The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
As the 2010s come to a close, BoF reflects on how the past decade transformed the fashion industry — and the culture at large. Explore our insights here.
SHANGHAI, China — Last week, BoF began its two-part series looking back on the decade of China, from the rise of WeChat to the country's 'consumption upgrade.' But in a nation now the centre of global commerce, boasting a fashion market worth over $372 billion, there's plenty still to cover.
Below, the story shifts to politics, consumer behaviour and media to examine the forces that have helped define China’s fashion, beauty and luxury markets from 2010 to today, with an eye on the trends likely to shape the years to come.
The Rise (and Rise) of Xi Jinping
Following his appointment in 2012 as general secretary of the Communist Party — and as President of the People's Republic of China the following year — Xi Jinping's economic policies have defined how companies are able to navigate the country's shifting business landscape. Via the ambitious Belt and Road initiative, which aimed to connect China's manufacturers to developing markets in Africa and Southeast Asia, Xi paved the way for other Chinese investors to develop their presence globally. After the removal of presidential term limits in 2018, meaning he could serve for life, President Xi's hold on China won't be loosening anytime soon.
Beijing has increasingly employed the internet as a tool to serve its political interests through an extensive censorship regime and an increasingly robust “Great Firewall.” This has resulted in a parallel tech landscape and helped fuel the rise of apps like WeChat. The decade also saw significant investment into China’s lower-tier cities, which are now white-hot consumption centres, and spending overtook manufacturing to become China’s main GDP growth driver.
Chinese President Xi Jinping addresses students of MGIMO | Source: Shutterstock
Xi's election was followed by the launch of far-reaching anti-graft campaigns, which indicted over 100,000 people for corruption-related offences including the gifting of luxury goods. Years later, China's slowing economic growth and mounting debt spurred attempts to boost consumption: rounds of trillion-yuan tax cuts did away with substantial mark-ups for luxury goods, whereas a crackdown on grey market ("daigou") practices encouraged shoppers to spend closer to home. Amid the ongoing US-China trade dispute and volatile relations with President Donald Trump, Xi's focus on limiting foreign technology's power in China has underscored self-reliance as a virtue. That will go on to define China's tech and innovation scene in the new decade, although Europe's luxury brands continue to walk a fine line by cosying up to both superpowers.
Luxury Met Its Most Important Consumers
China's digitally native younger spenders have proven especially vital for brands' bottom lines this decade. Increased spending on high-end products from bags to jewellery have driven growth for what would become, by the end of the decade, the largest global market for luxury goods. So-called 'Post-'90s' and 'Post-'00s' shoppers also helped shape the marketing strategies of luxury brands globally by incentivising the chase for new formats and mediums — from collaborating with hit video games to community-focused youth culture gatherings — alongside a deeper focus on merchandising to cater to each generation's unique characteristics. Elsewhere, a sea change in tourist behaviour (thanks to tax cuts, currency fluctuations and a slowing local economy) saw affluent Chinese travellers spend less abroad and more at home.
Omnichannel Became Omnipresent
The 2010s yielded global advancements in augmented reality, facial and voice recognition and new digital platforms, but China led the charge.
As mobile e-payments (totalling half of all Chinese payments in 2015 according to Daxue Consulting) helped break new digital technologies into the physical retail space, bridging e-commerce and brick-and-mortar channels became the norm. In a 2017 letter to Alibaba's shareholders, Jack Ma coined the phrase 'New Retail,' describing how "the boundary between offline and online commerce [will disappear] as we focus on fulfilling the personalised needs of each customer."
Luxury players expanded aggressively across the mainland in the first half of the 2010s, only to scale back on cookie-cutter brick-and-mortar stores in response to a slowing market (Prada went from 49 to 33 stores between 2013 and 2015). By the time omnichannel strategies went mainstream, the ubiquity of e-commerce, repatriation of luxury spending and a better grasp of geographic and demographic segmentation demanded a new approach. Thereafter, brands invested in digital activations like WeChat games or e-commerce (typically by partnering up with a giant like Alibaba's Tmall or JD.com's Toplife, which was acquired by Farfetch in 2019). Content-friendly pop-ups and exhibitions designed to be experienced physically and digitally also took hold; mall and department store giants like Beijing's SKP headed down the art-mall route.
Geopolitics Went Global
LVMH, Richemont and Kering saw sales in Hong Kong suffer after protests which began in June 2019 against a proposed extradition bill evolved into a wider — and later, violent — fight for police accountability and universal suffrage. Tourists from mainland China (a boon for local retail) dropped by as much as 90 percent in some months from the previous year's total, according to Hong Kong's Travel Industry Council.
