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Category: Fashion

Retail News Asia is committed to providing both local and global retailers with the latest Fashion news throughout the Asian market. This on a daily base.

  • Ted Baker Asia trading ‘a challenge’

    Ted Baker Asia trading ‘a challenge’

    Global fashion chain Ted Baker overcame an uncertain backdrop in Asia to boost profits by 18.6 per cent last year.

    Rebecca Marks, an analyst at Verdict Retail, said Ted Baker’s strong full year results demonstrate the strength of the brand, driven by its reaction to trends “and signature mix of quality and attention to detail”.

    Ted Baker reported a pre-tax, full-year profit of £58.7 million.

    But the company said while trading generally was in line with expectations, the Ted Baker Asia business trading environment “continues to be challenging”.

    “Whilst Asia currently represents a small part of our business at 3.4 per cent of revenue, we remain positive about the long term opportunities to develop the brand in this territory,” the company said.

    “In Asia, we remain focused on building brand awareness in this market where we are in the relatively early stages of investment. In line with our development strategy in this territory, we have opened another store in Beijing and we are opening further concessions in China and Japan.”

    Marks said the overall results showed Ted Baker was on track to establish itself as a global lifestyle brand.

    “The  investment in brand-building in newer markets paying off,” she said.

    “A strong performance in North America demonstrates the brand’s growing recognition, enhanced by 22 retail and wholesale openings in this market throughout this period. Closer-to-home, the brand is investing in a new distribution centre in the UK to service its European markets – a necessary move to support the growing popularity of its e-commerce platform, where its 45.8 per cent growth primarily reflected its performance in the UK.”

    While womenswear sales were up 15.9 per cent year-on-year, menswear collections outperformed with 20.1 per cent growth.

    “As the prevalence of celebrity and fitness culture continues to heighten male’s interest in fashion and personal appearance, Ted Baker opportunely responded to its typical 25-45 year old male shoppers’ growing demands for increased choice and style with its fashion-led quality collections justifying its premium price points,” said Marks.

    “A raft of planned store openings planned in the coming year, alongside continued investment in its eCommerce platforms and personalisation globally, will help ensure Ted Baker is positioned to enjoy another flourishing financial year ahead. Initial reactions to its Spring/Summer collections have been positive, tapping into the growing activewear market with its new contemporary collection of premium sportswear for women, Fit to a T.

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  • Tiffany ‘needs to reconnect’ with consumers

    Tiffany ‘needs to reconnect’ with consumers

    Jeweller Tiffany & Co’s latest results represent a disappointing end to what has been a challenging year for the company.

    The fact that worldwide net sales declined by 2 per cent even on a constant currency basis neatly indicates that the weakness is not solely down to the appreciating dollar. This point is underpinned by the fact that on a constant exchange rate basis all regions – with the exception of Japan – posted negative same store sales growth.

    Looking across the geographies the most problematic region remains the Americas where total sales declined by 8 per cent for the quarter; on a comparable store basis the decline was 10 per cent. While it may be true that some of this is down to weaker tourist spending in key cities where Tiffany has its flagships, it is also the case that Tiffany is struggling to maintain market share and relevance among middle-income and affluent American consumers.

    That this is so is partly down to a much more competitive environment for fashion jewellery, which constitutes an important part of the company’s sales mix. The growth of Pandora across the US, for example, has helped to take some custom away from Tiffany. Although Pandora’s US growth is now on a slower trajectory, we believe it is still gaining market share.

    While Tiffany still has a strong brand, it is notable that the brand resonates most with affluent older shoppers. Among affluent younger shoppers the brand is not viewed negatively but is seen as representing ‘old world luxury’ which does not entirely chime with their lifestyles and values. This means Tiffany often loses out among this important, and growing, group.

    Tiffany has tried to address this problem with the introduction of new fashion focused collections and more accessible introductory price points across some ranges. However, while the changes have been well received, they have been sufficient to change perceptions.

    These are clearly long term issues which have acted as a drag on Tiffany for some time. However, they were exacerbated during the fourth quarter by the lower levels of holiday gifting of jewellery in the US. For a brand like Tiffany, where lavish gifting is an important driver of buying, such a trend was distinctly unhelpful.

    Looking ahead, the upcoming fiscal year will be one in which the declines start to bottom out – especially after the second quarter. However, it is unlikely that the year will be one of much progress and Tiffany will end the year flat to slightly down.

    Growth will only come when Tiffany finds a way to reconnect its brand to the American consumer.

  • No silver spoon in this Malaysian billionaire’s daughter’s mouth

    No silver spoon in this Malaysian billionaire’s daughter’s mouth

    Yen Kuok was never handed anything on a silver platter. In spite of being the daughter of Malaysia’s richest man, Robert Kuok, she worked her way through trial and error to make a success of her online consignment fashion store in Hong Kong.

    In an article by social news network SAYS Malaysia, Yen relates how she had a no-nonsense upbringing and went to school with only a moderate amount of pocket money.

    “The way my family brought me up was very strict. In fact, I was not given much pocket money. When I was in school, my friends’ pocket money was usually much more than mine,” she was quoted as telling the media in Hong Kong.

    She even talked about how her first piece of branded clothing by Viktor & Rolf was a gift from her brother when she was 17 years old.

    Yen explained that her grandmother set these strict rules when advising her son that her granddaughter should not be raised like a “princess” just because she came from a wealthy family.

