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Global brands will continue to prioritize China in 2021 to increase sales


Global brand will continue to prioritize China in 2021 to increase salesThe latest ‘State of Fashion 2021 Report’ by The Business of Fashion and McKinsey & Company’s has predicted China’s fashion sales will to return to pre-Covid levels. This optimism is based on the pace of recovery in Q4 2020 and Q1 2021 and perhaps, what works for China is consumption has rebound, with retail sales returning to positive levels in August and global brands, like Estée Lauder, Nike and Lululemon and luxury conglomerates LVMH and Kering, reporting strong growth, as more and more Chinese consumers are forced to spend money at home instead of shopping abroad.

Brand visibility to help sales

The report suggests with international travel unlikely to resume for most of 2021, it is important for brands to be more visible,Global brand will continue to prioritize China in 2021 to increase attractive and available to Chinese consumers in the mainland. Brands will definitely need to focus on China-centric digital strategies, feel analysts. This will need partnering with one or more China-based e-commerce platforms. Moreover, brands will need to look afresh at their brick and motor store networks, investing more on China properties even while they close stores across the globe.

Indeed, there are compelling arguments in favour of Asia-Pacific market, particularly China portion over the last half of this year. The Business of Fashion reports, “The State of Fashion Report analysis of the 311 fashion companies that disclose regional sales figures, brands generating more than 30 per cent annual sales in the Asia Pacific (APAC) region — including Mainland China, Japan, South Korea and Taiwan — achieved higher market valuations during the pandemic than their counterparts. On average, APAC-focused companies boasted a market cap that was 18 per cent higher than their competitors.”

Perhaps this is driving many brands like Montblanc, Hublot and MSGM to open new stores in Asia. A report by Savills, a property consultancy shows, the number of stores by luxe brands in China went up 4 per cent in the first half of 2020. Indeed, in a market where offline is expected to grow 5 per cent in 2021 compared to 2019, many brands will now need to focus on opening stores to boost sales and meet demand. In fact, brands have understood well the Chinese consumer has the money and are willing to spend and this includes even the lower tier Chinese consumers who are trading up.

Luxury brands see heightened demand

Year 2020 was a turning point for luxe brands. They had to focus a lot more on e-commerce platforms, particularly China-centric ones to boost sales. Alibaba’s stats reveal over 200 global luxury brands the likes of Balenciaga, Prada and IWC — participated in Singles Day activities on its platforms alone. And as per, the transaction value of goods from more than 130 luxury brands surged almost 100 per cent year-on-year in the first 30 minutes of sales. Even with impressive growth this year, there is still plenty of room for luxury e-commerce to grow in China in 2021.

The report suggests “While the lack of international travel removes a major gateway for new brand discovery, the desire to discover new brands remains. All this is not to say that the rebound in consumption for major brands doesn’t also mean opportunities for smaller niche and international players in China. Again, while the lack of international travel removes a major gateway for new brand discovery, the desire to discover new brands remains.”

Challenges in 2021

The Business of Fashion report outlines the biggest challenge global fashion and beauty brands looking at China this year will face is: “finding equilibrium: to balance investments in both online and offline channels, while building relationships and experiences for consumers across online and offline. At a time in which global budgets are stretched, and operating costs in China, particularly in the online space, are rising, striking this balance will be difficult, but the stronger the ties that bind brands to Chinese consumers are now, the better placed brands will be to win new and returning business at home, as well as overseas, when that becomes a possibility again.”