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The Next Decade- A New Dawn for China's Fashion Industry


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Presentation on China\'s Fashion Industry- Trends and Opportunities in the Next Decade

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The Next Decade- A New Dawn for China's Fashion Industry

  1. 1. Transforming “Soft” Culture to “Hard” Economy- Opportunities across China’s Creative & Fashion Industry The Industry must not only groom “World-class” Fashion Brands ... but also through strategic partnerships develop innovative platforms to transform China’s Fashion Industry to be globally competitive and sustainable in the long-term Feb 2012BY KC YOONEmail: Kcyoon.glg@gmail.comMob: 18675573803 CHINA CAPITAL
  2. 2. PART 1-China’s Creative & Culture Economy Significant Potential in China’s Creative & Culture Industry Impacted by Internal + External Drivers 2
  3. 3. External Digitization – Increasing Available Content Convergence – Increasing Accessibility Digitization of Traditional Content McKinsey’s table showing penetration of digital devices In China upto 2015 Growing Chinese Consumption Focus on Building Creative & Culture Industry Internal • China expected to be world’s largest • Multiple moves to encourage Creative luxury market in 2014; second largest Industry- de-regulation; seeding of consumer market globally by 2020 investment funds; etc Creative & Culture Industries undergoing “digital” evolution as economies migrate from manufacturing to knowledge-based.. 3
  4. 4. From 12 BC- Over 1000 years of 38 sites identified mythology as World Heritage recorded in by UNESCO with 27literature, poems & Cultural sites songsSince 2800 BC -4000 28 officiallyyears of history - 25 recognized writtenmajor dynasties and languages, 22 over 100s of ethnic minority plus emperors 100 spoken dialects SHANGHAI BLOCKBUSTER TANG MOVIE The first luxury “RED CLIFF” lifestyle fashion A recent USD 80m brand to emerge movie directed by Founded in 1994, China’s 1st Already grossed over USD120m in from China International clothing brand - Director John Woo Asia alone part 1 of the 2 part movie.. Inspired by traditional Han Chinese clothing combined with “ can’t beat Red Cliff as the most the modernity and dynamism of fabulous and classiest movie this the 21st century. summer” The Observer UK 2009 …Deep foundation for creation of new media & cultural activities, design inspirations, etc.. 4Shanghai Tang is an international clothing chain
  5. 5. USD 80 Billion ++ Fashion • Luxury Products- Jeweler, Accessories, Leather Goods, etc. • Apparel brands- casual wear, sports, Formal, niche wear, etc. • Footwear brandsChinese Govt in 12th Five Year Plan has made deliberate focus on Culture sector as a “Pillar” industry 5
  6. 6. PART 2-China’s Fashion Industry Fashion Sector within Creative Industry.. Growth Accelerated Pulled by Overall Creative Industry.. 6
  7. 7. Expansion to Maturity Early Stage Market Growth Market Year 2010- 2020 & Late 1980s to 2000 Year 2000-2010 beyond Key Events Global 12th 5 YR Plan Asia Financial WTO- Impacting Crisis Financial endorse effective 2004 Industry Crisis Culture Ind. Beginnings of Domestic & Grow th of ForeignFashion Brands Domestic Entry of HK-Casual (some)Foreign Sports & Brands-Fast Fashion + Sports brand Wear Brands Casual Wear Brands hit in Market LiNing Mass Market Luxury YR 1990: YR 2000: YR 2010: YR 2020: Growing recognition & strength of domestic luxury brands! Recent market entrants still finding growth opportunities! New domestic brands growing through internet retail channels All signs suggests that the market is poised for another stage of evolution – MASSIVE EXPANSION! 7
  8. 8. Massive Opportunity!!Next Evolutionary Phase willsee China’s FashionIndustry- Becoming a GlobalPlayer 8
