12 July 2016
China’s Garment Market
I. Market overview
China’s 1.3 billion population constitutes a huge garment consumption market. Due to factors such as rising production costs, appreciation of the Renminbi and sluggish markets at home and abroad, retail sales of garments between January and November 2015 totalled Rmb848.8 billion, representing a year-on-year growth of 9.6%, according to an analysis made by the Industry Department of the China National Garment Association.
For the industry as a whole, due to changes in market consumption structure, Chinese garment brands have split into two major camps. The first comprises upmarket brands. Here the consumers are a high income group that has ever growing spending power for luxury and high-end brands and is more concerned with garment quality and shopping experience. The second adopts a mass market strategy and, like Uniqlo, Zara and H&M, offers affordable and trendy garment which are favoured especially by young consumers.
In a survey report published by HKTDC Research in 2015 on garment consumption in the Chinese mainland, respondents indicated that their average spending on garments in the 12 months prior to the survey was Rmb4,000, while their average budget for buying garments in the next 12 months is Rmb4,517. Respondents from Shanghai have the highest budget which is some 35% higher than their average spending in the preceding 12 months. Mainland consumers have the habit of visiting clothing stores frequently, with almost 80% of them visiting at least once a month. The time of their visiting takes place mostly in weekends and public holidays. The most popular spots for buying clothes are department stores, the main reasons being the wide variety of brands and trendy fashions available. Other than physical stores, more than 30% of the consumers prefer shopping for clothes online. Among consumers with experience in buying clothes online, 35% say they browse the Internet at least once a week to shop for clothes. The majority of the respondents say they would pay and buy directly after making enquiries online. The most effective advertising or promotion activity is offering discount/sale in shopping malls, followed by TV/radio/broadcast commercials. Other than in Shenyang, Tianjin and Chengdu, offering discount/sale in shopping mall is the garment advertising/promotion activity that is most effective in attracting the attention of the respondents in the survey.
Women’s garment market: This market is highly segmented and keenly competitive. China’s women’s garment brands have already developed into a market structure which encompasses high- to low-end products. There are numerous brands in the women’s garment market, with domestic brands mostly concentrated in the mid- to low-end segments. In recent years, with the growth in the spending power of female consumers, some domestic brands started forging into mid- to high-end women’s garment market segments, setting their target groups at female white-collar workers, private business owners and government employees aged 30-45. Most of the enterprises which own women’s garment brands such as Ellassay, Marisfrolg, Yinger and Koradior are located in South China. Yet most of these domestic brands are regional ones and there is a dearth of national or international ones.
Men’s garment market: The consumer market for men’s garment is now undergoing a growth period. According to some reports, retail sales in China’s men’s garment market exceeded Rmb630 billion in 2015 and are expected to grow at a compound annual rate of 11.8% between 2015 and 2020. As the spending power of the male consumers in China continues to grow, their requirements for outfits are gradually going beyond staying warm and looking presentable. They are increasingly demanding in terms of specific features, for example, brands that suit different environments and occasions. Consequently, demand for mid- to high-end men’s garments has increased continuously. Market surveys indicate that China has already become a major market for international high-end men’s garments. Currently the distribution of men’s garment industrial clusters in China has broken away from the previous situation in which Zhejiang dominated the scene. Today, the market is equally divided among Zhejiang, Fujian and Guangdong.
Children’s garment market: According to National Bureau of Statistics figures, in 2015 there were about 240 million children under the age of 15 in China and, for the whole year, 16.55 million babies were born, representing a birth rate of 12.07%. This also underscores the colossal demand of the children’s garment market in the next few years. Figures from Euromonitor, a market intelligence firm, indicate that the children’s garment market in China was worth Rmb137.2 billion in 2015, representing an annual growth rate of 7.9%. Per capita spending on children's garment in China was Rmb350 in 2008 and increased to Rmb740 in 2012, equivalent to an annual growth rate of 20.58%. Per capita spending on children's garment is expected to reach Rmb1,700 by 2017, suggesting that room for further growth is huge. It is estimated that the children’s garment market in China today is equally split between domestic and foreign brands. Whereas domestic brands span across all segments of the market, foreign brands are mostly concentrated in first- and second-tier cities. The prospects of the children’s garment market have also attracted the entry of more and more adult wear brands and even other industry sectors, such as Li Ning, 361 Degrees and Anta. As the post-80s and post-90s generations are assuming parenthood, their aspirations for quality of life would surely translate into higher demands on children’s wear brands, such as switching from practical outfits to ones that sell on quality and specialisation.
