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Fast fashion offers 'affordable luxury'

By WANG ZHUOQIONG (China Daily) Updated: 2014-05-31 04:37

Fast fashion offers 'affordable luxury'

A fast fashion brand shop in Shanghai. Fast fashion brands have quickly emerged to woo Chinese consumers who are interested in style and fashion at affordable prives. The apparel market in China rose to 1.53 trillion yuan ($245 billion) in 2013 from 904.78 billion yuan in 2008. [Photo by Jing Wen/For China Daily]

New generation of consumers looks for an individual style at a reasonable price

Customer focus makes Zara successful
It is easy to assume the key to Zara's success worldwide is because it's fast. But Zara believes it's more accurate to call its business model “customer-driven fashion” because it really is producing what customers in each country demand.

The proximity of manufacturing to product designers in Spain, the feedback loop and fast logistics are what makes that happen.

The Zara model means that it is constantly updating its collections throughout a season. By contrast, other brands tend to have a set collection each season that they don't constantly refresh. Zara has two deliveries each week, and in these deliveries there are always new products. This keeps the stores looking fresh as there is always something different to buy from week to week.

It also orders products in smaller batches. This means that if you want to buy the green wool coat, you'd better do it quickly, because Zara will not keep making that green coat. This business model obviously enhances the “scarcity” of products, which encourages people to “buy now because there may not be any later”.

Inditex and all of its brands are based in Spain, and so are its designers. It also carries out more than half of its manufacturing in or close to Spain. This gives it a high level of control over production, which means it can produce things very quickly.

For example, if store staff in Shanghai, Tokyo or New York notice a new trend in street fashion, or they find that customers come in and ask for a certain kind of product, it can be rapidly produced close to the headquarters and delivered to stores all over the world in a matter of weeks. This would not be possible if the majority of manufacturing was done far away, because the turnaround of products would be a lot slower.

There is a constant feedback loop between stores all over the world and product developers in Spain. Every day, store managers all over the world are speaking with product teams in Spain about what is selling well, what isn't selling well and why. Their insights come from observing customers to see what they like and what they want. There's also a lot of data. This means Zara can rapidly change and improve products from week to week.

For example, maybe a blue wool coat isn't selling well because customers want it in purple. So in a matter of weeks, the company can develop it in purple. Or people keep coming into stores and asking for black sandals with a gold buckle. When sales staff hear that over and over, the message goes back to the headquarters, where they can start making black sandals with a gold buckle and have them in the stores in a matter of weeks.

- WANG ZHUOQIONG

On a Friday night this spring, 26-year-old Miranda Lin in Beijing set off for a date, wearing a gray turtleneck top and pink pleated skirt from fast fashion brand Zara Espana SA, a division of Spain-based Industria de Diseno Textil SA, known as Inditex.

A regular visitor to stores featuring the fast fashion brands from Zara, H&M Hennes & Mauritz AB and Uniqlo Co Ltd, Lin said fast fashion garments are the closest she can get to the latest styles.

"The best part is that they come at a more affordable price," she said.

"Because of that, I can change my wardrobe every season and I feel confident about myself," said Lin, who occasionally purchases luxury bags and accessories to go with her fast-changing wardrobe.

Lin is among a rising number of Chinese urban consumers who have grown interested in fast fashion clothes, supporting the expansion of such brands despite the slower growth of retail sales overall in recent years.

"Fast fashion, which can also be termed 'affordable luxury', has answered the needs of a young generation of Chinese customers who are longing for international fashion and a fashion identity," said Lu Xiaoming, founder of Organic Plus, an organic makeup producer based in Shanghai.

Five years ago, an affluent customer in her 20s would be showing off a Chanel outfit. But that type of customer has become more confident, and she's looking for something that's just right for her, not just something with a pricey logo, he said.

Fast fashion's rapid rise

Fast fashion brands have quickly emerged to woo Chinese consumers who are interested in style and fashion at affordable prices. According to statistics from Euromonitor, the apparel market in China has been booming, rising to 1.53 trillion yuan ($245 billion) in 2013 from 904.78 billion yuan in 2008 .

Meanwhile, sportswear companies are lagging, and their growth has been weak compared with their fast fashion competitors.

