How to Win in the Chinese AF&L Market: Strategies for Global Brands
The apparel, fashion, and luxury (AF&L) market in China is one of the largest and most dynamic globally. Despite a difficult 2022, the industry is set to return to double-digit growth, fueled in part by a rising middle class. However, for multinational companies, doing business in China is becoming more challenging.
According to the National Bureau of Statistics, the China Consumer Confidence Index fell by 28 percent from October 2021 to October 2022, dampening consumer spending. Chinese champions are increasingly outpacing their global peers, and many are adopting a more agile operating model and supply chain to enable greater responsiveness to changing consumer preferences. They are also adept operators of the various social media and e-commerce channels in China, engaging local key opinion leaders (KOLs) and consumers (KOCs) to connect directly with customers.
In this article, we provide strategies for global AF&L brands to strengthen their long-term competitiveness in the Chinese market. Companies should begin by defining and communicating their brand position clearly, ensuring consistency across online and offline channels. They can then reevaluate their strategies for physical-store networks and digital platforms while investing in omnichannel and direct-to-consumer (D2C) engagement. Finally, product development, supply chain, technology, and digital infrastructure could also help boost the efficiency and relevance of global brands in the local market.
Elevate Brand Positioning and Communications
In China, preferences are constantly evolving and often follow a different path than those in other markets. Global brands should tailor their brand positioning to appeal to local consumers and create a true local marketing engine to deliver their value proposition. The biggest mistake foreign companies make is thinking that Chinese consumers want the exact same products sold in their home country. The reality is that the tastes and preferences of Chinese consumers differ; therefore, international brands must adapt their product offerings accordingly. Brands need to gain a deep understanding of Chinese tastes and trend while balancing it with their global brand identity.
Optimize Store Networks and Formats
Consumers are shifting from traditional department stores to shopping malls in premium locations that boast a wider and more interesting array of lifestyle experiences and food and beverage options. Global brands should realign their store network presence in new traffic centers and explore a variety of store formats. This includes pop-up stores in high-end shopping malls or department stores, temporary shops in office buildings, and more.
Adopt an Omnichannel D2C Approach
Chinese consumers have embraced an omnichannel approach, and commonly jump between online and offline touchpoints before making a purchasing decision. Global brands should take targeted actions to implement an effective omnichannel D2C strategy and capture the value at stake. This ranges from upgrading D2C digital touchpoints for a better consumer experience to equipping store staff for better customer engagement or encouraging omnichannel customer acquisition outside of physical stores. Brands should also make specific efforts to connect with consumers through familiar channels like WeChat, which is used widely for messaging, e-commerce, and social media.
Seize Opportunities in the Convergence of E-commerce and Social Media
Shopping on social media platforms has become a natural shift for Chinese consumers. To achieve sustainable growth in e-commerce, brands should develop tailored channel roles along the consumer decision journey and build new capabilities to drive operational excellence. This includes creating local content and building live stream operations. This is important not only when considering social platforms; Chinese consumers expect even television commercials to be localized.
Localize Product Development for Greater Relevance
The savviest brands start with their global assets and IP as the foundation and then incorporate design elements that reflect local tastes and trends. To keep up with fierce competition from local brands, companies should reconfigure their organizational structure and accelerate time to market by adopting a “test and chase” model to test and review product features. Global companies that are considering entering China should also invest in consumer research and analytics; developing an understanding of the shifting product preferences of the Chinese consumer should form a core part of the brand’s strategy.
Adapt Supply Chain Strategy for Increased Agility
Demand patterns are more dynamic in China compared with those of mature markets. Given the market’s unique needs, companies should tailor their supply chain strategy by embracing data-driven planning and developing a “China for China” supply chain while leveraging their existing infrastructure for all other global markets. Brands can kick start the localization process by building a strong local team that can run supply chain operations.
Prioritize Tech and Digital Localization for Enhanced Resilience
Having the right technology and the right digital infrastructure and team in place is necessary to create seamless, localized experiences for consumers. Global brands should make targeted investments in technology in China, deliver localized digital products, and establish an in-market talent base while ensuring collaboration between global and local functions.
Breaking into the Chinese market is not without its challenges. Yet for every brand that has tried and failed, others have succeeded. Whether a brand or company wins ultimately depends on truly knowing Chinese consumers, market dynamics, and competitors, and on harnessing global IP and assets. The levers we have discussed can help global companies gain an accurate and robust understanding of the Chinese landscape and adapt accordingly, thereby opening the door to one of the world’s most exciting markets.