Protest against extradition law in Hong Kong | Source: Shutterstock
In August 2019, Beijing introduced a ban on solo travellers to Taiwan — which has long been at loggerheads with China over its sovereignty — the estimated cost of which could hit $900 million by January 2020. Meanwhile, recent reports uncovering the Chinese government's mass imprisonment of Uighurs in the autonomous region of Xinjiang turned the microscope onto global retailers such as H&M, Esprit and Adidas, whose supply chains have reportedly been subcontracted to factories manned by muslim minorities under circumstances of forced labour.
As Local Mega-Brands Thrived, Foreign Fast Fashion Fled
Homegrown mass-market fashion brands like Heilan, Peacebird, GXG and Metersbonwe upped their game by establishing strong physical and digital footholds and tapping into decades of consumer know-how. But the cutthroat market proved too much for global fast fashion players like Forever 21, New Look, Asos and Topshop, who made their mainland debuts from the 2000s but exited the mainland in recent years after failing to localise and sustain momentum. Some foreign giants are still present (Zara, H&M and Uniqlo to name a few), keeping consumers interested by tapping into nation-wide shopping festivals, buzzy collaborations and local ambassadors. Whether these moves will continue to give them the edge beyond 2020 remains to be seen.
Sustainability Got Off to a Slow Start
In 2012, Beijing made environmental care a national priority after myriad air, water and food poisoning scandals pushed the country to breaking point. Helmed by President Xi — a vocal supporter of the Paris Agreement on climate change — the government's 2016 five-year-plan set a target of 4.5 million tonnes for recycled textile production by 2020. Beijing's 2018 decision to cease serving as a global dumping ground for nearly half of the world's recyclable waste could push leaders to rethink their waste management policies, and in 2019, Shanghai's municipal government rolled out strict new recycling laws that could soon be implemented nation-wide.
Sustainable fashion, however, took a backseat for much of the 2010s. Although 70 percent of surveyed Chinese consumers recognise consumption's impact on the environment, sustainability hasn't become a priority. Industry pioneers like Icicle, Erdos, alongside Modern Media Group Style Editorial Director Shaway Yeh, have their work cut out in years to come.
Investors’ Spending Sprees Plateaued
The decade witnessed a host of global fashion group investments by Chinese companies. Labels like Sonia Rykiel to Buccellati were snapped up by Chinese firms, while Shandong Ruyi and Fosun raced to become the mainland's version of LVMH with their acquisitions (SMCP, Aquascutum, Gieves & Hawkes, Cerruti 1881 to the former; Lanvin, Caruso, Wolford, Tom Tailor and St John Knits to the latter). Meanwhile, affluent heirs Adrien Cheng (of Hong Kong jeweller Chow Tai Fook) and Wendy Yu bet on Moda Operandi and Mary Katrantzou respectively.
Lanvin store front, IFC Shopping Mall in Shanghai | Source: Shutterstock
But not all of them panned out, and new government measures seeking to limit overseas investment have tempered the buying frenzy. Sonia Rykiel, acquired by First Heritage Brands in 2012, entered receivership in April 2019; Gansu Gangtai Holding is reportedly seeking a buyer for Buccellati. While Shandong Ruyi's 2018 deal to buy Bally from JAB Holding is at a standstill, the group is reportedly facing 2 billion yuan ($284 million) in debt after spending over 40 billion yuan ($5.6 billion) since 2010. Still, European brands continue to prove attractive additions to mainland portfolios and Chinese firms have the liquidity to take on brands other players would find too risky.
Digital Darwinism Struck Fashion Media
Grappling with a decade of digital disruption, some Chinese media players shuttered print publications, while others pivoted towards younger audiences. Self Magazine's local edition, alongside Modern Media Group's creative lifestyle title Outlook Magazine, were among those to cease operations after 2016.
Established publications developed new verticals to target increasingly niche audience segments and drive revenue, from the Vogue China's millennial-centric VogueMe and VogueFilm to Elle China's ElleMen China and GQ China's WeChat-only sponsored content channel GQ Labs. Local editions of Harper's Bazaar and Esquire experimented with monetising digital covers of top celebrities to tap into local idol culture — fans have been said to purchase thousands of 'covers' to support their favourite stars. But as the landscape shifted, industry heavyweights got restless and an exodus of senior executives rocked Condé Nast China, Trends Media and Huasheng Media in 2018.
Despite an already-crowded scene, new players thrived. Media and events stalwart Yoho! captured the hearts of the country's digital savvy youths, and Huasheng Media (licensee of titles like T Magazine, Wallpaper and Kinfolk) succeeded in acclimatising niche publications to the Chinese market. Though the road ahead remains uncertain for industry giants and newcomers alike, a digital-focused community-led approach will remain a north star for many brands in the years ahead.