    Even her father’s approach to education was unconventional, because unlike many other parents of today, he never pressured her to bring home a string of As.

    “My father kept telling me that going to school is not only about studying and getting good grades, but instead, education is meant to expand one’s horizons,” Says Malaysia reported her as saying.

    “My father had never forced me to get an A in my exams, and he said it doesn’t matter if I get a B.”

    That approach worked wonders, as Yen excelled academically and was eventually accepted into both Stanford and Harvard (opting for the former in sunny California) before settling down in Hong Kong upon graduation.

    Her online consignment store, called ‘Guiltless’, is the first of its kind in Hong Kong to offer luxury goods at “pre-loved” prices, “with a first-class retail experience”, she told Wundrful, an online platform that highlights the people behind their respective brands.

    “Besides collecting and curating second-hand luxury goods, the site also offers new items from past collections at up to 80% off their original retail price,” SAYS Malaysia reported.

    But even after she had overcome various obstacles to establish her business, it wasn’t always smooth sailing for the self-made entrepreneur.

    With little in her pocket when she first started out her business, Yen resorted to modelling the clothes herself and cropping off her head before uploading the pictures onto the site.

    Soon, profits started trickling in, and she was able to hire real models and pay professional photographers to take better shots of her merchandise.

    “Finally, I worked on the packaging to improve the buyer experience. After about five months of trial and error, we finally got it right,” she told Wundrful.

    Her father must certainly be proud.

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  • Cosmetics retailers will like the look of China’s online import tax rules

    Cosmetics retailers will like the look of China’s online import tax rules

    China is changing tax rules for imported goods that are sold online in a move that will make beauty products such as eye creams and moisturizing gels from L’Oreal SA’s Lancome and Korea’s Amorepacific Corp. become cheaper for Chinese consumers.

    The government will remove a special tax, or so-called parcel tax, previously levied on imports sold online. Instead, it will charge value-added and consumption duties that are currently imposed on most products sold in China but with a 30% discount, according to a Thursday statement posted on the website of the Ministry of Finance.

    The move came after China in January broadened a pilot program in which a port district in the eastern city of Hangzhou was allowed to trade imported goods at lower taxes. As the world’s second-largest economy pushes its online retail industry and promotes cross-border e-commerce, the country has expanded the program to 13 cities. China’s State Council approved the latest changes which will come into effect on April 8, according to the Thursday statement.

    “Cosmetics will be the biggest beneficiary after the tax adjustment,” said Catherine Tsang, a Hong Kong-based tax partner at PricewaterhouseCoopers LLP. As beauty and personal care is one of the most popular category among imports bought by China’s Internet shoppers, any price cuts will further boost the market, Tsang said in an interview.

    Riding on a wave of popularity from South Korea’s TV dramas and music, Amorepacific’s Etude House and other brands from the country are in demand among Chinese customers. For Korean products, cross border e-commerce has become a more direct and cheaper way to expand in China compared with setting up store networks, Tsang said.

    Online sales of imported goods have grown at a compounded rate of 63% in the five years to 2015, reaching 638 billion yuan ($98 billion) and accounting for 17% of China’s total online retail sales, according to data from Mintel Group Ltd.

    The most popular categories of products being purchased online in China are consumer electronics, clothing and shoes, appliances, food and beverage, and beauty products, according to research firm Euromonitor International.

    Previous changes to promote cross-border e-commerce include:

    • China started pilot program with a zone in Hangzhou in March 2015
    • Trial expanded Jan. 2016 to Tianjin, Shanghai, Chongqing, Hefei, Zhengzhou, Guangzhou, Chengdu, Dalian, Ningbo, Qingdao, Shenzhen, Suzhou
    • Parcel tax in zones set at 10% (food, infant items), 20% (electronics, apparel), 30% (high-end watches), 50% (cosmetics, alcohol)
    • Tariffs waived for items that incur taxes below 50 yuan

    While food and baby items such as diapers may cost more after the April adjustments because of their current lower tax rates, those imports may remain attractive as China’s growing middle-class are becoming more concerned about health and are willing to pay more for quality, daily necessities, PwC’s Tsang said.

    “That’s why the demand for imported goods is increasing so fast,” she said. ”China’s consumer now are less price-sensitive especially to products they eat or use on their skins.”

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  • Hong Kong luxury ambitions wane

    Hong Kong luxury ambitions wane

    New consumer research suggests the Hong Kong luxury market is set for another challenging year.

    While 42 per cent of consumers surveyed in China are looking to spend more on luxury items, in Hong Kong the figure is only 25 per cent. That marks a five percentage point drop from 30 per cent of last year, according to the seventh edition of the China Luxury Forecast, released by PR company Ruder Finn and Asian market research company Consumer Search Group (CSG).

    The report says the results further reinforce last year’s conservative approach to retail spending by Hong Kong consumers.

    Growing wealth has led to consumers broadening their international horizons, with spend on travel still the top luxury category for both mainland China and Hong Kong. More than half (53 per cent) of consumers on the mainland say they intend to spend more on luxury travel in the coming year, up from last year’s figure of 50 per cent. This is expected to drive more growth in luxury markets outside China.

    In Hong Kong the luxury travel picture again paints a decrease in purchase intention, down by 5 per cent compared to last year.

