fashionable! Since supermarkets launched
their own brand of clothing, “granny clothes” have
disappeared from the shelves. The supermarket clothes
are relatively cheap, having to compete with fast fashion
and e-commerce in order to survive!
1

CHINESE
SOCIAL MEDIA
[Discovery: how to run a private label clothing brand] The
Chinese department store industry has been seeking a
breakthrough in the joint and self-operated models and
tryingtodeveloptheirprivatelabelbrands.However,private
label brands have a long history in western countries and
formedadeepunderstandingoflocalconsumptionpatterns
and habits. Brand clothing begins to attract more and more
consumers and cheap clothing sales have slowed down.
Private clothing brands remains at 30% -50% of the market.
2

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Consulting
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Private Label Clothing Brands in China | Daxue Consulting

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