McKinsey published an analytical report on Chinese apparel, fashion and luxury market, to help international brands restructure their sales strategy and become more competitive in Chinese market. The report suggests although Chinese consumer confidence went into a tailspin the zero-spread lockdown that affected incomes critically, 2023 sees confidence returning after stringent lockdowns were lifted. Prediction is, the sector will experience double digit growth, moving forward, as the Chinese middle-class will once again indulge in their penchant for all things luxury.

However, this does not mean international brands will find the market easy sailing. As the report says in 2021, Chinese brands outperformed international brands in a ratio of 60:40. This trend has been gaining ground since 2013 with local brands steadily capturing more market share year on year. This begets the question what Chinese winning brands are doing to outsmart international ones.

Local brands playing to their advantage

Being based locally provides greater agility in adapting operating models quickly in response to immediate market dynamics which international brands find difficult to match as they are bound by decisions from their headquarters, mostly in the US and Europe. Having this agility also helps managing supply chains quicker as local brands have a better network simply because all supply is also local. As Chinese e-commerce channels and social media are intrinsically insular and tailored to only Chinese consumers, leveraging them accurately is another huge advantage. Local brands have excelled in engaging Chinese consumers with local key opinion leaders and social influencers and at a scale no international brand has been able to.

What global brands need to do

As per McKinsey the first thing international brands need to implement is move away from their global positioning which in most cases don’t resonate with main Chinese consumer segment, the middle class, who often cannot comprehend or relate to Western positioning concepts. Therefore, the value proposition which in most international brands seem to be individualistic experience based needs to be reworked, often exclusivity and impeccable quality being the baseline that are relatable.

Local product relevance is the big winning ticket for international brands. Those who have written their Chinese success stories are ones that usher in their global assets and intellectual property and then gradually incorporate local designs and styles more suited to local cultural and social preferences and trends. Successful brands have found that nothing beats being locally relevant. Having the right social media content generated by local content creators who have a finger on the local trends prevalent further strengthens the local appeal process.

Especially in a market like China that is extremely technology and digital savvy, the right mix of technology and digital infrastructure is going to play a crucial role in consumer outreach, call to action and thereafter sales. International brands will find it an absolutely must to deploy a local in-house team that can work in tandem with the global team to create the most effective communication and engagement. Thus, international brands have to mimic the agility of operations and hiring talent who can become local assets in ensuring the best of a wide supply chain that can be started off as and when the need arises and it does, most times.

McKinsey’s recommendation on being successful in China is based on close analysis of brands that have got it right. For Shanghai Tang and Bosiden, there are Gucci and Raplh Lauren, the later having successfully acquired double-digit growth in 2022 according to President & CEO Patrice Louvet.