Page 294 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
market via entry-level discounted outlet prices,” he said a Fitch Ratings analyst in Hong Kong, cautioned that the
and noted that discount outlets are still underdeveloped. sector is facing problems such as an oversupply in retail
Higher domestic consumption might offer a viable space, while structural challenges from the e-commerce
solution for international brands, which are reducing price boom are far from disappearing. She also noted that the
differences between Chinese and international markets. price gap at home and abroad is another hurdle (Paton).
Outlet malls typically offer off-season or factory excess China continues to act as the linchpin in the global
goods priced at a discounted rate compared to in-season luxury market with Federica Levato, Partner at Bain &
products by the same brand. There were only about 40 Company, saying there isn’t another region or country in
such factory outlet malls in China in 2016 compared with the near term that will be able to assume the same role
as many as 300 in the US (Paton). The increasing tendency that the so-called Middle Kingdom has been playing.
for Chinese consumers to buy luxury goods at home is “The relevance of Chinese consumers, locally as well as
expected to drive growth of 6-8 percent in 2017 for the abroad, will still be high in the market and will continue to
Mainland China market (Global Luxury). deeply shape the industry in the coming years,” asserted
Levato, adding that the continued tightening of credit
RDM Asia, operator of the luxury discount mall chain by Chinese policymakers has not yet rocked the market.
Florentia Village, is eying the “re-localization” trend by “The Mainland China market is on a positive trend and we
targeting China’s rising middle class who want deals on expect it to be maintained throughout this year [2017],
designer brands such as Prada, Gucci, Saint Laurent and fuelled, among other factors, by the repatriation of local
Salvatore Ferragamo while shopping at its malls, which are consumption,” she predicted (Action).
decorated with Italian-style piazzas, fountains, gondolas
and porticos. With three outlets in Tianjin, Shanghai The Chinese consumers that do decide to stay at
and Foshan, RDM planned to open new malls in Wuhan, home and spend, attracted by a closing price gap thanks
Hubei Province and Chengdu, Sichuan Province in 2017 to tougher restrictions on cross-border shopping, may
and extend into Chongqing in 2018. A boutique outlet in help boost mainland China’s luxury market by 6 to 8
Hong Kong, its first outside the mainland, is scheduled to percent, according to Bain. Bain tells luxury brands that
open in late February 2018. RDM Asia Managing Director to keep the momentum going they will need to shift
Maurizio Lupi said additional expansion is also in the their focus to millennials, who will make up 45 percent
works, as the firm believes opportunities outnumber of the personal luxury goods market in just eight years.
risks. “Our confidence in China comes from the numbers, This has been a particularly important issue for brands in
in the sense that we are consistently growing every year China as millennials make up a growing proportion of the
in terms of turnover and the number of customers visiting upper middle class and tend to have a greater disposable
our centers,” he told the South China Morning Post in an income to apply to high-end goods (Rapp).“It will increase
interview. The firm’s three outlets generated a combined at an even faster pace this year,” said Bruno Lannes, a Bain
turnover of 5.5 billion yuan in 2016 and welcomed 11 partner based in Shanghai (Paton).
million shoppers. Sales turnover is expected to rise by 20
percent in 2017, while foot traffic is expected to grow 15 Toys
percent in the same period. Value Retail will also begin
construction on the expansion of its operation in Suzhou Toys and games recorded healthy value growth in
later in 2017, reflecting its strong belief in the potential 2016 driven by the strong performance of video games,
of the local market there (Paton). “The market is growing which saw a double-digit increase in sales. In addition,
again,” said Claudia D’Arpizio, a Bain partner and lead traditional toys and games also posted positive growth,
author of the study. “It’s less dependent on gift giving with construction toys leading the way (Euromonitor).
in China and less dependent on tourist flows that were China’s toy industry posted strong growth in 2016,
driven by price differentiation and bargain hunting. It’s countering recent trends in China’s light industry sector.
more solid and it’s healthier” (Global Luxury). While China’s total exports dropped by 7.7 percent and
imports by 5.5 percent in 2016, toy exports rose by 9.5
According to Bain, were it not for purchases from percent and imports by 23 percent. Although lower
Chinese consumers, the overall global market for cost manufacturing locations in India and Vietnam
personal luxury goods from 2012 to 2015 would have have attracted investor attention, China’s toy industry
contracted by an average 2 percent annually. Despite the has been performing well due to a shift in the country’s
growth potential, challenges remain ahead. Yeeman Chin, burgeoning domestic consumer market and advanced
294
market via entry-level discounted outlet prices,” he said a Fitch Ratings analyst in Hong Kong, cautioned that the
and noted that discount outlets are still underdeveloped. sector is facing problems such as an oversupply in retail
Higher domestic consumption might offer a viable space, while structural challenges from the e-commerce
solution for international brands, which are reducing price boom are far from disappearing. She also noted that the
differences between Chinese and international markets. price gap at home and abroad is another hurdle (Paton).
