Is There More Risk in China For Brands Than Before?

on April 3 2013 | in Retail Trends | by | with 2 Comments

retail, China, J Crew, Gap, Lane Crawford

Women’s Wear Daily recently reported that 70 percent of Chinese feel apparel from international brands is more fashionable than Chinese labels and that 62 percent feel outside brands have a better overall reputation than those from China, according to data from the Chinese Consumer Survey.  While U.S. brands are anxious to capitalize on their popularity, analysts warn that factors like economic slowdown and a potential housing bubble in China should curb these brands’ enthusiasm.

“There’s more risk in China than there had been,” said Howard, chairman of Manhattan’s retail consulting and banking firm Davidowitz & Associates, Inc. “Now if you’re a rational person, you have to see there’s more risk. If your business is not there already, you should be researching it before jumping in. It’s time to slow down a little. Open just a couple of stores at a time.”

Three American companies that have had their share of mistakes, Davidowitz said, are Walmart, Carrefour and Tesco: “The top three retailers in the world saw same store sales growth decline 27 percent on average in 2012. And they’ve all reduced their expansion plans.”

Some  American clothing brands, however, see strong consumer demand and are growing. Gap, for instance, has become enormously popular among Chinese shoppers. The brand just opened six stores in the country, and hopes to 45 Gap and Gap Outlet stores there by the end of the fiscal year. J. Crew is also finding new popularity in China thanks to its arrangement with the popular Lane Crawford department stores.

And what do the experts think? “It’s a mixed bag with some doing well and others going down — although the luxury sector is clearly doing better than others,” Davidowitz said. “Still, some — like Tiffany and Burberry — are down. But I believe China is in a steady recovery and I continue to believe in it. The brands will continue to believe in it. But they’ll all be more cautious, as well.”

Chinese Consumer Survey reports that 28 percent of women, 30 percent of consumers age 20-to-29, and 30 percent of Tier 1 shoppers are more likely than their counterparts to plan on purchasing more clothes in the coming year. Experts worry that if more Chinese take on home mortgages, they will have less disposable income for retail shopping.

Despite market uncertainties, the morale of the masses remains strong. The Cotton Council International and Cotton Incorporated Chinese Consumer Survey revealed that 87 percent of Chinese consumers are “very or somewhat optimistic” about economic conditions in their household over the next year.” The Chinese GDP is expected to grow 7.5 percent this year. At the same time, the U.S. GDP is supposed to fall from 2.2 percent in 2012 to 1.6 percent in 2013, according to the Bureau of Economic Analysis.

photo credit: thinkretail

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2 Responses to Is There More Risk in China For Brands Than Before?

  1. Kevin says:

    Would like to know where info about Gap comes from. Reliable sources tell me they are getting whipped in China. Not surprising considering that their products are not appealing to Chinese customers and their marketing is severely lacking.

  2. Ria Fernandez says:

    I agree, I think this market is just starting to be so saturated with brands, new-comers should really be wary. We recently just did a study on the Fashion market in China, and thing is, apart from all the western brands that have taken over… there is also the local industry that is growing as well! While there is a lot of money to go around, it is still a lot of market share to compete with.

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