Today, almost all global fashion brands explore business opportunities in Asian markets. In the midst of the economic downturn, sales of US and European fashion brands were severely hit by a weak wholesale market. The situation is aggravated by the unfavorable global currency fluctuations which greatly impairs brands’ revenue growth. For example, if the cost of a product remained unchanged at 100 units of currency, the product would cost 152 units of currency in Russia, 112 units of currency in China and Korea and only 101 units of currency in Japan, based only on currency revaluation.
The combination of the economic downturn and the revaluation of some currencies has been a growth opportunity for many global brands to drive expansion towards emerging high consumption Asian markets such as China, Japan, Russia and Korea. With a view to achieving a balance in business, increasing returns and minimizing risk, US and EU fashion brands are diversifying their market presence by attempting to increase their Asian market share.
Japan and Russia
At present, many leading US brands have established their presence in Japan: Levi’s, Gap, Ralph Lauren, Calvin Klein, Coach, Nike, Tiffany and Timberland. Victoria’s Secret has announced plans to expand into international markets including Japan and Russia. Entering Asian markets is a significant strategy for retailers wishing to achieve global brand positioning and establish brands without boundaries. In some situations, Japanese women would spend 30% of their income on clothing and skin care product consumption, the rise of women’s income and the spending behavior of this region is one of the driving forces for entering this market.
South Korea is another emerging market for global fashion brands. The market is filled with international brands such as Spain’s Zara, Sweden’s H&M, U.S.- based brands like Gap and Forever 21 and G2000 and Giordano from Hong Kong. These international brands offer various options to accommodate the preferences of Koreans. However, it has been noted that there is a tendency for local Korean stores to emulate the Japanese Chain store “Uniqlo” in order to compete with the global brands. Many foreign brands prefer to position themselves in the high-end market.
Though China has in the last two years fallen from its former double-digit GDP growth rate, it has recovered this year to have an estimated year-on-year increase of 11.1%. This is 3.7 % points higher than for the same period last year. Sales for domestic consumption reached a year-on-year rise of 18.2% in the first half of 2010, valued at about 7.26 billion Yuan.
Clothing consumption in China averaged an annual growth rate of 14.7 % from 2001 to 2008, and over 15% in 2009. In November 2009, China’s total clothing retail sales increased by 25.8% compared with November 2008. In 2010, the total capacity of the apparel market is expected to be more than 6300 billion Yuan. A conservative estimation of the expansion rate of the apparel market by 2015 is around 10.5%.
The Chinese fashion market is very appealing to many key players. Brands are stepping into the market seeking new retail expansion prospects. China seems to have an unending appetite for luxury brands. In 2009, China’s luxury goods consumption hit $9.4 billion, accounting for 27.5 % of global luxury sales. The Chinese luxury market is on the way to become the largest in the world. Louis Vuitton is opening its’ twenty-first direct shop in the China Jiangsu Province. Versace plans to double the number of its stores in China to 44 by the end of 2010, while the Burberry Group will continue its push into China with its network of 50 stores in 30 Chinese cities.
As Asian countries continue to lead the global economic recovery. The next region for retail expansion and future growth will probably be the Asian market. SGS has a knowledge base of all applicable regulations, as well as a global network of textiles experts that can help fashion brands expand their business to new markets.
Find out more about SGS Softlines Services.
China GB 18401-2003: China National General Safety Standard for Textile Products The General Administration of Quality Supervision and Inspection and Quarantine of the People’s Republic of China has published a national standard GB 18401-2003 “National General Safety Technical Code for Textile Products”. The new standard specifies general safety requirements for textile products manufacturing, distribution or use in China, and it has been in effect since the 1st January 2005.
Find more info on China National General Safety Standard for Textile Products (PDF 247 KB)
South Korea Korea Certification (KC Mark): Impact on Korea Textile Commodities. The Ministry of Knowledge Economy (MKE) of Korea has implemented a New National Unified Mark, called KC Mark (stands for “Korea Certification”). This is a legally compulsory certification mark that must appear on products as specified in related laws and ordinances.
Find more info on Korea Certification (KC Mark): Impact on Korea Textile Commodities (PDF 156 KB)
Karen E. Kyllo
Ph.D. Deputy Vice President
SGS U.S. Testing Company, Inc.
t: +1 973 461 7934
The SGS Group is the global leader and innovator in inspection, verification, testing and certification services. Founded in 1878, SGS is recognized as the global benchmark in quality and integrity. With 59,000 employees, SGS operates a network of over 1,000 offices and laboratories around the world.