    Bright spot

    Meanwhile, eCommerce continues to be the bright spot for luxury brands, with online purchases by mainland Chinese and Hong Kong customers amounting to 26 and 20 per cent respectively of luxury spending.

    Surveying 1040 consumers from more than 120 cities in China and 301 from Hong Kong, the forecast covers people from tier 1, 2 and 3 mainland cities. For first-tier cities it interviewed 300 consumers, 400 from second-tier cities and 340 from third-tier cities. Their average annual household income was RMB 833,509 (US$128,293.35) in the mainland, and HK$957,006 (US$123,340.22) in Hong Kong.

    When it comes to online purchases, accessories and beauty are the favoured products, and official brand websites the most preferred digital channels. Customers have also indicated higher confidence in spending online without having first visited physical stores, with an average number of two visits, down from 2.3 and 2.6 visits last year in China and Hong Kong respectively.

    Word of mouth is the key influencer for product choice, surpassing celebrities, luxury communities and key opinion leaders.

    Hong Kong and China customers also value “Chinese” elements differently when it comes to buying products or services. On the mainland, 58 per cent of respondents said that “embedded Chinese elements” were “extremely or very important”, compared to sentiment in Hong Kong, at just 11 per cent. Also, 55 per cent of Chinese consumers said they appreciated “elements symbolising good luck” compared to 25 per cent of Hong Kong consumers.

    Most valued by Hong Kong consumers (44 per cent of respondents) were elements reflecting Chinese heritage, which were second-most appreciated by Chinese consumers (52 per cent).

    Travelling to shop

    China’s luxury travel market continues to grow, with Chinese respondents taking four domestic and three international trips, while in Hong Kong luxury consumers take 3.7 international trips annually. Japan, Taiwan and China are the top three destinations for those from Hong Kong, while Hong Kong tops the list for mainland travellers, followed by France and Japan.

    For mainland consumers, culture and history were the main reasons for destination choice (63 per cent), while Hong Kong travellers most valued transportation convenience (50 per cent). Shopping was the second most popular motivation in both markets (46 per cent and 47 per cent in China and Hong Kong respectively).

    Most luxury consumers in both Hong Kong and mainland China have a budget for shopping when travelling abroad. As many as 57 per cent of Chinese consumers and 46 per cent in Hong Kong know in advance what brands they will buy.

    “While the demand for luxury remains strong in mainland China, Hong Kong luxury consumers are showing lesser intent in luxury purchase,” says CSG Hong Kong executive director Simon Tye.

    “Hong Kong customers are still interested in discovering new luxury brands and experiences. They are very discerning customers who know and appreciate quality products.”

    Travel and beauty show the most significant growth in the luxury sector, according to Ruder Finn Asia GM for luxury Gao Ming.

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  • Clarks retailer S Culture ends year in the red

    Clarks retailer S Culture ends year in the red

    Clarks shoe brand retailer, S Culture has announced a loss for the year and will not pay a dividend.

    Chairman Chong Hot Hoi described 2015 as the worst year for Hong Kong retail sales since  2002, driven by the fall in big spending tourists from the mainland and weak domestic consumer spending.

    S Culture recorded a same-stores sales decline of 6.6 per cent and a net loss of HK$16.4 million for the year. Chong said the opening of new retail outlets during 2014 and early 2015 contributed to the loss, as they were yet to break even under the unfavourable atmosphere of the retail market during the year.

    S Culture sells shoes under the Clarks, Josef Seibel, Petite Jolie and The Flexx retail brands in Hong Kong, Mainland China and Taiwan. It flagged a looming loss in a profit warning issued in early July.

    But despite 2015 being a year to forget, the company is optimistic about 2016.

    “Hong Kong is bracing for greater economic challenges as the prospective interest rate increase shall induce capital outflows that could pressure Hong Kong as the Asian financial hub at a time when China’s economy is growing at its slowest pace in the past 25 years,” said Chong in the company’s trading announcement.

    “Looking ahead, the near-term outlook for retail sales will still be constrained by the weak performance of inbound tourism as cited by the government. We would also watch closely the impact from dimmer global economic prospects amid US interest rate normalisation. To this end, we had been imposing measures and applying more flexible operating tactics in order to minimise such effects to our operations as a whole. In the meantime, while there had been signs

    that the general operating costs, such as market rental level, were declining, we were still cautious about the other operating costs such as staffing and utilities as their nature was downward sticky,” he said.

    “Despite the above, we still remain positive and maintain our belief in our business. While we are still experiencing unfavorable market drivers in the local retail market, we are still confident that the group would be poised to be highly attentive to the changes in the retail market and apply the appropriate strategies to tackle the existing challenges and keep our pace for steady development, especially in the mainland. We still hold the same view about mainland consumer market and continue with our strategy to increase our presence in the mainland.”

    S Culture has now expanded into the cities of Shanghai, Qinhuangdao, Haikou, Qingdao, Songyuan, Zhengzhou, Harbin, Luoyang, Dandong and Beijing through collaborating with the local retailers and operates four company-owned stores with its brands well-received in the mainland, Josef Seibel and The Flexx.

    “We expect to increase our market share in the Mainland by utilising both on- and off-line channels whichever is more effective in the case.”

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  • Li Ning skips out of the red

    Li Ning skips out of the red

    Thanks to a health boom on the mainland, Chinese sportswear brand Li Ning has skipped out of the red to turn a modest profit after three years of losses.

