Shoppers looking at clothing and accessories at a Chloe shop in Shanghai. Chloe, the French fashion label owned by Cie Financiere Richemont SA, aims to add four stores in China this year in competition with its business rivals to win the trust of Chinese consumers, said Chief Executive Officer Geoffroy De La Bourdonnaye. Qilai Shen / Bloomberg
BEIJING - Bustling Xidan Street in downtown Beijing is home to dozens of clothing stores, featuring both foreign and domestic labels.
It is also testimony to the growing popularity of domestic brands. Not only are Zara and H&M full of chic teenagers, but so, too, are their Chinese competitor, MetersBonwe.
Furthermore, PYE, JNBY, Ochirly, Septwolves, Lilanz and Cabeen have all witnessed growth in sales over the past few years.
Chinese online apparel brand VANCL has been imitating H&M's marketing strategies, putting eye-catching low prices on their T-shirts, pants, and canvas shoes.
Li Ning, the final torchbearer during the opening ceremony of the 2008 Beijing Olympics and former gymnastics gold medallist, has also seen tremendous growth in his namesake company, Li-Ning Co Ltd.
His sportswear business is a top domestic brand in China, with more than 7,900 stores across the country. Although it has forecast a fall in sales and a 1 percentage point decline in gross profit margin for 2011, Chief Executive Officer Zhang Zhiyong told the Wall Street Journal that it plans to invest $10 million in its United States operations this year.
Li-Ning first entered the US market in 2007 by setting up a research and development center and design studio in Portland, Oregon. Among its staff are at least 30 veterans of companies such as Nike, Adidas, Converse and Columbia.
Li-Ning's products sold in the US include equipment and apparel for Asian-dominated sports such as ping-pong and badminton, niche areas in which Li-Ning is an established leader.
Other Chinese rivals to the likes of Nike and Adidas are Peak and Anta, which are both listed on the Hong Kong stock market and have successfully sponsored the US National Basketball Association (NBA).
Analysts predict China's sportswear market will grow from an estimated $7.2 billion in 2009 to around $12.4 billion in 2012.
"Privately-owned garment enterprises, compared with their overseas rivals, have the advantages of modern equipment and greater flexibility in product type, distribution channels and types of incentive systems," said Chen Chong, a retail analyst with Founders Security.
"Chinese brands are in a very fast development period," said Peking Tan, R&D director of Greater China with MillwardBrown, a world-leading research agency. "The rising Chinese brands also benefit from their huge domestic market, with which they are familiar."
Since the late 1970s, China's garment industry witnessed rapid development under the country's economic reforms and opening-up policies. Dramatic changes caused by these reforms have touched virtually every aspect of China's economy and society.
In 1992, China initiated efforts to establish a market-oriented economy. These reforms improved the flexibility and responsiveness of the Chinese apparel industry. Over time, the Chinese industry has progressed from being largely volume-driven in the 1960s and 1970s to being export-driven in the 1980s and early 1990s to being more consumer-oriented today.
In 1995, China became the largest apparel industry in the world with more than 3.9 million workers employed in 47,000 factories and companies.
China's sewing industry has long been concentrated in its coastal region, with its relatively convenient transportation and communications, good infrastructure and external economies of scale.
The coastal areas were among the earliest regions in China to implement economic reforms. This resulted in increased competition between Chinese private investors and foreign investors in the apparel industry .
"Having established the competitiveness of their brands versus foreign rivals, Chinese companies have several advantages. On the one hand, they tend to rely less on franchise stores than their foreign counterparts, giving them greater control over quality and brand management; on the other hand, local brands are generally more flexible in expanding into lower-tier cities," said Chen.
Chinese garments are well known in Western countries for their moderate or low prices. However, Western luxury brands remain very much a status symbol in China.
The World Luxury Association forecasts China will become the largest luxury goods market and its sales volume will reach $14.6 billion in the next four or five years.
Research from Bain Capital, one of the world's leading business strategy consultancy firms, showed that in 2010, sales of luxury goods increased substantially year-on-year by 30 percent in China, while sales declined in Japan and the US, the world's top two luxury goods markets.
The report said that compared with the strong growth inside the Chinese market, the huge purchasing power of the Chinese is apparent outside the country.
After decades of effort, a few made-in-China brands now produce high quality clothing for high-fashion consumers. Chinese shoppers not only line up outside Chanel and Louis Vuitton stores, they have also started to show off their purchases at NETIGER and Shanghai Tang.
"The Chinese, who used to be a bit shy about their culture and their economy, all of a sudden they won those medals," Raphael le Masne de Chermont, CEO at Shanghai Tang, was quoted by CNN as saying. "They started to feel proud to be Chinese."
That pride helps to support his company's hopes to conquer markets in the West. Shanghai Tang has opened stores in several world fashion cities including London and New York.
"Chinese brands have been recognized by mass consumers, but they are facing problems in building brand-reliability and trust," said Tan.
Because China is expected to be the world's biggest luxury market soon, Chinese culture and preferences cannot be ignored. More than 100 second-tier cities have populations with more than 1 million people and consumers there have both the buying power of their tier-one peers and an interest in luxury brands, according to a report by PricewaterhouseCoopers.
In the West, Chinese culture, Chinese designs and China elements are increasingly accepted. In addition, more Chinese are seeking out goods that emphasize their culture.
"Chinese luxury companies do possess a great opportunity to win the hearts and minds of Chinese consumers, especially when traditional Chinese elements are smartly produced with modern technology and marketing," said Sandy Chen, research director at TNS, a research firm.
(China Daily 05/23/2011 page13)