Global fashion growth – should brands be looking beyond China?

Friday December 20, 2019 - Posted by:

China is a market that holds great potential for fashion brands targeting international growth, but it’s by no means an easy territory to break into. Should companies be prioritising other destinations in Asia and elsewhere to achieve growth?

If you’re a fashion brand with big ambitions, there is no denying the huge potential for growth on the global stage.

However, it’s important to be aware of the challenges involved in expanding your business across international borders. Attempting to break into new territories without the necessary marketing understanding, or the right language and localisation expertise to connect with your audience, can be a risky undertaking.

In no global market are the obstacles facing foreign brands more apparent than China. This is a country that offers huge potential for businesses, not least because it boasts the world’s biggest shopping event – Singles’ Day – and is set to see ecommerce sales rise by 27 per cent to $1.935 trillion (£1.479 trillion) in 2019.

But China is proving a difficult market for many international businesses to crack. In the fashion sector, brands aspiring to global success could have a lot to gain from looking to other territories that offer plenty of opportunities and fewer barriers to entry.

Looking beyond China

In their State of Fashion 2020 report, The Business of Fashion (BoF) and management consulting firm McKinsey point out that China “continues to present a lucrative opportunity” for many local and international brands, but some companies are “at risk of becoming over-reliant on the market”.

“We see further potential to explore markets beyond China, including India, Southeast Asia, the Middle East and Russia,” the report authors write.

In the last decade, China accounted for 38 per cent of global fashion industry growth across all segments, according to McKinsey research cited in the study. The country has delivered big results for some companies, with LVMH and Gucci among the luxury brands that have enjoyed success there.

However, other big names have had a tougher time in China. Asos and New Look have had to take a step back from the market, while Dolce & Gabbana and Burberry gained unwanted press coverage for advertising campaigns that were out of step with Chinese consumer sentiment.

Fashion companies looking for global expansion opportunities can find them in several countries and regions other than China, such as Southeast Asia, where countries like Vietnam and the Philippines are witnessing growth in GDP and local spending power.

Indonesia may be especially lucrative, as it is on course to become the biggest modest fashion market in the world, according to BoF and McKinsey.

The Middle East could also be a source of great potential, largely thanks to the willingness of local consumers to spend on expensive items. McKinsey analysis has shown that the average customer in the UAE and Saudi Arabia spends more than six times and two times as much, respectively, on fashion as the typical buyer in China.

Regardless of your target market, if you’re planning to take your brand global in 2020, it’s vital to make the right preparations so you’re primed to succeed on the international stage.

Working with experts to get maximum results from practices like international SEO and content localisation can minimise risk and increase your chances of thriving overseas.

Trends and challenges in 2020

As far as the fashion industry as a whole is concerned, the most successful businesses will be those that are equipped to meet the challenges the sector is expected to face in 2020.

One of the key trends anticipated for the coming year is an increasing emphasis on sustainability, which is proving significant in fashion and other industries.

According to BoF and McKinsey, innovation and investment in research and development will prove essential when it comes to achieving short-term sustainability targets and “reinventing fashion’s economic model for longer-term transformation”.

“Consumers and employees will continue to demand more from purpose-driven companies that champion their values – from climate change consciousness to diversity and inclusion,” the report authors write.

The study predicts overall growth of between three and four per cent for the fashion industry in 2020, slightly below the 3.5 per cent to 4.5 per cent estimated for 2019.

External factors like macroeconomic uncertainty, political change and the risk of trade wars could all play a part in consumer decisions next year, but for fashion brands that are prepared with the right tools and strategies, regions like Southeast Asia will continue to offer great opportunities.

Find out more about how Locaria can support your international expansion efforts by requesting a quote online or calling us on +44 (0)20 3948 6800.

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