CHINA IN FOCUS: A BURGEONING APPAREL MARKET
insights COTTON INCORPORATED supply chain
Special REPORT
China in Focus: A Burgeoning Apparel Market
shoes (11%), and cosmetics (10%). While consumers in China are not homogenous geographically in what drives their apparel purchases or in how they use online resources to buy clothing, they are pragmatic shoppers who enjoy quality clothing and brands that match their ideals about value.
• C hinese consumers are willing to pay a premium to keep cotton, the most recognized, preferred, and purchased fiber, in their clothing
Precedence for Growth Taiwan and South Korea GDP per capita (2005 USD)
25,000
OPPORTUNITIES FOR GROWTH
20,000
While Chinese consumers are conservative spenders, who save
15,000
a great deal of their wealth, research shows that the capacity for spending has not yet reached an apex. The rapid economic growth in South Korea and Taiwan, in the 1980s, indicates that the largest increases in apparel spending occur once per capita GDP reaches
Consumer apparel spending per capita (2005 USD)
GDP Per Capita Taiwan
600
Clothing Spending Per Capita Taiwan
500
GDP Per Capita South Korea
400
Clothing Spending Per Capita South Korea
300 10,000
200
5,000
levels near $5,000. Although significant growth in the Chinese
100 0
economy and clothing expenditures has occurred over the past
2010
to shop for compared to electronics (20%), groceries (14%),
2005
Chinese consumers (31%) consider clothing their favorite item
• W hile domestic brands are the most frequently purchased, many shoppers prefer international brands
2000
shopping for clothing, up significantly from 65% in 2008. Most
1995
seven out of 10 Chinese consumers (74%) say they love or enjoy
• A pparel shopping habits and influences differ considerably by demographics and treating the Chinese market as homogenous could prove unsuccessful
1990
on semi-necessities, like clothing, through 2020*, more than
1985
recreation is projected to grow faster in China than spending
• Economic growth in previous emerging markets suggests a continued rise in Chinese consumer apparel spending in upcoming years
1980
While spending on discretionary items such as education and
Key Insights
1975
continues to offer considerable opportunity for sales growth.
1970
As the second-largest apparel market in the world, China
0
two decades, Chinese per capita GDP remains well below $5,000.
Source: Taiwan Directorate-General of Budget, Accounting, & Statistics and Bank of Korea
Current GDP figures reveal that the upward movement in apparel
CHINA
spending still has momentum. Most consumers say they have
GDP per capita (2005 USD)
more or the same amount to spend on clothing compared to last
GDP Per Capita
3,000
year (40% and 45%, respectively), and only 15% say they have
2,500
less. Nearly one-quarter (23%) say they plan to purchase more
2,000
seasonal change (55%), while a smaller share buy based on
2010
2008
2006
2004
2002
0
2000
clothing for need-based reasons such as replacement (56%) or
50
500 1998
in their apparel shopping habits. Most Chinese say they buy new
100
1,000
1996
Chinese consumers demonstrate a perceptible level of self-control
150
1994
PRAGMATIC SHOPPERS
200
1,500
1992
did last year, which bodes well for retailers and brands.
250
Clothing Spending Per Capita
1990
clothing, while 62% plan to purchase the same amount as they
Consumer apparel spending per capita (2005 USD)
0
Source: World Bank (GDP), Chinese National Bureau of Statistics
[email protected] © 2012 Cotton Council International and Cotton Incorporated
supply chain insights
China in Focus: A Burgeoning Apparel Market retail channels where consumers shop for clothing Differences in retail channels shopped by demographics
Department Stores
Specialty/ Chain Stores
Hypermarkets/ Warehouse Clubs
Independent Stores
Street Markets
Male and Female
Male
Male and Female
Female
Female
Age Groups
30 – 54
15 – 29
20 – 54
All
All
City-Tiers
Tier 1
Tier 3
Tiers 2 – 4
Tiers 3 and 4
Tier 4
Regions
North
East
East & South
South
West
Gender
Source: Cotton Council International (CCI) & Cotton Incorporated’s Chinese Consumer Survey
desire, 32% buy just to add new items to their wardrobes and
and treating the Chinese market as homogenous could prove
only 18% buy new clothing to be trendy. Research shows that
unsuccessful.
