CHINA APPAREL MARKET UPDATE 2019 - PART 2: KEY TRENDS AND DEVEL0PMENTS - Illustrated with case studies - Fung Business ...
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CHINA APPAREL MARKET UPDATE 2019 PART 2: KEY TRENDS AND DEVEL0PMENTS - Illustrated with case studies Asia Distribution and Retail August 2019
TABLE OF CONTENTS
Digital Social media – Cross-sector Fashion’s sharing
Key Takeaways transformation in a new powerful expansion economy catches
supply chain retail channel continues on quickly
P.03 P.04 P.12 P.19 P.26
Embracing “New C2M model Off-price retail “Plus-size” fashion M&A continues at
Retail” prevails grows fast market gets bigger elevated levels
P.33 P.38 P.43 P.48 P.55
KEY TAKEAWAYS
Embracing digital transformation in supply chain Social media – a new powerful sales channel Pursuing cross-sector growth
• Supply chain digital transformation enables • Every stage in consumers’ shopping journey, • Cross-sector collaborations and partnerships are
apparel retailers to shorten replenishment times, from product discovery to placing orders to becoming more prevalent in the apparel market
optimize deliveries, match supply with demand and product reviews can now be done on smart
ultimately boost value and revenue devices via social media platforms/ apps • Major apparel players have expanded beyond the
fashion sector to pursue cross-sector growth,
• Apparel players are embracing a data-driven • The convenience and reach of social media has which enables them to reach out to new
approach in their manufacturing processes, tying made it a new powerful channel for brands to customers and seek new business opportunities
their business decision to analytics insights connect with customers and sell their products
Online clothing rental services on the growth Embarking on in-store digital upgrading Rapid development of C2M customization
• Clothing rental and resale of used clothing is • Apparel retailers have caught up with the • The advent of smart technologies has made it
increasingly popular among Chinese consumers, “New Retail” trend by pairing up with e- easier for apparel players to tailor products and
especially the younger generation commerce players for digital upgrading or services to the needs of individual customers
leveraging advanced digital tools to redefine
• Such clothing rental trend has led to the rapid growth • The rapid development of C2M customization
the way they engage with customers and
of online clothing rental services in the country and service model has marked an important
provide better shopping experience for them
the rise of some local online fashion rental platforms breakthrough in mass customization
Off-price retail – a win-win solution for brands and Rising demand for chic plus-size clothing Creating synergy and value in M&A
customers • Considering the growing demand for more • Increasing numbers of major local apparel
• More apparel players are partnering with off-price fashionable options in larger sizes, some companies have conducted mergers and
retailers online and offline to get rid of their leftover plus-size retailers are investing in plus-size acquisitions with their foreign counterparts to
inventory collections or offering stylish clothing in a boost their market share and brand influence,
• Featuring best deals on quality products, off-price broader range of sizes to satisfy plus-size expand market presence and enhance their
retailers are becoming increasingly appealing to customers’ rising demand for trendy clothing supply chain capabilities
consumers and capture new customers
1
DIGITAL TRANSFORMATION IN SUPPLY CHAIN Enhancing overall performance by shortening replenishment times, optimizing deliveries, matching supply with demand and ultimately boosting value and revenue
Embracing digital transformation in supply chain
From manufacturing to logistics to marketing and retailing,
stakeholders along the apparel supply chain are stepping up
efforts to embrace digital transformation in a bid to keep pace
with changing market demands and rising consumer
expectations. Implementing supply chain digital transformation
enables apparel retailers to shorten replenishment times,
optimize deliveries, match supply with demand and ultimately
boost value and revenue.
5
(Photo source: Fung Business Intelligence)
Digital transformation in supply chain – manufacturing
The apparel market needs to evolve swiftly to respond to increasing consumers’ demand for immediacy and constant
newness. This requires a highly digitalized manufacturing processes supported by strong IT systems and connected
devices and platforms. Realizing the importance of optimizing supply chain efficiency, some apparel players are
embracing a data-driven approach in their manufacturing processes, tying their business decision to analytics insights.
Case: Handu’s data-driven system optimizes production
Backed by strong IT systems including Order Management System (OMS), Warehouse Management System
(WMS) and Enterprise Resource Planning (ERP), China’s online fast fashion retailer Handu is able to collect
and analyse real-time selling data of every single item and respond quickly to dynamic market demand
with prompt follow-up actions – placing replenishment orders and modifying product designs. Sales of each
item and customers’ preferences and feedback are all recorded in the system and such data are turned into
actionable insights used for analysis and demand forecast.
In addition, the company also shares some data and insights with its key vendors to synchronize
manufacturing activities with retailing. For example, factories and suppliers of fabric can forecast demand
based on data provided by Handu, benefiting major stakeholders across the entire supply chain.
Handu’s data-driven manufacturing approach has greatly elevated its supply chain agility and resiliency,
giving a significant competitive advantage to the company. In the 2018 11.11 Global Shopping Festival,
Handu recorded over 100 million yuan in sales on Tmall within the first 10 minutes and 35 seconds of the Handu’s head office in Jinan city, Shandong province
24-hour spending spree. (Photo source: Fung Business Intelligence)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 6
Digital transformation in supply chain – manufacturing
Case: Red Factory’s optimized IT system facilitates production management and achieves agility
The emergence of Internet celebrity fashion shops/brands has led to a growing need for
micro/agile supply chain, which can handle orders in small quantities and of great variety of
styles in a very short lead time with zero inventory.
To meet the requirement for fast production of a large amount of small-batch orders, Red Factory,
an S2b (supply chain to small business) platform providing supply chain solutions to Internet
celebrities and online apparel shops, has developed an optimized IT system to facilitate order
/production management and achieve speed and agility.
