27 Sept 2017
China’s Garment Market
I. Market Overview
China’s 1.3 billion population constitutes a huge market for garments, and one that is growing year by year. China’s adult garment market was worth around RMB1,144.4 billion in 2016, an increase on the previous year of 6.4%. Market value is expected to reach RMB1,370.4 billion by 2019.
Chinese garment brands can be divided into two major categories. The first comprises upmarket brands, targetted at consumers from high-income groups with growing spending power, increasing taste for luxury and high-end brands, and a concern for garment quality and shopping experience. The second adopts a mass market strategy and, like Uniqlo, Zara and H&M, offers affordable and trendy garments especially favoured by young consumers.
In a survey published by HKTDC Research in 2015 on garment consumption in the Chinese mainland, respondents indicated that their average spending on garments in the previous 12 months was RMB4,000, while their average budget for buying garments in the next 12 months was RMB4,517. Respondents from Shanghai had the highest budget for future garment consumption – some 35% higher than their average spending on garments in the preceding 12 months. Mainland consumers questioned in the survey said they visited clothing stores frequently, with almost 80% of them visiting at least once a month. Their visits took place mostly at weekends and public holidays. The most popular spots for buying clothes among the respondents were department stores, the main reasons for this being the wide variety of brands and trendy fashions available. More than 30% of those asked, however, preferred shopping for clothes online. Among consumers with experience in buying clothes online, 35% said they browsed the Internet at least once a week to shop for clothes. The majority of the respondents said they would pay and buy directly after making enquiries online. The survey indicated that the most effective advertising or promotion activity was offering discount/sale in shopping malls, followed by TV/radio/broadcast commercials. Other than in Shenyang, Tianjin and Chengdu, offering discount/sale in shopping malls was the garment advertising/promotion activity that was most effective in attracting the attention of the respondents in the survey.
Women’s garment market: Euromonitor data reveals that China’s women’s garment market was worth around RMB872.8 billion in 2016, an increase of 5% from 2015. Of this, women’s underwear showed the fastest growth with a 7% increase. Market value is expected to reach RMB963.2 billion by 2021. This highly segmented and keenly competitive market has developed into a structure which encompasses high- to low-end products. Outstanding design, frequent updates and price advantage are crucial for a brand to excel. 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, targetting female white-collar workers, private business owners and government employees aged 30-45.
Men’s garment market: The consumer market for men’s garment is undergoing a growth period. According to Euromonitor data, China’s men’s garment market was worth RMB513.1 billion in 2016, an annual increase of 4%. Of this, sales of jeans showed the fastest growth with an annual increase of 8%. Market value is expected to reach RMB551.5 billion by 2021. As the spending power of the male consumers in China continues to grow, their requirements for outfits are gradually going beyond just staying warm and looking presentable. They are becoming increasingly demanding in terms of specific features – for example, buying brands that suit different situations and events. Consequently, demand for mid- to high-end men’s garments is continually rising. Market surveys indicate that China has already become a major market for international high-end men’s garments. The distribution of men’s garment industrial clusters in China has changed in recent years. Previously, Zhejiang dominated the market, but today it is equally divided between Zhejiang, Fujian and Guangdong.
Children’s garment market: According to National Bureau of Statistics figures, in 2016 there were about 230 million children under the age of 15 in China. Moreover 17.86 million new babies were born. This underscores the likely colossal size of the children’s garment market in the next few years. According to Euromonitor data, China’s children’s garment market was worth RMB145 billion in 2016, an increase of 7% on 2015. Of this, baby garments showed the fastest growth with a 13% increase. According to a market survey conducted by HKTDC on China’s infant and children’s clothing market in 2017, respondents generally indicated a preference to shop at physical shops in spite of the growing online shopping market. The reason they gave was that at physical shops they could personally feel the quality and thickness of garments and avoid the problem of colour discrepancy which may occur in online shopping. Product materials and safety designs were their primary considerations.
Work wear (uniform) market: As China’s industrial structure undergoes adjustments and the number of people engaging in the secondary and tertiary sectors continues to grow, demand for work wear is trending up. According to an assessment of leading Chinese enterprises in work wear released by the China National Garment Association, there are 19 industries in China that require the wearing of standard uniforms, and the market 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 industry cluster has 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’ demand for casual wear is 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 Chinese sportswear market grew 12% year-on-year to RMB186.6 billion in 2016. 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 margins get slimmer, the development of innovative technologies has become an increasingly important feature of 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 catering to environmental and safety concerns, they enjoy obvious value-for-money advantages over natural fibres.