impulse and desire-based shopping tends to stimulate apparel sales. Notably, even with rapid modernization in apparel retailing, impulsive buying behaviors among Chinese consumers have not risen in the last decade. Cultivating more spontaneous shoppers may be a large undertaking for even the most dynamic brands and retailers. Therefore, marketing efforts that appeal to consumers’ pragmatism and help create a need for new apparel purchases
THE FIBER FACTOR While fiber content is already one of the primary factors Chinese shoppers consider before buying apparel, its importance has increased significantly over the past year (77%, up from 73%). The amplified importance of fiber could stem from consumers noticing changes at retail. According to the Global Lifestyle Monitor
may be a critical component necessary for sales growth.
survey, more than half of Chinese respondents (56%) say clothing
DIVERSE DRIVERS
which concerns many consumers. Most consumers say they are
The clothing needs of Chinese consumers have remained
bothered by cotton being replaced by other fibers in key product
relatively consistent over the past several years, but differ in
categories like T-shirts (60%), denim jeans (56%), and dress shirts
regards to demographics. Among the most important purchase
(54%). Consumers’ awareness of a shift in cotton’s presence in
drivers, fit (84%) and style (80%) have the highest significance
apparel at retail is not surprising, as cotton is the most recognized,
for Chinese consumers—similar to consumers in other countries.
preferred, and purchased fiber among Chinese shoppers.
previously made from cotton seems to be made of other fibers now,
Additional key attributes consumers assess before buying include
Knowledge of fiber content gives consumers evidence of quality
fiber content (77%), price (76%), and finishing (75%), which
when they evaluate clothing. A total of nine out of 10 consumers
allows shoppers to determine the quality and value of the apparel
say they check fiber content labels before buying and more than
they plan to purchase. While the top purchase drivers are similar
half (52%) believe that better quality clothing is made from natural
across city tiers and regions, there are differences in apparel
fibers such as cotton. While more than eight out of 10 (81%) say
shopping habits and drivers depending on where consumers
that clothing prices have increased compared to last year, the
live. For example, northern consumers are the most scrutinizing
majority of consumers say they are willing to pay even more, if
apparel shoppers and place a great deal of importance on
necessary, to keep cotton in their clothing; 80% for T-shirts, 73%
environmental friendliness. Eastern shoppers are greatly
for dress shirts, 68% for denim jeans, and 62% for dresses indicate
influenced by promotions and are the most brand-conscious.
a willingness to pay more to maintain cotton in their clothing.
Those living in the south are more apathetic towards clothing and prefer to shop for other products, and western consumers
BRAND BEHAVIOR
are extremely aspirational shoppers who are becoming more
Brand name, a major factor that Chinese consumers consider
influenced by promotions. In order to be successful in the
before purchasing new clothes, has increased significantly in
Chinese apparel market, retailers and brands must recognize that
importance compared to last year (60%, up from 54%). Chinese
apparel shopping habits differ considerably by demographics,
shoppers tend to prefer branded items, which they believe to
[email protected] © 2012 Cotton Council International and Cotton Incorporated
supply chain insights
China in Focus: A Burgeoning Apparel Market Northern Consumers:
Scrutinizing and Environmentally Conscious – Northern consumers consider more factors in their decisions to purchase clothing. The tendency to consider multiple factors (e.g., color, durability, performance features, washing instructions, etc.), before buying apparel, may be due to a higher prevalence of shopping at department stores, which typically offer more clothing variety and features. Given the heavy industry, rapid urbanization, and increased pollution in the north, consumers in this region are more sensitive to environmental issues. More than 6 out of 10 northern consumers (64%) say environmental friendliness is important to their apparel purchases, significantly higher than consumers in other regions.