    For its latest financial year, it had a net profit of Rmb14 million (US$2.2 million), reversing from a Rmb781 million loss in 2014. Revenue grew 17 per cent to nearly Rmb7.1 billion.

    Over the past three years, the brand has restructured, shedding 20 per cent of its inventory, closing thousands of underperforming stores and adding more than 300 directly run outlets. It also increased its eCommerce inventory.

    In a filing with the Hong Kong stock exchange, Li Ning says retail, wholesale and eCommerce outlets all achieved double-digit revenue growth last year.

    “Supportive national policies stood the sportswear industry in good stead,” says the company. “The initiative to lead an eco-friendly life has deeply implanted the idea of pursuing a healthy lifestyle in the hearts of people.”

    Li Ning is backed by private equity group TPG Capital and Singapore sovereign wealth fund GIC. The company was founded by Chinese gymnast Li Ning, who won three gold, two silver and one bronze medal at the Olympic Games in Los Angeles in 1984. Following his retirement, he set up the company in 1990, selling footwear, apparel, accessories and equipment for sport and leisure.

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  • Uniqlo to open flagship store in Singapore

    Uniqlo to open flagship store in Singapore

    Japanese clothing brand Uniqlo is set to open its first global flagship store in Singapore and the Southeast Asia region at Orchard Road by the second half of this year.

    The store, spanning across three levels at Orchard Central (a total area of 2,700 sqm), will generate more than 300 jobs here. It will be Uniqlo’s biggest outlet in Singapore and the region.

    “We are very honoured, and excited, to open our first UNIQLO Global Flagship Store in Singapore. Having been a member of the local retail scene since 2009, we remain committed toward contributing to the local community and being an integral part of Singapore’s growth and future,” said Taku Morikawa, CEO of Uniqlo Southeast Asia.

    Uniqlo fans can expect the flagship store to provide an extensive range of Uniqlo’s latest lines for women, men, kids and babies. The store will also serve as a platform to showcase the brand’s LifeWear collection.

    There are currently 13 global flagship stores around the world, including cities such as New York, London, Paris and Shanghai.

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  • Dubai-based group behind Robinsons and Zara to refresh retail offerings

    Dubai-based group behind Robinsons and Zara to refresh retail offerings

    Dubai-based conglomerate Al-Futtaim Group is embarking on a slate of moves to refresh the offerings at its stable of retail brands here, such as household names Robinsons department store and the Marks & Spencer chain.

    The multi-faceted efforts to draw more shoppers are part of a drive by its Asia group chief executive, Mr Christophe Cann, who was appointed to the role in January to grow the company’s business in the region.

    “The strategy is to build a profitable long-term business, to bring new brands to the market and to keep the strength of the group which is quite diversified,” said Mr Cann, at the Robinsons store at The Heeren.

    The group’s diversified retail portfolio also includes sports brands such as Royal Sporting House, Reebok, and fashion labels such as Zara, Pull and Bear, and Massimo Dutti.

    For a start, it will inject $12 million to renovate Robinsons at Raffles City in phases over one year, starting in July. Upgrading plans are also afoot for Marks & Spencer stores at shopping malls – Parkway Parade, Paragon and Raffles City.

    Shoppers will also be able to take a pit stop at a new 1,000 sq ft cafe at the Marks & Spencer outlet at Wheelock Place in Orchard Road, set to open in the third quarter.

    “Having new concepts and new brands are ways to keep customers’ money in Singapore… We need to give more reasons for customers to visit us, to stay longer in the store,” said Singapore-based Mr Cann.

    The group is also adding more food and beverage offerings at Robinsons at The Heeren, with a new restaurant by chef and TV personality Angela May due to open on level two of the store next month.

    Mr Cann also flagged an upcoming outdoor F&B area at The Heeren – where T.G.I. Friday’s outlet used to be – to be connected to level two of Robinsons via a bridge. The F&B area will be up and running in the third quarter.

    Apart from culinary offerings, Al-Futtaim will be trying out new retail concepts, with the opening of a “sneakers bar” at Orchard Central later this year. The new store, spanning about 1,000 sq ft, will carry limited-edition footwear.

    Mr Cann added that the Royal Sporting House outlet at VivoCity will also be given a makeover and will open next month.

    “Sports is not just about products these days, it is about lifestyle. The new shop will look more fashionable and appeal to a younger crowd. We will also downsize on the number of brands, carrying only the best performing ones,” he said.

    This big revamp of its stores across various brands is expected to boost profitability.

    For example, Mr Cann said Robinsons, which has three outlets here – at The Heeren, Raffles City and Jem mall – booked a loss of “a few million dollars” last year, but is likely to break even this year; while its Marks & Spencer chain here is already profitable.

    Singapore is Al-Futtaim’s second- largest market in the region after Malaysia, followed by Thailand and Indonesia.

    Mr Cann said the company expects to invest around $80 million a year across the four markets to enhance its offerings.

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  • J Crew ends ‘torrid year’

    J Crew ends ‘torrid year’

    In closing what can only be described as a torrid year for the company, J Crew has posted a weak, but improved, set of fourth quarter figures.

    Total sales rose by 1 per cent, boosted by strong sales gains of 26 per cent at Madewell. While this compares favorably to the 5.5 per cent decline of last quarter, this is but a small bright spot surrounded by a sea of relatively gloomy numbers.

