Market Features in2008

By Wang Ting

Luxury Brands Enter 2nd Tier Cities

Event:

In October 2008, a  new  LV franchised  store was  launched in MASION MODE  in Urumchi in Xinjiang Province, which  is the  25  LV  sales  points  in China. However, only three months ago, LV has just set its new step in Changsha, the capital  city  of Hunan  province.  LV seems  to begin its expansion strategy in Chinese second tier cities already.  Moreover, in the city of Changzhou, in  Jiangsu  province,  several international luxury brands have footed here, such as BOSS, GIVENCHY, and so on.

Perspective:

The  global  f inancial  cr isis made  the  luxury  indust ry  face  tough environment  badly. Although  some  brands  declaimed  its  "no-discount" strategy, most of  the brands fnd  the operation and fnancial  revenue are a little bit far away from the earlier scheduled target.
  
As some foreign media reported, those luxury brands began to fnd hope in China, and  focus on some big cities  in China, such as Beijing, Shanghai, and so on.
 
According to the  analysis,  after  the consumption deflation  in  the European and American markets, luxury brands adjusted their development strategy  in China, making it as a new gold-rush  region  for  long-term investment development. Those brands, such as LV Group, expect to gain a long-term beneficial profit  rather  than  in a short-term period, so  that  they don't  care  about  the  consumption  ability  in  those  second  tier  cities,  but aiming  to  foster groups of  target consumers. For  those  international  luxury brands, what  is  the most  important  now  in China  is  to  gain more market share.

Whereas, there is some one wondered  the  reason why  LV  entered Urumchi. Representative from the LV Group gave the answer: "the reason makes us choose the destination, not only because they have the top-grade shopping malls, but also we care about the city itself."
 
Multi-Operation Mode

Event:

A new shopping center named SOLANA opened  in  the Chaoyang district in Beijing in June,  2008.  Its  unique operational  commercial mode  have  focalized  the attention  of  the  publics: isolated European  style  buildings for each  franchised  store,  sufficient outdoor spaces and  beautiful  scenes,  offer a sound  environment  for shoppers and activities.

In fact,  the SOLANA expects,  through  various operation mode,  such as retailing,  restaurant,  bar,  cinema, ice  stadium, SPA,  and so on,  the consumers to find and enjoy  the consumption way  they  like, which SOLANA  called  the  "Lifestyle Shopping Commercial Mode",  aiming  to attract more consumers to shop.

During the recent two years,  in Chinese  apparel commercial  fields, several innovation  operational modes emerged gradually: E-commercial mode, ITAT mode, lifestyle store mode, and so on. 

Perspective:

During the past two years, when referring to the E-commercial operation mode in Chinese apparel fields, the most famous case would be the brand of "PPG":  various  sad  news were  exposed  after  its  shinning  appearance The debt crisis causing by the broken fnancing chain, the leaving of the PPG senior manager, etc. making the apparel industry begin to consider about the so-called PPG operational mode.  
   
Then, turn the attention to the newly-opened shopping mall. Maybe, due to the location or the else, even before the Christmas Eve in 2008, the word "crowded" would be a little unfamiliar to the SOLANA mall. Shall we doubt the originality of  lifestyle  shopping or the consumer  could not accept the new operational mode? 

Of course, we could not give a concrete or positive answer at once. After all, each newly-emerged commercial mode needs time to develop, to shape the brand and form a consumption group. 

Recently, Chinese apparel industry is experiencing an era of operation mode innovation and differentiation, which would be  beneficial to the bilateral development of brand and industry in a sustainable  long-term.

However, the new mode should orient with  the  theme  of,  among the fierce market competition, as a tool  to serve the brand and consumer, rather than as a purpose.

Meanwhile, during the operational process,  the  disadvantages  or  the problems, causing by management, should  be  paid more  attention  and avoided gradually. 
   
Mergers and Acquisitions

Event:

In February 2008, Belle International (1880.HK)  finished  its mergers and acquisition of Mirabell Internat ional Group  (1179.HK) .

Referring to  this  acquisition, Belle expressed  that,  according  to  the strategy  of  developing middle/high grade casual foot wear business, the brands  sold  and  distributed within the Mirabel l Group  in  domestic market  possess  great  potentials, and  could  support  the Belle Group further comprehensively. 

Since Belle International was successfully listed in Hong Kong Stock Exchange (HKEX). Currently, Belle International has al ready finished several acquisitions, and become the largest retailer of ladies' footwear in the PRC based on sales revenue.
Recently, Belle International offers a wide range of footwear products, which  comprise  of  self-owned brands: Belle, Tata, Staccato, Senda, Basto, Joy&Peace, and 28 distribution brands.

Perspective: 　
　
Since 2007, Belle Group, through a series  of  acquisition  of  small  or medium sized  footwear enterprises in China,  has  already  become  an apparel  industrial  giant  in  domestic market. According to the statistics, if accumulating all the brands under Belle Group, in Chinese large-scaled shopping malls, it would share nearly half market. 
 
Generally speaking,  in  recent years,  this  kind  of  acquisition  in textile  and  apparel  industry  is not  ubiquitous.  For example, the Youngor Group (600117) achieved the acquisition of XinMa and Smart under the American KELLWOOD.

Industrial experts analyzed that, this acquisition could utilize the distribution channel of  those  two  brands  in American market; while  the mergers of Belle Group could unite the resource of those enterprises, operating and managing the brands and shoe products at different levels at the same time, which could enhance the control of the upstream suppliers, as well as to improve the share in the downstream market, resulting in an increasing market competitiveness and less competitor significantly.

In a competitive market, owning more qualified distribution channel and terminal resource, and sales points in large-scaled department stores, weigh more to the development of brands markedly.