Chinese consumers are willing to pay a premium of more than 20 per cent to buy international clothing.
That’s according to a new report by global consulting firm OC&C Strategy Consultants, aimed at helping international apparel brands succeed in China.
The report, Heated Battle to Dress the Modern Chinese Consumer – Establishing a Winning Proposition in China’s Apparel Market, says increased discretionary spending and consumer sophistication mean significant opportunities for international apparel brands.
Nearly half of respondents to the survey on which the report is based showed a preference for international apparel brands over domestic counterparts. However, perceptions that international products are a status symbol are no longer a key driver for purchase. Instead, people favour international apparel brands mainly because of better quality and design.
The study asked Chinese consumers to rate the European and US apparel brands they had bought in the past year on a 1-7 scoring system. J Crew, Oasis and Forever 21 were the champions in their respective segments, while Hugo Boss, American Eagle Outfitters and Gap were the first runners-up.
On average, Chinese consumers buy apparel almost once a month, on which they spend about 6-7 per cent of their disposable income.
“The China apparel market is undergoing a transformation as the urban middle class grows,” says OC&C Strategy Consultants greater China partner Jack Chuang. “Foreign apparel brands may benefit from Chinese consumers’ growing sophistication. They are starting to place more importance on quality and design, while price is no longer their top priority.
“However, since a massive number of international brands have been flooding in, Chinese consumers are facing many more options and becoming more selective.”
Almost 60 per cent of survey respondents buy only from apparel brands they are familiar with, while 70 per cent say they have higher brand loyalty than before. And while price is no longer the top concern, 60 per cent of respondents still actively compare prices and look for promotions.
About 65 per cent of consumers research online before making a purchase, which means that building brand online is a critical complement to the offline presence, says Chuang. “The power of domestic social media such as WeChat and Weibo must not be underestimated.”
Despite flourishing online channels, a physical presence in China is still the most important way for Chinese consumers to know about international apparel brands, Chuang says.
“Given the trend toward price transparency, cross-border eCommerce and international travel, price equalisation will increasingly be expected by Chinese consumers across a wide brand spectrum. However, it might have significant impact on corporate profit if brands are heavily reliant on mark-ups from the Chinese market. Therefore, companies should be wary of imposing exorbitant premiums, while taking careful consideration of factors such as the global economy, exchange rates and customs tax.”
The study canvassed 2600 respondents from 22 cities across China, with consumer surveys and focus groups held from March to May.
Founded in 1987, OC&C provides corporate and business strategy, channel, marketing, organisational and change strategy, and transactional support services. It has more than 400 consultants in 14 offices globally including greater China and India. It has offices in Hong Kong and Shanghai.