Will China Really Become the Next Fashion Giant?
While the answer to this question initially appears to be a matter of metrics, calculations and projected growth rates, an air of uncertainty looms over the landscape of the entire industry for a variety of reasons. Before exploring those implications, we can examine some positive traits of the Chinese fashion scene.
It could happen!
Industry experts across the globe have expressed that China has great potential to surpass the US fashion market in the relatively near future. The Chinese fashion market boasts calculated annual growth rates (CAGR) of 8% in revenues and 4.3% in sales volume. The other two leading markets are the US and the EU. The EU fashion industry is still ranked number 1 in revenues and sales, however their growth as stabilized, leaving room for China and US markets to rise in ranks.
This advancement is largely attributed to the growing popularity of e-commerce retailers and purchasing behaviors. Even WeChat started out mainly for social media but is now an e-commerce platform, reaching over 1 billion daily users. Additionally, the progress of the Chinese fashion industry is supported by an increase in middle class spending, as well as the already substantial amount of internal consumption and spending. In addition, ordere.com CEO, Simon Locke, attests to the number of Chinese students that have studied fashion in the US and returned home to start their own lines, which are being embraced more and more by consumers, in and out of China.
On the converse, there are political, social and even psychological barriers that must be overcome in order for China to become the largest fashion market and remain in this position.
Or could it?
The unpredictability of the trade war between China and the US, as well as uncertainty regarding how Brexit may impact the EU market (and the rest of the world) are sources of pessimism for industry experts. From another standpoint, social responsibility and care expressed towards social issues is a point of concern. This is a subject matter of importance to the younger generation. In fact, the generation of millennials are expected to account for almost half of global consumer spending in the coming years, and it has already been demonstrated (eg. the recent Gucci boycott) that negligence of social issues can lead to a downturn in business. Labor issues are very relevant here in regards to the Chinese market, and these concerns will definitely need to be assuaged on the growth path.
Another obstacle relates to the end consumer. Manufacturers and wholesalers within the Chinese fashion market are known for their efficiency and cost leadership practices. This has become such the norm, that the phrase “Made in China effect” has been used to describe the negative connotation surrounding items produced in China and the fact that they may be assumed to be cheap or lacking quality. Now that industry stakeholders aim to pursue differentiation tactics and change the narrative of their products, they will need to either reverse a deep-seated thought process in many of their customers, or strategize how they may reach their target audiences in a different way.
Can the Chinese fashion market stakeholders make the gradual shift to a differentiation strategy? Most importantly, can they make the rest of the world believe it? The coming years will surely tell whether or not this impressive growth pattern remains constant.
MBA Candidate 2019