China has become the world's largest textile and apparel producer, consumer, and exporter. The textile and apparel industry will remain an important livelihood industry in China for a considerable period of time.
According to statistics from the National Bureau of Statistics, the total retail sales of consumer goods nationwide in 2008 was 1,084.88 billion yuan, an increase of 21.6% over the same period in 2007. Among them, apparel increased by 25.9%, and the cumulative clothing consumption across society exceeded 1 trillion yuan in 2008. In 2009, the total retail sales of consumer goods nationwide was 1,253.43 billion yuan, an increase of 15.5% year-on-year, among which apparel increased by 18.8%.
The domestic demand market has always been the first driving force for the development of China's textile and apparel industry. Since 2009, under the support of the country's policies to expand domestic demand, the domestic demand market has achieved stable and relatively fast growth, becoming an important factor supporting the stabilization and recovery of the textile and apparel industry. According to data from the National Bureau of Statistics, in 2009, the cumulative domestic sales revenue of textile and apparel enterprises above designated size reached 2,971.224 billion yuan, an increase of 14.69% year-on-year; the proportion of domestic sales revenue in the industry reached 79.94%, an increase of 2.86 percentage points year-on-year.
According to data analysis from the National Bureau of Statistics and the China Textile Industry Association, the total output of the entire apparel industry declined after 2008, with continuous negative growth for two years from 2008 to 2009. This was mainly due to the significant reduction or even shutdown of export-oriented small and medium-sized enterprises affected by the financial crisis. Meanwhile, the decline in apparel production indicated the emergence of a turning point in the development of the apparel industry, shifting from a scale-expansion path to a value-expansion path. However, the apparel production of enterprises above designated size has continued to show an upward trend. Although there was a smaller growth rate in 2008, it basically recovered to the pre-financial crisis growth level in 2009. In January-February 2010, the cumulative apparel production reached 3.559 billion pieces, an increase of 17.15% year-on-year.
Enterprises above designated size refer to all state-owned industrial enterprises and some non-state-owned industrial enterprises with annual sales revenue of more than 5 million yuan.
On April 24, 2009, the General Office of the State Council of China issued the "Textile Industry Adjustment and Revitalization Plan", which states: "Maintain the combination of developing international markets and expanding domestic demand. Coordinately plan the international and domestic markets, adopt comprehensive measures, consolidate and develop international markets, maintain the stability of export shares, while striving to cultivate and expand domestic consumer demand," and at the same time, "Guide textile enterprises to vigorously develop new products to meet the needs of different consumers; optimize and innovate business models, strengthen marketing network construction, reduce circulation links; actively develop rural markets, increase sales in remote cities, and facilitate farmers' consumption." The issuance of the "Textile Industry Adjustment and Revitalization Plan" is undoubtedly an important impetus for the construction of a strong apparel country in the textile and apparel industry, and also the first feasible plan to explore the future strong apparel country.
In 2009, China's apparel industry achieved countercyclical growth in benefits. The total profit of the industry, the average profit per enterprise, and the profit per capita grew significantly by 21.31%, 26.77%, and 19.70% respectively, while the industry profit margin increased by 5.93% year-on-year. Labor productivity continued to grow at a double-digit rate. Enterprises' cost control capabilities have significantly improved. In 2009, the main business income and profit growth indicators of the apparel industry development capability exceeded those of 2008. This indicates that the development model of the industry has changed, shifting from scale expansion to benefit expansion. The enhancement of the industry's development capability is reflected in the transformation of the core competitiveness.
2. Research on the Chinese Apparel Market Industry
2.1 Macro-environment Analysis
2.1.1 Economic Environment
According to data from the National Bureau of Statistics, between 2001 and 2009, the Gross Domestic Product (GDP) increased from 1,096.55 billion yuan in 2001 to 3,353.53 billion yuan in 2009, with an average annual compound growth rate of 15%. Per capita GDP increased from about 8,622 yuan in 2001 to about 25,000 yuan in 2009, at a compound annual growth rate of approximately 14.2%.
2.1.2 Social Environment
Through the migration of rural populations to cities and the transformation of towns into cities, industrialization accelerates the urbanization process in China. According to data from the National Bureau of Statistics, China's total urban population increased by approximately 126 million people from 2001 to 2008, with a compound annual growth rate of about 3.4%. The urban population accounted for approximately 37.7% of the total population in 2001, increasing to about 45.7% in 2008.
It is expected that by 2013, the proportion of China's urban population to the total population will increase to 53%.
With the rapid economic growth in China, the income levels of urban households have correspondingly increased, improving living standards. According to data from the National Bureau of Statistics, the annual per capita disposable income of urban households in China increased from 6,860 yuan in 2001 to about 17,175 yuan in 2009, with a compound annual growth rate of approximately 12.1%.
