The China Edit | Asos China, Chinese Tourists Shaping Retail, Alibaba’s Weibo Deal, Retail Hotpots In Asia Pacific, CFDA Launches ‘Americans in China’

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.

Source: ASOS

Asos Seeks Foothold In China Fashion Ecommerce(The Financial Times)

In conjunction with strong earnings reporting last week, British fashion e-tailer Asos elaborated on its country-specific expansion strategies. Company’s revenues rose 33 percent in six months and generated a pre-tax profit of 25.7 million pounds ($40 million), which will bypass dividends in favour of re-investment. A dedicated Russian website was launched on Wednesday, an operation which chief executive Nick Robertson described as “business as usual.” China, on the other hand, merited a more calculated approach.

The company has allocated up to 4 million pounds in annual investment over the next three years to build up a separate China platform. Asos China will be powered by a third-party technology platform and offer a reduced inventory reflecting 10 percent of the global assortment. All products will be fulfilled locally from a dedicated distribution hub. It will be interesting to track how Asos’ free global shipping and returns policy will be executed in the Mainland. The website is expected to launch this October and should have a long enough grace period to calibrate itself: the first two operational years are anticipated to be loss-making. Asos, whose domestic UK sales only account for 40 percent of turnover, is clearly measuring return over longer periods.

How Chinese Tourists Are Shaping World’s Retail And Travel Sectors” (South China Morning Post)

The average Chinese per capita income is expected to increase sevenfold (from $2,500) between now and 2050, fuelling continued focus on the country’s burgeoning middle classes. Their propensity for overseas travel and shopping has been a key driver of revenue growth in high profile American, European and Pan-Asian destinations and is one of the few aspects of the global luxury industry that shows little sign of slowdown. China’s Central Government has proven to be an unwitting ally in this process: by increasingly placing emphasis on boosting the country’s consumer services and retail sectors, it has become an active proponent of all forms of leisure travel. In a recent Outline for National Tourism and Leisure, the State Council issued a Seven-Year Plan encouraging more generous employer holiday policies. This will surely result in additional domestic trips to Tier 1-3 cities, more Hong Kong/Macau travel, and, of course, more overseas journeys. Foreign retailers of all ilk should hedge their bets and await at each of these destinations.

China’s Changing Internet Landscape” (The New York Times)

The Alibaba Group’s investment into SINA Corporation’s microblogging platform Weibo was the digital talk of the week, aptly described as the deal that could reshape the country’s internet space — something akin to Amazon or eBay investing in Twitter. Alibaba acquired 18 percent of SINA’s Weibo subsidiary for $586 million, in a strategic alliance committed to explore the social commerce potential between the former’s millions of independent online merchants and the latter’s nearly 500 million users. The deal generously values the Weibo unit at $3.3 billion.

The confluence of these two internet giants is generally considered mutually complementary: Alibaba’s weakness lies in social while SINA has come up short in monetising its content sites. Joining forces for compelling social commerce applications and a strengthened mobile position (potentially a new mobile OS to take on Google Android’s domination in the market) should be on the agenda, as should joint efforts to data mine analytics on consumer behaviour. Chinese consumers may complete more online transactions through Alibaba than any other platform, but it is the distinctively Chinese microblogging tools like Weibo that hold the key to sustained engagement and brand loyalty.

Retail Chains Attracted To Asia” (China Daily)

According to CBRE’s latest report, “Retail Hotpots In Asia Pacific: 2013 Key Findings,” the region’s overall economy is relativity resilient and a steady flow of new entrants continue to be attracted to its young demographics and rising income levels. On a top level view, established markets such as Hong Kong, Singapore and Tokyo lead in number of overall new entries and American retailers continue to expand the most aggressively. Within the “luxury and business” retail segment, those with more established presences in the region are shifting their focus towards markets such as Wuhan, Shenyang and Nanjing to support demand from growing consumer bases.

Given the increased fashion knowledge and growing buying power of these locales’ increasingly delineated middle classes, CBRE Retail Asia executive director Sebastian Skiff also sees increased demand for mid-range stylish fashion and believes there are significant opportunities for more affordable brands to consider entry.

CFDA, Vogue To Launch ‘Americans in China’ Program” (Women’s Wear Daily)

The Council of Fashion Designers of America (CFDA) and Vogue Fashion Fund’s latest endeavour, underwritten by Hong Kong retail magnate Silas Chou, aims to raise the profile of American labels in Mainland China. The “Americans in China” initiative will kick off in late June 2013 when three former CFDA/Vogue Fashion Fund finalists present their AW2013 collections at the Ming Dynasty City Wall Relics Park in Beijing. The designer duos behind Proenza Schouler, Rag & Bone and Marchesa are expected in town for the June 21st event, as well as at a pair of pre-show gatherings hosted by US Ambassador-to-China Gary Locke and Vogue China editor-in-chief Angelica Cheung.

Restaging a previous runway showing for a select Chinese audience is not a particular original undertaking: Italian and French fashion houses such as Prada, Fendi, Dior and Louis Vuitton have gone down the same promotional path in recent seasons. The broader question this begs is with regards to the CFDA’s positioning strategy: is the non-profit trade organisation simply exposing its incubated roster to cross-border opportunities, or is there the making of a long-term commercial play by facilitating market entry through partners like Mr. Chou?