With a strong IT team supported by staff previously working for tech companies such as Baidu and
Alibaba, Red Factory has developed its own ERP system which is connected to WeChat for easy
communication and data sharing along the supply chain. Performing three major functions –
interacting with customers, prototyping/ sample making and production management, the
optimized IT system analyzes orders and automatically matches orders with the appropriate
factories/ production lines; it also centralizes and stores all the data and information related to the
orders. Through the system, every single merchandiser in Red Factory can handle 20-30 orders
simultaneously.
Red Factory’s production base
(Photo source: Fung Business Intelligence)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 7
Digital transformation in supply chain – logistics
To satisfy the growing needs of consumers for faster and more reliable delivery services, major players in the apparel
market are building smart logistics network and adopting advanced technologies in warehousing and logistics
operations. The deployment of smart logistics tools also facilitates further digital transformation and upgrading of the
apparel industry.
Case: Alibaba’s e-commerce platform Tmall and logistics arm Cainiao
In recent years, many international and local fashion players have launched their online stores on Alibaba’s
e-commerce platform Tmall to cash in on the booming e-commerce market in China.
As the backbone of Tmall’s success, Alibaba’s logistics arm Cainiao is optimizing its logistics performance
with advanced digital technologies including cloud computing and artificial intelligence (AI). For example,
the company has made use of cloud computing for real-time logistics data sharing and intelligent algorithms
for efficiency improvement including volume forecasting; it has also built a “logistics cloud” supported by
Alibaba Cloud laaS platform for package tracking at every stage of the supply chain, enabling the three
primary stakeholders – the package recipients, business owners who ship items and freight companies who
deliver packages to track the shipment in real time, thereby maximizing logistics transparency.
Besides, Cainiao has also adopted various advanced technologies including the Internet of Things (IoT), AI-
backed tools and robotics in their warehouses and domestic fulfillment centers to track supply and
demand and improve order fulfillment. Backed by Cainiao’s vast logistics network which offers same-day
Tmall Double Eleven Gala 2018
and next-day delivery services across 1,600-plus counties, Tmall handled and fulfilled over 1 billion orders (Photo source: CNA.com)
during the 2018 11.11 Global Shopping Festival, setting a new record for logistics volume.
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 8
Digital transformation in supply chain – logistics
Case: ERKE’s smart logistics system
Domestic sportswear brand ERKE has set up a smart logistics system
powered by Warehouse Management System (WMS) and Warehouse Control
System (WCS), which enables the company to process and utilize real-time
data and direct real time activities within warehouses and distribution
centers, ensuring a higher throughput of goods and ultra-fast delivery.
Backed by its smart logistics hub and some 7,000 brick-and-mortar stores,
ERKE is able to offer 2-hour delivery in selected areas, greatly enhancing
customer shopping experience. The company’s upgraded logistics system has
also brought significant membership growth; the number of its subscribers
has surged more than 99%, with members’ repeat purchase rate and average
order value rising 58% and 15% respectively.
ERKE’s official online store
(Photo source: ERKE.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 9
Digital transformation in supply chain – marketing
With more and more shoppers going online, many apparel players are using digital marketing tools to interact with
customers in a more innovative and creative way, hoping to boost traffic and further increase sales.
Case: JNBY sets up an official account on WeChat
JNBY has opened an official account on WeChat and WeChat Mini Program to engage with customers JNBY’s WeChat
and market their products. The company has significantly increased its sales with its digital marketing Mini Program
efforts. In 1H18, online sales accounted for 8.5% of the company’s total revenue, with the online sales
growth jumping 45.1% yoy, much higher than the offline sales growth of 23.6% yoy.
Case: Uniqlo upgrades its store on WeChat Mini Program (Photo source: JNBY’s
WeChat Mini Program)
Uniqlo has upgraded its store on WeChat Mini Program, which allows customers to directly place
order on the Mini Program store. The upgraded Mini Program store has a “scan and order” function
where customers can scan the code on the tag to see product details and order via the app; customers Uniqlo allows customers to
can also use the “VR”360° function to view product with virtual reality technology. Apart from directly place order on the
Mini Program store
leveraging WeChat to market their products, Uniqlo also paired up with Shanghai Transport Radio
Station FM105.7 to jointly launch a fashion living streaming event at Uniqlo’s Shanghai flagship store in
May 2019. A famous radio presenter in Shanghai and experts from different fields were invited to the
event and shared their summer fashion tips with consumers.
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence (Photo source: Ebrun.com) 10Digital transformation in supply chain – retailing
Technologies such as AI, augmented reality (AR) and virtual reality (VR) enable apparel brands to provide compelling and
enjoyable in-store shopping experience, meeting the expectations of increasingly tech-savvy Chinese customers.
Case: C&A opens first new concept store in Nanjing
In May 2018, international fast fashion brand C&A opened its first new concept store for China in
Nanjing. With the use of “black technologies”, all the screens and sound systems in-store can be
controlled through a cloud platform at the back-end management system. The store is also equipped
with a magnetic anti-theft system, in which all the anti-theft product tags are embedded with RFID chips
for data collection. C&A also uses Beacon technology and the shake feature in WeChat to detect
customer's shopping route inside the store, which helps the brand to better understand customer’s C&A’s first new concept store in Nanjing
portrait through connecting their CRM and POS systems with customer’s user ID in WeChat. (Photo source: Fashionnetwork.com)
Case: Hodo Group launches “Hodo-JD.com Experiential Store”
In October 2018, Hodo Group and JD.com jointly launched the “Hodo-JD.com Experiential Store” at
Huiju Wuxi Shopping Center in Wuxi. The store – offering mainly Hongdou’s apparel items and home
products, as well as JD.com’s private labels such as Jingzao and Jingxuan – intends to bring a new,
modern and high-quality shopping experience to its consumers by introducing a unique consumption
scene and adopting various “black technologies” such as smart mirrors with styling recommendation
and personal guide function.
