OC&C's 2016 Apparel Proposition Index states that International brands are set to benefit from China's booming apparel market.
- Over 70% of surveyed respondents are more willing to spend on clothing than before
- Almost half of respondents prefer international apparel brands over domestic counterparts for better quality and design
- Chinese consumers are willing to pay over 20% premium when purchasing international apparel over home market prices
- J.Crew, Oasis and Forever 21 rank top in their respective segments amount European and US apparel brands
According to the report, increased discretionary spending and consumer sophistication are providing international apparel brands significant new opportunities. Although domestic apparel brands have taken the lead in the past, almost 50% of respondents now show a preference for international apparel brands over their domestic counterparts. However, perceptions that products from international brands are a status symbol are no longer a key driver for the purchase. Instead, people are in favour of international apparel brands mainly because of its better quality and design.
The study asked Chinese consumers to rate the European and US apparel brands they purchased in the past year on a 1-7 scoring system. J.Crew, Oasis and Forever 21 were the champions in their respective segments while Hugo Boss, American Eagle Outfitters and Gap were the first runners-up.
On average, Chinese consumers purchase apparel almost once a month, spending around 6-7% of their disposable income on it.
“The China apparel market is undergoing a transformation as the urban middle class grows. Foreign apparel brands may benefit from Chinese consumers’ growing sophistication. They are starting to place more importance on quality and design, while price is no longer their top priority,” said Jack Chuang, Partner, Greater China, OC&C Strategy Consultants. “However, since a massive number of international brands have been flooding in, Chinese consumers are now facing many more options and becoming more selective.”
The report shows that almost 60% of respondents only buy products from apparel brands they are familiar with and 70% of respondents say they have higher brand loyalty than before. In addition, while price is no longer the top concern for Chinese consumers in apparel shopping, 60% of respondents still actively comparing prices and seeking promotions.
“65% of consumers research online before they make a purchase, which means that building brand online is a critical complement to the offline presence. The power of domestic social media such as WeChat and Weibo must not be underestimated, as it provides a unique and interactive experience to consumers,” added Chuang. “Despite the flourishing online channels, physical presence in China is still the most important way for Chinese consumers to know about international apparel brands. Opening stores in popular locations where consumers visit most often has become even more important for brands.
Given the trend towards price transparency, cross-border e-commerce and international travel, price equalisation will increasingly be expected by Chinese consumers across a wide brand spectrum. However, it might have significant impact on corporate profit if brands are heavily reliant on mark-ups from the Chinese market. Therefore, companies should be wary of imposing exorbitant premiums, while taking careful consideration of factors such as the global economy, exchange rates and customs tax,” concluded Chuang.
The study canvassed 2,600 respondents from 22 cities across China, with consumer surveys and focus groups held from March to May 2016.
The 2016 Apparel Proposition Index is available to read online or download.