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Fast-fashion retailers outpace luxury retailers in China expansion last year, but miss out online opportunity

Fast-fashion retailers expanded faster than luxury retailers in China last year as most of them exceeded their target number of store openings, according to KnightFrank Research. However, they have struggled to compete with domestic operators in online shopping.

Zara aimed to open 8 stores in 2013 but opened 22 while H&M opened 49 stores, exceeding its target of 44. Forever 21 met the target by adding one store in China while C&A beat its target of 35 by opening 39 stores. However, Uniqlo, surprisingly missed the target of 100 by adding 57 stores.

On the contrary, over 60 percent of the 45 international retailers surveyed by KnightFrank missed their targets due to a range of factors, including the difficulty of finding good quality sites, tightening government policies on anti-corruption, or a change in strategy for internal reasons.

Sixty-five percent of luxury retailers missed their expansion targets. For example, Prada planned to open 7 stores but ended up with four while Burberry opened 8 stores, missing its target of 11. Longchamp and Gucci aimed to add 9 and 10 stores respectively but opened none.

"Fast-fashion retailers are not only one of the most active segments of the market but they are increasingly forming the corner stones to many mid-tier and mid-upper-tier shopping centres. Far from shrinking in size in the face of e-commerce, new fast-fashion stores are typically highly spacious, multi-level and take up some of the best locations in the centre," said KnightFrank Research.

Among the stores opened last year by fast-fashion retailers, Uniqlo’s Guangzhou store tops the chart of the store size with 10,000 sq. m. while its Shanghai store taking up an area of 8,000 sq. m. H&M’s Hebei store covers 1,500 square metres while its Chengdu store spreads across 2,500 sq. m. Gap’s store in Beijing takes up an area of 1,100 sq. m. and Zara’s Shanghai store covers 1,300 sq. m.

"The rise of these mini-anchors is coinciding with the demise of traditional anchors such as old-format department stores. Rather than offering a value proposition of ‘everything under one roof’, these new concept stores offer highly curated environments and an opportunity to provide customers with a unique brand experience," KnightFrank Research pointed out.

"Store design and touch points are all used to transmit core values and brand essence. The value of this is captured by higher brand loyalty, which in turn leads to increased sales through all channels, whether in store or online," it added.

Despite fast expansion in China, fast-fashion retailers have struggled to overcome domestic dominance in online shopping market. Domestic operators such as Tmall.com and 360buy.com account for around 50 percent and 21 percent of the total B2C market respectively. However, international online shops represent less than 3 percent of the market share.

"International retailers who choose not to launch a platform on Tmall, such as Zara and H&M, miss out on exposure to a massive customer base as well as open the door to imitators selling products that masquerade as their own," noted KnightFrank Research.

Even if Gap launched an online store in Tmall, the space is too limited to market its full brand proposition to customers.

 

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