Work wear (uniform) market: As China’s industrial structure undergoes adjustments and the number of people engaging in secondary and tertiary sectors grows continuously, demand for work wear is trending up. According to an assessment of Chinese leading enterprises in work wear released by the China National Garment Association, there are 19 industries in China that require wearing standard uniforms and market demand is estimated to be worth more than Rmb300-400 billion a year. With almost 30,000 enterprises now involved in producing work wear, a sizeable industrial cluster has been formed. Nowadays, buyers are paying more attention to the design approach, styles, quality as well as the technology elements of work wear. For work wear manufacturers, branding will be the development trend of the future as they strive to raise corporate profit margins effectively by staying away from price competition and further expansion of low-cost manufacturing.
Casual wear market: As the economy grows, mainland consumers’ requirements on casual wear are on the rise and casual wear categories are also changing and evolving continuously. Casual wear targeted at the mass market is getting more fashion oriented, fashion casual wear is getting more style oriented, sports casual wear is getting more thematic oriented, business casual wear is getting more youth oriented, outdoor casual wear is getting more everyday-life oriented, and denim casual wear is getting more personal oriented. Presently the Chinese casual wear market has a low degree of concentration and there is a host of domestic and international brands. International clothing brands such as Uniqlo which are known for their trendiness, large variety of styles and short lead times have successively entered the mainland casual wear market, making competition ever fiercer.
Sportswear market: From Adidas, Nike, Puma, Li Ning and Anta to Qiaodan, 361 Degrees and Xtep, the sportswear market has posted rapid growth in the last few years. Euromonitor figures reveal that the size of the Chinse sportswear market grew 11.3% year-on-year to Rmb165 billion in 2015. In this market, domestic brands are dominating the second-tier and lower-tier cities while international brands are mainly concentrated in first- and second-tier cities. As Nike and Adidas are adjusting their market strategies and paying attention to the third- and fourth-tier cities, it is expected that cut-throat competition in sportswear will be set off in all market segments.
As profit margin gets slimmer, development of innovative technologies has become a turning point for competition among companies. For example, some garment brands are forming strategic partnerships with upstream manufacturers of simulation functional fibres. This gives rise gradually to the trend in which upstream innovation in raw materials will set the course of fashion trends at the user end. Given that simulation functional fibres can ensure the attractiveness and comfort of garments while also cater to environmental and safety concerns, they enjoy obvious value-for-money advantages over natural fibres.
II. Market competition
Figures from a mainland apparel brands research centre indicate that, with more than 10,000 brands in existence, the degree of brand concentration in the market has gone down. With more and more new brands entering the market and international brands stepping up their presence in the mainland, market competition is heating up.
In the garment market it is domestic brands that take up dominant positions. A number of leading domestic brands have become the bellwethers of the industry. Examples include Youngor in men’s suits, Threegun in knitted underwear, Bosideng in winter clothes, Septwolves in jackets, Joeone in trousers and Erdos in cashmere sweaters. Nevertheless, because large shopping malls in large cities are constantly adjusting their positioning upwards, some domestic brands have been forced to retreat from these large city shopping malls and extend or move into second-tier cities and wholesale markets. On the other hand, domestic brands are also upgrading themselves continuously and are rolling out bespoke services. In focusing on innovation and brand upgrading in response to market changes, they are driving the development of domestic apparel brands.
