The Western sense of fashion is becoming more “in-style” in China, and leading the trend are fast-fashion retail giants like H&M (Sweden), ZARA (Spain), and Forever 21 (USA). In fact, H&M passed its 300th store mark by opening 73 locations in the country just last year. These foreign brands appeal to a growing desire among Chinese—especially young—consumers to identify as internationally minded and with a modern sense of fashion. With such demand from the world’s largest middle-class population, it’s no wonder that foreign brands are lining up to enter malls and shopping centers in the Middle Kingdom. There are a few main ways that fashion brands approach the market and put their clothes on sales racks across the country.
For a company that prefers to retain direct control over their global expansion efforts, the ideal business structure is a wholly foreign-owned enterprise, whereby the parent company creates and owns a local China company as a subsidiary. The company can be registered and operate within China, while remaining owned and managed by the foreign firm in the manner that they see fit. Another viable option is to create a joint-venture with a local partner. In this case, the foreign company retains at least partial control, in exchange for shared decision-making power and profits with a partner who might have more local market knowledge, better logistics networks, additional capital, or some other added value. For instance, the American brand Brooks Brothers entered China twelve years ago, but it wasn’t until they devised aggressive goals to expand that they saw a need for a joint venture tie-up that could help deliver key aspects of the growth plan. Another option is to develop the brand in China through an authorized distributor. One fashion company that has done this successfully is the Canadian brand, Roots.
Lastly, but equally worthy of consideration and equally viable is to “virtually” launch product lines without having any physical presence in the country. This can be done, of course, with the help of the good ol’ World Wide Web and the sensation of e-commerce in China. The country’s e-commerce sector is arguably one of China’s most efficient, most evolved, and uber-competitive arenas. It is also arguably a model that the rest of the modern world could learn a great deal from. Nowadays, sophisticated Chinese shoppers are engaging in detailed conversations with brands online, reading reviews, placing orders, paying by mobile platforms, and receiving delivery (often within 24 hours) all from their smart phones. Recognizing these factors, Macy’s, Inc. is testing the market exclusively with an e-commerce pilot. Under a joint venture, Macy’s began selling in China last year through Alibaba’s e-commerce site Tmall Global. Customers typically complete payments on mobile platforms, and shipments are quickly fulfilled from Hong Kong through local logistics channels.
Careful planning before entering any new market is necessary to ensure that the growth plan will be aligned with the company’s values and strategic vision. Advanced preparations to establish a structure that best suits the company’s goals will also help ensure that the organization can adapt to unexpected challenges as they arise. And being prepared to execute successfully is something that never goes out of style.
-Sean Doherty is a Colorado native and graduate of Metropolitan State University, living and working in Hong Kong, Shanghai, and Nanjing, China. Sean represents the Denver South Economic Development Partnership as the Greater China Exchange Coordinator, focused on fostering the exchange of ideas, strategies, and talent between China and the metro-Denver area. In 2016, Sean was selected as a Jiangsu Province Youth Friendship Ambassador. He can be reached at KairosHappens@gmail.com