Western Consumers:
Aspirational – Western consumers are significantly more likely than their counterparts to say they believe their income will increase (54%), they will buy more clothes (35%), and they will buy higher priced/higher-end clothes (35%) in the next year. Over the past decade, the Chinese government has made a significant effort to revitalize the western parts of China, creating a boom in jobs, income, and consumption. Given the rapid urbanization in the West, more consumers are finding promotions and advertisements influential to their clothing purchase decisions.
Eastern Consumers:
Brand Conscious – More than 7 out of 10 Eastern consumers (71%) say brand name is important in their apparel purchases. The top 10 menswear and womenswear brands purchased by consumers, in this region, are less fragmented when compared to the top 10 brands purchased in other regions. This finding may point to more brand loyalty in the East. In this region, consumers also access the internet and spend more time online. As a result, Easterners are more likely to get their trend ideas online and be influenced by internet advertisements.
Southern Consumers: Pragmatic – Southern consumers tend to consider a smaller list of factors in their apparel purchase decisions and are less likely to be influenced by advertisements and promotions. Given that southern cities were some of the first to urbanize; many consumers have already been exposed to new brands, features, advertising, etc. Consequently, these consumers demonstrate characteristics typical of more mature markets where some of the “newness” and “excitement” related to shopping may have decreased. For consumers in this region, widespread shopping convenience has led to more pragmatic shoppers, a movement seen in other developed countries. Source: Cotton Council International (CCI) & Cotton Incorporated’s Chinese Consumer Survey
be of better quality, over non-branded products*. Overall, the top brands purchased for most apparel product categories were top brands purchased are domestic, yet many of the favored also segmented, the top 10 athleticwear brands were significantly brands are international. Among the dominant menswear and more concentrated, accounting for 69% of total athleticwear womenswear brands purchased by Chinese consumers in 2011, brands purchased. In 2011, Li Ning accounted for 20% of men’s most were domestic, with Meters/Bonwe (3%), Li Ning (3%), and women’s athleticwear purchases, followed by Anta (9%), Semir (2%), and Yishion (2%) topping the list. However, many Nike (8%), 361° (8%), and Adidas (7%). Athleticwear brands Chinese consumers are more likely to say they prefer international garner consumer loyalty and purchases based on their promises brands, ranking Jeans West, Levi’s, Nike, and Adidas as some of performance and a healthy lifestyle, while also diversifying of their favorite denim and athleticwear brands. These results their product lines to meet the needs of their active and casual indicate receptiveness in consumers to purchase international clientele. brands available in the Chinese market, based on the reputation and quality of merchandise.
CHANNELS SHOPPED
Regardless of demographics, the brand allocation of menswear Although the retail channels where Chinese shop for clothing have and womenswear purchases are exceptionally fragmented, with remained relatively consistent over the past few years, shopping the top 10 brands only accounting for 21% of purchases. The preferences and influences vary by demographics. Overall, a extreme brand fragmentation represents fierce competition in the plurality of Chinese (41%) shop for clothes at department stores apparel markets and significant opportunities for both domestic (e.g., The Pacific or Parkson), followed by 36% at specialty stores and international brands to increase their market share. While (e.g., Giordano, C&A, or Li Ning), 30% at independent stores,
[email protected] © 2012 Cotton Council International and Cotton Incorporated
supply chain insights
China in Focus: A Burgeoning Apparel Market 24% at chain stores (e.g., Shanshijiudu), 23% at hypermarkets/ warehouse clubs (e.g., Carrefour or Trustmart), 8% at off-price
Product Allocation of Chinese & U.S. Consumer Apparel Purchases (unit basis)
stores, and 7% at street markets. In 2011, there were 513 million
Intimates
23%
Internet users in China (Internet World Status), and with average
15%
prices paid for clothing increasing (up 5% in 2011 compared to
14%
2010), Chinese shoppers are turning to the Internet to find the
13% 9% 8% 5%