In recent years, due to rises in costs and erratic demand in international markets, foreign trade processing enterprises are in urgent need of looking for new growth areas. Many of them turned their attention to the domestic market, further intensifying competition. Rising costs are also bearing down on garment enterprises to go upmarket, improve product design and move away from competing solely on prices.
Currently, China’s high-end garment market is almost taken up by brands from France, Germany, Italy, Japan, the US, the UK and Korea. Hong Kong and Taiwan brands are mainly concentrated in the mid-range market while domestic brands are mostly found in the mid- and low-end markets.
Overall, the garment market was relatively slow in recent years, but fast fashion and online sales continued to grow. In particular, European brands such as Zara and H&M have posted marked growth in market shares. This was mainly attributable to their consumer-friendly prices as well as their diverse and creative styles, which helped ease the price pressure on consumers while meeting their shopping needs. It is understood that fast fashion brands represented by Zara, H&M, Gap and Uniqlo will quicken their pace of penetrating the China market, particularly in second- and third-tier cities. H&M currently boasts over 350 outlets in China while Uniqlo plans to expand into China at the rate of 100 new outlets a year.
III. Sales channels
Garment sales channels in the mainland have developed from the department stores, specialty stores and rural markets of the past to multiple sales channels ranging from warehouse-style shopping centres, supermarkets and chain stores, specialised garment markets, mail-order, TV and online sales.
According to a consumer survey conducted by HKTDC Research, thanks to the convergence of brands and the comfortable shopping ambience they offer, department stores are the type of stores most frequented by respondents for clothes buying (62%). This illustrates that large department stores are still the main channel through which garment and accessories are sold. This is particularly so for the sales of mid- to high-end garment and brand-name garment for which department stores remain to be the main channel.
Specialised garment markets: Focusing mainly on the mid- and low-end segments, specialised garment markets have played an indispensable role in China in the 1980s. After more than 30 years of development, as a mature model for the distribution of garment products, these markets have already achieved good economic results and social influence while establishing a sizeable industrial base. China’s main specialised garment markets are located in three regions:
South China region: Represented by Guangdong and Fujian, the specialised garment market in the South China region enjoys the advantages of having an early start, a free flow of information, favourable geographic locations and solid industrial bases. Currently in Guangzhou, a specialised garment market consisting of a Liuhua cluster centred around Baima and a Shahe cluster centred around Shadong has been formed. More than 10 wholesale centres are found within the Liuhua garment wholesale commercial district. In addition, Humen Town in Guangdong is another area where a lot of garment wholesale activities take place. Fumin Commercial Building and Huanghe Fashion City are two prime examples.
East China region: The garment wholesale markets in East China are mainly found in Zhejiang, Jiangsu and Shanghai. Thanks to the geographic location and excellent development model of the Yangtze River Delta, the garment economy of the East China region has in some ways surpassed its Pearl River Delta counterpart. Notable examples of specialised garment markets include: the Qipu Lu garment wholesale market in Shanghai, Merchants Mall (招商城) in Changshu, Light Textiles City in Keqiao, Woollen Sweater Market in Puyuan, Sijiqing Market in Hangzhou, and the Leather City in Haining.
North China region: The specialised garment markets in North China are mainly clustered around Beijing, Tianjin, Hebei and Shandong. Currently Muxiyuan Commercial District in Beijing is most representative of the specialised markets and is the largest garment distribution market north of Yangtze River. The main trading markets for textiles, garment, footwear and headwear in Shandong include Jimo Garment Wholesale Market, Zichuan Garment City, Zibo Zhoucun Textiles World and Luokou Garment Wholesale Market in Jinan.
Specialty stores: Selling in specialty chain stores is now one main model of selling branded garments and quite a number of enterprises are adopting a combination of franchised stores and self-operated stores. This can compensate for the shortcomings of not having sufficient control in franchising while avoiding the risk of investing too much in self-operated stores. Very often large powerful brands tend to prefer self-operated stores so as to maximise brand influence. As a way to raise profile and enhance image, many brands are redoubling efforts in developing specialty stores.
