The China Fashion Market - An analysis of opportunities for Finnish Fashion Brands.

1. 1
The China Fashion MarketAn analysis of opportunities for Finnish Fashion Brands
Client: Finpro
Date: 29, October 2015

2. 2Table of Contents
About Mark Greiz……………………………………………………….
PART 1 GEOGRAPHICS AND ECONOMY
China Map……………………………………………………
Population………………………………………………….….
Administrative Levels………………………………….…..…
Tier System……………………………………………………..
GDP…………………………………………………................
Economy……………………………………………...……….
Income per capita…………………………………………..
Income distribution…………………………………………..
Retail growth rate………………………………………….…
PART 2 APPAREL MARKET
Market Overview……………………………………………..
Expenditure on clothing………………………….…………
Category size………………………………………………….
Women’s wear top brands….....…………………………..
Men’s Wear top brands…………………………….…….…
Men’s Wear opportunities…………………………………..
Chinese sports and casual wear brands........................
Up and Coming Chinese fashion designers…...……..…
Children’s wear………………………………………………
SECTION I THE CHINA MARKET
6-8
12-13
10
11
14-17
43
41-42
40
39
38
37
36
34-35
31-33
29
24-28
23
21-22
18-20

3. 3Table of Contents
PART 2 APPAREL MARKET (Cont’d)
Foreign Brands………………………………………………..
Fast fashion brands………………………….………………
New Market entrants………………………………………..
Luxury market………………….....…………………………..
PART 3 DISTRIBUTION CHANNELS
Department stores………………………………..….………
Shopping Malls……………………………………………
Specialty stores…………………………….....................
Multi brand stores……………………………………...…
Street Style…….……………………………………….…..
Sizing………………………………………………………...
Online Sales overview……………………………………
Online Sales Fashion………………………………...……
Online Sales Platforms……………………………………
Online Shopping Habits………………………………….
Key Consumer Segments………………………………..
Chinese dream…………………………………………….
44
45-46
47
48-57
58-62
63-65
66
94
88-93
86-87
83-85
79-82
73-78
71-72
70
67-69

4. 4Table of Contents
PART 1 Common Distribution Models
Common modes of Market entry…………………….……
Distribution models……………………………….………..…
Distributors & 3P Showrooms …………………..………..…
Finland co-op showroom……………………….…………..
Finland Style Branding……………………………….…..….
Co-Branding………………………….……………................
PART 2 E-commerce
Overview…………………………………………………….…
Export via overseas website…………………………….……
Export via third party platform………………………….…
China based company site….....……………………….…..
Finland Style APP…………………………………….……....…
PART 3 High intensity Models
Franchising………..…………………………...........................
Department stores………………………………............……
Co. owned Store…………………………………………...…
Direct Investment Models…………………………………....
PART 4 Trade Shows……………………………………………….…..
SECTION II MARKET ENTRY & OPPORTUNITIES
96
97-101
103-111
112-117
118
119
121
122-123
124-134
138
135-137
140-141
142
143-144
145
146-153

5. 5Table of Contents
PART 1 Digital Marketing
Overview…………………………………………………………
Social Media………………………………………………….….
KOL PR Practices………………………………….…………..…
Video sharing……………………………………………………..
SEO…………………………………………………......................
Digital Optimization ……………………………………………..
PART 2 Branding
Overview…………………………………………………………
Youth marketing……………………………………………….
Marketing to Men……………………………………………..
Marketing to Women…………………………………………
Localization……………………………………………………..
PART 1 SUMARY & RECOMMENDATIONS
Key findings………………………………………………………
Market entry recommendations…………………………..…
Trademark registration………………………………………..
PART 2 APPENDIX
Visuals and mock-ups………………………………………….
SECTION III MARKETING
156-161
162-170
171-173
174-176
177
178
179-183
196-197
198-200
201
202-222
SECTION IV SUMMARY
184-185
186-190
191-193
194

6. 6
Twenty years experience
in Asia
.
ABOUT
MARK GREIZ
Speak Mandarin and Japanese
Featured in print, TV and
Radio
Lecturer:
Fashion Institute of Technology
Lim College
Academy of Art U.
IFA Paris-Shanghai
Focus on:
Fashion
Cosmetics
Athletic wear
Health and fitness
Home textiles
Cosmetics
Accessories
Hospitality
Working relationships with:
The China Fashion Association
Moen Design
Shanghai Fan Ze Lai Decoration
V. Show Group
and key OEM and private
label manufacturers for apparel,
home textiles, cosmetics and
accessories and packaging.