best deals. According to the Global Lifestyle Monitor survey, more than three-fourths (77%) of consumers shop for clothing online; outranking other product categories like electronics (69%) and cosmetics (50%). This shopping trend presents domestic and international brands with a lucrative opportunity to build their online customer base. What sets Chinese apparel e-commerce apart from other countries is how they shop for clothes online. More than seven
China U.S.*
21% 24%
Tops
14%
Socks Outerwear
3%
Pants/Shorts Jeans
11% 10%
Sweaters
4% Skirts/Dresses 4% 5% Athleticwear 6% 4% Suits/Suit Separates 3% 1% 2% 3% Sleepwear
Sources: Cotton Council International (CCI) & Cotton Incorporated’s Chinese Consumer Survey and *Cotton Incorporated’s Lifestyle Monitor™ Survey
out of 10 (72%) start shopping for clothing through e-commerce that participants had a higher price tolerance and willingness to sites like Taobao, significantly higher than in Japan (24%) or pay more for outerwear than other apparel products because these Europe (18%). These web sites, similar to Amazon.com, allow items meet a need to keep their external appearance well-groomed users to shop for multiple brands of clothing. The popularity of and satisfy their aspirations for a prosperous lifestyle. e-commerce sites may be due to the reality that Chinese shoppers,
Appealing to the practicality of Chinese consumers is essential
like consumers around the world, are using the Internet to buy to the future growth of apparel shopping within China. Quality clothes as well as read customer reviews (59%), compare prices is extremely important to consumers, as well as their sense of (59%), and browse the latest styles (58%). The percentage of value and appearance. Consumers identify quality clothing by Chinese consumers who use the Internet as a source for clothing considering key attributes such as fiber content and brand, with ideas has risen steadily (71% in 2012, up from 16% in 2003). many consumers willing to pay a premium to keep the quality they According to iResearch, China is expected to overtake the U.S. as desire. As the Chinese apparel market continues to grow, retailers
the largest online retail market in the world by 2013. However, for and brands have an opportunity to benefit from consumers’ retailers and brands to achieve success in China’s e-commerce propensity for online shopping and receptivity to international market, they must be able to go beyond being “a source for brands. clothing ideas” and use e-commerce and social media sites to build loyalty with their customers.
PRODUCT PURCHASES AND PROSPECTS In general, Chinese consumers are more willing to pay premium prices for products other consumers can see and skimp on items more hidden from view, such as home appliances or intimate apparel (Wall Street Journal). Chinese consumers indicate that outerwear, representing 13% of apparel purchases, is one of the top four most purchased items on their shopping lists. In comparison to the U.S., outerwear represents a much larger share of apparel purchases. Outerwear commands a price-premium as consumers pay more on average for outerwear (¥333) than other apparel items (¥174). Recent focus groups conducted among women in Shanghai, Xi’an, and Chengdu, China found
About the Research Cotton Council International & Cotton Incorporated’s Chinese Consumer Survey is an on-going, quarterly consumer survey that began in the third quarter of 2009. Each year, approximately 4,000 Chinese consumers are interviewed in over 100 cities throughout all four city-tiers and regions in China. Respondents are male and female, between the ages of 15 and 54, and purchase their own clothing. Results are weighted to be representative of the urban Chinese clothing shopping population. Cotton Council International & Cotton Incorporated’s Global Lifestyle Monitor Survey is a biennial consumer research study. In the 2012 survey, 5,000 consumers (approximately 500 in each of the 10 countries surveyed) were surveyed via telephone, face-to-face interviews, and online. Respondents were male and female, aged 15 to 54. The ten countries included in the 2012 survey were Brazil, China, Colombia, Germany, India, Italy, Japan, Thailand, Turkey, and the United Kingdom. In China, respondents were interviewed in three major cities: Beijing, Shanghai, and Guangzhou. *Source: McKinsey & Company
[email protected] © 2012 Cotton Council International and Cotton Incorporated
Special REPORT
China in Focus: A Burgeoning Apparel Market
shoes (11%), and cosmetics (10%). While consumers in China are not homogenous geographically in what drives their apparel purchases or in how they use online resources to buy clothing, they are pragmatic shoppers who enjoy quality clothing and brands that match their ideals about value.