  9. 9. Focus of 12th Globally ..Culture Industry i.e. media &Five Year Plan entertainment haveon Grooming of been major drivers for “Culture” expansion & spread of Industry fashion & brands Acquisition of Significant Investments in Foreign Brand Stakes in Domestic Apparel Significant (Follie Follie- fashion accessory) BrandsInvestments by USD 115M “Insiders i.e.( PE +Wealthy Family 15% equity Offices) Acceleration of Culture Industry will have significant impact on China’s Fashion Industry…expanding role in economy.. 9
  10. 10. Men’s & Women’s Apparel BCG Report 2011 Other Fashion Spend : 2010: per capita fashion • Significant Market spend : opportunities for shoes, • China- RMB 1,150 accessories, child wear, • USA- RMB 5,770 etc. (not included in • UK- RMB 5,020 projected market size) Opportunity still to capture market share & gain attractive returns from investments in China’s Fashion Industry 10
  11. 11. Slowing Developed Market Economy- Growing Fashion Consumption Foreign Luxury +Fashion Brands ” Young brands continue to grow; existing Undergoing Consolidation with Potential brands expanding brand portfolio for Acquisition Comfortable Zen-style Teen and clothes catering to the Young Casual average middle-classFashion brands lady 25-45years Luxury brands Leading casualwear brand extending to build a fast- fashion brand Fashion Sportswear and menswear catering to 20-Surf and Action 40year old consumers in wear brands 2nd/3rd tier cities Potential for investments & partnerships with both foreign and domestic brands 11
  12. 12. BCG Consumer Needs Analysis: Global Fashion Group VF Corp’s 2015 Strategy: Increasing wealth of urban female consumers Targets 28% CAGR growth from Asia driven by create new demands for diverse occasion-based China & Revenues from China to reach fashion needs- USD 1 BillionOpportunity for foreign brands to meet emerging needs ofChinese female consumers – Topshop, Jcrew, Express, Outdoor sports and action brands to drive growth- North Ann-Taylor, Banana Republic.. Face, Vans, Lees…. Market remains attractive for strong brands that can identify and meet consumers needs… 12
  13. 13. Chinese Fashion Consumers!Growing & wealthy consumerpool ..influenced byavailability of internet butwidely distributed.. 13
  14. 14. Distribution of Wealthy Households2015: 300M+ M iddle- class households Consumer Spend Breakdown Large Wealthy Consumer Base Trading Up! 2015: 100M+ Luxury consumers Age Profiles of Wealthy Consumers Young wealthy Young wealthy consumers consumers 2025: 1 Billion UrbanConsumers + >200 Cities of 1M+ Population Apparel spend share Diverse consumer Diverse consumer Base & new retail Base & new retail locations locations Expanding consumer base (both wealth & geographically) creates opportunities for both trading-up as well as mass-market brands 14
  15. 15. Internet Users Number and Penetration2015: Over 800M internet users + 300M Online Shoppers Key Brand-building & Sales channel Share of Online Shopping Spend 2015: Online retail to reach 7% of all retail ~RMB 1.8 trillion Significant share Of sales Online Shoppers Number and PenetrationApparel largest category of online shopping (12-15%) Success of online-only Apparel brands e.g. VANCL Dynamism of China’s internet – provides opportunities for new channels & online-focused brands 15
  16. 16. Increased Market Complexity Brands.– a Challenge for BrandsWorld-class Talent, SkillsRequired to be Competitive-Technology +RetailManagement + Branding +Marketing .. 16
  17. 17. Potential Range of Actions that can Address IssuesLimited Brand Building Establishing Fashion Cluster to Attract & Management Partnership with Leading Investment M entoring by Experienced Industry Experience Global/Foreign Fashion brand Partnership with established Long-term Skills & Share Resources Competitiveness & Leaders/Professionals Value Brand (PE) Funds Limited RetailManagement Skills and Talent Scaling + Sustaining Profits as Cost increases Limited Funds & Resources to grow Market (global) Global Branding Attracts Consumers Combination of strategic & cross industry partnerships between various fashion industry players could offer solution 17