The “Hodo-JD.com Experiential Store”
(Photo source: Linkshop.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 11SOCIAL MEDIA – A NEW POWERFUL RETAIL CHANNEL A powerful way for apparel players to connect with customers
Social media – a new powerful sales channel
In recent years, the rise of social commerce – which combines
product sales with recommendations of users/ key opinion leaders
(KOLs) in social networks – has taken the e-commerce scene by
storm. Every stage in consumers’ shopping journey, from product
discovery to placing orders to product reviews can be completed on
smart devices via various social media platforms and apps. The
convenience and reach of social media has made it a new powerful
channel for apparel retailers and brands to connect with customers
and market their products.
13
(Photo source: Unsplash.com)Young consumers tend to research products on social media platforms
Driven by the higher penetration of mobile devices and improved
logistics infrastructures in lower-tier cities in recent years, social media Number of monthly active users, 1H19
platforms have been growing exponentially. Increasing numbers of
apparel brands and retailers are turning to monetize the huge traffic on
social media platforms by tapping social-commerce – they allow users to
share deals on social media platforms and bring others into the fold.
Compared with traditional online shopping sites, social commerce 1,133 million 807.9 million 486 million
platforms enable brands and retailers to draw higher traffic at relatively
Source: Respective company websites; compiled by Fung Business Intelligence
lower costs.
What content do you like to read the most on social-commerce platforms?
Apparel and bags 38.6%
Social commerce is trending in China, especially among
Home products 33.9% younger consumers, who tend to use social media
Toiletries 27.0% platforms to discover brands and review products. Riding
Food and beverages 26.9% on the trend, some apparel brands and retailers have set
Cosmetics 22.9% up their own app, WeChat official account, WeChat Mini
Digital products 17.9%
Program, etc., in addition to their own websites, to
Healthcare products 15.9%
Sports and outdoor products 11.1%
extend their reach to customers; some of them choose
Baby and maternity products 8.5% to partner with KOLs / Internet celebrities to sell via
Fresh food 6.4% social media.
Others 4.8% iiMedia Research, April 2019 (n=1322)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 14Apparel retailers set up own app and leverage WeChat Mini Program
“Scan and go”
Shopping cart
Case: Bestseller
Follow offline shopping guides
Hoping to push forward its O2O initiatives and improve consumer
experience in multiple channels, Bestseller developed WeChat Mini
Programs for its brands – Vero Moda and Jack&Jones, with
embedded functions such as “scan and go” and “shopping cart”.
Sales associates in offline stores (“shopping guides”) can launch their
own “page” on the Mini Program for customers to follow. Through
their own page, they can recommend products, share styling tips and
promotion information with customers and even provide one on one
services to them. According to Bestseller, the Mini Program racked up WeChat store
around 100 million yuan in sales in 2018, of which 75% came from
Membership center
shopping guides' sharing with their own circle of friends.
Log in page for shopping guides
Vero Moda’s Mini Program, June 2019
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 15Apparel retailers set up own app and leverage WeChat Mini Program
Bestseller’s mini game on WeChat, April 2018
Case: Bestseller (Cont’d)
Besides, Bestseller also launched mini games on WeChat to attract
new customers, especially the young generation. For example, in
April 2018, Bestseller launched a mini game for consumers to battle
for the best-looking outfits in cartoon style with their friends on social
media platforms; winners can get coupons when purchasing in
Jack&Jones and Vero Moda stores. This event generated 800,000 yuan
offline sales within two weeks.
(Photo source: 91ud.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 16Apparel retailers leverage content-based social-commerce platforms
Case: Mogujie
On-air livestreams
Some apparel brands and retailers choose to leverage content-based Discovery
social-commerce platforms to reach more consumers as large
numbers of consumers search for product reviews and styling tips on My followings
these platforms. One prominent example is Mogujie.
Trending
Mogujie has evolved from a consumer sharing community to a
fashion e-commerce platform. Users – individuals or KOLs – can all
post fashion reviews and styling tips on the platform to share with
other users and lure them to purchase. They can post their outfits,
tag the brands and comment on the products, and post links to the
product page.
Livestreaming zone
Many lesser-known brands and individual KOL-designed brands are Short-videos
especially active on Mogujie. Jienilu, 小甜心_呢, yoke_瑜儿 are
some of the examples. Mogujie store on WeChat
Mogu’s Mini Program, June 2019
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 17Apparel retailers leverage content-based social-commerce platforms
Items for
purchases
Case: Mogujie (Cont’d) Number of
viewers
Mogujie has also launched a livestreaming platform for hosts. The
livestreaming feature is designed to provide a more interesting
shopping journey for customers. Users can view the livestreaming
when looking for advice on what to wear, or just for entertainment
during their free time.
The Interactive experience enables them to discover new looks and
find clothes that fit their style. They can also communicate with
livestreaming hosts directly via the online chat room. By enabling Follow the KOL
transactions during livestreaming shows, Mogujie makes shopping
Add to cart
easier and more convenient for customers, effectively getting
customers to make impulse purchases and spend more. Purchase now
According to Mogujie, live video broadcasting business grew
strongly with associated GMV increasing 138.1% yoy for FY19 ended
31 March 2019. It could be inferred that the GMV from live video Chat room
broadcasting for FY19 is around 4 billion yuan, constituting 23.3% of
the total GMV, remarkably higher than 1.4% of FY17 and 11.8% of
FY18.
Mogu’s Mini Program, June 2019
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 18CROSS-SECTOR EXPANSION CONTINUES Expanding beyond apparel products to seek new business growth
Pursuing cross-sector growth
Cross-sector collaborations and partnerships are becoming more
prevalent in the apparel market. Many major apparel players have
expanded beyond the fashion sector to pursue cross-sector
growth, which enables them to reach out to new customers and
seek new business opportunities, a key to driving sustainable
development.
