IN DEPTH - CHINA'S APPAREL MARKET PART 1: MARKET UPDATES AND REVIEW OF DISTRIBUTION CHANNELS - Fung Business ...
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E-commerce . Business Models . Innovations
IN DEPTH – CHINA’S APPAREL MARKET
PART 1: MARKET UPDATES AND REVIEW OF
DISTRIBUTION CHANNELS
December 2016
Teresa Lam, Tracy Chan
Asia Distribution and Retail
IN THIS ISSUE
KEY TAKEAWAYS P3
MARKET OVERVIEW P4
SALES OF KEY SUB-SECTORS P5
DISTRIBUTION CHANNELS P13
2
KEY TAKEAWAYS
The apparel market in China has experienced By category, sportswear posted the strongest
slower growth over recent years. Sales of sales growth in 2015, outperforming the
apparel in China are expected to reach growth of womenswear, which remained the
1,788.2 billion yuan in 2016, increasing at a largest sub-sector of China’s apparel market
slower rate of 4.2% yoy. in terms of sales in 2015.
For sales channels, specialist retailers and Nevertheless, department stores have seen
department stores have long been the two rapid sales share decline over the years. They
major distribution channels for apparel and have lost share to the fast growing Internet
footwear in China, taking up over a half of the retailing, which has become one of the most
apparel distribution in the country. popular and influential sales channels for
apparel in China.
Multi-brand stores, featuring unique and
contemporary fashions and bringing together
talented designers locally and internationally,
have also garnered increasing attention in
China over recent years.
3
MARKET OVERVIEW
- CHINA’S APPAREL MARKET TO SEE SLOWER SALES GROWTH
Sales of apparel in China, 2011-2020 China’s apparel sales are expected to
reach 1,788.2 billion yuan in 2016,
2,500.0 16.0%
increasing at a slower rate of 4.2% yoy.
14.2% 2,119.2 14.0% We believe the slower sales growth is
2,032.4
1,947.8 attributable to:
2,000.0 1,865.7
1,788.2 12.0%
10.2% 1,716.7
1,622.8
1,527.9 • Economic slowdown in China
1,417.7 10.0%
1,500.0 • Weak consumer sentiment
1,286.4
7.8% 8.0% • Increasingly saturated
6.2% womenswear and menswear
1,000.0 5.8% markets
6.0%
4.2% 4.4% 4.3%
4.0% Despite the slowdown, the growth
500.0 4.3% 4.3%
momentum of China’s apparel market is
2.0% expected to be sustained by increasing
household income and the fast-growing
0.0 0.0% middle class. The apparel market is
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 projected to deliver steady growth over
billion yuan yoy growth the next couple of years and reach 2,119.2
billion yuan by 2020.
Source: Euromonitor International; compiled by Fung Business Intelligence
Photo source: www.gegugu.com
4
SALES OF KEY SUB-SECTORS
Sales of key sub-sectors of China’s apparel market, 2011-2015
By category, womenswear
remained the largest sub-
900 16.0%
834.5 sector of China’s apparel
783.8 14.0% market in terms of sales in
800
729.9 2015. Nevertheless, the
676.8 12.0%
700 sector registered slowest
612.4 10.0% sales growth compared with
600
8.0% other key sectors.
491.9
billion yuan
500 452.9 470.3
6.0%
422.5
389.6
4.0%
It is noteworthy that
400
sportswear continued to
2.0% deliver strongest sales
300
0.0% growth in 2015 compared
200 148.3 165.0 with other key sectors,
141.8 139.2 134.7 127.1 137.2 -2.0%
105.9 116.4
96.4 indicating the vast growth
100 -4.0% potential of the sportswear
0 -6.0% sector.
2011 2012 2013 2014 2015
Sales of womenswear Sales of menswear
Sales of childrenswear Sales of sportswear
yoy growth of womenswear yoy growth of menswear
yoy growth of childrenswear yoy growth of sportswear
Source: Euromonitor International; compiled by Fung Business Intelligence
5
SALES OF KEY SUB-SECTORS
- WOMENSWEAR: TO SEE SINGLE-DEGIT SALES GROWTH IN 2016
Sales of womenswear in China’s apparel market, 2011-2016
Womenswear remained the major
1000 16.0% contributor to total apparel sales in
14.9% 875.8 China, with sales taking up 48.6% of the
900 834.5 14.0%
783.8 total apparel sales in 2015. The sector is
800 729.9
676.8 12.0% expected to grow 4.9% yoy to 875.8
700 612.4 10.5% billion yuan in 2016.
billion yuan
600 10.0%
7.8% 7.4%
500 6.5% 8.0%
However, the womenswear sector has
400 6.0% witnessed continued sales slowdown
300 4.9% over the past few years due to increasing
4.0%
200 market saturation and stiffer
100 2.0% competition.