The increase in disposable income has stimulated the development of China's retail industry. According to data from the National Bureau of Statistics, the compound annual growth rate of China's consumer goods retail total from 2001 to 2009 reached 16.1%, faster than the growth rate of urban disposable income.
2.1.3 Policy and Regulatory Environment
The National Development and Reform Commission of the People's Republic of China (hereinafter referred to as "NDRC") is the competent authority of the domestic apparel industry, responsible for formulating industrial policies, government guidance on product development and promotion, project approval, and management of industrial support funds.
There are no specific regulations governing the entry of the apparel retail industry in the current laws, regulations, and policies of our country. Currently, the laws, regulations, and policies involved in the operation of the industry mainly include:
September 2009: "Guiding Opinions on Further Strengthening the Management of Textile Enterprises"
-- Strengthening the enterprise’s market-oriented marketing management concept and user-first service awareness, encouraging enterprises to carefully study the market, develop new varieties according to market demand and changes, and produce products that meet market demand;
-- Actively expand domestic consumption, clothing and home textiles producers vigorously open up rural markets, increase sales to remote rural areas, and facilitate farmers' consumption.
September 2009: "Guidance on Accelerating the Construction of Self-own Brands in Clothing and Home Textiles"
-- Support self-own brand clothing and home textiles enterprises to enhance their core competitiveness.
-- Provide financial services for the construction of self-own brands in clothing and home textiles.
-- Help self-own brand clothing and home textiles enterprises expand overseas markets.
-- Increase protection for self-own brands in clothing and home textiles.
May 2009: "Notice on Exemption of Entry-Exit Inspection and Quarantine Fees for Exported Agricultural Products and Textile and Apparel Products"
-- For exported textile and apparel products, the entry-exit inspection and quarantine fees will be charged at 70% of the current standard, encouraging exports of textile and apparel products.
April 2009: "Adjustment and Revitalization Plan for the Textile Industry"
-- By 2011, enterprises above designated size are expected to achieve an added value of 1,200 billion yuan in the industrial sector, with an annual growth rate of 10%; total exports of 240 billion US dollars, with an annual growth rate of 8%;
-- Cultivate around 100 self-own brands with strong influence, raising the proportion of self-own brand products in exports to 20%.
-- Use technological renovation as a handle, adopting advanced and applicable technologies to reform traditional industries, improve the efficiency of the textile industry, improve the product structure, and enhance the ability to supply effective markets.
-- Significantly improve technological support, making significant progress in the industrialization and application of high-tech products, raising the proportion of textile technology equipment with international advanced levels to around 50%, continuously improving the output rate of new products, and increasing the labor productivity of the entire industry by an average of 10% annually.
October 2006: "Regulations on Fair Trading Practices Between Retailers and Suppliers"
-- Standard requirements for regulating retailers who abuse dominant positions to engage in unfair trading practices and hinder fair competition.
-- Standard requirements for suppliers engaging in behaviors that hinder fair competition.
-- Standard requirements for charging fees by retailers to suppliers.
-- Standard requirements for retailers to pay suppliers.
-- Standard requirements for return conditions.
July 2006: "Measures for the Administration of Retailer Promotional Activities"
-- Safety and management standard requirements for promotional activities.
-- Content authenticity and comprehensiveness standard requirements for advertisements and other promotional methods used in promotional activities.
-- Quality, price, and return standard requirements for products in promotional activities.
-- Retailers with single-store operating areas exceeding 3,000 square meters conducting promotional activities under the names of new store openings, festivals, store anniversaries, etc., must file their publicly disclosed promotional content with the county-level or higher (including county-level) commerce authorities within fifteen days after the end of the promotional activity.
July 2006: "Notice from the Ministry of Finance, National Development and Reform Commission, and Ministry of Commerce on Policies to Promote Transformation of Foreign Trade Growth Mode and Support 'Going Out' of Textile Enterprises"
-- Support innovation in the textile industry, accelerate structural adjustment, and transform foreign trade growth mode. Necessary support will be given to the research and development of key textile technologies and complete sets of equipment, the construction of public innovation platforms in industrial clusters, and the construction and promotion of self-own brands in textile and apparel.
-- Support capable textile enterprises to 'go out', invest in factories overseas, and achieve diversification of origin. Key encouragement will be given to textile and apparel enterprises with complementary infrastructure to cluster-style investment in overseas textile industrial parks.
April 2006: "Notice on Several Opinions on Accelerating Structural Adjustment in the Textile Industry and Promoting Industrial Upgrading"
-- Accelerate technological structural adjustments and increase product added value. Strengthen integration of upstream and downstream industrial chains and cooperation among industry, academia, and research, innovate business models, enhance the status of Chinese enterprises in the international textile and apparel supply chain, and increase product added value;
-- Vigorously promote the construction of self-own brands and create internationally influential self-own brands. Key support and vigorous cultivation will be given to enterprises with advantages in brand design, technology research and development, and marketing channel construction; encourage the creation of industry-wide and regional brands with public attributes, aiming to form several internationally influential self-own brands by 2010, significantly increasing the proportion of self-own brand products in textile and apparel exports.