FASHION & BEAUTY
Machine-A store | Source: Courtesy
How a Nondescript Boutique Wooed China’s Fashion-Forward Students
Multi-brand boutique Machine-A has become a go-to for London-based Chinese students seeking up-and-coming designer pieces. Despite the cramped interior of its unassuming Brewer Street store in Soho, shoppers are attracted by its teams' discerning eye for global talent. "The store buys unique pieces that you can't find online," says Shanghai-based analyst Kathy Kang, who was delighted to discover Chinese designer Ximon Lee during her last visit. (It also helps that the store ensures a Mandarin-speaking staff member is always available). Fashion school students — thankful for the brand's work in championing recent graduates — have become Machine-A fans and helped drive its annual growth rate to 35 percent. Becoming profitable will be its next big challenge. (Irina Li for BoF China)
What Luxury Brands Can Learn from Taobao
Alibaba-owned B2C marketplace Taobao has long been popular with younger Chinese shoppers thanks to its wide range of distinctive and affordable brands, but luxury players could also learn a thing or two from its boutiques. Responsive and personable customer service is key: most Taobao boutique reps are online for over 16 hours every day of the week. Some sales associates will try on products for customers, working as personal shoppers and de facto influencers to establish intimate brand-shopper relationships. Many boutique owners will also provide personal styling and fitting recommendations according to their own body types, garnering loyal followers and upping customer retention rates in the process. (Jing Daily)
How China is Driving Luxury Digitisation
Upgrading the way people in the mainland consume digital content, China's mobile revolution has also disrupted luxury's traditional methods of engagement. With young and tech-savvy 'post-80s' and 'post-90s' shoppers pegged as luxury's current driving force, the likes of Gucci and Burberry have become fluent in new communication tools, from video games to live-streams. Just this month, Louis Vuitton launched its collaboration with hit online game "League of Legends," which was created by Tencent-owned Riot Games. Linking with Tencent to bolster a brand's marketing and e-commerce chops is now the norm, rather than the exception. A McKinsey report has noted that "instead of legacy reputations established over hundreds of years in Europe, these new luxury consumers are influenced more by what is happening right now." As new luxury consumer segments emerge in neighbouring regions like Southeast Asia, brands will be better-equipped to keep up. (Pandaily)
TECH & INNOVATION
Forklift loading products into a lorry | Source: Unsplash
Newly Funded Lazada Alumnus to Bring Chinese Players to Southeast Asia
Southeast Asian e-commerce consultancy Intrepid Group recently closed its Series A funding round. Intrepid — run by co-founders and former executives of Alibaba-owned Lazada e-commerce platform — has not disclosed the amount of its funding round. It did disclose that the funds will be used to help Chinese brands tap Southeast Asia's rapidly growing e-commerce industry, which Bain & Company forecasted to be worth $40 billion this year and hit $150 billion by 2025. Though the region shares China's rapidly rising middle class and increasingly tech-savvy shoppers, it won't be a sure win for the mainland's brands and retailers. "[The] e-commerce environment in South East Asia is very different from China," said Charles Debonneuil, Intrepid Group's chief executive and co-founder of Lazada Group, in a statement. "South East Asia is also very fragmented: there are six markets with very different consumers, different cultures, different languages, different regulations." (TechNode)
ByteDance Subsidiary Links Arms with Chinese State Media Player
Official registration documents reveal that Chinese tech giant and TikTok owner Bytedance has recently established a joint venture with media company Shanghai Dongfang Newspaper. The joint venture, named Pengpai Audiovisual Technology Co. Ltd., will focus on partnerships in the digital rights of short video content, and is one of many deals Bytedance has made with state media organisations to feed its news aggregator app, Jinri Toutiao. The joint venture won't make things easier for TikTok, which has been under scrutiny in the US due to alleged data privacy concerns stemming from its parent company's ties with Beijing. (Reuters)
Baibu Closes Largest Funding Round in China’s Textile Industry
Guangzhou-based B2B textile trading e-commerce firm Baibu closed a $300 million Series D funding round last week, signalling growing venture capital interest in the mainland's rapidly digitising manufacturing industry. According to local media outlet 36Kr, the investment — led by DST Global and joined by Baibu's early investors including CICC Capital and Source Code Capital — marks the largest ever fundraising round in the Chinese textile industry. Baibu data reveals that the five-year-old company's sales reached almost 10 billion yuan ($1.4 billion) this year, and new funds will be funneled into R&D, logistics and building relationships with factories producing unbleached and undyed textiles. The news follows the closure of Shenzhen-based textile start-up Smart fabric Textile Technology's $100 million Tencent and Sequoia-led Series C round in the fall. (Tech in Asia)
CONSUMER & RETAIL
Protesters march on a street on August 3, 2019 in Hong Kong, China. | Source: Getty Images
Joyce Boutique Delists as Hong Kong Retail Struggles
