Strategies for Global Fashion Brands to Thrive in China's Evolving Market Landscape

Navigating China's Apparel and Fashion Landscape: Priorities for Global Brands

Despite a challenging backdrop, China remns an attractive market for global companies capable of balancing globalization with localization. The apparel, fashion, and luxury AFL sector in the country continues to grow dynamically, fueled by a rising middle class and an expected double-digit growth trajectory post-crisis. However, navigating the Chinese market presents its own unique set of challenges.

According to data from the National Bureau of Statistics, China's Consumer Confidence Index dropped 28 year-on-year between October 2021 and October 2022, dampening consumer sping power and necessitating a more agile approach for businesses ming to thrive in this market. Chinese local champions are increasingly outpacing their global counterparts through the adoption of an agile operating model and supply chn strategy that enables quick adaptation to changing consumer preferences. Moreover, they are adept at harnessing social media platforms for direct engagement with consumers through key opinion leaders and influencers KOLs and KOCs.

outlines strategic priorities for global AFL brands seeking sustnable success in the Chinese market:

1. Elevate Brand Positioning and Communication:

   • P China evolve constantly, diverging from trs observed in other markets. Global companies should tlor their brand positioning to local consumer preferences, while leveraging a robust local marketing engine to articulate their unique value proposition.

2. Optimize Store Networks and Formats:

   • Shifting consumer behavior has seen the preference for department stores wane in favor of premium shopping malls that offer an array of lifestyle experiences beyond fashion products. Global brands should align their physical store network presence with these new traffic hubs, while considering a variety of innovative formats to cater to evolving consumer needs.

3. Adopt an Omnichannel Direct-to-Consumer D2C Approach:

   • Chinese consumers have embraced the omnichannel shopping experience, frequently weaving through online and offline touchpoints before making their purchasing decision. Global companies should leverage this tr by implementing a targeted D2C strategy that encompasses everything from enhancing digital touchpoints for an optimal consumer experience to equipping store staff with tools to excel in customer engagement across channels.

4. Seize Opportunities at the Convergence of E-commerce and Social Media:

   • The shift towards shopping on social media platforms has become natural for Chinese consumers, presenting a significant opportunity for brands to drive growth through e-commerce efforts. To capitalize, companies should develop customized channel roles aligned with consumer decision-making journeys while refining operational capabilities such as localized and live stream operations.

5. Localize Product Development:

   • Savvy global brands start by leveraging their existing assets and intellectual property IP as a foundation before incorporating design elements that reflect local tastes and trs. Understanding Chinese consumer preferences, market dynamics, and competitive landscapes is crucial for successfully localizing product offerings.

6. Invest in Technology and Talent:

   • Breaking into the Chinese market requires investments in technology tlored to the local market and the establishment of an in-market talent base capable of ensuring seamless collaboration between global and local teams. Global brands should focus on delivering localized digital products while prioritizing talent development both strategic and operational needs.

Navigating China's AFL landscape is not without its challenges. However, for every brand that has struggled to gn a foothold in the market, there are those who have succeeded through deep understanding and adaptation. By focusing on these strategic priorities, global companies can gn a comprehensive grasp of the Chinese market dynamics while leveraging their global IP and assets.

We invite interested readers to explore further insights into this dynamic sector or discuss career opportunities within McKinsey Company.

Author: Alice Scalco, Michael Straub, Jacob Wang, Daniel Zipser

Contributors: Achim Berg, Lambert Bu, Cherry Chen, Asina de Branche, Johnny Ho, Connie Leung, Ray Liu, Doris Lu, Alex Sawaya, Zheng Sun, Kevin Wei Wang, Rebecca Zhang, Cherie Zhang
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