7. 7
China’s Apparel
Market
Is the most exciting
in the world.

8. 8Market Overview
Formalizeddistribution
Top 20 growth cities for women’s apparel sales 2010-2025
11 out of top 20 growth cities are from the China Market
Source: McKinsey & Co.

9. 9Market Overview
Formalizeddistribution

10. 10Market Overview
Total retail sales of clothing, shoes, hats
and textiles 2009 - 2013
Approximately $185 Billion
Source: Li & Fung

11. 11Category Size
Retail sales of selected apparel
categories in China
Category 2014 Market Size CAGR (2013) CAGR 3 YR
Women’s 8% 5%
Men’s CNY 521 billion* 7% 4%
Children’s CNY 25 Billion* 12% 11%
CNY 750 Billion*
USD 118 Billion
USD 82 Billion
USD 4
*

12. 12Ladies Wear
Top 10 Brands
Brand Share (%) Origin
Vero Moda 3.82 Denmark
Only 3.78 Denmark
Girdear 2.37 Taiwan
Ochirly 1.66 Hong
Kong
Juzui 1.61 China
Marisfrolg 1.52 China
Elegant
Prosper
1.51 China
La
Chapelle
1.46 China
E-land 1.36 Korea
Amass 1.34 Taiwan

13. 13Men’s Wear
Top 10 Brands shirts and suits
Brand Origin
Youngor China
Shanshan China
Goldlion China
Romon China
Vicutu China
Joeone China
Baoxiniao China
Pierre Cardin France
Hongdou China
Selon Hong Kong

14. 14Men’s Wear
Opportunities
Men are looking for unique looks
Men want to improve their personal style
Increasing demand in Men’s grooming,
health and fitness categories
Increased jobs in creative industries
Men are increasing competitive
Opportunities exist in Tier 1 & key Tier 2 cities
for imported Men’s wear and niche
brands
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15. 15
Chinese Brands
Up and Coming
RanFan
Simon Gao
Helen Lee
TANGY
Jiwenbo
HeYan
Stella Lam
White Collar
Boundless
Masha Ma
Jefen
Uma Wang
Black Spoon
C. J. Yao
M.O.F
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16. 16
In general, domestic brands
dominate the mass market
while foreign brands are usually
more popular in the mid- to
high-end market and tier-1 and
tier-2 cities.
Foreign Brands

17. 17
China is the largest international
market for ZARA and Uniqlo
China is the largest international
market in Asia for H&M and C&A.
Fast fashion
Brands

18. 18New Market
Entrants
41% 33%
39%35%
24% 28%Recent entries include:
Abercrombie & Fitch (US)
Old Navy (US)
Forever 21 (US)
New Look (UK)
Topshop (UK)
Maje (France)
Sandro (France)
Kooples (France)
Paula Ka (France)
Bruno Magli (Italy)
Gu (Japan)
✜
✜
✜
✜
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As established brands further develop Tier
2 and tier 3 cities, a continual stream of
new brands enter the market.
✜
✜
✜
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19. 19Luxury
Market overview
41% 33%
39%35%
24% 28%
Mainland China Luxury Spending

20. 20
Distribution
Channels

21. 21
Department Stores
41% 33%
39%35%
24% 28%
o Account for 36% of apparel distribution
o Top 40 department stores groups total approx 3900 stores
o Main channel for mid-to high-end apparel
o Around 50% of the total revenue of department stores come from apparel
sales.
o Many department store adopt the concessionary operating model.
o Commission rates are around 17 - 20%.
o Department stores are very promotionally driven with the stores controlling the
weekly sales product promotions and special holidays such as Chinese new year,
golden week, etc in which most brands need to participate.

