In March of 2013, Liyuan Peng, appeared before the media spotlight for the first time as China’s new first lady. While she is a well-known folk singer, she used her new role to signal support for China’s continued drive toward domestic innovation and consumption – through fashion.
Peng’s outfits were simple and elegant, and rather than from current foreign favorites like LV or Dior, came from a local brand — Exception de Mixmind. Peng’s chic image, an inspiration for mature Chinese women, will be a catalyst for the future growth of the fashion’s industry for mature womenswear.
Mature womenswear is experiencing surging demand as 30-45 year old women grow in numbers and wealth. We estimate that the number of consumers in this segment has now reached 164 million, and that the size of the market has grown from RMB 21.8 billion to RMB 86.7 billion over the past 5 years a CAGR of 41%.
Although attractive, the womenswear market remains fragmented and competitive. The low entry barrier for mid-range products has resulted in thousands of newly established third and fourth tier brands, many produced by former OEMs that manufacture for third parties. Achieving scale has also proved difficult. Increasingly educated consumers are demanding product quality and design that domestic brands struggle to offer. In addition, many fundamental issues, such as aggressive end channel expansion and unclear brand positioning, has also contributed to high failure rates.
To develop market leadership, companies must detach themselves from an OEM product development and distribution mentality. Peng’s example, as well as that of many other famous 1990s celebrities such as Maggie Cheung, has inspired buyers to demand domestic brands with attitude and value. Businesses must satisfy consumer demand, build brand DNA, channel management, and improved in-store experience through a professionalized management team.
To be sure, there are successful domestic womenswear companies that have made significant progress. PORTS has developed a brand culture known of minimalism, grace and its famous “No 10” white shirt. To properly deliver the brand’s core value directly to consumers, Lancy emphasizes on the operation and development of end channels and direct-owned stores. Other brands have also been focusing on innovative sales and distribution model, such as Ochirly, by combining advance ERP system to monitor and control franchisees’ inventory levels and discounts and to manage product prestige.
Investment in the sector has also been active, but we believe many opportunities to capture market growth still exist. Many Chinese brands are developing joint ventures or franchise arrangements with well-known international brands to upgrade their image. Larger listed Chinese apparel groups are developing expertise and opening presences overseas, particularly in towns like Paris and Milan where affluent Chinese consumers are shopping abroad. Government support is also emerging, for example in areas like Shenzhen where annual promotional fairs are being organized to bring domestic brands to Europe to showcase products and absorb foreign ideas and expertise. Acquisitions have also accelerated, such as Bosideng’s purchase of Jessie, a well know mature womenswear brand in Shenzhen, to expand its leadership down winter apparel to appeal to a new customer segment.
We believe that Bosideng’s acquisition is only the beginning of the consolidation of high-end mature womenswear, and signals the opportunity for forward-thinking, well-managed companies to succeed.