The sluggish sportswear market has hit the expansion plans of the two international sportswear giants, creating challenges including high inventories.

In contrast, international fast fashion brands have emerged quickly. Uniqlo, a division of Fast Retailing Co Ltd, doubled its brand share from 2010 to 2013. So did Zara and H&M.

There are more than 450 Inditex stores in China. As of Jan 31, 152 of those stores were for the Zara brand, 61 Pull & Bear, 53 Massimo Dutti, 64 Bershka, 66 Stradivarius, 42 Oysho and 17 Zara Home.

Last year, Inditex's global sales rose 5 percent to 16.72 billion euros ($23 billion) and net income was up 1 percent to 2.38 billion euros. In 2013, the group opened 331 new stores, taking the total to 6,340 globally in 87 markets.

China remains a key market for Inditex. Pablo Isla, chairman and chief executive officer, said that by January 2015 "we expect to have over 500 stores in China so we continue to grow significantly".

He said the company also continues to invest in refurbishing existing stores, for example the Zara in Shanghai's West Nanjing Rd, which opened up again last year after modernization, as well as the refurbishment of the unit at The Place in Beijing.

"We have seen strong activity in China in terms of openings and this will remain the case in the coming years," said Isla on a conference call in March. Another top fast fashion company, H&M, has strengthened its presence in first-tier cities with a new flagship store that's opening in Sanlitun, Beijing.

That will be store 200 on the Chinese mainland. Meanwhile, a new store of 3,100 square meters in Shanghai has labeled as the largest store for the company in China.

Since its entry to China in 2007, China has become the fastest-growing market for the H&M group.

The country is playing a strategic role in the company's global expansion as well. Fredrik Olsson, H&M's head of expansion, who has made many trips around China, said: "We are now in all the largest cities and are continuing to expand [in China], while at the same time we are also opening stores in more growing cities.

"There are far in excess of 100 cities in China with a population of more than 1 million."

In 2013 alone, H&M opened a net 71 new stores in China, an increase of 53 percent on 2012, taking the total number of stores in the country to 205. The newer brands are also expanding in China - COS, Monki and Cheap Monday.

In 2013, H&M increased global sales by 9 percent in local-currency terms to the equivalent of more than 150 billion kronor ($22.7 billion). Gap Inc launched its brand Old Navy recently in China, contributing to its growing store base in the world's second-largest apparel market. The company will highlight China as its largest growth initiative where it expects sales to reach $1 billion in three years.

Ben Cavender, an analyst at the China Market Research Group in Shanghai, said the aggressive expansion of fast fashion brands including H&M and Uniqlo is the result of rising interest among Chinese consumers in products that offer style and quality, instead of premium brands in luxury categories. He said the quick expansion of these companies indicates that more fast fashion brands want to make sure they are building relationships with Chinese consumers early on before these shoppers become familiar with too many other competing brands.

"Chinese consumers are more sophisticated and have more understanding of products," he said. The government's austerity campaign has also created an environment that has encouraged consumers to avoid being too flashy and obvious, which has cut into the popularity of luxury brands, Cavender added.

In addition, he said that Chinese consumers still like luxury goods, but most of their purchases are made outside of China because domestic prices are higher for the same items.

Cavender noted the importance for fast fashion retailers of building market share by designing for local customers in terms of fit and style. Designing for China could raise some costs but it makes sense in the long term, he said.

Going online

Beyond sprucing up physical stores to attract more customers, online shops can offer a major boost, said Cavender. He said that e-commerce is a boon for regions that don't have as many malls as first-tier cities. It's also ideal for customers who are too busy working to go shopping.

He cited Uniqlo's collaboration with Tmall as an example. Cooperating with Tmall, the leading e-commerce platform of Alibaba Group Holding Ltd, often helps fast fashion retailers to increase their sales. "Brands will have more control if they have their own website, but it is difficult to get the same amount of traffic as Tmall," he said.

Magnus Olsson, H&M's country manager for greater China and Southeast Asia, said the company will launch its own e-commerce business in China by the end of this year.

The group has already established an online presence in nine countries. Gap, Zara and Ryohin Keikaku Co Ltd's Muji, based in Japan, have also introduced their own websites.

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