China’s imports of selected garments in 2016:
HS Code Description 2016
6101 Men’s overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), wind-cheaters, wind-jackets and similar articles, knitted or crocheted 30.2 18.4 6102 Women’s overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), wind-cheaters, wind-jackets and similar articles, knitted or crocheted 38.7 6.3 6103 Men’s suits, ensembles, jackets, blazers, trousers, overalls, breeches and shorts (other than swimwear), knitted or crocheted 195.8 14.8 6104 Women’s suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, overalls, breeches and shorts (other than swimwear), knitted or crocheted 346.3 9.3 6105 Men’s shirts, knitted or crocheted 114.8 0.3 6106 Women’s shirts, knitted or crocheted 19.9 -1.1 6107 Men’s underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted 41.6 -22.1 6108 Women’s slips, petticoats, briefs, panties, nightdresses, pyjamas, négligés, bathrobes, dressing gowns and similar articles, knitted or crocheted 49.8 0.4 6109 T-shirts, singlets and other vests, knitted or crocheted 594.7 -1.7 6110 Jerseys, pullovers, cardigans, waistcoats and similar articles, knitted or crocheted 614.6 -0.5 6111 Babies’ garments and garment accessories, knitted or crocheted 107.3 5.3 6112 Track suits, ski suits and swimwear, knitted or crocheted 22.2 0.3 6113 Garments, made up of knitted or crocheted fabrics, impregnated, coated, covered or laminated with plastics or other material; or rubberised fabrics 3.0 18.7 6114 Other garments, knitted or crocheted 72.7 37.6 6115 Socks, knitted or crocheted 99.0 31.7 6116 Gloves, knitted or crocheted 16.5 23.1 6201 Men’s overcoats, car-coats, capes, cloaks, wind-cheaters, wind-jackets and similar articles, not knitted or crocheted 455.7 3.9 6202 Women’s overcoats, car-coats, capes, cloaks, wind-cheaters, wind-jackets and similar articles, not knitted or crocheted 499.2 -3.5 6203 Men’s suits, ensembles, jackets, blazers, trousers, overalls, breeches and shorts (other than swimwear), not knitted or crocheted 844.3 -1.8 6204 Women’s suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, overalls, breeches and shorts (other than swimwear), not knitted or crocheted 878.6 0.1 6205 Men’s shirts, not knitted or crocheted 228.2 -4.6 6206 Women’s shirts, not knitted or crocheted 135.4 9.6 6207 Men’s singlets, underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, not knitted or crocheted 8.6 -18.0 6208 Women’s singlets, slips, petticoats, briefs, panties, nightdresses, pyjamas, négligés, bathrobes, dressing gowns and similar articles, not knitted or crocheted 15.5 14.7 6209 Babies’ garments and garment accessories, not knitted or crocheted 36.3 8.9 6210 Garments, made up of fabrics, impregnated, coated, covered or laminated with felt, nonwovens, plastics or other material; or rubberised fabrics 71.0 19.4 6211 Track suits, ski suits and swimwear, not knitted or crocheted 216.0 9.1 6212 Brassieres, girdles, corsets, braces, suspenders, garters and similar articles and parts thereof 135.8 7.6 6213 Handkerchiefs, not knitted or crocheted 1.5 33.9 6214 Shawls, scarves, mufflers, mantillas, veils and
119.3 -12.0 6215 Ties, bow ties and cravats, not knitted or crocheted 8.4 -7.4 6216 Gloves, not knitted or crocheted 6.8 -18.8
Source: Global Trade Atlas
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, domestic brands are dominant. 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. However, 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 have begun looking urgently for new growth areas. Many of them turned their attention to the domestic market, further intensifying competition. Rising costs are also encouraging garment enterprises to go upmarket, improve product design and move away from competing solely on price.
Currently, China’s high-end garment market consists almost completely of brands from France, Germany, Italy, Japan, the US, the UK and Korea. Hong Kong and Taiwanese brands are mainly concentrated in the mid-range market while domestic brands are mostly found in the mid- and low-end markets.
Overall, growth in the garment market has been relatively slow in recent years, but fast fashion and online sales have continued to rise. In particular, European brands such as Zara and H&M have posted marked growth in market shares. This is 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 the likes of Zara, H&M, Gap and Uniqlo will quicken the pace of their penetration into the Chinese market, particularly in second- and third-tier cities.
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.
In a consumer survey conducted by HKTDC Research, department stores proved to be the most popular place to buy clothes with 62% of respondents saying they’d purchased garments there. This was largely due to the diversity of brands and the comfortable shopping ambience they offer. 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 the main channel.
Specialised garment markets: After years of development, as a mature model for the distribution of garment products, these markets are achieving 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. In Guangzhou, a specialised garment market has been formed, consisting of a Liuhua cluster centred around the Baima garment mart and a Shahe cluster centred around Shadong. More than 10 wholesale centres are located within the Liuhua garment wholesale commercial district. 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 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 the 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 a 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 stepping up efforts to develop specialty stores.