    Total comparable sales fell by 4 per cent off the back of a 3 per cent decline in the prior year. Here the gains made at Madewell were more than wiped out by the continued decline of the core J Crew brand where comparable sales fell by 5 per cent and total sales by 3 per cent.

    The company remains firmly in the red with a US$7.03 million loss recorded during the quarter – although, to be fair, this is a marked improvement on the $30.6 million loss recorded last year. Notably, however, losses for the full fiscal year now stand at a staggering $1.2 billion – something that leaves the company, and its balance sheet, in a very weak position.

    While there are many reasons to be negative, the results at least bring some respite in as much as they suggest that J Crew is at last starting to stem the tide of decline – especially so given that the shallower falls occurred during a quarter when overall demand was notably weak. Even so, the group still faces a herculean task in turning around its fortunes.

    Thanks to changes made by management across the year, many of J Crew’s full line stores are now looking much more disciplined in terms of merchandising and display. However, products are still priced above what many consumers are willing to pay – especially for relatively simple garments that have nice detailing but little else in terms of fashion credentials.

    The issue of price is underlined by the fact that while J Crew’s mainstream stores suffer, J Crew Factory stores are fairly popular with more shoppers willing to buy its products at a reduced price. This isn’t the position that the company would like to be in, but it is one that reflects the fact that there is much more work to do in terms of refining the brand image and the product offer so that it can attract the premium J Crew wants to charge.

    That people are unwilling to pay full price means that discounting at mainstream stores and via the mainstream website is also frequent. While this is a necessary evil to clear down inventory, J Crew is building a reputation as a retailer from which customers should never buy at full price – something that is hampering its ability to rebuild its brand and price integrity.

    In our view, what J Crew needs is a fresh take – and this is something it is hoping will be delivered by the spring collection, the first designed by its creative director Somsack Sikhmounmuong. Even if this is a hit it will be just the first of many steps that J Crew needs to take to rebuild itself into a successful lifestyle brand.

    The market is more competitive and crowded than ever and J Crew needs to do much more to stand out.

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  • Mix of innovation, soft power drives ‘K-beauty boom’ in China

    Mix of innovation, soft power drives ‘K-beauty boom’ in China

    Eating exotic and wild species is nothing new in China, just like a saying well known in Guangzhou: “Chinese will eat everything with four legs except tables and eat everything that swims except a submarine.”

    Their openness to new ingredients and recipes strikes a similar note, as South Korean cosmetics companies embrace such quirky ingredients as snail slime, horse oil and pig skin collagen as long as they are considered good for the skin.

    With ingredients ranging from an extract from cocoons, goat milk and volcano clay, Korean beauty items come in all imaginable forms. They range from hair mousse styling foam and fruit flavored yogurt to mask sheet packs for the feet and breasts.

    The relentless experimentation may be one of the most decisive factors behind Korean cosmetics’ success in China, which helped spread the “K-beauty boom” beyond Asia to reach Western customers over the past few years.

    South Korea’s cosmetics exports to China doubled on-year to US$1.08 billion in 2015, which accounts for nearly 40 percent of its total global sales, according to the Korea International Trade Association. South Korea is the second-largest cosmetics exporter to China following France.

    Chen Ming, a 30-year-old makeup artist from Guangzhou, says she has tried several basic skin care products and massage packs by Korean brands, which emphasize naturally flawless skin. For the “nude makeup look,” she is willing to try highly functional cosmetics with bizarre ingredients.

    “Let’s say horse oil is known as good for moisturizing and healing for skin, but you don’t want to use it until it is turned into some kind of dermatological formula to apply onto the skin,” the resident of China’s third-largest city on the southern coast said. “Unlike major Western cosmetics, many Korean cosmetics put key ingredients before labels to give a sense of what it is made of. I think it’s an effective way to sell a product.”

    While major cosmetics companies, including No. 1 AmorePacific Co. and its smaller rival LG Household & Healthcare Ltd., have a wide range of luxury and lower-end lines, independent brands put more focus on targeting safety-conscious Chinese consumers who also care about price tags. Most lower-end brands have lineups ranging from $10 to $50 per item, with advanced formulas below $100.

    “In China, cheap products are considered not reliable because they could contain harmful chemicals, while expensive products are just too expensive for ordinary consumers,” Lou Wei, a 46-year-old music teacher in Guangzhou, said. “Korean products are known as cost-effective compared to Western brands. Plus, the skin types are similar between Koreans and Chinese.”

    The unwavering popularity of Korean dramas and entertainment shows has also elevated their brand power to the next level.

    According to a survey by the Korea International Trade Association last year, 70 percent of 1,400 middle-class consumers in major Chinese cities said they have seen Korean dramas and shows. Eight of them evaluated that such experiences positively affected their perception towards Korean products.

    Most recently, “Descendants of the Sun,” a mega hit KBS drama currently on air both in Korea and China, showed how companies can benefit from consumers who want to mimic styles of celebrities.

    Laneige, AmorePacific’s mass brand, saw skyrocketing sales of items used by actress Song Hye-gyo, who starred as a doctor in the drama, which was viewed a combined 1 billion times on iQiyi, its official streaming site in China.

