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.
Hello BoF Professionals, welcome to our latest members-only briefing. China’s colossal size and dynamism makes it a top priority for any global business, but it remains opaque to many in the fashion industry. Leveraging our rare access and local knowledge, the BoF China team demystifies the Chinese market with weekly industry analysis and the wider socio-cultural context you need to sharpen your focus.
Now, however, some analysts say there's too much money for too few good ideas, and by some estimates, 90 percent of Chinese start-ups are predicted to fail. In the absence of an exceptionally persuasive business case, they suggest investors keep their wallets shut .
If you went to Beijing, Shanghai or Shenzhen two years ago, everybody sitting in a Starbucks was talking about investment.
That strategy hasn't always paid off, however. As reported by BoF last week, Gansu Gantai Holding is reportedly looking for a buyer for Italian jeweller Buccellati after defaulting on a loan, and Shandong Ruyi has yet to complete its acquisition of Swiss luxury shoe brand Bally from JAB Holding despite having signed a deal back in February 2018.
Nowadays, investors are more cautious compared to the period when Xiaohongshu and Mogujie were actively in the market for funding
Looking ahead, entrepreneurs may not be able to tap the tech giants that have recently poured money into Chinese businesses. Eager to own Chinese people's lives online and beyond, Tencent and Alibaba have together made over 1,000 investments, according to the FT. Nineteen of the 71 Chinese unicorns are either backed or owned by the BAT triumvirate, who together have a market cap fast approaching a trillion dollars.
Making things worse, China's tech giants are themselves struggling: property app unicorns Aiwujiwu and Pinganfang.com both folded in January; JD.com founder Richard Liu has urged overworked employees to work even harder, saying in a leaked internal email released by TechCrunch, "we have been in the loss for more than ten years"; and Uber-inspired ride-sharing app Didi, valued at a whopping $56 billion, reported losses in the hundreds of millions last year, leading them to shelve a planned IPO.
We're not necessarily heading into a capital winter
Additional reporting by Denni Hu
FASHION & BEAUTY
A Gucci boutique | Source: Shutterstock
Gaga for Gucci, China Helps Kering Beat Estimates
Wall Street predicted Kering would reach revenues of €3.74 billion ($4.19 billion) this quarter, but the French luxury group did even better, rising 17.5 percent year on year to reach €3.785 ($4.24) billion. Gucci helped Kering get across the line, beating the average with revenues growing 20 percent. Chief financial operator Jean-Marc Duplaix attributed the brand's rapid growth to China, which has become Gucci's third biggest online market after the UK and the US, and shows no signs of slowing down. Continuing to bet on China's penchant for purchasing high-end items online, the French luxury group behind the likes of Balenciaga and Bottega Veneta added Alexander McQueen to Tmall's Luxury Pavilion premium e-tail platform early in the second quarter. (Jing Daily)
Beauty App Meitu Launches Facial Cleansing Device IRL
Meitu's 115 million monthly active users spend as much as 40 minutes editing a single selfie before uploading it to social media. Real life offers less than pixel-perfect control, but Meitu is nevertheless offering a solution, a facial cleansing device that resembles Swedish brand Foreo's LUNA. The MeituSpa uses sonic pulses to clean pores and purports to help the skin absorb beauty products more easily. Meitu plans to begin selling its own skincare products too. This is not the company's first foray into the physical realm. But their smartphones designed to take exceptional (if unreal) selfies sold fewer than 730,000 handsets last year, and Meitu has since sold the business to Xiaomi. (Abacus)
L'Oréal's Asian Sales Pass Europe for the First Time
L'Oréal SA now earns more in Asia than it does in Western Europe, a remarkable reversal from just ten years ago when European sales more than tripled those in Asia. The result is thanks in large part to China's enduring appetite for luxury goods. The Paris-based company behind brands including Armani, Kiehl's and YSL saw strong quarterly growth of 14 percent despite the Chinese economy as a whole slowing to 6.4 percent last year. Despite losing steam, China continues to outperform more developed economies. While L'Oréal CEO Jean-Paul Agon said sales in Western Europe showed signs of strengthening, he said they were nothing that would compete with sales in Asia. L'Oréal's stock has risen 21 percent this year, with revenue up 7.7 percent to €7.55 billion ($8.46 billion). Last week, the world's biggest cosmetics maker overtook oil giant Total SA to become France's second most valuable company. (Bloomberg)
TECH & INNOVATION
A Xiaomi Store | Source: Shutterstock
There’s Something Same-y About US and China Tech Giants
China's tech giants started as copycats of US businesses, but now the influence is increasingly heading in the other direction. Apple is introducing films and payments just as Chinese smartphone maker Xiaomi earlier introduced content and finance. Google is getting into gaming and Facebook is looking to integrate messaging and social media, two things Tencent—best known for WeChat despite its revenues coming largely from gaming—built its business on. Whether such copycat expansion is a smart move depends very much on how governments deal with the tech giants' growing monopoly on our attention and data. There's talk that Chinese officials wants to break up Alibaba and Tencent, just as US politicians rail against Facebook and Apple. (FT)
