China remains top apparel market

AT Kearney’s Retail Apparel Index has ranked China as the top apparel market globally due to its market size and strong growth.

Three trends have shaped China’s apparel market: the rise of e-commerce, a boom in fast fashion, and the evolution of the luxury market.

“In most emerging markets, e-commerce is less than one per cent of total sales: in China, it is six per cent which is higher than in the US. More than three-quarters of online sales in China are in apparel,” said Althea Peng, AT Kearney partner and the study’s co-author.

Over the last year several fast fashion retailers have aggressively expanded in China. Uniqlo opened 65 stores in China in fiscal year 2012, taking its total count to 145, and it plans to add 100 stores a year to reach 1000 stores.

H&M opened 52 stores in 2012 and Zara opened 37 stores. Gap plans 35 stores in 2013.

China’s luxury market remains strong – it surpassed Japan to become the second largest luxury market in the world in 2012 – but it is not growing as fast as in the past. A key reason is that a large portion of luxury purchases are made abroad, due to lower prices and a strong renminbi.

Latin America also takes a strong position in the Apparel Index, led by Chile, Brazil and Mexico. Apparel retailers have aggressive expansion plans for the region. Gap, which currently has 36 Latin American stores (including 28 in Mexico and four in Chile), plans to open 30 more by 2014, including its first Brazilian store in 2013.

Zara has 150 stores in Latin America (56 of which are in Mexico, and 39 in Brazil), including 12 new stores built in 2012.

The Middle East region also remains an attractive retail apparel market with the UAE, Kuwait, and Saudi Arabia respectively ranking second, fourth and sixth place in the Index.

Many retailers are testing their operations in the UAE before expanding to other Middle East countries due to its ease of doing business, sizeable retail segment, large expat community, and tourism.

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