20
(Photo source: Fung Business Intelligence)Apparel players expand into household sector
Case: Peacebird
In September 2018, Peacebird opened five lifestyle and
home product stores “Peacebird Livin” in Ningbo. As the
first lifestyle and home products brand of Peacebird,
Peacebird Livin’ offers a wide range of products, with a total
of 3,000 SKUs, including bedroom and living room
furniture, kitchen appliances, sanitary ware, home textile,
home décor and fragrances. Integrating fashion creativity
and home life, Peacebird Livin aims to provide customers
with a comfortable, stylish and enjoyable shopping
environment.
Peacebird’s homepage pictures of Peacebird Livin
(Photo source: Peacebird.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 21Apparel players expand into digital payment sector
Case: HLA
In May 2018, HLA invested around 500 million for a 64%
stake in Shanghai-based third-party digital payment service
provider Handpay. With the third-party payment license
granted by the Chinese government, Handpay focuses on
providing digital payment and e-commerce operation
solutions to banking and financial institutes. The investment
in Handpay enables HLA to penetrate into the digital
payment industry and further strengthen its e-commerce
business .
(Photo source: Handpay.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 22Apparel players expand into commercial property sector
Case: Peacebird
In April 2019, Peacebird and Shanshan Commerce Group
entered into a strategic partnership on outlet malls
development. The two companies will cooperate in various
areas including outlets’ store design and innovation
(composite buildings), store effectiveness enhancement,
and consumer interaction. Peacebird Group has seven
fashion brands targeting young consumers, which match
well with the positioning of Shanshan’s outlet malls.
Peacebird and Shanshan Commerce Group entered into a strategic partnership
on outlet malls development
(Photo source: Linkshop.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 23Apparel players expand into hospitality sector
Case: JNBY
JNBY, after launching its home product brand JNBYHOME in
March 2017, forayed into the hospitality sector in October
2018. Through JNBYHOME, the company has paired up with
local youth hostel Travelling to jointly work on a hotel
construction project in Hangzhou. The two companies
would integrate their respective resources in brand
operations, customer base and traffic.
Concept image of the JNBYHOME plus Travelling With hotel project
(Photo source: Socialbeta.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 24Apparel players expand into beauty sector
Case: JNBY
HLA launched its in-house cosmetics brand éOL in March
2018. Available at Heilan Home’s lifestyle stores online and
offline, the brand features natural skincare and color
cosmetics products ranging from cleanser, moisturizer, eye
cream, skincare mask to lip gross, makeup foundation,
mascara, eyebrow pen, blush and BB cushion compact.
HLA’s in-house cosmetics brand éOL
(Photo source: Xinhuanet.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 25FASHION’S SHARING ECONOMY CATCHES ON QUICKLY Online clothing rental services come into vogue in China
Online clothing rental services on the growth
Fashion’s sharing economy is catching on quickly in China.
Clothing rental and resale of used clothing is increasingly popular
among Chinese consumers, especially the younger generation,
who are more concerned about sustainability and open to sharing
clothes. They also have a stronger desire to constantly change
their wardrobe to keep up with the fast-changing fashion trends.
Such clothing rental trend has led to the rapid growth of online
clothing rental services in the country and the rise of some local
online fashion rental platforms.
27
(Photo source: Pexels.com)Chinese consumers are catching up fast in the sharing economy
• Chinese consumers are more actively involved with and open to sharing
platforms when compared with U.S. consumers
Chinese consumers vs. U.S. consumers’ attitudes toward sharing economy China is
one of the countries in Asia
spending most on renting clothes
68%
60% No. of online resale platform users in China
47%
25% 42% Up from 1.5 million in 2014 to
8% ~38 million in 2017
Have used a Have provided a Believe benefits China, together with India, are leading in
sharing economy sharing service/ outweigh the risks renting clothes consumption in Asia
service/ product asset
Spending on renting clothes in Asia
Source: Lloyd’s Innovation Report 2018, SCMP’s China Internet Report 2019; compiled by Fung Business Intelligence UP at a CAGR of 11.4%, 2017-2023
(est.)
Source: Allied Market Research, QuestMobile; compiled by Fung Business Intelligence
28Major reasons driving Chinese customers towards clothing rental
Convenient,
easy return Desire to update everyday
Avoid waste, wardrobe to keep up with
appealing to the eco- fast-changing fashion
conscious customers trends at lower costs
Why renting clothes? Having a chance to
Couldn’t afford full- familiarize with
time ownership of various brands and
luxury fashion items collections
Don’t want to
spend too much on Looking for more
an item they would temporary style
wear only once solutions
Try before
Source: Fung Business Intelligence purchasing (Photo source: unsplash.com )
29Major fashion rental platforms in China
Case: MsParis
Company name:
Founded in 2014 in Shanghai, MsParis is one of the largest MsParis
online clothing rental platforms in China. Starting out from
offering mainly gowns and luxury fashion items, the company
has expanded into the market for everyday wear, carrying Founded in 2014,
womenswear from over 500 brands including international based in Shanghai
luxury fashion houses and major high street brands. Offering
monthly membership plan at 488 yuan/ month, Ms Paris had
around 7 million registered users as of January 2019.
> 500 brands from
international luxury
Key developments 488 yuan/ month fashion houses to
(first month special major high street
In December 2018, the company launched a new offering for new member –
enabling customers to rent brand new clothes. After securing brands
199 yuan/ month)
US$18 million from a series A funding round in December
2016, MsParis raised additional US$30 million from a series B+
funding round joined by Alibaba’s Ant Financial in November
2018.
~7 million
registered users
(as of January 2019)
Ms Paris’s mobile app, June 2019
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 30Major fashion rental platforms in China
Case: YCloset
Company name:
Founded in 2015 in Beijing, YCloset is also one of the leading clothing YCloset
rental platforms for womenswear in China. Housing hundreds of major
international and local fashion brands, the company carries over 1
Hundreds of
million items in stock, featuring formal and smart casual wear. Offering
Founded in 2015, international luxury
monthly membership plan at 499 yuan/ month, YCloset had over 15
based in Beijing and affordable luxury
million registered users as of September 2018.
brands
Key developments
In November 2018, the company completed a new funding round led
by Alibaba Group, which had also led a series C funding round for Y-
Closet in 2017. Other investors of Y-Closet include SB China Capital, 499 yuan/ month
Sequoia, IDG Capital, ZhenFund and GSR Ventures. (first month special
for new member –
299 yuan/ month)
It’s almost like a relationship.