AI Designer Is Runner Up for Chinese Fashion Prize
Outfits designed using artificial intelligence (AI) won second place in the China International Fashion Design Innovation Competition. DeepVogue, an algorithm developed by Shanghai-based company DeepBlue Technology, was the sole non-human participant in a field of 16 designers from around China. It also won the "People's Choice Award". DeepBlue was quick to point out that a great deal of human assistance was instrumental to DeepVogue's success, including the input of material that the algorithm was trained on. The competition's panel of 50 judges said AI won't replace human designers, or at least not all of them. (Radii)
Long After Livestreaming, Vlogs Catch on in China
The term vlog, or video-log entered the Miriam Webster Dictionary in 2009 but it's only since late last year that the term shot up in usage in China. Video site Bilibili and Sina, which runs social media site Weibo, are among the companies that have pushed the medium. Bilibili, which pays 2,000 RMB ($300) for every million views, saw vlogs increase by 16 times and their views increase by 18 times in 2018. Bilibili went on to launch a 30-day vlog challenge in January to celebrate Chinese New Year. Web celebs and beauty blogs have now joined the trend. (Sixthtone)
CONSUMER & RETAIL
JD.com packages | Source: Shutterstock
JD Opening Retail Complex in Chongqing
E-commerce and logistics giant JD will open a large retail complex in Chongqing, central China, later this year according to Yan Xiaobing, senior vice president of Jingdong Group. The complex will include the consumer electronics on which JD, previously known as JD.com, first built its brand, as well as home appliances. The Jingdong Home Appliance Super Experience Store will cover an area of nearly 50,000 square meters, including three floors of the main building and a smaller building in Chongqing Putai Plaza. The Experience Store will sell smart appliances, mobile communications and other IT products, while an additional comprehensive store will stock major categories such as digital, home life and daily necessities. (Every network )
Tencent Wins Approval to Sell Nintendo's Switch in China
It's better late than never for Nintendo, which finally has permission to sell its hit gaming console, the Switch, in China two years after the device was first launched. Approval was granted by officials in Guangdong, where Nintendo's China partner Tencent Holding is registered. Approvals for hardware and software are separate, however, with the Ministry of Culture and Tourism approving devices and the State Administration of Press and Publication approving the games, meaning there are no guarantees Nintendo will be able to sell all its IP. (Initially, the console will be sold with a game called New Super Mario Bros. U Deluxe.) Nintendo and Tencent previously collaborated with Tencent's hit mobile game Arena of Valor available on the Switch. (Reuters)
Estée Lauder and NetEase Drop Lawsuits
Koala, NetEase's e-commerce platform, has dropped a lawsuit it filed against Esteé Lauder for damaging its reputation, while the US beauty giant has in turn dropped the lawsuit it filed against Koala for infringing its trademarks by allegedly selling MAC cosmetics without a license. Estée Lauder (Shanghai) Co., Ltd. is the exclusive distributor of Estée Lauder products, including MAC, in China. The Manhattan-based company sought 1 million RMB ($149,000) in damages, while Koala was asking for 21 million RMB ($3.12 million) and an apology. Estée Lauder had also accused the Hangzhou-based company of selling fake Estée Lauder products on its site. (Jiemian)
POLITICS, ECONOMY, SOCIETY
Fan Bingbing | Source: Shutterstock
Beijing Buys Stability for China’s Economy
Officials say the Chinese economy grew at 6.4 percent in the first quarter of 2019 compared with the same period last year. Despite scepticism over Beijing's numbers, economists believe the slowdown has reached its bottom thanks to the hundreds of billions of dollars Beijing pumped into the economy, as well as encouraging more business loans from state-run banks. These gambles paid off when the Chinese economy was growing at double digits, but now analysts fear China won't be able to shoulder its debts. One positive sign stood out, however, with retail sales up 8.3 percent in the first three months of the year. (NYT)
Banished for Tax Evasion, Fan Bingbing Returns to the Red Carpet
Once China's most bankable star, actress and brand ambassador Fan Binging disappeared from social media and public appearances in July 2018. After reappearing on social media in October to apologize for tax fraud, and pay fines of more than 883 million RMB (US$127.4 million), Fan finally made a public appearance this week, attending an event hosted by video streaming site iQiyi. Fan had previously represented brands including Mont Blanc, De Beers and Thai travel retail group King Power. (Apple Daily via Asia One)
China’s Exporters Lament Losses at Canton Fair
A ceasefire in the China-US trade war can't come soon enough for manufacturers exhibiting at the spring edition of the Canton Fair, which last autumn drew 190,000 buyers from around the world. Officials suggest the antagonism may soon be coming to a close, but already Chinese exporters have suffered its impacts. According to trade data firm Panjiva, US imports of container freight from China fell 6.4 percent in the first quarter of 2019, while US imports of Chinese-made furniture by Ikea, Home Depot, Target and others fell 13.5 percent. (SCMP)
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