The China Edit | Guo Pei, Credit Cards, Cheap Chic, Marks & Spencer, Alibaba Combats Fakes

The China Edit is a weekly curation of the most important must-read fashion business news and analysis from and about the world’s largest luxury market.

Beijing-based couturier Guo Pei | Source: Courtesy

Creating Chinese Couture” (Wall Street Journal)

Fifteen years after first opening her Shanghai atelier, Guo Pei has finally achieved a level of craftsmanship that meets her own standards. A team of 450 artisans, 300 of whom specialise in traditional hand embroidery, generate between 3,000 to 4,000 pieces a year for some 300 regular clients, including public figures from the worlds of entertainment and government. This is a staggering volume for any couture operation. And while the business does not share financial data, Guo acknowledges low margins and a reliance on costly imported materials such as dyed Italian silks.

According to Guo Pei, in recent years, prêt-à-porter has been so highly priced in China that commissioning a tailor to achieve a similar look has often been considered a more accessible alternative. Guo positioned her own atelier to reverse this perception and, in the process, has helped raise the profile of domestic couture, ‘demi-couture’ and other made-to-measure offerings.

China Hot Market Without Profit Seen in Pretty Lady Card” (Bloomberg)

Retailers and service providers seeking to tap China’s emerging consumer classes are finding eager allies in the retail banking sector. A number of domestic (state-owned and other) and foreign credit card issuers are targeting a significantly under-leveraged capital market: roughly 43.6 trillion RMB ($7 trillion USD) in Chinese household savings.

Indeed, credit cards are being marketed and issued at dizzying rates (46 million cards were issued last year). Yet the industry faces challenges in the form from ingrained consumer habits. Not only are cash transactions very common in China, but when Chinese cardholders do swipe plastic, only 3 to 8 percent of consumers typically rollover their balances, according to the Boston Consulting Group, compared to the over 40 percent of US cardholders who habitually rollover charges. And even if more Chinese begin to carry balances, annual interest rates are fixed by the Central Government at around 18 percent, pushing card issuers to differentiate their offerings with increasingly creative incentives. Deutsche Bank and Huaxia Bank co-issued a “Pretty Lady” credit card that offers triple points for cosmetics purchases and fitness-club dues, while China Citic Bank Corp’s “Ms. Magic” credit card is studded with Swarovski crystals.

Asia Gravitates to Cheap Chic” (Wall Street Journal)

A newly release report by CBRE, a real-estate services firm, indicates that midrange ‘fast fashion’ retailers are expanding their Asian footprint at a faster rate than luxury brands. This can be partly attributed to the latter’s longer tenure in the market and resulting penetration in mature Tier 1 and 2 cities, whereas the likes of Zara and H&M are relative newcomers (market entries in 2006 and 2007, respectively) with much catching up ahead.

More simply considered, this trend also highlights a key reality amid the country’s shifting demographics: the majority of the additional 260 million middle-class Chinese consumers anticipated by 2020, while preemptively drawn to luxury goods, are still young, trend-driven and operating with average monthly incomes limited to 3,000–5,000 RMB.

Marks & Spencer Steps Up China Expansion Efforts” (Jing Daily)

Richard Thomas joined Marks & Spencer a year ago as Head of the Far East Region and was charged with leading the British retailer’s on-going repositioning efforts in China. Despite an early Hong Kong presence dating back to the late 1980s, M&S did not have a Mainland retail presence until late 2008, when it opened a prominently located flagship on Nanjing Xi Lu in Shanghai. Early trading was rough due to poor merchandise planning and a misunderstood pricing strategy.

Last year, the company announced plans to double its Mainland footprint, with approximately a dozen new doors in the pipeline for the end of 2013. In an interview, Thomas focuses on the expanded role of the company’s Hong Kong office as a regional HQ, tasked with increasingly broad responsibilities, from product development and direct sourcing all the way through to “marketing innovation.”

Alibaba Pledges to Combat Fake Goods on its Shopping Portals” (Reuters)

Alibaba, China’s biggest e-commerce group, is renewing its commitment to combating piracy on its eBay-like Taobao Marketplace, with a pledge to commit “as many resources as necessary” and the formation of a corporate taskforce to coordinate the initiative. The announcement coincides with the group’s upcoming leadership transition. Intellectual property is a sensitive topic for Alibaba and the company hopes to shape the conversation around this issue ahead of a rumoured public offering said to take place next year.

In the past year, founder and outgoing chief executive Jack Ma cracked down on unauthorised vendors operating Taobao storefronts, cooperating with law enforcement authorities to take down over 170 million yuan worth of pirated merchandise. But given that the total volume of Taobao transactions topped 160 billion yuan during this same period, there is clearly still much more to be done.