• C hinese consumers are willing to pay a premium to keep cotton, the most recognized, preferred, and purchased fiber, in their clothing
Precedence for Growth Taiwan and South Korea GDP per capita (2005 USD)
25,000
OPPORTUNITIES FOR GROWTH
20,000
While Chinese consumers are conservative spenders, who save
15,000
a great deal of their wealth, research shows that the capacity for spending has not yet reached an apex. The rapid economic growth in South Korea and Taiwan, in the 1980s, indicates that the largest increases in apparel spending occur once per capita GDP reaches
Consumer apparel spending per capita (2005 USD)
GDP Per Capita Taiwan
600
Clothing Spending Per Capita Taiwan
500
GDP Per Capita South Korea
400
Clothing Spending Per Capita South Korea
300 10,000
200
5,000
levels near $5,000. Although significant growth in the Chinese
100 0
economy and clothing expenditures has occurred over the past
2010
to shop for compared to electronics (20%), groceries (14%),
2005
Chinese consumers (31%) consider clothing their favorite item
• W hile domestic brands are the most frequently purchased, many shoppers prefer international brands
2000
shopping for clothing, up significantly from 65% in 2008. Most
1995
seven out of 10 Chinese consumers (74%) say they love or enjoy
• A pparel shopping habits and influences differ considerably by demographics and treating the Chinese market as homogenous could prove unsuccessful
1990
on semi-necessities, like clothing, through 2020*, more than
1985
recreation is projected to grow faster in China than spending
• Economic growth in previous emerging markets suggests a continued rise in Chinese consumer apparel spending in upcoming years
1980
While spending on discretionary items such as education and
Key Insights
1975
continues to offer considerable opportunity for sales growth.
1970
As the second-largest apparel market in the world, China
0
two decades, Chinese per capita GDP remains well below $5,000.
Source: Taiwan Directorate-General of Budget, Accounting, & Statistics and Bank of Korea
Current GDP figures reveal that the upward movement in apparel
CHINA
spending still has momentum. Most consumers say they have
GDP per capita (2005 USD)
more or the same amount to spend on clothing compared to last
GDP Per Capita
3,000
year (40% and 45%, respectively), and only 15% say they have
2,500
less. Nearly one-quarter (23%) say they plan to purchase more
2,000
seasonal change (55%), while a smaller share buy based on
2010
2008
2006
2004
2002
0
2000
clothing for need-based reasons such as replacement (56%) or
50
500 1998
in their apparel shopping habits. Most Chinese say they buy new
100
1,000
1996
Chinese consumers demonstrate a perceptible level of self-control
150
1994
PRAGMATIC SHOPPERS
200
1,500
1992
did last year, which bodes well for retailers and brands.
250
Clothing Spending Per Capita
1990
clothing, while 62% plan to purchase the same amount as they
Consumer apparel spending per capita (2005 USD)
0
Source: World Bank (GDP), Chinese National Bureau of Statistics
[email protected] © 2012 Cotton Council International and Cotton Incorporated
supply chain insights
China in Focus: A Burgeoning Apparel Market retail channels where consumers shop for clothing Differences in retail channels shopped by demographics
Department Stores
Specialty/ Chain Stores
Hypermarkets/ Warehouse Clubs
Independent Stores
Street Markets
Male and Female
Male
Male and Female
Female
Female
Age Groups
30 – 54
15 – 29
20 – 54
All
All
City-Tiers
Tier 1
Tier 3
Tiers 2 – 4
Tiers 3 and 4
Tier 4
Regions
North
East
East & South
South
West
Gender
Source: Cotton Council International (CCI) & Cotton Incorporated’s Chinese Consumer Survey
desire, 32% buy just to add new items to their wardrobes and
and treating the Chinese market as homogenous could prove
only 18% buy new clothing to be trendy. Research shows that
unsuccessful.