0 0.0%
2011 2012 2013 2014 2015 2016e Since 2013, the womenswear sector has
been experiencing single-digit growth,
Sales of womenswear yoy growth of womenswear with sales growth slowing from 7.8% yoy
in 2013 to 6.5% yoy in 2015.
That said, some womenswear brands are
still able to stand out in the competitive
In 2015, womenswear made up 48.6% market and capture a larger market
48.6% of total apparel sales in China share through different strategic
approaches, such as jumping onto the
fast-fashion bandwagon and getting an
accurate gauge on market positioning.
Source: Euromonitor International; compiled by Fung Business Intelligence
6
SALES OF KEY SUB-SECTORS
- WOMENSWEAR : CASE STUDY OF LA CHAPELLE
La Chapelle
Offering fast-fashion items appealing to local tastes
Local apparel brand La Chapelle has jumped on the
fast-fashion bandwagon, rolling out new fashion
items every week.
With its deep understanding and knowledge about
the taste and preference of Chinese consumers, La
Chapelle is able to offer fast fashion products at low-
enough prices yet acceptable quality.
La Chapelle’s market share, 2011-2015*
Market share Ranking
(%)
2011 1.18 12
2012 1.18 12
2013 1.44 6
2014 1.44 6
2015 1.32 4
Photo source: http://www.lachapelle.cn/
Source: China National Commercial Information Center (CNCIC)
*Note: CNCIC data only cover sales in major department stores in China. The actual overall market share of the brand mentioned may deviate
from the CNCIC data.
7
SALES OF KEY SUB-SECTORS
- WOMENSWEAR : CASE STUDY OF LA CHAPELLE (CONT’D)
La Chapelle
Selling products via both physical and online stores
The company sells its products directly to end-
customers through both online and offline stores.
Bricks and Mortar
As of 30 June, 2015, La Chapelle run approximately
7,147 self-managed retail stores, covering about
2,230 department stores and shopping malls across
31 provinces, autonomous regions and
municipalities in China.
Online storefronts on Tmall and JD.com
Tmall - https://lachapelle.world.tmall.com/
JD.com - http://lachapelle.jd.com/
Source: http://www.lachapelle.cn/ 8
SALES OF KEY SUB-SECTORS
- WOMENSWEAR : CASE STUDY OF JNBY
JNBY
Accurate marketing position, catering to target customers
JNBY, a local womenswear designer brand targeting 25-30 aged women
fond of nature and healthy lifestyle, has won over its target customers
through quality and pragmatic design. The use of quality natural fabric,
such as cotton and flax fabric, combined with pragmatic fashion style
have made JNBY stand out in the market.
Selling products via both physical and online stores
Well-received by its target customers, JNBY has set up about 1,300 self-
managed and franchise stores in China and 12 other overseas markets,
including North America, Russia, Europe and Southeast Asia.
For online sales network, JNBY has opened online stores on 3rd party
platforms:
Tmall - https://jnby.world.tmall.com/
JD.com - http://mall.jd.com/index-71947.html
Vip.com - http://brand.vip.com/JNBY/
JNBY’s market share, 2013-2015*
Market share Ranking
(%)
2013 0.2% 81
2014 0.29% 54
2015 0.38% 36
Source: CNCIC Photo source: Fung Business Intelligence
*Note: CNCIC data only cover sales in major department stores in China. The actual overall market share of the brand mentioned may deviate
from the CNCIC data. 9
SALES OF KEY SUB-SECTORS
- MENSWEAR: TO CONTINUE SLOWER GROWTH IN 2016
Sales of menswear in China’s apparel market, 2011-2016
Menswear has the second largest
600 14.0% market share in China’s apparel market,
13.1% 505.5
470.3
491.9 12.0% just behind womenswear. In 2015, sales
500 452.9
422.5 of menswear represented 28.7% of the
389.6 10.0% total apparel sales in China. The sector is
400 8.4%
billion yuan
7.2% 8.0%
expected to grow 2.8% yoy to 505.5
300 billion yuan in 2016.
4.6% 6.0%
200 3.8%
4.0% However, akin to the womenswear
100
2.8% sector, the menswear sector has been
2.0%
getting increasingly saturated and
0 0.0% mature and witnessed continued sales
2011 2012 2013 2014 2015 2016e slowdown over the past few years.
Sales of menswear yoy growth of menswear
Since 2012, the menswear sector has
been experiencing single-digit growth,
with sales growth slowing from 8.4% yoy
in 2012 to 4.6% yoy in 2015.