Hong Kong-based luxury multi-brand boutique Joyce has been plagued by declining sales for months and the city's ongoing pro-democracy protests haven't helped curb losses. The 48-year-old luxury retailer (credited for introducing brands like Comme des Garçons and Alexander McQueen to Hong Kong) has delisted from the Hong Kong Stock Exchange for the cash price offer of $0.28 HKD per share, repurchased by the Woo Family — the owner of fashion and real estate empire Wheelock and Company and the Lane Crawford Joyce Group (which is wholly owned by Peter Woo Kwong-Ching, the executive chairman of Wheelock Holdings Pte Ltd). Joyce's stock has lost nearly 65 percent of its share price since listing in 1990 and the offer was made amid ongoing disruptions to inbound tourism and customer sentiment. (BoF China)
In China, ‘Post-90s’ Consumers Take the Reins
The mainland's consumer groups are becoming more segmented, fast. According to results released by e-marketplace Taobao following last week's 'Double 12' shopping event (which owner Alibaba markets as a sequel to November's Singles' Day), Chinese consumers born after 1990 outspent their 'Post-80s' peers for the first time. Taobao data reveals that 'Post-90s' consumers checked out on 2.7 billion more transactions than last year — the equivalent of 10 items per person from that demographic. 'Post-90s' young men have been an especially lucrative customer group for beauty products: they outspent other generations in anti-hair-loss items and recommended face masks on the platform over 20,000 times during the promotional period. (Sina)
China’s Retail Sector Perks Up as Trade Tensions Thaw
China's retail and industrial sectors have beat expectations following last week's news of Beijing and Washington's much awaited "phase one" trade deal. Figures for November released on December 16 were upbeat: retail sales rose 8 percent from the previous year (against an expected 7.6 percent) buoyed by government stimulus efforts and consumption during last month's Singles Day shopping extravaganza. Though export activity and corporate investment are likely to see an uptick as the 17-month-long spat cools, growth in infrastructure and property left much to be desired and will present challenges as the mainland heads into 2020. (Bloomberg, Reuters)
POLITICS, ECONOMY, SOCIETY
Riot police stand off against demonstrators in front of a Bally store inside New Town Plaza shopping mall | Source: Getty Images
Malls Targeted During Hong Kong’s ‘Christmas Shopping’ Protests
Extreme factions within Hong Kong's pro-democracy protest movement staged city-wide protests in the city's malls on December 15, leading to altercations with police officers and members of the local population. Seven malls were occupied, with some protestors smashing store windows in Sha Tin's New Town Plaza — which houses 350 international labels and boutiques — and clashing with police in Kowloon Bay's Telford Plaza. Other malls, like Times Square in Causeway Bay and Harbour City in Tsim Sha Tsui (two major luxury shopping destinations) were also disrupted. Not everyone in Hong Kong was in solidarity with the activists: thousands gathered in the city's Tamar Park on the same day to support its police force and condemn violence by radicals. (South China Morning Post)
After the NBA, Arsenal Gets Embroiled in Xinjiang Furore
Following the backlash against the NBA in October, Arsenal footballer Mesut Özil has become the latest sports personality to incur the wrath of Chinese netizens and officials, after speaking out against the internment of Muslim ethnic minorities in Xinjiang. Midfielder Özil, who has 4 million followers on Chinese social media site Weibo, made a post on December 13 calling Uighurs in the province "warriors who resist persecution." The post included the national flag of East Turkestan — a symbol commonly used by the region's independence activists. In response, Chinese netizens burnt Arsenal football shirts and demand that the club fire Özil. Chinese state broadcaster CCTV cancelled a broadcast of Arsenal's Premier League game against Manchester City on December 15, and China's foreign ministry said the player had been "deceived by fake news," extending an invitation for him to visit Xinjiang to "see the truth for himself." However, some have argued that the response has been far more muted than the backlash against Houston Rockets general manager Daryl Morey after he tweeted his support for protestors in Hong Kong. (Inkstone)
Chinese Media Fights Back Against NYT Rape Allegation Story
Earlier in December, The New York Times published an article on 21-year-old college student Liu Jingyao, who accused JD.com Founder Richard Liu of raping her in 2018, only to be subsequently labeled "a slut, a whore, a liar, a gold digger and many other things" on the Chinese internet after her name became common knowledge. The piece described the "vast and often vicious" social media backlash Liu's accusations ignited in a country the NYT article says is plagued by widespread sexual assault and harassment, and where "elites face little scrutiny." Chinese media outlets have since responded to what has been described as a "one-sided" story, with Global Times arguing that it "wrongly depicted Chinese society as one that is indifferent to women's rights," in a reflection of "how certain US media outlets are... unable to set aside prejudices when reporting on China." The state media publication went on to argue that extramarital affairs and private morality are taken very seriously in China, and that the protection of womens' rights has improved in recent years. (Global Times)
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