According to the recently published study “China’s Apparel Market 2012” by Hong Kong-based trading group Li & Fung, China’s fashion retail in third and fourth-tier cities will soon become rather competitive as domestic and international  fashion brands crowd into these cities while competition in first-tier cities continues as before.


Those international fashion brands that successfully penetrated the Chinese market opened numerous new stores in 2011 - Uniqlo 43, H&M 31, Zara 29, C&A 11 and Gap Inc. 5 to be precise. Nothing unusual weren’t it for the fact that 80 percent of these new stores didn’t open in first-tier cities but in second and third-tier ones. Nike and Adidas too announced their expansion into smaller cities. Instead of Beijing, Shanghai and Hong Kong (the latter still the springboard for many an entry into China), cities like Wuhan, Wuxi, Changsha, Fuzhou, Xiamen and Wangfujing will soon call the shots in retail.

Chinese brands like Youngor, Fuguiniao, Joeone and Septwolves respond by maintaining their foothold in first-tier cities while expanding in third and fourth-tier ones. In addition, those focused on international markets like Bosideng, Trendy, Qeelin and Metersbonwe plan to expand into European and American markets as well.

Thus, China is on a firm growth path and on its way to overtaking the US in becoming the world’s largest retail market. "Retailers operating in China are no longer just focusing on the bigger first and second-tier cities. They're now expanding in third and fourth-tier cities as disposal incomes in these untapped markets increase," said Carrie Yu, PwC's retail and consumer leader for China and the Asia Pacific. However, the luxury market remains firmly in the hands of international brands. According to a survey by Hurun Research Institute, Louis Vuitton, Cartier, Hermes and Chanel are the luxury brands most favoured by Chinese millionaires. Though there may still be a dearth of home grown luxury labels, the existing ones are reaching for international markets as well. China’s self-proclaimed first luxury brand Ne Tiger opened studios in the US, France, Italy and Russia and luxury label Trand is quite well known outside of China.

According to the National Bureau of Statistics of China, retail sales for clothing, shoes, hats and textiles rose in 2011 by 24.2 percent year-on-year to 795.5 billion yuan (95,7 Milliarden Euro). In the first three quarters of 2012, they increased by 17.8 percent and a retail volume of 666.5 billion yuan (80,2 Milliarden Euro).

It is interesting to note that urban households in China spend about 11 percent of their annual expenditure on clothes, whereas rural households spend only 7.2 percent. Chinese consumers exert a good amount of self-control when shopping; of those surveyed, most gave seasonal changes or a need for replacement as reasons for buying new clothes rather than impulsive buying behaviour. However, 50 percent admitted to being influenced by promotions and discounts. Around 38 or 27.6 percent of all apparel sales were realized in department stores and clothing and footwear specialist retailers, respectively.


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