UK fashion businesses are potentially missing out on massive demand from growing middle classes in China’s second tier cities,.
Speaking at the Drapers Ecommerce Summit today (February 27) Ken Ardali, director of ecommerce at multichannel specialist China Retail Group, said that UK fashion brands and retailers should target the growing middle classes in second and third tier Chinese cities.
With over $2 trillion (£1.3 trillion) retail sales and a growth rate of around 8-10% a year, he highlighted the opportunities for UK fashion businesses in China.
The country’s top three cities house a population as big as the UK, with 28.8 million in Chongqing, 18.58 million in Shanghai, and more than 16 million in Beijing.
However, he added that with the markets in those cities now maturing, brands and retailers should start focusing on second and third tier cities where the growing middle class has an appetite for “affordable luxury”.
He said: “In the mid-tier cities what we’re finding is that the middle-class is growing fastest.
“Disposable income, especially among the young, is making them want items that they can show to their friends and family that [shows] they are successful. Louis Vuitton and Hermes have realised this and have already established a bricks-and-mortar presence in the big cities and are now moving to these mid-tier cities.”
Ardali pointed to young fashion brand Jack Jones, which now has a network of around 2,000 stores in 300 cities, and sportswear brand Nike, which now draws around $2.5bn (£1.65bn) 10% of its global revenue from China, as good examples of how to tackle the Chinese mass market.
He said: “Where I think there is a huge demand is this middle class and lower middle class. This is the mass market and it’s growing at an astronomical rate.”
“There is a young demographic who are reasonably affluent and becoming more so. The cities are good focuses even for an ecommerce strategy.”