In the past, you could only ‘get
married’ to an item of clothing;
now you can have a date with a
dress and see if it fits you.
>15 million
(Doris Ke, marketing and PR director for YCloset) registered users
(as of September 2018)
YCloset’s mobile app, June 2019
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 31Major fashion rental platforms in China
Case: Le Tote
Company name:
Founded in 2012 in San Francisco, Le Tote expanded into China in Le Tote
January 2018, marking the first U.S. online clothing rental
platform launched in the country. Considering the popularity of
Korean fashion trends in China, the company offers about 50% U.S. Founded in 2012,
and western brands along with 50% Korean and Chinese brands on based in San Francisco;
its platform to appeal to local tastes. Charging 599 yuan/ month, entered China in
Le Tote had over 500,000 registered users as of October 2018. January 2018
Key developments > 150 designer and
high-street fashion
• The company launched two pop-up stores in Shenzhen and 599 yuan/ month brands
Guangzhou respectively in August and September 2018; the (first month special
stores featured one-on-one exclusive styling service, styling and for new member –
makeup lectures, virtual fitting room, etc. 399 yuan/ month);
1497 yuan/ quarter
• Apart from launching its official app LeTote China, the company
has also opened an official account on WeChat and used
WeChat’s payment system for transactions
>500,000
registered users
(as of October 2018)
Le Tote’s mobile app, June 2019
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 32EMBRACING “NEW RETAIL” Embarking on digital upgrading to enhance in-store experience
Embarking on in-store digital upgrading
Deeper integration of offline and online commerce has become
more prevalent in the “New Retail” era – mainly about leveraging
technologies to create a more engaging shopping experience and
fulfill the personalized needs of each customer at every touch
point. Considering the blurring lines between online and offline
stores, many apparel retailers have caught up with the “New
Retail” trend by pairing up with e-commerce players for digital
upgrading or leveraging advanced digital tools to redefine the
way they engage with customers and provide better experience
for them.
34
(Photo source: Fung Business Intelligence)Selected examples of apparel players embracing “New Retail”
Adidas and Tmall announced their comprehensive strategic partnership in February 2019.
The two companies will deepen collaboration in various areas, including new product launch,
consumer operations and new product innovation. In addition, Adidas will undergo a
comprehensive digital upgrade featuring new retail concepts through Alibaba’s business
operating system, leveraging on Alibaba’s new retail scenes, including omni-channel retailing,
smart stores, shopping guide and digitalized retail stores. Adidas hopes to synchronize
inventory across its online and offline stores and enhance retail operation efficiency.
The exclusive release of Adidas’ running shoe line –
UltraBoost 19 – on Tmall
(Photo source: Alizila.com)
GXG opened its first new retail experiential store in Nanjing before the 11.11 Global
Shopping Festival on 4 November 2018. The store adopts a lot of Tmall’s new retail
technologies, including virtual fitting service and red envelopes collection and interactive
games. GXG‘s cooperation with Tmall involves membership, data, marketing, product
planning, supply chain, etc. In the 2018 11.11 Global Shopping Festival, GXG was one of the
most popular brands on Tmall with sales on the platform topped 300 million yuan.
GXG opens first new retail experiential store in
Nanjing
(Photo source: Yifu.net)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 35Selected examples of apparel players embracing “New Retail”
Metersbonwe paired up with Mobile Tmall app to test new retail models in Shanghai
in September 2018. Metersbonwe’s customers can place orders via Tmall app with their
smartphones, or directly through sales associates at all the 22 Metersbonwe’s stores in the
city. Backed by Tmall’s big data analytics technologies and supply chain capabilities, the
apparel retailer can conduct real-time inventory management and keep track of the stock
across its stores. After receiving orders from customers, Metersbonwe can instantly locate the
nearest store carrying the items that the customers have ordered and deliver the order to
Metersbonwe’s new retail concept store in customers within one hour through its logistics partner Fengniao Delivery.
Shanghai Wanda Plaza
(Photo source: Fung Business Intelligence)
Zara, in tie-up with Tmall, launched a pop-up event featuring new retail concept at its
flagship store in Shanghai Times Square in September 2018. This is ZARA's first new retail
campaign in China. Offering ZARA's seasonal collections and special limited-edition products,
the two-story store adopts a theme of “Wear Future” and aims to engage customers with
innovative digital services. Installed with advanced QR code scanners, the store makes use of
Zara mobile app to provide an easier shopping experience for customers. With Zara mobile
app, visitors can scan the barcodes of their favorite items to check the product size and
inventory in real time and opt for fitting, and then wait for a shop attendant to bring the Zara’s new retail flagship store in Shanghai Times
clothes to a fitting room for them. Customers can also order items through the app. Square
(Photo source: Fung Business Intelligence)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 36Selected examples of apparel players embracing “New Retail”
Peacebird opened its first new retail flagship store in Joy City, Hangzhou in September
2018. This new retail flagship store offers a new consumption scene through adopting various
“black technologies” including smart shopping guide and magic mirror. In addition, the
flagship store has set up an experiential zone “Youth Lab” to create “Peacebird +”– a
consumption scene covering products from all categories of Peacebird. To bring more
creativity into its brand and boost engagement among young consumers, Youth Lab has
paired with local heritage brand Shanghai Phoenix Bicycles to launch co-brand clothing
products featuring vintage looks and invited popular fashion stylists from time to time to
Peacebird’s first new retail concept store in Joy share styling tips with customers.
City, Hangzhou
(Photo source: Soupu.com)
Semir introduced its new retail concept with the technical support of Tmall in April 2018.
