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© 2015 DAXUE CONSULTINGALL RIGHTS RESERVED
PRIVATE LABEL CLOTHING BRANDS
IN CHINA
SEPTEMBER, 2015
Daxue香港 上海 北京
Consulting
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TABLE OF CONTENTS1.0 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
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Private-label growth requires strategies
that are tailored to each market.
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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/
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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.
“
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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/
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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.
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PRIVATE LABELCLOTHING BRANDSIN 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
in order to develop their own private label clothing
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
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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.pdfSOURCE: 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
reduce their dependency on apparel sales. Oriental
Department Store, a domestic store in Fuzhou, has
reduced the number of apparel products to focus
more on education products.
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Department store
Intime Department Store
Ito Yokado Department Store
SOURCE: http://www.funggroup.com/eng/knowledge/research/industry_series25.pdf
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
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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%
SOURCE: http://www.funggroup.com/eng/knowledge/research/industry_series25.pdf
2013
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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.
SOURCE: http://www.funggroup.com/eng/knowledge/research/industry_series25.pdf
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Department stores are the primary channel for mid-to high-end apparel distribution.
Hypermarkets and
supermarkets target
middle-income andlower-middle-income groups.
“
SOURCE: Fung Business Intelligence Centre 2014
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HYPERMARKETS &SUPERMARKETS
Hypermarkets and supermarkets are gaining
popularity in China as retailing channels for lower-
priced apparel that are usually unbranded (or don’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 wear brands (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.
SOURCE: http://www.funggroup.com/eng/knowledge/research/industry_series25.pdf
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Internet retailing is the fastest growing non-store sales channel for apparel in China, and currently represents plenty of opportunities.
“
SOURCE: Fung Business Intelligence Centre 2014
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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
buy apparel products online. The total transaction
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/
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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/
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Meters/bonwe, China’s leading casualwear
apparel company, used a QR code that was printed
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.
SOURCE: http://www.funggroup.com/eng/knowledge/research/industry_series25.pdf
Apparel retailers are
exploring
O2O business models to reach more
customers.
“
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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.
“
SOURCE: Fung Business Intelligence Centre 2014
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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/
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Overseas apparel brands or retailers are also selling to Chinese consumers.Some choose to enter the market via
online platforms, and not opening physical
stores. Miss Selfridge, for example, a
high street brand from the UK, entered
the Chinese market in September 2014
opening an online store on Shangpin.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.
SOURCE: http://www.funggroup.com/eng/knowledge/research/industry_series25.pdf
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.
“
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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 brands gain popularity but not much profit. The impurity 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
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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!
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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 trying to develop their private label brands. However, private label brands have a long history in western countries and formed a deep understanding of local consumption patterns 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.
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