    At 11st Street, a Korean online retailer that runs a Chinese language site, sales of Laneige’s blemish balm pact jumped 10-fold from March 14 to March 20, while a new lipstick sold out three days after its release.

    “As Korean dramas were usually aired in China at least several months later, sales of related products were reflected with time lag,” said Yoo Sang-woo, a sales director at 11st Street’s Chinese shopping page. “As ‘Descendants of the Sun’ is simultaneously aired in Korea and China, the customer reaction is almost instant.”

    While major players have built production lines in China to get ahead in the fast-growing market, smaller brands have raised considerable sales at duty-free shops and through Chinese vendors who buy in bulk in Korea and resell with a margin both online and offline.

    Experts say the biggest hurdle for those who have yet to establish a direct sales network in the mainland is how to tackle the rising number Chinese knock-offs, stressing the need to expand official distribution channels.

    “In the case of best-selling items, consumers are reluctant to buy them at local shops or through private vendors over concerns of fake products. Some of them buy cosmetics in Hong Kong shops or ask a favor of friends visiting Korea,” said a Guangzhou-based trade official. “Chinese prefer products made in Korea because they have safety concerns over food and anything related to the body.”

    In light of such growing calls, the Korea Trade-Investment Promotion Agency (KOTRA) has pledged to provide support to emerging cosmetics companies via overseas marketing efforts jointly with international retail giants.

    On Wednesday, KOTRA held a “K-beauty Summit” with officials from 40 small and medium-sized cosmetics companies and U.S. retail behemoth Amazon. It also agreed with Taobao, the online market place by Chinese e-commerce giant Alibaba, to hold a beauty trade fair in the first half of this year to expand their sales network.

    Experts say online marketing efforts have become ever more important for further expansion to reach out to the growing number of smartphone users in smaller Chinese cities.

    “Despite recent economic slowdown, the Chinese consumer goods market still offers a great deal of opportunities to Korean cosmetics and clothing companies,” Park Hyun-jin, a researcher at the Seoul-based Dongbu Securities, said.

    “The e-commerce market will continue to grow thanks to the popularity of mobile shopping. As the number of smartphone users has sharply risen in smaller cities and urban areas, brand marketing via mobile and online will help boost sales in China.”

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  • Do malls, online shops mix? Zalora says Pinoys have best of both worlds

    Do malls, online shops mix? Zalora says Pinoys have best of both worlds

    Like most disruptions in the past, the advent of ecommerce has been framed as a battle between online convenience and the traditional brick and mortar experience: your couch or the mall.

    Ecommerce has played its part as the upstart in this battle, with brands such as Lazada and Zalora coming from nowhere a few years ago to winding their way into the public consciousness.

    Despite this, ecommerce currently accounts for only about 1% of the local retail market. However, as Paulo Campos III, founder and CEO of fashion retailer site Zalora Philippines pointed out, “Where it’s going – that’s the exciting part.”

    “If you believe that the concept of ecommerce is universal, and not just a western country thing, then the experience of other countries provides a glimpse of what’s in store for the country,” he said in an exclusive interview with Rappler.

    In the US and EU, ecommerce now represents about 8-10% of the retail market including big names like Amazon.com.

    But more relevant to the Philippines is its success closer to home.

    “China is the shining story of ecommerce in emerging markets and and somehow validates the thesis that ecommerce is a global, universal thing and that it’s going to happen eventually here and everywhere else,” Campos said.

    Indeed, some of China’s best known companies, including the record holder for biggest IPO ever, Alibaba, are built upon ecommerce and already have 6-7% of China’s giant retail market.

    But its success there doesn’t guarantee it would work here, especially in a country where malls have become the de facto townsquares.

    This is especially true of a firm like Zalora that plays in the fashion space where the fit and feel of clothes are so essential to the buyer.

    Unlike Uber

    Setting up shop in the country in 2012, initially as a venture of Rocket Internet, Zalora has since grown to become the leading fashion-focused ecommerce platform in the country, averaging around 200,000 users per day.

    To visualize this, that’s about on par with the amount of daily foot traffic the big malls get, Campos said.

    Yet, he doesn’t see this as a signal that malls will soon be disrupted in a way Uber has done to taxis around the world.

    “Filipinos will continue to go to the mall in the large numbers they do now. Culturally, the mall is more than just a place to go to buy stuff, it’s where people hang out, cool off and even go to Mass,” he said.

    “In terms of how I see the development of the brand, we’re moving to an omni-channel experience,” Campos explained.

    For example, someone goes to the store to check out an item but then does the research online and then might go back to the store or they can just buy from the site.

    “This omni-channel experience means that ecommerce and the mall will coexist and in fact reinforce each other in a harmonious way,” he said.

    Consumer patterns

    Another interesting point about this relationship lies in consumer patterns.

    Campos pointed out that Zalora sales are highest on Wednesday and Thursday, while they are lowest, at only 50% of the highest days, on Saturday and Sunday.

    Within a day, sales are highest between 1 pm and 4 pm and are lowest between 6 pm and 8 pm. This has been true for every week for 4 years.

    These patterns are the exact opposite of sales patterns in the offline world.

    “What I tell our brand partners is that when customers are in the mall, they are shopping with you. When they’re not in the mall like during downtime at the office that’s when people are shopping with us,” Campos said.

    “People are shopping with us on hump day and 1-4 pm, taking advantage of fast Internet at the office. Somehow it’s complementary,” he said.