  18. 18. PART 3-Investment Opportunities Value- Potential Value-Creation Platforms and Opportunities Range of Investment Opportunities in the Fashion Industry 18
  19. 19. 1 Brand Investment Platform A Opportunity Potential Players Value-add to Fashion Industry • Foreign- PE • Capital & global fashionForming PE Fund Funds/Global Fashion- network access for focused Funds domestic brands to go • Investment targets• Outbound USD Fund global Opportunities in Creative Industry centered on Education, Beauty & to acquire foreign • Fashion house in-house - luxury brands brands for China - Outdoor/sportswear Healthily Lifestyle, Travel, Fashion, Sports Entertainment, Leisure- investment arms - High-end RTW • Most Domestic Co still• RMB Fund to invest single –brand- grow - fast fashion • Domestic Fashion Retail in domestic brands portfolio in multi-brand - fashion accessories Groups (HK/China- based) strategy“Platform already seeing major size USD 200Mtransactions recently.. Investments indomestic & foreign brands..over just the past 6months..(M&A also active in global fashion Creative Cluster and Retail Real Estatebrands) Platform USD 58M
  20. 20. 1A Luxury Brands HK/China Contributes 30% of Close to 100 stores- the global revenues with highest leading men’s luxury brand in compstore growth China Fast Fashion Brands Expands to 42 cities in 2011 Expands to 59 stores in 2011 BESTSELLER Fashion Group China Casual Wear Brands 4,000 stores in over 300 China has 3,000+ out of 4,200 cities- ONLY, VERO MODA, 2,000 global stores with 500 Global stores ; contributing JACK& JONES are leading cache-cache in China 30%+ of total operating income brands Sports Brand 5,400 outlets across China Foreign Brands with strong heritage, design and globally known have penetrated the market successfully 20
  21. 21. 1A Company Brand Country Description Acquirer Amount Feb 2011 Tectron Moonbasa China B2C Fung Capital USD5.8M Mass market Female Fashion Feb 2011 Ferragamo Ferragamo Italy Luxury Brand Peter Wu - 8% equity Jun 2011 Miroglio Female Italy Female Fast Mandarin USD58M Fast-fashion Fashion Capital Partner Sep 2011 Delvaux Delvaux Belgian Luxury Leather Fung Capital Goods Dec 2011 Trendy Orchily China Female Casual L Capital USD30M International 5 Plus RTW Oct 2011 Xinhe Anmani China Female Highend L Capital RTW Dec 2011 Li Ning Sports China Sportswear TPG/ USD110M GIC 21
  22. 22. 1 Brand Investment Platform B Opportunity Potential Players Value-add to Fashion Industry • Foreign/Domestic VC • Nurturing centers for Forming Fashion Funds young designers & Incubators brands • Investment Targets • Fashion houses in-house • Start-up Opportunities in Creative Industry investment arms centered on Education, Beauty & -Young designers accelerators Healthily and Lifestyle, Travel, Fashion, Sports Entertainment, brands • Access to capital and - New Leisure- incubation centres • Retail Malls & Dept stores backend support i.e. for young fashion manufacturing/logistic brands s- focus on design Domestic governments – provide co-funding“Platform just beginning to gain appearance inChina (although prevalent in high-tech industries)– globally successful models in Toronto, NewYork and recently Singapore Cluster and Retail Real Estate Creative Platform
  23. 23. 2 Real Estate -Fashion Economic A Cluster Platform Opportunity Potential Players Value-add to Fashion Industry Fashion Real Estate Clusters • Infrastructure/Real • World-class Estate Fund • World-class Fashion Cluster to • Investment Targets Fashion Design • Global fashion attract global shows OpportunitiesReal Estate Developers • in Creative Industry centered on Education, Beauty & – Foreign City planners talent, businesses Commercial & Retail Real estate in • Healthily Lifestyle, Travel, Fashion, Sports hub for Shenzhen “Creative + domestic RE players and create Entertainment, Leisure- identified fashion City interaction & • Internet+ cluster cities innovation ecommerce hub • City Government • Fashion Manufacturing h ubChina’s Fashion Clusters have emerged fromthe textile manufacturing base- with cities likeHumen, Foshan, Shanghai having a base.Global acknowledged fashionCluster and Retail Real Estate Creative cluster cities –Barcelona, Milan, New York. Planned PlatformFashion Cluster city will be the next step…