In 2015, menswear represented
28.7% of total apparel sales in China
28.7%
Source: Euromonitor International; compiled by Fung Business Intelligence
10SALES OF KEY SUB-SECTORS
- CHILDRENSWEAR: TWO-CHILD POLICY SHORES UP GROWTH MOMENTUM
Sales of childrenswear in China’s apparel market, 2011-2016
160 16.0% Although childrenswear took up merely
145.5 8% share in China’s apparel market,
14.4% 137.2
140 127.1 14.0% stronger growth momentum is expected
116.4 for the sector following the full
120 105.9 12.0%
96.4 9.9% 9.9% implementation of two-child policy
9.2%
billion yuan
100 10.0% starting January 2016.
7.9%
80 8.0%
6.0%
60 6.0%
Some industry experts said upon the
rollout of the two-child policy, China is
40 4.0% expected to have an extra 1.5 million
20 2.0%
new-born babies per annum over the
next couple of years. Considering the
0 0.0% expected baby boom, we believe baby
2011 2012 2013 2014 2015 2016e and toddler wear will be the main
powerhouse for the childrenswear
Sales of childrenswear yoy growth of childrenswear
sector.
Furthermore, rising household income
in China is also expected to drive the
growth of childrenswear sector.
In 2015, childrenswear presented 8% According to CNCIC, the average retail
of total apparel sales in China price of children’s clothing has posted a
8% CAGR of 19.4% between 2011-2015,
representing an average yoy growth rate
of 4.5%.
Source: Euromonitor International; compiled by Fung Business Intelligence
11SALES OF KEY SUB-SECTORS
- SPORTSWEAR: STRONGEST SALES GROWTH AMONG OTHER KEY SUB-SECTORS
Sales of sportswear in China’s apparel market, 2011-2016
Sportwear registered sales growth of 11.3%
200 181.4 14.0%
yoy in 2015, well above the total apparel sales
180 165.0 12.0% growth of 5.4% yoy. Sportswear also posted
160 148.3 the highest sales growth among all other key
141.8 139.2 11.3% 10.0%
8.6%
134.7
10.1%
apparel sectors.
140 9.9% 8.0%
billion yuan
120
6.0% The propelling growth in the sportswear
100 sector is mainly driven by the following
4.0%
80 factors:
2.0%
60
40 -1.8% 0.0% • Participation in exercises and sports
-2.0% surges as Chinese consumers are
20
-3.2% shifting toward leisure and healthy
0 -4.0% recreation instead of basic living
2011 2012 2013 2014 2015 2016e necessities.
Sales of sportswear yoy growth of sportswear
• Greater attention to health-conscious
lifestyle along with continued
enhancement of people living standards
• Government policies to promote
In 2015, sportswear made up national health and sports participation
serve a boost to the sports industry.
9.6% of total apparel sales in China
9.6% Recent policies include the “2016-2020
National Fitness Plan” released in June
2016, the “13th Five Year Plan for the
Development of Sports Industry” in July
2016.
Source: Euromonitor International; compiled by Fung Business Intelligence
12DISTRIBUTION CHANNELS
- SPECIALIST RETAILERS, DEPARTMENT STORES TAKE HOLD IN CHINA APPAREL DISTRIBUTION
Specialist retailers and
Market share (retail sales) by distribution channel for apparel and footwear in China, 2011-15
department stores took up over a
half of apparel and footwear
2011 2012 2013 2014 2015 distribution nationwide
Store-based retailing 96.5 92.4 89.0 84.3 79.0
Specialist retailers and
I. Grocery retailers 6.1 6.0 5.6 5.2 4.9
department stores have been the
• Non-grocery retailers 52.9 49.6 47.1 45.6 44.7 two major distribution channels
- Clothing and footwear specialist retailers 22.0 23.4 24.4 24.2 24.0 for apparel and footwear in China,
- Leisure and personal goods specialist taking up over a half of the apparel
retailers 18.1 17.5 17.4 17.4 17.9 distribution in the country.
- Other non-grocery retailers 12.8 8.6 5.4 4.0 2.8 Clothing and footwear specialist
• Mixed retailers 37.5 36.8 36.3 33.5 29.5 retailers and department stores
had a share of 24.0% and 29.5%
- Department stores 37.5 36.8 36.3 33.5 29.5 respectively in 2015.
Non-store retailing 3.5 7.6 11.0 15.7 21.0
It is noteworthy that department
II. Home shopping 0.1 0.1 0.1 0.1 0.1 stores have seen rapid sales share
III. Internet retailing 3.4 7.5 10.9 15.6 20.8 decline over the years. They have
lost share to the fast growing
Total 100 100 100 100 100
Internet retailing.
Source: Euromonitor International; compiled by Fung Business Intelligence
13DISTRIBUTION CHANNELS
- ONLINE RETAILING, ONE OF THE MOST POPULAR SALES CHANNELS FOR APPAREL
Selected examples of foreign apparel brands entering China via
Online retailing has become one of
both online and offline channels , 2015-3Q16
the most popular and influential
sales channels for apparel.