The main provisions related to foreign apparel retailers and apparel brands entering the Chinese market include the "Catalogue for the Guidance of Foreign Investment Industries," the "Administrative Measures for Foreign Investment in the Commercial Sector," and the "Administrative Measures for Business Franchising."
In October 2007, the "Catalogue for the Guidance of Foreign Investment Industries (2007 Revised Edition)" was released, encouraging certain foreign textile industries and leather, fur, feather (down) and their products industries to invest in China. Specific contents include:
-- Textile industry, such as 1. Production of special industrial textiles using high technology; 2. High-end fabric weaving, dyeing, and finishing processing; 3. Processing of special natural fibers (including animal fibers other than wool, hemp fibers, bamboo fibers, mulberry silk, colored cotton, etc.) that meet ecological, resource recycling, and environmental protection requirements; 4. Clothing production using computer integrated manufacturing systems; 5. Production of high-end carpets, embroidery, and lace products.
-- Leather, fur, feather (down) and their products industry, such as 1. Clean technology processing of leather and fur; 2. New technology processing of leather post-treatment; 3. Processing of high-end leather (sofa leather, car seat cushion leather).
2.2 Overview of the Chinese Apparel Market
The Chinese apparel market is a rapidly expanding market with gradually tapped consumption potential. Chinese apparel is increasingly developing towards leisure, diversity, personalization, fashion, and branding.
Industrial clusters are an important feature of the development of China's apparel industry. Currently, the prominent characteristic of China's apparel industry distribution is its clustering. In major apparel producing areas such as Zhejiang, Fujian, Guangdong, Jiangsu, Shandong, and Hebei, numerous regional industrial clusters have formed around professional markets or exports. The domestic apparel industry is currently in a state of perfect competition overall. Due to low entry barriers, various domestic and international brands abound in the market, resulting in serious homogenization.
According to statistical data from the National Bureau of Statistics, from January to November 2009, the industrial sales output of the textile and apparel industry increased by 14.59% compared to the same period in 2008. From January to November 2009, the total industrial sales output of the textile and apparel industry in Jiangsu, Guangdong, Zhejiang, Shandong, and Fujian provinces accounted for 62% of the total.
In 2009, the total profit, average profit per enterprise, and profit per capita of China's apparel industry increased significantly by 21.31%, 26.77%, and 19.70%, respectively. The industry profit margin increased by 5.93% year-on-year. Labor productivity continued to grow at a double-digit rate. Enterprises' cost control capabilities have significantly improved. In 2009, the main business income and profit growth indicators of the apparel industry development capability exceeded those of 2008. This indicates that the development model of the industry has changed, shifting from scale expansion to benefit expansion. The enhancement of the industry's development capability is reflected in the transformation of the core competitiveness.
As people's living standards improve, the process of purchasing and consuming clothing has become an action that includes dreams, emotions, and pleasures, becoming a pleasant personal experience. It fully showcases the consumer's position, education, appreciation ability, and economic strength. Clothing consumption is not only about consuming clothing itself but also about consuming the culture of the brand, the service of the company, and the information provided by the company. Consumers' psychological maturity in consumption is gradually increasing, and the main body of consumption is shifting from mid-to-low-end to mid-to-high-end, with the share of high-end demand gradually increasing. Additionally, consumers' pursuit of fashion in clothing is becoming increasingly strong, with higher requirements for the style, quality, and fame of products, keeping pace with international fashion trends.
2.3 Overview of the Chinese Men's Apparel Market
The distribution of men's apparel industrial clusters in China has very obvious regional characteristics, forming a tripartite pattern centered on Zhejiang, Fujian, and Guangdong, with most men's apparel manufacturers concentrated in Zhejiang and Fujian.
Research shows that the total retail sales of men's apparel in China increased from approximately RMB 84 billion in 2001 to approximately RMB 260 billion in 2008, with a compound annual growth rate of approximately 17.5% during this period. In 2008, the per capita consumption of men's apparel in China was approximately 25% and 20% of that in the United States and Europe, respectively. It is estimated that the total retail sales of men's apparel in China will reach approximately RMB 58 billion by 2013, growing much faster than developed countries.
Chinese men's apparel is experiencing a popular trend of casual formal wear, with international brands participating and making "mass fashion men's apparel" one of the competitive focal points in the current Chinese men's apparel market.
Although the average per capita men's apparel consumption in third- and fourth-tier cities in China currently lags behind the national average, with the migration of rural populations to cities brought about by industrialization and the transformation of some towns into cities, along with urban development and continuously rising disposable income, the demand for men's apparel products in these cities will be stimulated, expanding the entire men's apparel market.
