Global Fashion Retailers Rushing into China market - Business - Sales

Global Fashion Retailers Rushing into China market

August 25, Leading international fast fashion retailers are establishing or strengthening their presence in China, eyeing the country's ever-growing consumer market.

American fashion house The Gap Inc. owner of Banana Republic, Piperlime and other brands, in June announced plans to enter China by opening four flagship stores in Shanghai and Beijing by the end of 2010, each with a floor area of over 1,000 square meters.

Gap's move is the latest by global retailers, including Spanish firm Inditex SA, owner of high-street chain Zara, to establish a presence in the world's fastest growing consumer market.

Since entering China in 2006, Zara has set up 34 stores in the country. It is reportedly opening its first store in the southern city of Guangzhou this year. Vice Chairman of Inditex, Pablo Isla, said previously that Zara will be present in 50 Chinese cities in 2012.

Swedish retailer Hennes & Mauritz AB (H & M, STO: HMB), Europe's second-largest fast fashion retailer, entered Hong Kong and Shanghai in 2007 and later expanded into second-tier cities such as Hangzhou and Ningbo. It currently operates 27 stores in China.

Japan's Fast Retailing Co. Ltd. Asia's largest clothing retailer and parent of the Uniqlo brand, restarted its China operations in 2007 after pulling back a year earlier.

Uniqlo, which had 64 stores in China as of May, will accelerate its development in China and open 1,000 large-scale stores in the country over the next 10 years, the official People's Daily reported in May, citing Tadashi Yanai, Fast Retailing's CEO.

"I hope Uniqlo China's sales will exceed one trillion yen, and overtake Japan as its largest market," Yanai was quoted as saying.

The company opened its China flagship store on Shanghai's high-end Nanjing East Road earlier this year.

German firm C&A, whose portfolio of in-house brands includes Clockhouse, Westbury and Your Sixth Sense, has set up 19 China-based stores since 2007.

With an eye on boosting growth in China, a number of international retailers are also reportedly eyeing the country's fast-growing e-commerce market, which generates more than RMB 100 million annually for Uniqlo, according to a Southern Metropolis Daily report.

Zara, which recently began its online sales network in Europe, also said it planned to target China's online consumer market from 2011, the paper said.

While global competitors are racing to cash in on China's soaring consumer spending power, leading Chinese clothing retailer Shanghai Metersbonwe Fashion & Accessories Co. Ltd. (Metersbonwe, 002269.SZ) has met with difficulties in its expansion plants in the first half (H1) of this year.

Metersbonwe posted an 82% year-on-year drop in H1 net profit attributable to shareholders to RMB 40.33 million, down a staggering 82% year-on-year.

The company attributed the sharp decrease to rising production and sales costs, as well as reduced financial subsidies from the government.

Metersbonwe, which owns the prominent Chinese labels Metersbonwe and Me & City, was the first domestic retailer to start SPA (Special Stores with Private Label Apparel) operations, a concept created by Gap in 1986.

The SPA model has worked well for both Gap and its European counterparts; Inditex, H & M and British firm Next Retail Ltd. have all developed steadily since their application of the model in the 1990s.

But Metersbonwe's SPA experience has been less impressive; the retailer saw a 24.77% drop in 2009 net profit despite a 16.63% rise in sales revenue, according to its 2009 financial report.

Buoyed by its successful listing in August 2008, Metersbonwe has focused on expanding its network of outlets to boost growth and enhance its presence in the domestic market. The company opened 111 stores last year, 80 of which were for its upscale Me & City brand.

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