22. 22
Shopping Malls
41% 33%
39%35%
24% 28%
o Most specialty
brands will be
present in both malls
as standalone stores
and department
stores as shop-in
-shops because this is
essential to extend
their reach across all
cities.
o In 2013 China built
half half of the brand
new mall space in
the world.
o Between 2011-2014
in Chengdu 3
million square meters
of mall space was
complete.
o More new mall
space was built in
Chengdu in 2013
than in all of Europe
including Russia
(422,000 Sq meters)

23. 23
Specialty Stores
41% 33%
39%35%
24% 28%
o Account for 30% of
apparel distribution
o 12% YOY growth in
2013
o Number of outlets of
apparel specialty
retailers nearly 600,000
o Most brands operate a
combination of self
-operated and
franchised stores.
o Company owned (tier 1
and 2) and franchise
(smaller tier 2 and tier 3)
o Better control over
merchandising, store
interior, promotions and
marketing strategy.

24. 24
Multi Brand Boutiques
41% 33%
39%35%
24% 28%
o Growth of multi brand
concepts
o Industrial, Alter, Xinlelu,
STARS, Spaceship,
Dongliang, Triple Major,
Maria Lusia, Tuan Tuan,
Dressing for Fun,
Galatea Wan,
mianhua tian, Project
Aegis, BNC, Arrtco, 01
Men
o Offers unique, niche,
avant garde local and
international brands.
There are over 900
multi brand buyer
outlets in China with
an annual revenue
over 6 billion RMB.

25. 25
Multi Brand Boutiques
41% 33%
39%35%
24% 28%
Store sizes range from
100 sq meters to 8000 sq
meters (The Fashion Door
Guangzhou).
Average store revenue is
US$1,000,000 per year
with top earners at over
UD$7,000,000 per year.
By 2020 the number of
Multi brand boutiques
is planned to exceed
5,000 stores with an
annual revenue of more
than 60 billion RMB.

26. 26
Multi-brand Stores
41% 33%
39%35%
24% 28%
Kun Man Ma
Junya Watanabe,
Christopher Kane
Roland Moure
mugler
Viktoria Chan
Berenik
House of V
Norwegian Rain
jacquemus
Undercover
Band of Outsiders
Patricia Motta
Ristro
Gabriel Lab

27. 27
Street Style
41% 33%
39%35%
24% 28%
Opening up of society
Exposed to new ideas
Want to express individual style
Traveling
Taking risks
Creative industries
According to
research 75%
of Chinese
consumers are
willing to try
new brands

28. 28
618 million
Internet Users
The number of Chinese using the Internet grew 8.5% and Mobile Internet users grew
even faster, by 19.0% over the prior year
Internet Users 2013
MOBILE AND
500 million
Mobile users

29. 29
Online Sales
2014
o Online retail sales in China totaled $458
billion in 2014
o U.S. online sales were $297 billion.
o In 2014, Chinese e-commerce contributed
to 19.4% of GDP growth and 33.5% of total
retail growth

30. 30
Online
41% 33%
39%35%
24% 28%o Online retailing is the fastest growing retail
channel for apparel in China.
o Approx $ 75 billion in 2013
o Approx 27% of total apparel spending
o Approx 27% of total online spending
Apparel

31. 31
Online
41% 33%
39%35%
24% 28%
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
2011 2012 2013 2014
B2C
C2C
Proportion of online sales to platform

32. 32
Online
41% 33%
39%35%
24% 28%
B2C and C2C
C2C: Taobao
B2C Platforms:
Tmall, JD, Dangdang,
Yihaodian, Jingdong
B2C Self operated
sites:
Vancl, Coach
In 2011 approx 6% of
online sales trasaction
value was from B2C
self-operated sites. In
2013 approx 28%

33. 33
0 20 40 60 80 100
Shop Online Weekly
Made first online
purchase < 4 years ago
Buy products on social
media
Shop on mobile phones
Shop on tablets
China
China
0 10 20 30 40
Shop online weekly
Made first online
purchase < 4 years ago
Buy products on social
media
Shop on mobile phones
Shop on Tablets
US
US
OnlineShopping habits
Source: PwC’s Global Total Retail Survey Feb 2014

