Foreign brands in China Need to Go Big or Go Home

Post by 
Cecilia Wu
Published 
November 28, 2019

It is a well-known fact that many foreign companies are either struggling or retreating in China. The supermarket industry is a vivid bugbear.

But it is also said during the troubled times, fortune probably favors the big and the bold.

That is why Walmart just announced its determination of doubling down on China by opening 500 new stores. A while ago, Ikea also proclaimed its “expansion mood” by injecting USD 1.4 billion into the Middle Kingdom. The moves might suggest a telltale sign that international brands have only two options in China: Go Home or Go Big. There seems to be no middle ground. Playing the strategy of “small & beautiful” should only fall into the master hands of newborn native brands.

Take the beauty sector as an example, local brands have continuously managed to seize a sizeable market share when competing with foreign giants. The annual double 11 beauty sales ranking gives us a glimpse of local brands’ vitality.

For a few local beauty brands, such as Perfect Diary, Judydll, it only took them 3 years to make their mark in such a cut-throat arena.

Today  L’Oreal Group cemented its crown place in China’s beauty vertical simply because it is big enough to withstand waves of sieges from local insurgent brands. Every year the beauty behemoth either spending massive budget on digital channels in China or acquiring as many promising brands/startups as possible worldwide.

Next, if we cast our eyes on the fashion category, the business is becoming increasingly polarized at a global level. According to McKinsey, the top 20% contributed 137% of the total profit in 2018. They are called the “super winners”, and include two new Chinese entrants Anta Group and HLA corporation.  

Inside China, most large foreign fashion brands have a rather unsettling prospect. Names like Nine West, New Look, Forever 21 simply disappeared from the country.

Meanwhile, local companies are gradually grabbing their seats in the Top 10 apparel brands list in terms of market share.

Still, for a handful of foreign brands, they decided to up the ante in China game. For instance,

  • H&M’s sister brand COS has continuously accelerated its expansion in China.
  • In January 2019, Skechers US opened its 3,000th store in the world at Star Mall Shenyang Plaza, China, which is also the brand’s largest store. It has the largest number of stores in China (941), followed by the U.S. (472), and India (222).
  • Uniqlo expects the Greater China network to surpass 1,000 stores by the end of August 2021 in tandem with the emphasis on digital marketing and e-commerce.

Some might argue that betting big on China might just end up throwing dust in the air. Yes, could be. But no big move means you even do not get the dust, just go home without a proper fight.

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