More than helping Semir integrate its online and offline payment, Tmall also created
interactive shopping experience for customers in Semir’s stores. Customers who use Tmall app
to scan the QR code in any of the 500 Semir smart stores across the country can experience
AR video interactions and receive online coupons. Semir’s flagship store at Dragon Dream in
Zhongshan Park has also adopted the facial recognition technology supported by Tmall.
Semir’s new retail concept store backed by Tmall
digital technologies
(Photo source: Tdcheml.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 37C2M MODEL PREVAILS Taking customization to the next level
Rapid development of C2M customization
From AI to big data, the advent of smart technologies has made it
easier for apparel players to tailor products and services to the
needs of individual customers. Driven by the increasing demand
for individualized customization, the rapid development of C2M
customization service model has marked an important
breakthrough in mass customization in the apparel industry,
taking customization to the next level.
39
(Photo source: Pexels.com)What is C2M model?
• Key facts about C2M
One of the e-commerce models
featuring direct interactions between
consumers and factory/
Manufacturing process E-commerce manufacturers, cutting out all the
responds positively to End-user model intermediaries
end-user needs needs
Products are made-to-order,
thus keeping ‘zero’ inventory Customized
orders Enables consumers to order
customized and quality products
Zero at relatively lower costs
Inventory
Source: Fung Business IntelligenceCustomized wardrobe for menswear
Case: Ybren.com
Founded in 2014 in Hangzhou, Ybren.com is a domestic
menswear C2M custom clothing company. It offers made-to-order
men’s clothing including suits, T-shirts, shirts and pants through its
online and offline channels. Operating an online platform plus 47
brick-and-mortar stores, the company pairs up with local and
foreign factories and has over 700 wardrobe consultants to offer
door-to-door tailoring service across 140-plus cities in China,
serving over 9 million customers.
Ybren’s online platform
How it works
Price range 1. Make appointments online or by call for free on-site measure
T-shirts: 199 yuan – 1,080 yuan services
Shirts: 199 yuan – 1,880 yuan
Pants: 299 yuan – 1,899 yuan 2. Meet with professional consultants at home and take body
Suits: 1,199 yuan – 2,299 yuan measurements for accurate fit
(From the company’s website accessed in May 2019)
3. Pick favourite style and fabric to customize the clothes; professional
consultants help define and finalize final style and details
4. Custom clothing delivered home around 10 days after placing the
order, with one-year after-sales support
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 41Mobile app for bespoke suit service
Case: Cotte Yolan How it works
1. Make appointments for on-
Founded in 2007, Cotte Yolan is a C2M custom clothing company
site measure services or
launched by Qingdao-based formal wear manufacturer Kutesmart. walk into the company’s
Backed by Kutesmart’s 3,000-employee and a 3D printing smart service buses for express 3D
factory, Cotte Yolan incorporates 3D scanning technologies into measurement
their tailoring process, enabling the company to obtain accurate
measurements and produce better-fitting clothing. Operating an 2. Meet with personal
online platform plus 7 physical stores, the company partners with wardrobe consultants and
world-renowned clothiers and offers custom suit service for men take measurement for
and women. accurate fit
3. Pick favourite style and
fabric to customize the
Price range clothes; wardrobe
Shirts: 399 yuan – 2,399 yuan consultants help define and
Vest: 780 yuan – 13,980 yuan finalize final style and
Pants: 1,000 yuan – 18,000 yuan details
Overcoat: 3,980 – 26,800 yuan
Suits: 1,980 yuan – 38,800 yuan 4. Custom clothing delivered
(From the company’s website accessed in May 2019) home around 7 days after
placing the order, with 30-
Cotte Yolan’s mobile app, June 2019 day after-sales guarantee
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 42OFF-PRICE RETAIL GROWS FAST Appealing to both apparel players and consumers
A win-win solution for brands and consumers
Excess inventory is a challenge for almost all apparel players in
the market. Increasing numbers of apparel brands and retailers
are partnering with off-price retailers online and offline to get rid
of their leftover inventory, contributing to the growth of off-price
fashion retailers. Featuring best deals on quality products, off-
price retailers are becoming increasingly appealing to consumers
today, who are now more quality-driven and demand products
that are value for money.
44
(Photo source: Pexels.com)S2B2C online distribution app for off-price apparel products
Case: Aikucun
Founded in 2017 in Shanghai, Aikucun is an online distribution app for
off-price apparel products. Through partnering with 5,000-plus apparel
brands worldwide, Aikucun has established an innovative supplier-to-
business-to-customer (S2B2C) business model, which enables the
company to connect brands (upstream suppliers) with product distributors
(downstream businesses), who connect with customers via WeChat.
Currently, Aikucun works with over 1 million distributors, with more than
40 million hot fashion items sold through the platform so far. As of
December 2018, Aikucun’s GMV topped 3 billion yuan, a drastic increase
from 10 million yuan for the first month of its launch in September 2017.
Aikucun has already raised around 1.5 billion yuan since its launch,
including 100 million yuan from a Series A funding round led by Eastern
bell Capital in September 2017; US$110 million from a Series B+ funding
round joined by Sinovation Ventures, GGV Capital, BA Capital and United
Media FoFs, among others. In November 2018, the company also set up a
40,000-sqm supply chain management center in Zhenjiang with a view to
reducing supply chain lead times and enhancing logistics efficiency.