34. 34
China Market EntryAnd opportunities
SECTION II

35. 35
Lorem Ipsum has two main statistical methodologies are
used in data analysis which summarizes data.
Lorem Ipsum has two main statistical methodologies are
used in data analysis which summarizes data.
Distribution Models
China Major Apparel
Retailers
Brand Owners
Agents/
Showrooms
Distributors
Sub-distributors
Wholesalers
Retailers
(Dept Stores)
Customers
Brand Owners
Brand Owners
Brand Owners
Distributors
Sub-distributors
Wholesalers
Retailers
(Dept Stores) Customers
Retailers
(Multi-brand
stores)
Showrooms Customers
Retailers
(Multi-brand &
Dept stores)
Customers
Brand Owners Customers
M.1
M.2
M.3
M.4
M.5

36. 36
Showrooms
Wholesale buyers and vendors get
together to do substantial business at the
recent addition of multi-brand
showrooms in China’s fashion capitals.
Services vary showroom to showroom
but include:
o Fashion sales agency
o Liaison with distributors, retail property
developers, multi-brand stores and online
shops
o Retail consultancy
o Buying services
o PR
o Brand Management

37. 37
Showrooms
NC Space, VDS
Showroom, Project
Crossover, Mi, AMF， WH
Showroom, SOMI, DFO
(Danube Fashion Office)
NHEW Showroom.

38. 38
FINLAND STYLE
STUDIO
Inspiration
Creativity
Networking
Building a home in the china market
Will act as a tool to promote Finnish
fashion to the Chinese consumer,
retailers, co-branding partners, investors,
distributors and the media.

39. 39
FINLAND STYLE
 Collaborative showroom just
for Finnish brands
 Buyers from all over China and
Asia can access the latest
collections and order throughout
the year
 Retain full control of your
marketing and sales strategy
 Control sales directly with retailers
 Establish enduring relationships
with buyers
STUDIO SHOWROOM
 Can be launched as a partnership
enterprise or JV by select Finnish
brands or by Finatex or another
government agency.

40. 40FINLAND STYLE
STUDIO POP UP TOUR
Pop up store tour in key
Tier 1 and Tier 2 cities
To build awareness for
Finnish brands, webstore
and to build
followers to weibo.
 Shopping centers
 Outside dept stores
 Pedestrian malls
 Creative parks
 Fashion and
entertainment
hubs (Xintiandi,
Sanlitun)

41. 41FINLAND STYLE
BRANDING

42. 42
China Market Entry
And opportunities
E-commerce

43. 43
Three Options
Exporting direct from
overseas website
Via third party platform in
China
Via China hosted e-
commerce site
E-Commerce

44. 44
Advantages
Does not require ICP License
Does not require company
set up
Low financial risk
Easier to manage
Exporting direct
from overseas website

45. 45
Concerns
Culture
Is your site localized for China
Local contact
Do you have effective customer support?
Customer service contact in China
Payment/Price
Can you accept Union Pay and Alipay
Price Escalation-duties, express shipping
Delivery/order fulfillment
From Finland?
From warehouse in China?
From Regional warehouse?
Return procedures
Promotion/Performance
Building awareness of your site
Site download speeds
SEO on Baidu
Exporting direct
from overseas website

46. 46
Taobao
China’s largest e-commerce site
C2C and B2C
Hosts more than 6.2 million online
stores
Nearly 800 million product listings
Over 50,000 items sold on their
website every minute
Over 2500 items of clothes sold
online every minute
E-Commerce sales
Via third party platform in China
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47. 47
Taobao
Companies with no legal entity in
China can set up a store on TaoBao.
Requires a Chinese bank account and
a Chinese Resident Identity Card.
Need to partner with a Chinese
national
Not recommended as a means of
market entry for foreign fashion brands
o Fake brands
o Grey market products
o Less reputable stores
o Less protection than Tmall (no
mandatory 7 day return policy)
E-Commerce sales
Via third party platform in China





48. 48
Tmall
Global retailers from fast fashion to
luxury are opening on Tmall.
Companies set up their own virtual
store
Seller pays a deposit to list and Tmall
collect 5% commission on each sale
WFOE’s are required to set up an
official virtual store
Tmall gives sellers access to backend
tools and analytics that are not
available for Taobao sellers.
E-Commerce sales
Via third party platform in China





Highly recommended to open on Tmall after there
is experience and brand recognition in China