impulse and desire-based shopping tends to stimulate apparel sales. Notably, even with rapid modernization in apparel retailing, impulsive buying behaviors among Chinese consumers have not risen in the last decade. Cultivating more spontaneous shoppers may be a large undertaking for even the most dynamic brands and retailers. Therefore, marketing efforts that appeal to consumers’ pragmatism and help create a need for new apparel purchases
THE FIBER FACTOR While fiber content is already one of the primary factors Chinese shoppers consider before buying apparel, its importance has increased significantly over the past year (77%, up from 73%). The amplified importance of fiber could stem from consumers noticing changes at retail. According to the Global Lifestyle Monitor
may be a critical component necessary for sales growth.
survey, more than half of Chinese respondents (56%) say clothing
DIVERSE DRIVERS
which concerns many consumers. Most consumers say they are
The clothing needs of Chinese consumers have remained
bothered by cotton being replaced by other fibers in key product
relatively consistent over the past several years, but differ in
categories like T-shirts (60%), denim jeans (56%), and dress shirts
regards to demographics. Among the most important purchase
(54%). Consumers’ awareness of a shift in cotton’s presence in
drivers, fit (84%) and style (80%) have the highest significance
apparel at retail is not surprising, as cotton is the most recognized,
for Chinese consumers—similar to consumers in other countries.
preferred, and purchased fiber among Chinese shoppers.
previously made from cotton seems to be made of other fibers now,
Additional key attributes consumers assess before buying include
Knowledge of fiber content gives consumers evidence of quality
fiber content (77%), price (76%), and finishing (75%), which
when they evaluate clothing. A total of nine out of 10 consumers
allows shoppers to determine the quality and value of the apparel
say they check fiber content labels before buying and more than
they plan to purchase. While the top purchase drivers are similar
half (52%) believe that better quality clothing is made from natural
across city tiers and regions, there are differences in apparel
fibers such as cotton. While more than eight out of 10 (81%) say
shopping habits and drivers depending on where consumers
that clothing prices have increased compared to last year, the
live. For example, northern consumers are the most scrutinizing
majority of consumers say they are willing to pay even more, if
apparel shoppers and place a great deal of importance on
necessary, to keep cotton in their clothing; 80% for T-shirts, 73%
environmental friendliness. Eastern shoppers are greatly
for dress shirts, 68% for denim jeans, and 62% for dresses indicate
influenced by promotions and are the most brand-conscious.
a willingness to pay more to maintain cotton in their clothing.
Those living in the south are more apathetic towards clothing and prefer to shop for other products, and western consumers
BRAND BEHAVIOR
are extremely aspirational shoppers who are becoming more
Brand name, a major factor that Chinese consumers consider
influenced by promotions. In order to be successful in the
before purchasing new clothes, has increased significantly in
Chinese apparel market, retailers and brands must recognize that
importance compared to last year (60%, up from 54%). Chinese
apparel shopping habits differ considerably by demographics,
shoppers tend to prefer branded items, which they believe to
[email protected] © 2012 Cotton Council International and Cotton Incorporated
supply chain insights
China in Focus: A Burgeoning Apparel Market Northern Consumers:
Scrutinizing and Environmentally Conscious – Northern consumers consider more factors in their decisions to purchase clothing. The tendency to consider multiple factors (e.g., color, durability, performance features, washing instructions, etc.), before buying apparel, may be due to a higher prevalence of shopping at department stores, which typically offer more clothing variety and features. Given the heavy industry, rapid urbanization, and increased pollution in the north, consumers in this region are more sensitive to environmental issues. More than 6 out of 10 northern consumers (64%) say environmental friendliness is important to their apparel purchases, significantly higher than consumers in other regions.
