Just a few days after the 2012 Chinese New Year, several fashion companies announced their aggressive Asia/China expansion plan. To name a couple, H&M will triple its store number in China to 270 in the next three years, and Michael Kors appointed a new China head to show their ambitious growth plan. Louis Vuitton, Gucci, and Salvatore Ferragamo also experienced a fantastic 2011 in China and are expecting to grow more this year. The Chinese market is like a dream land for the fashion companies that have already entered, and for those that have yet to come.
Among the different sectors in China’s fashion market, the lady’s shoe market is the one that cannot be ignored, and a great number of international players are willing to enter this business. The fashion market in China has been described as “once you stand on the land of China, you will get 10%. Then, if you are on the corner of the street, you will get 20%. And if you are in the right cities like Shanghai, Beijing, or Shenzhen, you will get 40%. And finally, if you are really good, you will probably get 80-100% annual growth.” Can this really be possible? Not easily.
In recent years, China’s lady leather shoes market presented sustained and rapid development. According to a survey conducted by CIIIC (China Industrial Information Issuing Center) of 270 important department stores in China, sales volume and sales amount of name brand female leather shoes in the last 5 years have had a compound annual growth rate of 15.54% and 39.19%, respectively, far more than the average retail growth and footwear products industry consumption growth.
Despite the rapid development in recent years, the growth rate is tending towards a slowdown in the future. According to a report issued by SATRA Technology Center in 2008, China’s annual footwear consumption is less than 1.7 per capita, far less than the United States, France, Japan, Germany, South Korea and other developed countries where the numbers are 7.3, 5.8, 4.8, 4.2, and 3.9, respectively. By the numbers, the potential market in China is enormous.
We believe that with the continuing improvement of the financial capability of Chinese women, and their pursuit of the beauty and quality of life, and due to the two “1980’s” and “1990’s” big consumer groups having gradually become the mainstream consumer groups, the future market demand for lady’s shoes will continue to remain far stronger than the average retail growth in the Chinese fashion industry.
There are several points to keep in mind to perform well in this huge yet highly competitive market. First, unlike clothing or other women’s fashion sectors, almost all of the mid or high level lady’s shoe brands in China are national brands, which means they operate and compete across most cities in China. Normally, they first occupy most sales channels in first-tier cities and then penetrate into second or third-tier cities in order to create a higher barrier for newcomers. Second, there is already one dominant player in the market – Belle, who controls two thirds of the sales channel resources with its 22 brands and RMB 25 billion in sales. Other two strong competitors are Daphne and Saturday, who account for roughly 10% market share as a whole. Third, 71% of customers in China buy shoes in department stores or shopping malls, which further enhances the importance of sales channel resources.
In terms of the high-end or luxury lady’s shoe market, the opportunity is huge. It is estimated that China will become the number one luxury market in 2015 (25% annual growth rate), with over RMB 248 billion in sales, accounting for 29% of the world’s total luxury consumption. The shoes segment occupies 5-10% of this total. Most international luxury brands have already entered the Chinese market, but no dominant players have emerged so far. Ferragamo is doing very well in China with around 40 shops, but the luxury lady’s shoe market is far from saturated. Market players and newcomers should grasp this golden opportunity to build a thriving future.