49. 49
Tmall Global - tmall.hk
Overseas companies without China
business licenses can apply to Tmall
Global.
Orders can be fulfilled and shipped
from outside of China, and customer
payments are settled in the home
currency.
Companies are required to provide a
China-based product return
arrangement and Chinese-language
customer service support.
E-Commerce sales
Via cross border third party platform in China

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

50. 50
Other sites
Shangpin
Xiu.xom
Yoox.cn
Moonbasa
Higo APP
E-Commerce sales
Via third party platform in China
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51. 51
Single or Multi
Brand
WFOE’s are needed to
establish e-commerce sites
in China
Must have applicable ICP
and business licenses
Essential for long term China
strategy
E-Commerce sales
Via company owned site in China
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52. 52
China Market Entry
And opportunities
Trade shows

53. 53
Trade Shows
Asia's largest fashion trade fair. New section named 'International Fashion Journey’
aims at connecting Chinese industry professionals to the latest brands emerging
from Europe and Asia. Different areas showcase influential Chinese fashion labels,
menswear labels, bespoke, casual and sportswear brands, women's wear labels,
fashion accessories brands, young designers, leather, fur, outdoor labels children's
wear and the newest fashion technological systems. Oct 18-20, 2015 & March 16-
20 2016
China International Fashion Fair

54. 54
Trade Shows
MODE SHANGHAI is the official trade show of Shanghai Fashion Week. It
connects global fashion, apparel and accessory collections with Asian
buyers from department stores, shopping malls, select shops and
distributors. Oct 15-Oct 18
Mode Shanghai

55. 55
Digital Strategy
Localization of site features:
• Content, hosting location,
load time, navigation,
visual design, models,
Live Chat, Integration of
Social Media.
E-Commerce:
• Adoption, functionality,
Tmall brand shop
presence & sophistication.
Pricing, loyalty programs,
sales.
Website &
E-commerce
Social Media
Sina Weibo, WeChat, Youku:
• Brand presence,
community size,
content and
functionality, frequency of
posting, engagement,
active fans, rewarding fans,
contests, m-commerce
integration.
Tips for a successful
Digital Marketing
Search, Digital media, PR:
• Baidu SEO and SEM
• Brand, product reviews and
popularity on Haibao, Yoka,
Xbiao etc.
• Blogger posts and reviews
• Youku vlogger marketing
• Advertising-banners
Mobile
Smart phone and Tablet
webpages and APP’s:
• Adoption, functionality,
sophistication, transaction
capability
• Mobile optimized webpage
is a critical reason for
consumers when choosing
an online shop.

56. 56
SUMMARY
SECTION IV

57. 57
FISC SHOWROOM INDIVIDUAL BRANDS (B)
Brands enter market alone.
Find showrooms to carry line
Trade show participation
Actively support showroom through:
• Local account manager
• Aggressive digital and marketing
strategy
• Merchandising, marketing and
promotional support to boutique
owners to differentiate brand at
point of sale, educate in-store staff
and encourage inventory turns.
• Localized product collections
• Investigate potential of shop in shop
in dept store either brand owned
or distributor financed or JV.
• Investigate potential e-commerce site
and Tmall
Brands enter market alone.
• Find showrooms to carry line
• Localized website
Minimal investment in other marketing
Advantages: lower financial risk
Disadvantages: low potential for
penetration, lack of brand awareness,
Low sales may encourage stores to drop
brand, Low sales may encourage brand
to leave market, no personal
relationships with buyers, low market
knowledge etc.
Open Showroom in Shanghai or Beijing.
Showroom has own e-commerce website,
APP and social media.
Individual brands are encouraged to have
their own localized website and social
media
Focus is to generate sales into multi brand
boutiques and dept stores, B2C
ecommerce and showroom sale events
1 account/showroom manager, 1 social
media marketing manager, 1
reception/accounting
Future plan to open multi brand boutique
RECOMMENDATIONS
INDIVIDUAL BRANDS (A)
MARKET ENTRY
Advantages: Full control over marketing,
medium financial risk, ability to develop china
centric strategy, economies scale, buzz worthy,
ability to localize products and co-brand
MINIMAL PRESENCE
#1#2 #3
Delay entry into China market
• Conduct research, focus groups
• Localize website
#4