MILAN, Sept 16 (Class Editori) - A report by Fung business intelligence group and China commerce association for general merchandise has showed that in China, apart from a slight slowdown between November 2019 and May 2020, gross margins and fashion retail revenues have increased in the last months.
In the second quarter of 2020, according to the analysis results, many shopping malls experienced double-digit increases compared to last year. Among the realities showed by the report, there are names such as Lane Crawford Joyce based in Hong Kong, Shanghai new world daimaru, Shanghai first yaohan, Bailian group, the Rainbow department store of Shenzhen and Nanjing Xinbai, only to name a few.
“During the lockdown”, as Christina Fontana- responsible for fashion&luxury of Alibaba- has explained to MFF “Intime stores (a chain of department store which is owned by Alibaba, editor’s note) have broadcasted about 200 live streaming every day in order to promote products in stores and sell them also online”. The most interesting data is that over 90% of online orders have come from new users. Local and on average relatively young customers, who have continued to buy in store, once they reopened. “I believe that the perfect integration between online and offline has supported the retail in China. In order to help the physical channel, the digital one must be used”. Another winning factor is the fact of relying on concessions, as it happens in all Asian mall,s where every brand owns the complete control of its own store.
These figures are openly countertrend with what is happening in the US market, where the pandemic has literally brought the important department stores to their knees, such as Neiman Marcus, Tailored brands, Lord & Taylor, J. Crew, Century 21, by accelerating the bankruptcy processin some cases.
“The US model, based on a majority of wholesale contracts and stores networks which are spread on the territory, is the less adaptive one”, as Luca Solca- senior research analyst, global luxury goods of Bernstein- has pointed out.“It is orthogonal to the luxury brands’ desire of exercising a larger control, with a preference for concessions”. Traditional propensity for concessions, predominance of locations in the city centers and better relations with the fashion labels, as Solca underlines, offer a competitive advantage to Asian department stores. In a Darwinian competitive scenario, where new formats and innovation always win, we should not be surprised if the “prehistoric” retail companies, namely the American ones, find it more difficult to survive.
Moreover, as declared by Swetha Ramachandran, investment manager and responsible of the Gam luxury brands equity fund, the main problem of the US shopping malls is that they are too many. “The consumption economy is relatively more recent in China and therefore it grows quicker there than in more saturated markets, as in the USA”, the analyst has explained.
In addition, according to Ramachandran, Asia can benefit from the increase in aspirational consumption related to the post-Internet era, while the US shopping malls were built long before the online retail sales reached the current levels. Therefore, Asian shopping malls are more able to meet the needs of the new purchasers’ generation (Millennials and GenZ), who are «omnichannel». The pandemic has just accelerated the change and highlighted which retail sales formats are able to reinvent themselves and look at the future.
Federica Levato, partner and leader of the vertical fashion&luxury of Bain & company, is a supporter of this theory as well. “It is necessary to underline that the channel crisis in the USA took place long before the COVID-19 pandemic and is also structural, due to the change in generations and in the shopping behaviors of consumers in the luxury segment. Conversely, this channel is something new in Asia, particularly at a local level.” Therefore, the integration between digital and physical channels, the quick change in stores’ layout, the concession model and the marketing strategies which focus on customers’ experience are the factors which contribute to support the fashion retail in China.
To this must be added the fact that the majority of large shopping malls are state-owned (totally or partially) and therefore are continuously financed. “Another reason”, as Guia Ricci, head of Boston consulting, has stated, “is surely the increase in domestic demand related to the conversion of a huge share of Chinese consumers, who were used to purchase abroad”. In the USA, the decrease in tourism flows goes hand in hand with the contraction in shopping malls’ sales.
(Source:Class Editori)
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