    He also pointed out that Zalora’s retail brand partners also found that online shopping doesn’t cannibalize sales. It’s just one way of reaching out to customers at another time and through a different channel.

    This blending of both worlds can already be seen in individual brands that all have their own ecommerce websites. You can buy Nikes online but that doesn’t mean they’ve closed down their stores.

    Local retailers like Bench and SSI, both of which sell through Zalora, already have online ecommerce sites, although Campos is confident that they will continue to sell on Zalora.

    “Customers who are shopping for a specific brand can go to its website directly, and those shopping around looking for many brands can go to Zalora. Brands are basically doubling their retailing channels through us,” he said.

    To facilitate this, Campos said that Zalora sells everything at suggested retail price (SRP). This means nothing will ever be cheaper or more expensive in the mall than on the site, and when an item goes on sale offline, it does so online as well.

    GLOBAL GROUP. Having been incubated by Rocket Internet, Zalora Philippines has since taken out different institutional investors and is now part of mother company Global Fashion Group (GFG). Campos describes GFG as essentially the leading fashion ecommerce group player in 27 emerging markets or "all of the interesting ones except for China." Photo from GFG's website

    GLOBAL GROUP. Having been incubated by Rocket Internet, Zalora Philippines has since taken out different institutional investors and is now part of mother company Global Fashion Group (GFG). Campos describes GFG as essentially the leading fashion ecommerce group player in 27 emerging markets or “all of the interesting ones except for China.” Photo from GFG’s website

    Digital department store

    Campos said that what Zalora brings to the table for consumers, besides convenience, is the ability to browse established brands while getting exposed to new ones.

    “About half of our brands, 750, are mall brands that work together with us on a virtual inventory basis or a marketplace basis. The other half are independent brands, the SMEs [small and medium-sized enterprises], and entrepreneurs that don’t have the scale to work with us like the big brands do,” Campos said.

    He added that while they have the top 20 online retail sellers, they don’t have a store so most consumers have never heard of them. On top of that, Zalora also has its own brand that encompasses about 20% of sales.

    He also pointed out that many users visit the site as an information resource to check on product alternatives and get reviews on different items.

    CUSTOMER SERVICE. Zalora Philippines now employs around 100 customer services representatives with 10 servicing excess demand from sister site The Iconic, serving Australia and New Zealand. Campos says that the firm plans to increase this number in the future as global ecommerce grows. Photo by Chris Schnabel/Rappler

    CUSTOMER SERVICE. Zalora Philippines now employs around 100 customer services representatives with 10 servicing excess demand from sister site The Iconic, serving Australia and New Zealand. Campos says that the firm plans to increase this number in the future as global ecommerce grows. Photo by Chris Schnabel/Rappler

    Tip of the iceberg

    Approaching its 4th anniversary in the Philippines, Campos said that Zalora is profitable on a unit economics basis. But at the moment it is sacrificing profitability for the bigger battle for market share.

    Far from traditional retailers, Campos said that the main challenge facing Zalora, as well as other big ecommerce players, is getting consumers comfortable with buying online, which is why it is channeling money into various marketing efforts.

    These efforts include the pop-up stores they had last year as well as hosting a Zalora Style Awards Ceremony to be held on April 7, and a regional model scouting competition to mark its 4th anniversary.

    Just getting consumers online is also proving to be tricky with Campos sharing that they are still fighting a battle on educating Filipinos on how to use mobile data.

    “I recently saw a Google study that showed that among all our peers in Southeast Asia, we use Internet on a fewer number of days per month than any other ASEAN country and significantly so,” he shared.

    “Out of 30 days, only 80% use it 1-5 days a month. So this phenomenon of being constantly connected or being a digital native is not true for most people in the country,” Campos added.

    Even potential customers who are connected are hampered by poor network infrastructure.

    “We have the benefit of comparing all the ASEAN countries that have Zalora side by side and through the comparison you can really see that we really do have an inordinately slow mobile Internet speed even compared to Indonesia or Vietnam,” he said.

    On the flipside, Campos pointed out that 40 million Philippine users have access to the Internet now, and the number is expected to go up to 75 million in the next two years. If the Internet improves in the next few years, this would bring huge potential to online businesses.

    With Internet speeds improving, the firm is hoping that as more and more consumers become digital natives, they would eventually get comfortable browsing the site from anywhere.

    Maybe even while hanging out in a mall.

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  • Hong Kong textile eye India as alternative production base to cut cost

    Hong Kong textile eye India as alternative production base to cut cost

    India is rising, not only as a new choice of relocating labour-intensive industries from China, but also as a retail market of good potential, says a research report by The Hong Kong Trade Development Council (HKTDC).

    In recent years, the sustained rise in production costs on the Chinese mainland has eroded the profit margins of many Hong Kong companies with labour-intensive factories located on the Chinese mainland, prompting them to seek alternative production bases elsewhere.

    While Southeast Asian countries offer many choices, the HKTDC report says India offers many advantages as an alternative production base, along with the added advantage of having a domestic market of great potential.

    According to the report, the majority of Indian garment producers are focused on the domestic market, as their product quality was generally lower than the standards required by overseas importers.

    Despite this, many big Indian exporters have successfully lined up with international buyers, including department stores, retail chains and brands.