Western Consumers:
Aspirational – Western consumers are significantly more likely than their counterparts to say they believe their income will increase (54%), they will buy more clothes (35%), and they will buy higher priced/higher-end clothes (35%) in the next year. Over the past decade, the Chinese government has made a significant effort to revitalize the western parts of China, creating a boom in jobs, income, and consumption. Given the rapid urbanization in the West, more consumers are finding promotions and advertisements influential to their clothing purchase decisions.
Eastern Consumers:
Brand Conscious – More than 7 out of 10 Eastern consumers (71%) say brand name is important in their apparel purchases. The top 10 menswear and womenswear brands purchased by consumers, in this region, are less fragmented when compared to the top 10 brands purchased in other regions. This finding may point to more brand loyalty in the East. In this region, consumers also access the internet and spend more time online. As a result, Easterners are more likely to get their trend ideas online and be influenced by internet advertisements.
Southern Consumers: Pragmatic – Southern consumers tend to consider a smaller list of factors in their apparel purchase decisions and are less likely to be influenced by advertisements and promotions. Given that southern cities were some of the first to urbanize; many consumers have already been exposed to new brands, features, advertising, etc. Consequently, these consumers demonstrate characteristics typical of more mature markets where some of the “newness” and “excitement” related to shopping may have decreased. For consumers in this region, widespread shopping convenience has led to more pragmatic shoppers, a movement seen in other developed countries. Source: Cotton Council International (CCI) & Cotton Incorporated’s Chinese Consumer Survey
be of better quality, over non-branded products*. Overall, the top brands purchased for most apparel product categories were top brands purchased are domestic, yet many of the favored also segmented, the top 10 athleticwear brands were significantly brands are international. Among the dominant menswear and more concentrated, accounting for 69% of total athleticwear womenswear brands purchased by Chinese consumers in 2011, brands purchased. In 2011, Li Ning accounted for 20% of men’s most were domestic, with Meters/Bonwe (3%), Li Ning (3%), and women’s athleticwear purchases, followed by Anta (9%), Semir (2%), and Yishion (2%) topping the list. However, many Nike (8%), 361° (8%), and Adidas (7%). Athleticwear brands Chinese consumers are more likely to say they prefer international garner consumer loyalty and purchases based on their promises brands, ranking Jeans West, Levi’s, Nike, and Adidas as some of performance and a healthy lifestyle, while also diversifying of their favorite denim and athleticwear brands. These results their product lines to meet the needs of their active and casual indicate receptiveness in consumers to purchase international clientele. brands available in the Chinese market, based on the reputation and quality of merchandise.
CHANNELS SHOPPED
Regardless of demographics, the brand allocation of menswear Although the retail channels where Chinese shop for clothing have and womenswear purchases are exceptionally fragmented, with remained relatively consistent over the past few years, shopping the top 10 brands only accounting for 21% of purchases. The preferences and influences vary by demographics. Overall, a extreme brand fragmentation represents fierce competition in the plurality of Chinese (41%) shop for clothes at department stores apparel markets and significant opportunities for both domestic (e.g., The Pacific or Parkson), followed by 36% at specialty stores and international brands to increase their market share. While (e.g., Giordano, C&A, or Li Ning), 30% at independent stores,
[email protected] © 2012 Cotton Council International and Cotton Incorporated
supply chain insights
China in Focus: A Burgeoning Apparel Market 24% at chain stores (e.g., Shanshijiudu), 23% at hypermarkets/ warehouse clubs (e.g., Carrefour or Trustmart), 8% at off-price
Product Allocation of Chinese & U.S. Consumer Apparel Purchases (unit basis)
stores, and 7% at street markets. In 2011, there were 513 million
Intimates
23%
Internet users in China (Internet World Status), and with average
15%
prices paid for clothing increasing (up 5% in 2011 compared to
14%