Garment supermarkets and discount stores have now become the new skyline in the garment market. Garment items sold in supermarkets are usually not the trendiest in style, but prices are more affordable and quality is more assured. There are also some garment brands which want to capitalise on the popularity of supermarkets to raise profile and boost sales. In discount stores, brands can maintain their brand advantages while offering discounted prices as in wholesale markets.
Store-in-store model: As the name implies, these are stores established in other stores, mostly large scale retailers like department stores. Store-in-store for fashion is basically a specialty store of a particular brand, and its form and management are usually freer than other concession counters in the same store. Yet they are not completely free from restrictions as if they were independent ones because they still have to align with the overall operations of their respective hosts. The decoration of a store-in-store usually has a unique style of its own in order to highlight the cultural characteristics of the brand. The heavy shopper traffic of gigantic stores is often the main attraction for manufacturers to set up stores-in-store there.
Online shopping market: China’s online garment shopping market has gradually come of age and people have formed the habit of online shopping over the years. Online shopping had a penetration rate of over 30% in 2014. According to figures published by iResearch, the size of the market reached Rmb3.8 trillion in 2015, with garments accounting for over 20%. The market size is expected to reach Rmb5 trillion in 2016. Garment is the largest and best developed product category as well as one with the longest history in online shopping in China. According to China E-Commerce Research Centre, the trends of development in China’s e-commerce market for clothing include: (1) The overall online clothing market will expand steadily to capture a substantial share in China’s e-tailing market; (2) Sales of clothing through mobile platforms will grow rapidly; (3) E-tailers of clothing will strengthen their own “credibility” by creating a transparent and safe online environment for consumers to shop and make payment; (4) Physical stores and e-platforms will increasingly complement each other and offline and online business will continue to integrate; (5) Personalised custom-made services will draw the attention of clothing e-tailers so that manufacturing processes will be consumer oriented and garments are tailored made according to consumer demand. In the B2C online garment shopping market, Tmall, JD and VIP.com are the main platforms. There are three main reasons why brands as well as channel businesses are all scrambling to start e-commerce. First, e-commerce allows cost savings; second, it allows tracking of market and customer data; third, it is a major channel for inventory clearance.
IV. Import and trade regulations
Beginning 2005, customs duties of garment have dropped from an average of 22%-25% when China first joined the WTO to 14%-16%. For some garment items of man-made fabrics, customs duties have been lowered to 17.5%. But in recent years, with the widespread practice of brand franchising, the majority of foreign garment brands are now manufacturing in the mainland, so only some high-end garment brands are enjoying the advantages brought about by the tariff adjustments.
China requires all products (both domestic and imported ones) entering its market to meet certain national compulsory standards. All code names of Chinese compulsory standards are prefixed by the letters “GB”. In addition, China also encourages the adoption of voluntary standards, the code names of which all begin with “GB/T”. Industry standards are also divided into compulsory and voluntary ones. Garment making is a light industry and its corresponding standard codes begin with “FZ” and “FZ/T” respectively.
The first industry standard for antibacterial knitwear, FZ/T 73023-2006 Antibacterial Knitwear, has been effective in the mainland since 1 August 2006. This standard stipulates that antibacterial products must possess the functions of inhibiting the growth, activities and multiplication of bacteria. The functions of inhibiting Staphylococus aureus, Escherichia coli and Candida albicans are also assigned the grades of A, AA and AAA. Grade A products should have a 99% efficacy of inhibiting Staphylococus aureus, while AA and AAA products should have an efficacy of more than 80% for Staphylococus aureus and efficacies of ≥70% and ≥60% for Escherichia coli and Candida albicans respectively. In addition to meeting appearance and intrinsic product quality criteria as stipulated in national standards and industry standards, antibacterial knitwear will also have to meet the various antibacterial efficacy and product safety criteria as laid down in the new standard. For those conforming antibacterial knitwear, an “Antibacterial Knitwear” certificate and label valid for two years will be awarded by China Knitting Industry Association.