Garment supermarkets and discount stores have become a new component of the garment retail landscape. Garment items sold in supermarkets are usually not the trendiest, 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 such as 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 as completely free from restrictions as if they were independent, 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: According to figures from the National Bureau of Statistics, the size of China’s online garment shopping market reached RMB5,155.6 billion in 2016, up 26.2% year-on-year and accounting for over 15.5% of total retail sales of consumer goods. According to analysis by the China E-Commerce Research Center, these are the main trends of development in China’s e-commerce garment market: (1) The overall online garment market will expand steadily to capture a substantial share of China’s e-tailing market; (2) Sales of garments through mobile platforms will grow rapidly; (3) Garment e-tailers will strengthen their own “credibility” by creating a transparent and safe online environment for consumers to shop and make payments; (4) Physical stores and e-platforms will increasingly complement each other and online-to-offline (O2O) 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 tailor-made according to consumer demand. In the B2C online garment shopping market, Tmall, JD.com 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.
Selected garment fairs to be held in China in the second half of 2017:
Date Exhibition Location 22-24 September 2017 2017 China (Dalian) International Garment & Textile Fair Dalian World Expo Center 11-13 October 2017 China International Fashion Fair (CHIC Shanghai) National Exhibition and Convention Center, Shanghai 19-22 October 2017 Ningbo International Fashion Fair Ningbo International Conference and Exhibition Center 30 November -
2 December 2017
Shenzhen International Exhibition for Clothing OEM/ODM Shenzhen Convention and Exhibition Center
IV. Import and Trade Regulations
Since 2005, customs duties of garment have dropped from an average of 22%-25% when China joined the WTO to 14%-16%. For some garment items of man-made fibres, 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 on the mainland, so only some high-end garment brands are enjoying the advantages brought about by the tariff adjustments.
Import Tariffs of Selected Garment Items in 2017
HS Code Description % 61046200 Women's trousers, overalls etc 16 61051000 Men’s cotton shirts, knitted or crocheted 16 61052000 Men’s shirts, of chemical fibres, knitted or crocheted 17.5 61059000 Men’s shirts, of other textile materials, knitted or crocheted 16 61061000 Women’s cotton shirts, knitted or crocheted 16 61062000 Women’s shirts, of chemical fibres, knitted or crocheted 17.5 61069000 Women’s shirts, of other textile materials, knitted or crocheted 16 61071100 Men’s cotton underpants and briefs, knitted or crocheted 14 61083100 Women’s cotton nightdresses and pyjamas, knitted or crocheted 14 61091000 Cotton T-shirts, singlets etc, knitted or crocheted 14 61099090 T-shirts, singlets etc, of other textile materials, knitted or crocheted 14 61102000 Cotton pullovers etc, knitted or crocheted 14 61103000 Pullovers etc, of chemical fibres, knitted or crocheted 16 61109010 Pullovers etc, of silk, knitted or crocheted 14 61109090 Pullovers etc, of other textile materials, knitted or crocheted 14 61112000 Babies’ cotton garments and garment accessories, knitted or crocheted 14 61179000 Parts of garment or garment accessories, of other textile materials, knitted or crocheted 14 62034210 Men’s Arabian trousers, of cotton denim 16 62034290 Men’s trousers and overalls etc, of cotton denim 16 62043200 Women’s upper garment, of cotton 16 62043300 Women’s upper garment, of man-made fibres 17.5 62045200 Skirts and divided skirts, of cotton 14 62046200 Women’s trousers, overalls etc, of cotton 16 62046300 Women’s trousers, overalls etc, of man-made fibres 17.5 62052000 Men’s cotton shirts 16 62053000 Men’s shirts, of man-made fibres 16 62059090 Men’s shirts, of other textile materials 16 62063000 Women’s cotton shirts 16 62064000 Women’s shirts, of man-made fibres 17.5 62069000 Women’s shirts, of other textile materials 16 62082200 Women’s nightdresses and pajamas, of chemical fibres 16 62179000 Parts of garment or garment accessories, not knitted or crocheted 14
Source: Customs Import and Export Tariff of the People's Republic of China 2017
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.
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 textiles printing and dyeing (9), wool textiles (15), linen textiles (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 came 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.
The Standardisation Administration of China has recently promulgated a number of national standards to further safeguard the textile and garment industry. Examples include Textiles - Test Methods for Nonwovens (GB/T 24218.16-2017 and GB/T 24218.17-2017), Textiles - Determination of Deodorant Property (GB/T 33610.2-2017) and Textiles - Testing and Evaluation of Sound Absorption Property (GB/T 33620-2017), all of which will come into force on 1 December 2017.