Distribution in China for Smaller Brands – Talking Points
10 August 2016
Author: Vesta Zemaite
The incredibly lucrative market for clothes, accessories, and other luxury goods in China – the largest in the world for mass fashion – understandably has brands scrambling to secure distribution in the region, regardless of the volatile economy.
It is possible for any brand to establish themselves in China and we encourage every fashion brand to consider what a Chinese presence might look like for them. Wen Zhou of 3.1 Phillip Lim speaks from a brand perspective when she states, “Each brand’s situation is unique and everyone can use different vehicles to enter. As long as you recognise your strengths and weaknesses, and identify a strategy early on and follow through, I think the rest will come.”
However, there are a number of factors that must be looked at in depth when doing so. Brands must not be complacent about the intricacies of distribution in this very distinctive corner of the world.
We wanted to briefly and simply set out a number of talking points for smaller brands. If you wish to go further into the subject, we are always happy to explore the territory with you.
While China has been viewed as a market addicted to luxury, enough of the bigger names have established themselves that fresh brands and perspectives are now being added to the mix in order for shopping centres to characterise themselves. This opens the door to smaller, younger companies with strong marketing strategies.
Social media is incredibly important in the Chinese context. Wechat, Taobo, Tmail, JD.com, and other Chinese social networks are key to infiltrate, as the Chinese place huge importance on the web presence of a brand when determining if a brand is attractive to them. Once established, a brand must then maintain an ongoing relationship with customers on social media. Incentives, private events, discounts, gifts, and the like get great response.
Possibly the most important thing to keep in mind is that distributors in China are spoilt for choice, with an incredibly broad array of worldwide brands eager to work with them. Thus, they are not apt to assist growing brands with promotion or marketing, much less invest funds into them. The onus is on brands to establish presences conducive to doing business in China prior to seeking entry into the market. Marketing strategies should be worked out before approaching a distributor.
Relationships are key. Particularly for smaller brands who need to work at a grassroots level initially, making your own way into what may seem like a closed club is necessary. Important decisions often rely on the whim of a small number of individuals or on select distributors, who might not be easily accessible or given exposure on the Internet. Slow and steady wins this race.
Leading on from the above, brands should not expect Chinese distributors to ask questions or share in-depth impressions. Again, if this type of exchange is expected or even anticipated, the responsibility for initiating conversation belongs solely to the brand – as does the responsibility for modifying working methods to accommodate the differing level of input.
Projections on future sales – essential for putting together orders – may rely on vague predictive mechanisms, especially for brands reliant on highly refined data. If looking to work with a regional Chinese distributor, brands should carefully ensure what they can expect to receive in this area and allocate resources accordingly.
Restock does not happen nearly as often in China as in many other areas of the world. Substantial stockpiles of goods are sat on, with new stock coming in approximately three times a year. This is a big difference from Europe and the USA among other markets, where new supplies come in ten times a year. As a result, reliance on liquidity must be evaluated, among other things.
Distribution networks in China are not necessarily joined up. Local distributors may not work together; national systems may not exist. Distribution sometimes happens via multiple layers of the industry, each to be penetrated and all operating in a single city. Complete research is needed with sophisticated analysis of every one of these elements before a potential distribution strategy is laid down. Remember, existing networks are not always the best solution.
The Chinese infrastructure is ripe for change and new policy is being implemented which may make distribution more streamlined; alongside institutional shifts, popular culture is of course metamorphosing. More of these developments will solidify in the next few years.
In the meantime, scanning a careful eye and mind over the Chinese business landscape and seeing where the resulting observations take you definitely cannot hurt the prospects of your brand. We, too, are staying attuned to this undeniably seductive market and hope to share more thoughts as they come.
Image source: https://www.pexels.com/@agoston-fung-1165130