2.4 Overview of the Chinese Mass Fashion Men's Apparel Market
Globally, the men's apparel industry is increasingly emphasizing personalized features and fashion elements. The close exchange and fusion of cultures in various countries have continuously improved the similarity and convergence of global men's apparel fashion trends. Increasing competition is driving the gradual shift of global men's apparel production to Asia and other regions with abundant and inexpensive labor. The rise of large consumer markets like China, with its large population and continuously improving citizen income levels, is also changing the market focus of the global men's apparel retail industry.
Abroad, the business-like, casual, and fashionable aspects of men's apparel have already merged. More refined men are pursuing the personalization and fashionability of clothing. After China's accession to the WTO, the market has further opened up, and more successful gentlemen are moving between international and domestic arenas. Behind busy work, the concept of relaxing oneself and emphasizing individuality is gradually taking root in people's hearts. Men are increasingly concerned about dressing, not only in terms of quality and brand positioning but also in the style and color coordination suitable for different occasions. They are more willing to wear different clothes in different situations, considering how to dress professionally yet individually in work settings and how to express personal clothing characteristics in informal gatherings or dining occasions. These issues are increasingly becoming considerations for business professionals when choosing attire.
Since the reform and opening-up, Chinese men's apparel brands have evolved from nothing to something, gradually developing from a single type to a diversified and stylized direction. Currently, the Chinese men's apparel market can be mainly divided into formal wear, business casual, casual wear, and sportswear based on product styles. Research shows that the retail sales of business casual men's apparel in the Chinese mass fashion men's apparel market were approximately RMB 110 billion in 2008, and it is expected to grow to RMB 250 billion by 2013, with an annual compound growth rate of approximately 18.4%.
With the entry of international apparel retail giants such as ZARA, H&M, and UNIQLO into the Chinese market, following international fashion trends, becoming fashionable, and personalized has become the main direction of development for Chinese apparel.
Currently, several major trends are emerging in the Chinese men's apparel market:
Fashionable Personalization of Men's Apparel: Mass fashion men's apparel has gradually become a favored choice for young business professionals in recent years. Tailored cuts, exaggerated patterns, and designs can reflect unique taste and individuality. Due to their relaxed and comfortable style, they have become the preferred choice for business professionals in weekend leisure, meetings, and vacation settings.
Young Fashionable Men's Apparel: Young men are surrounded by fashion marketing information and closely follow fashion trends. They have a good understanding of brand styles. Secondly, with the improvement of living standards and changes in consumption concepts domestically, they have their own understanding of fashion, clear attitudes, and firm goals. They require clothing to track global trends and highlight individuality.
Fashionable Sportswear and Casual Wear: With the improvement of living standards, exercise and health awareness have gradually taken the lead. Data shows that sportswear and casual wear have become the largest highlights in the apparel market, with annual sales growth rates reaching 20%-30%. With the successful hosting of the Beijing Olympics in 2008 and the Guangzhou Asian Games in 2010 in China, the concept of sports leading a healthy lifestyle has become deeply rooted in people's minds, and the fashionability of sportswear has become a global trend.
It can be seen that the biggest trend in the Chinese men's apparel market is the popularization of fashion. Followers of fashion clothing have expanded from the previous younger generation to middle-aged and young adults with financial means. And with the growth of China's economy and per capita consumption levels, the audience for fashion clothing is gradually expanding to the general public. The fashion gap between economically developed cities and small and medium-sized cities is also gradually narrowing. These series of changes provide broad market opportunities for Chinese mass fashion men's apparel.
Currently, Metersbonwe represents the mass fashion clothing market in China. Its target market is positioned at young people aged 18-25, characterized by being youthful, fashionable, and energetic. Metersbonwe emulates the ZARA business model through direct-operated stores and large store formats, locking onto its target consumer group with affordable prices and features that closely follow international fashion trends. Currently, it holds a leading position in the domestic youth mass fashion clothing market.
Besides Metersbonwe, Japan's Uniqlo and Spain's ZARA represent foreign mass fashion clothing companies that have entered China.
ZARA belongs to the Spanish Inditex Group, known as a textile giant in Spain. It ranks first in Spain and third globally as a clothing retailer, with sales exceeding €11.4 billion by the end of 2009. Of this, ZARA owns 1,341 chain specialty stores, accounting for about 75% of the group's total revenue.
ZARA officially entered China in 2006. As of now, ZARA has 33 chain stores in China. According to ZARA's official data, from 2006 to 2008, ZARA's sales performance has continued to rise: main business revenues were 129.26 million yuan, 250.19 million yuan, and 369.60 million yuan, respectively.
ZARA's success lies in the use of the SPA model. Through effective supply chain management, it enhances the turnover speed of the