Outlet malls typically offer off-season or factory excess China continues to act as the linchpin in the global
goods priced at a discounted rate compared to in-season luxury market with Federica Levato, Partner at Bain &
products by the same brand. There were only about 40 Company, saying there isn’t another region or country in
such factory outlet malls in China in 2016 compared with the near term that will be able to assume the same role
as many as 300 in the US (Paton). The increasing tendency that the so-called Middle Kingdom has been playing.
for Chinese consumers to buy luxury goods at home is “The relevance of Chinese consumers, locally as well as
expected to drive growth of 6-8 percent in 2017 for the abroad, will still be high in the market and will continue to
Mainland China market (Global Luxury). deeply shape the industry in the coming years,” asserted
Levato, adding that the continued tightening of credit
RDM Asia, operator of the luxury discount mall chain by Chinese policymakers has not yet rocked the market.
Florentia Village, is eying the “re-localization” trend by “The Mainland China market is on a positive trend and we
targeting China’s rising middle class who want deals on expect it to be maintained throughout this year [2017],
designer brands such as Prada, Gucci, Saint Laurent and fuelled, among other factors, by the repatriation of local
Salvatore Ferragamo while shopping at its malls, which are consumption,” she predicted (Action).
decorated with Italian-style piazzas, fountains, gondolas
and porticos. With three outlets in Tianjin, Shanghai The Chinese consumers that do decide to stay at
and Foshan, RDM planned to open new malls in Wuhan, home and spend, attracted by a closing price gap thanks
Hubei Province and Chengdu, Sichuan Province in 2017 to tougher restrictions on cross-border shopping, may
and extend into Chongqing in 2018. A boutique outlet in help boost mainland China’s luxury market by 6 to 8
Hong Kong, its first outside the mainland, is scheduled to percent, according to Bain. Bain tells luxury brands that
open in late February 2018. RDM Asia Managing Director to keep the momentum going they will need to shift
Maurizio Lupi said additional expansion is also in the their focus to millennials, who will make up 45 percent
works, as the firm believes opportunities outnumber of the personal luxury goods market in just eight years.
risks. “Our confidence in China comes from the numbers, This has been a particularly important issue for brands in
in the sense that we are consistently growing every year China as millennials make up a growing proportion of the
in terms of turnover and the number of customers visiting upper middle class and tend to have a greater disposable
our centers,” he told the South China Morning Post in an income to apply to high-end goods (Rapp).“It will increase
interview. The firm’s three outlets generated a combined at an even faster pace this year,” said Bruno Lannes, a Bain
turnover of 5.5 billion yuan in 2016 and welcomed 11 partner based in Shanghai (Paton).
million shoppers. Sales turnover is expected to rise by 20
percent in 2017, while foot traffic is expected to grow 15 Toys
percent in the same period. Value Retail will also begin
construction on the expansion of its operation in Suzhou Toys and games recorded healthy value growth in
later in 2017, reflecting its strong belief in the potential 2016 driven by the strong performance of video games,
of the local market there (Paton). “The market is growing which saw a double-digit increase in sales. In addition,
again,” said Claudia D’Arpizio, a Bain partner and lead traditional toys and games also posted positive growth,
author of the study. “It’s less dependent on gift giving with construction toys leading the way (Euromonitor).
in China and less dependent on tourist flows that were China’s toy industry posted strong growth in 2016,
driven by price differentiation and bargain hunting. It’s countering recent trends in China’s light industry sector.
more solid and it’s healthier” (Global Luxury). While China’s total exports dropped by 7.7 percent and
imports by 5.5 percent in 2016, toy exports rose by 9.5
According to Bain, were it not for purchases from percent and imports by 23 percent. Although lower
Chinese consumers, the overall global market for cost manufacturing locations in India and Vietnam
personal luxury goods from 2012 to 2015 would have have attracted investor attention, China’s toy industry
contracted by an average 2 percent annually. Despite the has been performing well due to a shift in the country’s
growth potential, challenges remain ahead. Yeeman Chin, burgeoning domestic consumer market and advanced
294