  24. 24. 2 Real Estate –Specialty & Luxury B Retail Outlet Platform Opportunity Potential Players Value-add to Fashion Industry • Large Outlet Multi-brand Developing Niche Retail Operators • Investment Targets Retail Real Estate • World-class Fashion • Real Estate Developers- Outlets to enhance Domestic /Foreign- Retail Branded and Unique • Luxury Designer shopping Outlets Opportunities in Developers Industry centered bringing Outlet Creative experience on Education, Beauty & Outlets for Fashion Specialty Retailing; Healthily Lifestyle, Travel, Fashion, a unique Entertainment, Leisure-of • Fashion Discount Sports located outskirts Outlets • Real Estate Fund environment plus multi-brands under population centers • Mass-Market Mall Outlets one roof • City GovernmentChina’s outlet centres exist in places likeShanghai Quingpu, Beijing Scitech..However global scale type outlet centersbeing developed in Changsha (GlobeOutlet); Japanese Creative(Mitsui developers Cluster and Retail Real EstateFudosan) also joining the outlet construction Platformexcitement
  25. 25. 2B Europe’s Chic, Leisure cum Luxury Designer Retail Outlet Chains Italian Village in China 19 Village-styled across Europe retailing Italy’s Fingen Group collection of Designer brands; located outside of large cities – London,York, Milan, Rome, Hambury- 75M annual retail traffic Europe’s leading Chic shopping village retailers- all at scenic/historical villages/towns – carrying range of luxury to highend brands June 2011- Italy’s leading luxury real-estate developer and fashion retailer RDM (Fingen Group) –opened of 1st of series of USD80M Europe’s award Italian Villages for Discount luxury retailing in wining FLashion China’s Wuqing (60,000sq m retail+ villages 2,000parking)-between Tianjin and Beijing. 4 to 5 more of these villages expected over the next few years. Differentiated Retail cum Leisure concepts targeted for families, tourists usually at the fringes of population centers 25
  26. 26. 3 Fashion Capabilities Platform Opportunity Potential Players Value-add to Fashion Industry • Fashion Design, Retail Investing in Fashion Consultancy, Branding & marketing • Investment Targets Capabilities • Access to core • Retail management / supply components required - Fashion Design • Manufacturing chain software playersIndustry centered on Education, Beauty & Opportunities in Creative supply chain to build sustainable houses globally competitive - Retail software • Healthily Lifestyle, Travel, Fashion, Sports Entertainment, Leisure- Retail Management fashion industry - Fashion education • Design technology • Global Fashion - Fashion ecommerce • Fashion Education Academy/SchoolsDespite rapid industry growth- core fashion &retail management skills in the Chinese industrystill remains weak- especially in areas ofBranding, Retail management know-how &technology + talent 26
  27. 27. Creation of Core IndustryPlatforms ..Address IdentifiedWeaknesses & FacilitateInnovation + GlobalKnowledge & TalentExchange .. 27
  28. 28. Access to Global Markets VALUE-CREATIONAccess to Access toDomestic Global Industry Domest CapitalResource ic Fashion Industry Access to Global Access to Fashion Global Knowledge Talent Brands Investment Platform Real Estate –Cluster & Retail Platform Fashion Capabilities Platform Platforms become fundamental base for the Globalisation of China’s Fashion Industry 28 28
  29. 29. China Fashion China Design Fashion Cluster Manufacturing (China) Cluster (China)Outdoor & Luxurysurf wear Brand cluster Cluster Global Global (USA) (Italy) Fashion Fashion City (Milan, City Italy) (HK) Global Creative City (Singapore) Access to Global Fashion knowledge, trends & talents major factor in “value-chain” upgrade
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