Since 1 August 2009, eight newly developed or revised national standards including Safety Requirements on Cords and Drawstrings on Children’s Clothing, Rule for Work Wear Inspection and Qipao (Cheongsam) have been implemented. For more information about related standards, please visit the related websites .
With effect from 1 December 2010, 60 textile industry standards under the Calculation Method and Basic Quota of Overall Energy Consumption for Dyeing and Printing Enterprises have been in force. These standards cover seven specialty fields, namely cotton textile printing and dyeing (9), wool textiles (15), linen textile (7), silk (4), knitting (11), threads and belts (4), and textile machinery and accessories (10). Of these 60 standards, three are adopted from international standards and, among these three, one is revised from an International Standardisation Organisation (ISO) standard and the other two are adapted from International Silk Association (ISA) standards.
Since 1 January 2010, the national standard GB/T 23314-2009 Neckties has come into effect. This standard defines for the first time the names of different types of neckties and various terms related to neckties. It sets out the indicators for formaldehyde contents, pH value, colourfastness, decomposable aromatic amines and odour in necktie fabrics. It also makes it compulsory for necktie accessories to meet indicators for physical and chemical properties.
GB/T 23328-2009 Woven Student Uniforms has been in force since 1 January 2010. Applicable to all student uniforms using textile woven material as main fabrics, this standard lays down the requirements, testing methods and classification rules for inspection as well as technical features such as labelling, packaging, shipping and storage.
GB/T 23330-2009 Clothing—Requirement of Protection against Rain has been in effect since 1 January 2010. This standard is adapted mainly from the European standard EN 343: 2003 Protective Clothing: Protection against Rain and is applicable for rainproof garment using woven textile material as main fabric.
The revised version of GB18401-2010, National Textile Products Basic Safety Technical Code has been in effect since 1 August 2011. Under this new mandatory code, the age of an infant/young child is changed from 0-24 months to 0-36 months. The code also stipulates that the standards implemented for a product should be specified in a product tag, and that the type of safety technology used for the product should be described in accordance with the new standard. The new code also has more stringent controls over formaldehyde contents, pH value, colourfastness, odour and poisonous and hazardous substances such as decomposable aromatic amine dyes.
FZ/T 73022-2012, Knitted Thermal Underwear has been in force since 1 June 2013. This new standard applies to the identification of the product quality of knitted thermal underwear. It also specifies the model number, requirements, test methods, rules of determination, product descriptions and packaging of knitted thermal underwear products. According to its stipulations, heat retention rate, heat retention rate per unit weight and environmental indices should be specified on the outer packaging of thermal underwear. In particular, heat retention rate should not be less than 30%.
The new version of GB 5296.4-2012, Instructions for Use of Products of Consumer Interest—Part 4: Textiles and Apparel has been effective since 1 May 2014. It is a national mandatory standard that replaces GB 5296.4-1998, Instructions for Use of Products of Consumer—Instructions for Use of Textiles and Apparel. This new standard simplifies the contents related to mandatory labelling to keep in line with international requirements. It also specifies inapplicable product scopes while adding informative documents for the judgment of defects and subdividing the specifications of various products.
GB 31701-2015 Safety Technical Code for Infants and Children Textile Products will come into effect on 1 June 2016. A transitory period of two years is set so that this new standard will be enforced compulsorily across the board by 1 June 2018. This is the first mandatory national standard dealing specifically with textile products of infants and children (children’s wear). It adds a number of safety requirements for infants and children textile products on top of those for textile products in general. Safety technical requirements for infants and children’s textile products are divided into Category A, B and C in accordance with the differences in safety requirements, with Category A having the highest requirements, followed by Category B while Category C meets only basic requirements. Infant textiles shall comply with Category A. Textile products with direct skin contact for children shall at least comply with the requirements of Category B. Textile products without direct skin contact for children shall at least comply with requirements of Category C. The standard also requires that the instructions for use of textile products for children’s wear shall indicate the safety category and the words “Products for Infants Use” must be added for infant textile products.