2010), Chinese shoppers are turning to the Internet to find the
13% 9% 8% 5%
best deals. According to the Global Lifestyle Monitor survey, more than three-fourths (77%) of consumers shop for clothing online; outranking other product categories like electronics (69%) and cosmetics (50%). This shopping trend presents domestic and international brands with a lucrative opportunity to build their online customer base. What sets Chinese apparel e-commerce apart from other countries is how they shop for clothes online. More than seven
China U.S.*
21% 24%
Tops
14%
Socks Outerwear
3%
Pants/Shorts Jeans
11% 10%
Sweaters
4% Skirts/Dresses 4% 5% Athleticwear 6% 4% Suits/Suit Separates 3% 1% 2% 3% Sleepwear
Sources: Cotton Council International (CCI) & Cotton Incorporated’s Chinese Consumer Survey and *Cotton Incorporated’s Lifestyle Monitor™ Survey
out of 10 (72%) start shopping for clothing through e-commerce that participants had a higher price tolerance and willingness to sites like Taobao, significantly higher than in Japan (24%) or pay more for outerwear than other apparel products because these Europe (18%). These web sites, similar to Amazon.com, allow items meet a need to keep their external appearance well-groomed users to shop for multiple brands of clothing. The popularity of and satisfy their aspirations for a prosperous lifestyle. e-commerce sites may be due to the reality that Chinese shoppers,
Appealing to the practicality of Chinese consumers is essential
like consumers around the world, are using the Internet to buy to the future growth of apparel shopping within China. Quality clothes as well as read customer reviews (59%), compare prices is extremely important to consumers, as well as their sense of (59%), and browse the latest styles (58%). The percentage of value and appearance. Consumers identify quality clothing by Chinese consumers who use the Internet as a source for clothing considering key attributes such as fiber content and brand, with ideas has risen steadily (71% in 2012, up from 16% in 2003). many consumers willing to pay a premium to keep the quality they According to iResearch, China is expected to overtake the U.S. as desire. As the Chinese apparel market continues to grow, retailers
the largest online retail market in the world by 2013. However, for and brands have an opportunity to benefit from consumers’ retailers and brands to achieve success in China’s e-commerce propensity for online shopping and receptivity to international market, they must be able to go beyond being “a source for brands. clothing ideas” and use e-commerce and social media sites to build loyalty with their customers.
PRODUCT PURCHASES AND PROSPECTS In general, Chinese consumers are more willing to pay premium prices for products other consumers can see and skimp on items more hidden from view, such as home appliances or intimate apparel (Wall Street Journal). Chinese consumers indicate that outerwear, representing 13% of apparel purchases, is one of the top four most purchased items on their shopping lists. In comparison to the U.S., outerwear represents a much larger share of apparel purchases. Outerwear commands a price-premium as consumers pay more on average for outerwear (¥333) than other apparel items (¥174). Recent focus groups conducted among women in Shanghai, Xi’an, and Chengdu, China found
About the Research Cotton Council International & Cotton Incorporated’s Chinese Consumer Survey is an on-going, quarterly consumer survey that began in the third quarter of 2009. Each year, approximately 4,000 Chinese consumers are interviewed in over 100 cities throughout all four city-tiers and regions in China. Respondents are male and female, between the ages of 15 and 54, and purchase their own clothing. Results are weighted to be representative of the urban Chinese clothing shopping population. Cotton Council International & Cotton Incorporated’s Global Lifestyle Monitor Survey is a biennial consumer research study. In the 2012 survey, 5,000 consumers (approximately 500 in each of the 10 countries surveyed) were surveyed via telephone, face-to-face interviews, and online. Respondents were male and female, aged 15 to 54. The ten countries included in the 2012 survey were Brazil, China, Colombia, Germany, India, Italy, Japan, Thailand, Turkey, and the United Kingdom. In China, respondents were interviewed in three major cities: Beijing, Shanghai, and Guangzhou. *Source: McKinsey & Company
[email protected] © 2012 Cotton Council International and Cotton Incorporated
