The Japanese clothes maker Renown Inc. plans to open hundreds of outlets in China following its tie-up with a major Chinese textile company.
Renown will become the first business listed on the Tokyo Stock Exchange's First Section to be acquired by a Chinese firm with the purchase in late July of a 41.18-percent stake by Shandong Ruyi Science & Technology Group Co. The deal was announced May 24.
Renown President Minoru Kitabatake said that the alliance would help the once struggling company pursue active expansion.
"It would be meaningless to go out into the vast Chinese market and open only 20 outlets over three to five years, as in Japan," Kitabatake said.
"We will build a full-fledged sales network by opening hundreds of stores at least."
Renown, a famous clothes maker with more than a century of history, is just one of a number of leading apparel companies looking at the burgeoning Chinese market for salvation from a contracting and fiercely price-competitive domestic scene.
"In Japan, the market has shrunk due to a low birthrate and an aging population, making it difficult to find new customers in the extremely mature market," Kitabatake said. "We must go into a market with growth potential."
He said Renown had decided it was "better to team up with a local company when trying to crack an unfamiliar market."
Kitabatake acknowledged that the Chinese had made strides in the quality of their products and in the technology used in production. However, Renown remained attractive because of its brands' strong reputations.
"We would like to meet the demand from (China's) growing middle-class by focusing mainly on four brands, including Simple Life," he said.
Takeshi Hirouchi, chairman of Onward Holdings Co. and head of the Japan Apparel Industry Council, said the fate of many Japanese firms would be tied up with their performance in China and other Asian markets
"The total pie of the domestic market has become smaller due to deflation and a low birthrate," he said. "It would be too easy if you think the industry could survive (remaining) only at home."
Several well-known medium sized clothes makers have filed for bankruptcy protection in recent years, including Kosugi Sangyo Co. (Golden Bear brand) and Yohji Yamamoto Inc. (Y's) last year, and Tokyo Blouse (Clathas) this year.
According to credit research firm Teikoku Databank Ltd., there were 797 bankruptcies in the clothing industry in 2009, more than in any year since their records began in 2001.
Clothing sales at department stores have been falling since the 1990s, with competition from Uniqlo and other low-priced brands biting deep into traditional clothiers' profits.
"The business model of selling high-profit items at department stores no longer works," said an executive of a major apparel maker.
Another industry executive said the whole industry was undergoing a "China shift."
"There will be more cases of (Japanese makers) strategically joining hands with Chinese capital," the executive said.
Japanese firms looking to China for an easy fix to their problems are likely to be disappointed. Global competition to win the hearts of China's newly prosperous consumers is intense, with Uniqlo operator Fast Retailing, Swedish retailer H&M, and Zara of Spain all looking at opening their own outlets in the country.
