Business / Opinion

Big challenges and opportunities

By Ricky Sun (China Daily) Updated: 2014-02-24 07:34

ZHANG CHENGLIANG / CHINA DAILY

With world-renowned consumer goods magnates entering China, a series of problems has sprung up in the Chinese market for international fashion brands.

Famous international fashion brands, such as Zara, C&A, Uniqlo and H&M, are characterized by genuine similarities. Although they originated from different cultural backgrounds, the brands will inevitably confront difficulties that international fashion brands face in China.

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Mango, a world-famous Spanish fashion brand, entered the Chinese market at an early stage but was forced to close stores after posting dismal sales figures, before gradually fading out of the market. Zara, H&M, Gap and other international brands are facing similar problems.

The first difficulty these companies are facing is unprecedented competitive challenges among international brands.

As a growing number of international fashion brands have entered China, several noted brands such as Esprit and Mango have experienced challenges in the Chinese market. Since 2009, Esprit's profits have spiraled downward. During the first half of 2011, the company's net profit dropped 98 percent and, in one day, its share price dropped $41. In response, the company began closing stores on the mainland.

Mango's 2010 China Market Financial Statements indicate that the brand market share in China only accounts for 2.7 percent of the global market, excluding VAT. Mango owned 115 stores in China as of 2013, a 42.5 percent year-on-year drop compared with 2012.

Most Mango stores were forced to offer big discounts to alleviate inventory pressure. However, Mango still didn't manage to eliminate its standing in the China market. On the other hand, when international fashion brands such as Zara and H&M make their debuts in China, they always try to label themselves as superior and high-end.