    The paper was written after a recent field trip to India that included factory visits and interviews with garment manufacturers.

    In the four years to 2014, India’s garment exports increased at an average annual rate of 12 per cent, surpassing China’s 9 per cent, in line with Bangladesh’s 13 per cent and eclipsed by Vietnam’s 17 per cent.

    With advantages of raw materials and prospects of vertical integration, India is a strong garment exporting country and a location worth considering for factory relocation in relation to labour-intensive manufacturing, such as garment-making.

    The report pointed out that while China is the undisputed world leader in exporting textiles and garment products, many have overlooked India’s position as the world’s second biggest exporter of textile and garment products in 2014, selling a total of $36 billion, during the year, far behind China’s $399 billion.

    For textile exports alone, India was second after China in 2014, with a share of 5.8 per cent of the global market, compared to China’s enormous 35.6 per cent share.

    HKTDC says it is not surprising that the bulk of garment manufacturing in India is for the domestic market, supported by the country’s huge capacity in textiles production.

    India stands out to be a substantial exporter in both garments and textiles. In 2014, India imported textiles worth only $3.8 billion, lagging much behind Vietnam’s $12 billion, Bangladesh’s $6.8 billion, and just ahead of Cambodia’s $3 billion, the report said.

  • Warm weather chills TSI Holdings bottom line

    Warm weather chills TSI Holdings bottom line

    With unseasonably warm weather at the end of last year dampening demand for winter clothing, Japanese apparel retailer TSI Holdings had weaker earnings for the year ended February 29.

    Its operating profit was flat at about 1 billion yen (US$8.86 million), falling short of a 1.2 billion yen projection. Sales fell about 9 per cent to 165 billion yen against a predicted 167 billion yen.

    Same-store sales, including online data, eased 3.6 per cent, with dips of 8 per cent for November and 4.1 per cent for December. High-margin items such as wool overcoats from mainstay brand Natural Beauty Basic met lukewarm demand.

    During the quarter, the company opened 58 stores for 21 brands, and has been negotiating with domestic and overseas apparel and natural cosmetics companies, leading to partnerships with a Chinese apparel company and a domestic beauty industry company.

    TSI also reports a “drastic shift” from paper media to digital promotion, and is enhancing its relationship with Google. This follows its eCommerce ratio growing from 9.6 to 10.8 per cent.

    Almost all brands’ O2O sites are now on the table, says the group, which is developing smartphone apps. Four brands opened sites – Free’s Mart, Jill Stuart, Natural Beauty and Zio Bernardo. Free’s Mart also became the first Japanese brand launched on the Zalora eCommerce site in Southeast Asia.

    The group’s own eCommerce sites grew 129 per cent year-on-year, from 11 to 20.

    TSI has 14 apparel subsidiaries in Japan and three overseas, and its 63 brands include Adore, Callaway, High Street, Nano Universe and Stussy.

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  • Fossil wearables teams with major fashion labels

    Fossil wearables teams with major fashion labels

    Fossil wearables has teamed with major fashion brands Chaps, Diesel, Emporio Armani, Fossil, Kate Spade New York, Michael Kors, Misfit and Skagen to launch in 40 countries in 2016.

    Fossil Group says it plans more than 100 wearables products – which include display- and non-display watches and trackers – will be available in 40 countries and more than 20 languages later this year. The category of wearables offered will vary by brand.

    Fossil Group will support the wearables with unique and branded apps across all brands, three product categories, and two operating systems. The 2016 launches are part of the company’s efforts to bring a fashion-first focus, innovation and an increased variety of products to the wearables industry.

    “One of the distinct advantages of a fashion company over traditional consumer electronics manufacturers is our product cycle,” said Greg McKelvey, chief strategy and digital officer with Fossil Group.

    “We demonstrate remarkable speed to market, from development to launch, in order to meet the retail industry’s seasonal new product deadlines.

    “The industry has been slow to adapt to growing consumer desires for new styles and options for wearables. With the diversity of major fashion brands we offer, customers will be delighted with the sheer volume of styles and options available when shopping for a wearable that fits their personal style.”

    With the look, feel and fashion appeal of traditional watches, Fossil Group’s digital display watches and non-display watches leverage the company’s core competency in making beautiful, quality watches.

    Since acquiring Misfit in November 2015, Fossil Group has increased capabilities for the development and production of the technology supporting its wearables products. The company’s wearable technology platform includes proprietary power management technology that enables coin cell battery-powered non-display watches and trackers to be deployed across the entire Fossil Group brand portfolio.

    Without the need for daily, weekly or even monthly charging, the new devices function much more like traditional watches and lifestyle accessories than as typical consumer electronic products that require daily maintenance.

    Concurrent with the advancement of Fossil Group’s owned technology and research and development capabilities, the company continues its strong partnerships with third-party technology partners, including Google and their Android Wear platform, to deliver on the company’s short- and long-term wearables strategy.

    Fossil Group this week displayed Fall products – including wearables, watches, jewellery, leather goods and other accessories – to business partners and media in its new European headquarters in Basel, Switzerland, during the annual Baselworld marketplace show for the world’s watch and jewellery industry.

    The new, 108,000 sqft, seven-floor Basel facility was constructed with modern geometric architecture. Three floors of brand showrooms present brand-immersive experiences for each of the company’s 17 owned and licensed brands, and a large auditorium and event space.