(Photo source: Aikucun.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 45S2B2C online distribution app for off-price apparel products
Aikucun’s S2B2C model
1. Purchasing inventory – Aikucun
pairs up with 5,000-plus apparel
brands worldwide 3
2. Connecting brands with distributors
(who could be people from different 4
walks of life, such as shop owners,
white-collar workers, college
students and full-time mothers) –
through Aikucun app, distributors
receive information of brands and
products available 1
3. Connecting with customers – 2
distributors deliver product
messages to customers – followers
and friends on their WeChat
accounts, while customers can place
orders with the distributors
4. Delivering orders – after receiving
orders from customers, distributors
arrange order delivery with Aikucun
and earn agency margin, running no
risk of bearing inventory
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 46O2O discount fashion retailer
Case: Dadacang
Founded in 2019 in Shanghai, Dadacang is an O2O commerce
platform featuring discounted apparel items. As an O2O retailer, Dadacang’s
Dadacang reaches out to its customers online and offline through mobile app
Dadacang mobile app, Dadacang WeChat Mini Program and its four
physical stores in Jiangsu, Anhui and Shanghai. By tying up with
over 5,000 domestic and foreign brands, the retailer offers
discount of up to 70% - 90% off for millions of apparel items, Dadacang’s Anhui branch
covering menswear, womenswear, childrenswear, sportswear,
footwear and accessories.
More than carrying fashion items, Dadacang also offers cosmetics,
jewelry, consumer electronics, household and food products.
According to the company’s website, brands currently in
partnership with Dadacang includes Adidas, Nike, Michael Kors,
Kate Spade, Longchamp, Gerber, Semir, Metersbonwe, Swarovski,
Pandora, L'Occitane, Philips and Zwilling J. A. Henckels, among
others.
Dadacang’s Jiangsu branch
Dadacang’s WeChat
Mini Program
Dadacang’s mobile app, July 2019
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 47“PLUS-SIZE” FASHION MARKET GETS BIGGER A growing plus-size population fuels demand for fashionable options in larger sizes
Rising demand for chic plus-size clothing
Despite a relatively low prevalence of obesity in China compared
with many western countries, the sheer size of China’s population
provides ample opportunities and potential for the plus-size
clothing segment. Considering the growing demand for more
fashionable options in larger sizes, some plus-size retailers are
investing in plus-size collections or offering stylish clothing in a
broader range of sizes in a bid to satisfy plus-size customers’
rising demand for trendy clothing and capture new customers.
49
(Photo source: Unsplash.com)Ample opportunities for plus-size clothing
• Currently home to nearly 1.4 billion people,
China is the most populous country in the
world. Despite the relatively low percentage
of obese people, the huge population has
easily made China one of the countries with Total population ~1.4 billion
the largest overweight population in the
world – over 43 million men and 46 million Overweight population
women in China are overweight/ obese, or
around 10.8% of men and 14.9% of women,
according to a study by U.K. medial journal
Men = 10.8%
The Lancet. > 43 million of men in China
Women = 14.9%
> 46 million of women in China
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 50Providing inclusive sizing to fulfil unmet consumer needs
Taking notice of the growth potential in the plus-
size market, many apparel players have stepped up
their efforts to address unmet consumer needs by Nike’s China online store
adopting inclusive sizing spanning XXS to 3XL/4XL offers womenswear in
size 2XL
in their products.
For example, Nike’s China online store is offering
size XXS to 2XL for their womenswear items and
size XXS to 4XL for their menswear items. Its China (Photo source: Nike.cn)
counterparts including Anta, Li Ning and Xtep are
also offering plus-size clothing, such as 3XL for
women and 4XL for men, with some menswear
products by Li Ning even up to size 5XL.
Li Ning’s online store
carries menswear in size
5XL
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence (Photo source: Lingling.com) 51Expanding product offerings to win over plus-size customers
Some plus-size retailers are offering stylish clothing in a broader range of sizes to meet consumers’ heightened
expectation. Offering various plus-size clothing styles to fit customers with different body shapes, some best-selling plus-
size brands are able to accumulate hundreds of thousands of followers and earn nearly 100 million yuan a year.
Case: Muzi Lixiang
Founded in 2010 in Beijing, Muzi Lixiang is an online oversize
womenswear brand on Taobao. Targeting female customers
weighing 200-270 pounds, the brand offers clothing items
sizing 2XL to 5XL, covering tops, dresses, pants, innerwear
and accessories. To better understand and provide better
services to its customers, all of Muzi Lixiang’s staff weigh at
least 200 pounds, including the founder of the brand Li Xiang,
who also serves as the brand’s plus-size model and influencer. Price range (mainly summer items)
Muzi Lixiang had nearly 950,000 followers on Taobao as of Tops: ~60 yuan – 190 yuan
July 2019 and generated about 100 million yuan in sales in Dresses: ~90 yuan – 180 yuan
Pants: ~60 yuan – 160 yuan
2018. Innerwear: ~20 yuan – 130 yuan
Accessories: ~20 yuan – 70 yuan
(From Muzi Lixiang’s Taobao store accessed in July 2019) Muzi Lixiang’s online store on Taobao
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 52Plus-size brands featuring unique design
Case: Garden Lis
Founded in 2018 in Beijing, Garden Lis is a plus-size retailer
featuring unique design plus-size clothing for women. Garden Lis’s Tmall store
Targeting female customers aged 25-35 weighing 170-240
pounds, Garden Lis offers clothing items sizing XL to 5XL,
covering tops, dresses, pants and innerwear. Currently, it has
217 self-operated and franchise stores in China and markets
its products online through launching on Tmall, WeChat Mini
Program and Xiaohongshu.