Selected Ways of entering the China market
examples of Online retailing accounted for 20.8%
Physical stores/ Chinese- Third-party
foreign apparel of the total retail sales of apparel
counters language online online
brands and footwear in 2015, up by 5.2
store marketplace
ppts from 2014, and spiked from
Superdry only 3.4% in 2011.
Topman
G-Cut Increasing number of foreign
brands have forayed into the China
Monte Milano market via establishing online and
Alice McCALL offline presence at the same time.
Naning9
Chaps
Tom Tailor
Topshop
Roots
8seconds
Source: News, Companies’ websites; compiled by Fung Business Intelligence
14DISTRIBUTION CHANNELS
- FOREIGN RETAILERS LEVERAGE ONLINE PLATFORMS TO TAP CHINA MARKET
To ride on China’s e-commerce boom, a number of Online platforms set up by fast fashion retailers in China
fashion players have established online presence to exert
influence and reach out to more consumers. Fast fashion
retailers – Uniqlo, GAP, Forever 21, Mango, Zara, C&A, Self-operated
H&M, Hollister and New Look provide good illustrations of online store
how foreign fast fashion brands use the online channel to
tap the China market.
Fast fashion brands’ foray into China’s e-commerce market,
2008-2014 Self-operated
online store
+ online store on
Tmall.com
2008 2011 2014
Self-operated
2010 2012 online store
+ online stores
on Tmall.com
and JD.com
Source: Companies’ websites, Insite ; compiled by Fung Business Intelligence
15DISTRIBUTION CHANNELS
- TOP SELLING APPAREL BRANDS ON ALIBABA’S DOUBLE 11 ONLINE SHOPPING FESTIVAL
Top five best-selling apparel brands by category on Tmall during the Singles' Day shopping festival, 2016
Womenswear Menswear Childrenswear Sportswear
Top 1
Uniqlo GXG Balabala Nike
During the Singles’ Day, the
Top 2 largest online shopping festival
Only Semir Pure Cotton Adidas which falls on 11 November in
China, thousands of local and
international apparel brands
Top 3 participated in this years' Singles'
Day shopping festival. They
Bosideng Peacebird Yeehoo New Balance offered customers better deals
with a hope to capture more
customer traffic and generate
Top 4 more sales revenue.
Handu Jack Jones Goodbaby Li Ning
Top 5
Ledin Uniqlo Gap Anta
Source: Companies’ websites, Ebrun ; compiled by Fung Business Intelligence
16DISTRIBUTION CHANNELS
- MULTI-BRAND STORES ARE GAINING TRACTION
• Multi-brand stores, an emerging retail format in China,
have also garnered increasing attention over recent
years.
• Featuring unique and contemporary fashions and
bringing together talented designers locally and
internationally, multi-brand boutiques appeal to the
increasingly sophisticated Chinese customers,
especially the fast-growing middle class, who are
turning from high-profile luxury brands to affordable
luxury brands and designer products with quality and
personal style .
• Targeting the rising middle-class and more affluent
consumers, multi-brand stores are mainly located in
key cities in China.
80 75
70
56
60
50
40
27
30
20 12 14 13
9 9
10
0
Source: Companies’ announcements, CMS; compiled by Fung
Business Intelligence
Photo source: Fung Business Intelligence 17DISTRIBUTION CHANNELS
- MULTI-BRAND STORES ARE GAINING TRACTION (CONT’D)
• The increasing number of
internationally recognized fashion
design and fashion buying courses in
the country helps train up designers
and fashion buyers; this also supports
the rise of multi-brand stores.
Photo: Beijing Institute of Fashion Techonology Park (BIFT PARK)
It is one of the Zhongguancun Science City construction projects
jointly developed by the People’s Government of Beijing
Municipality and Beijing Institute of Fashion Techology in 2012.
Regarded as a fashion hub in Beijing, it provides a knowledge-based
and campus-like environment of 10,000 m2 to accommodate
China’s emerging independent designers. It serves as a platform to
promote fashion culture interaction and encourage innovation in
the fashion industry. Photo source: Fung Business Intelligence
18UPCOMING ISSUES
Coming soon…
Please stay tuned for our upcoming issues featuring the
latest trends of China's apparel market and market share
analysis of key apparel brands.
Part 1: Market updates and review of distribution channels
Part 2: Eight trends shaping the future growth of China’s apparel market
Part 3: Performance of top apparel brands by category
19Contacts
Asia Distribution and Retail
Teresa Lam
Vice President
Tel: (852) 2300 2466
Email: teresalam@fung1937.com
Tracy Chan
Senior Research Analyst
Tel: (852) 2300 2480
Email: tracychansy@fung1937.com
Fung Business Intelligence
10/F, LiFung Tower,
888 Cheung Sha Wan Road,
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