The fight for customers in the young professional market segment between several large international fashion chains and numerous local boutiques in Shanghai is coming to a head as economic uncertainties are threatening to shrink consumer spending.
In the past several years when the stock market was going through a spectacular bull run, the foreign fashion chains, represented by Zara, Hennes & Mauritz (H&M) and C&A, made tremendous inroads into the Shanghai retail market, winning over many loyal customers among the young professional women in the city.
Sales at Zara, a trendy apparel chain run by Spanish Inditex, has seen rapid growth since it established its first store in the city in 2006. "Growth rate of sales (at Zara in China) is more than double the growth average of the group, which underlines the remarkable importance of China," said Jesus Echevarria, chief communications officer of Inditex Group, which has reported a jump in the rate of 25 percent to 1.25 billion euros ($1.97 billion) in net profit in 2007.
Maggie Zhang, a 26-year-old who works in marketing for a multinational company, is a loyal follower of Zara. She said she is obsessed with the unique European-style design, and its wide fashion spectrum. "I personally prefer Zara Women looks. It's fashionable and chic, but fits for office dress code, which beats the most local uniform brands," Zhang said.
On the same street of Middle Huaihai Road, there lies Europe's second largest garment purveyor, Swedish H&M, which has been running its first mainland store since 2007. It now owns three outlets in Shanghai and four in Hong Kong.
Most customers are intrigued by its renowned brand name. Yu Xiaochun, a piano teacher in her mid 30s, began to patronize H&M stores after hearing of it from her friends. She spent around 700 yuan for five items in the five-storey outlet. "I heard of this brand from my friends. I am amazed by its causal wear collections, affordable prices, and broad size options." Yu showed her newly purchased bright red-striped tops. "It's size 14. I'm quite big, most offerings from local shops don't fit me," she added.
The wide customer plaudits give more incentives to those cut-price garment makers. European fashion chain C&A, which has been operating seven stores in Shanghai and Beijing since 2007, underscores its expansion plan. "(We will) roll out C&A's retail format to some provincial capitals in China before the spring of 2009," said its communication officer.
Enchanted by China's young people, the budget brands, however, gives a punch on small local boutiques.
Unlike foreign outlets, which often have crowds of shoppers, Zhou Youqing's fashion house in Xinle Road, next to the sleek Middle Huaihai Road, is quite unruffled. This 40-sq-m unnamed boutique, has been going through lean times since H&M moved into the neighborhood in 2007. "We have been operating here for almost seven years, but saw customer flows decreasing during the first few months after H&M opened its gate, in particular at weekends. The monthly sales revenue had about a one-digit percent drop," Zhou said.
Then she decided to fight back by cutting prices and beefing up the clothes cycle. "We make smaller-size apparels with Korean and Japanese styles, which meet oriental women's needs with slimmer figures, and differentiate our store from the European clothes giants. And our prices have been trimmed down by up to a few hundred yuan." Zhou's strategies worked and is now seeing climbing customer flows. "But the profit progress was minor, as customers are now tightening the purse strings when it comes to fashion."