Considering the higher demand for plus-size clothing in Price range (mainly summer items)
Northern China, Garden Lis has already expanded into Tops: ~80 yuan – 280 yuan
Dresses: ~120 yuan – 370 yuan
Qingdao and Inner Mongolia and planned to ramp up its store Pants: ~100 yuan – 370 yuan
network in the northern region, with a focus on second-tier Innerwear: ~30 yuan – 50 yuan
cities. In May 2018, Garden Lis completed a multi-million-yuan
funding round led by local angel investor Tisiwi. (From Garden Lis’s Tmall flagship store
accessed in July 2019)
One of Garden Lis’s specialty stores in Qingdao
(Photo source: 36kr.com)
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 53Selected examples of plus-size menswear/ streetwear brands with
over 100,000 followers on Taobao
胖胖哥 4,690,000 ~20-160 yuan
followers * price range
Panmax 1,910,000 ~100-1,000 yuan
followers* price range
Asura
637,000 ~80-260 yuan
followers* price range
纺布者 452,000 ~40-760 yuan
followers* price range
Jpkthepangstyle 278,000 ~20-700 yuan
followers* price range
IM铁人制品 250,000 ~40-2,000 yuan
followers* price range
234,000 ~60-5005,754,000
半墨 yuan
followers^
followers* price range
Pmao 189,000 ~100-1,000 yuan
followers* price range
大依无忧 145,000 ~25-800 yuan
followers* price range
Source: Media reports, companies’
official websites/ social media
accounts/ apps; compiled by Fung
Business Intelligence
*Number of followers on Taobao as of July 2019
~Price range from the brands’ Taobao stores accessed in July 2019
54M&A CONTINUES AT ELEVATED LEVELS Joining forces with foreign counterparts to create synergies and value
Creating synergy and value in M&A
Increasing numbers of major local apparel companies have
conducted mergers and acquisitions (M&A) with their foreign
counterparts as a way to boost their market share and brand
influence, expand market presence and enhance their supply
chain capabilities.
56
(Photo source: Fung Business Intelligence)Selected M&A cases in China’s apparel sector, 2018 – 2019
Acquirer Target Date Transaction Details
amount
Xtep E-Land Footwear USA May 2019 US$260 million Xtep announced that it has entered into a share acquisition agreement with E-Land World
Holdings Inc., the parent Company, Ltd. and E-Land USA Holdings Inc., subsidiaries of South Korea’s fashion giant E-
company of American Land Group, through its wholly-owned subsidiary. Xtep will acquire 100% stake of E-Land
footwear brands - K- Footwear USA Holdings Inc., the parent company of footwear brands including K-Swiss,
Palladium and Supra, for US$260 million in an all-cash deal (approximately 1.75 billion yuan).
Swiss, Palladium and The acquisition will be funded by internal funds and is expected to be completed by the end
Supra of July 2019.
Koradior Keen Reach, March HK$2.4 billion China’s womenswear retailer Koradior announced plans to acquire the entire issued share
a fashion group wholly 2019 capital and shareholder loans of fashion group Keen Reach from Hong Kong-based
owned by Hong Kong- investment firm Apex Noble for a total consideration of approximately HK$2.4 billion, of
based investment firm which US$500 million will be paid in cash and approximately HK$1.9 billion will be financed
Apex Noble by the issue and allotment of 199 million consideration shares at the issue price of HK$9.5
per share. As of March 2019, Keen Reach owned fashion brands Keen Reach and Extra
Wisdom, along with high-end womenswear subsidiaries – Shenzhen Aoruina and Shenzhen
Naersi.
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 57Selected M&A cases in China’s apparel sector, 2018 – 2019
Acquirer Target Date Transaction Details
amount
Anta Amer Sports, March 2019 4.6 billion euros A consortium led by Anta Sports finished the acquisition of more than 90% of the issued and
a Finnish outstanding shares and voting rights of Finland’s Amer Sports for 4.6 billion euros.
sporting goods
company
Fosun Tom Tailor, February N/A In February 2019, Fosun Group announced a takeover bid for German clothing brand Tom
Group a German 2019 Tailor. Fosun raised its stake in Tom Tailor to 35.35% from 29% by acquiring new shares
clothing brand issued by the German company; the acquisition lifted Fosun’s stake over 30% threshold that
triggered a mandatory takeover offer under German law.
Trendy Denham, January N/A Trendy (China) Group Co.,Ltd., the parent company of domestic apparel brand Ochirly,
(China) a Dutch denim 2019 officially sealed an equity purchase agreement to acquire a majority stake in high-end denim
Group firm firm Denham Group B.V. According to the agreement, Trendy Group will acquire all the stake
of Denham Group B.V. held by Amlon Capital B.V. Following the acquisition, Denham’s
founder Jason Denham will continue to hold stake in Denham and to be the chief creative
officer of the brand, while Trendy Group’s senior vice president Andre Chen will serve as the
new CEO of Denham.
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 58Selected M&A cases in China’s apparel sector, 2018 – 2019
Acquirer Target Date Transaction Details
amount
La Chapelle Naf Naf SAS, November 35.3 million euros La Chapelle announced to indirectly acquire the remaining 60% stake in Naf Naf SAS, a
a French fashion 2018 fashion retailer under French fashion group Vivarte SAS, for 35.3 million euros (approximately
retailer 278 million yuan) through its wholly-owned subsidiary. The move came after LaChapelle
acquired a 40% stake in Naf Naf SAS for 20.8 million euros (approximately 160 million yuan)
in April 2018.
Semir JWU, LLC, the September US$ 5 million Semir announced to subscribe for 7.1 million shares of Jason Wu’s parent company JWU, LLC.
parent company 2018 for a total of US$5 million (34.73 million yuan). Upon completion of the investment, Semir
of New York- will hold an 11% stake in JWU, LLC. Meanwhile, Semir will also establish a joint venture with
based designer JWU, LLC. It will invest 45 million yuan into the JV, which accounts for 75% of the registered
capital. The JV will operate in China, Hong Kong and Macau for the brands including Jason
brand Jason Wu Wu, Grey Jason Wu, and other related brands developed by JWU, LLC. in the future.
Semir Kidiliz Group, May 2018 110 million euros Semir announced to acquire all the assets of French childrenswear group Kidiliz Group for
a French 110 million euros through its wholly-owned subsidiary Semir International Group (Hong
childrenswear Kong) Co., Ltd. Upon completion of the transaction, Semir Group will take over the entire
firm Kidiliz Group with the support of its management.
Source: Media reports, companies’ official websites/ social media accounts/ apps; compiled by Fung Business Intelligence 59You can also read
