Part One: Fast Fashion
29 October 2013, Hong Kong - CBRE Group, Inc. (CBRE) today released its “China Retail: A Changing Landscape” Part One: the Development of Fast Fashion Brand. China’s booming domestic consumption market has drawn enormous interest from retailers around the world. With economic reforms expected from the new administration, domestic consumption will become the major driver of national economic growth by further step. CBRE expects the China retail market has enormous potential to be tapped in the years ahead.
“Challenges do exist at this crucial turning point for China’s retail industry,” said Frank Chen, Executive Director and Head of CBRE Research, China. “These include competition from e-commerce, homogeneous product offerings, a lack of differentiation, and rising operating costs, especially labor. In the face of these, the retail industry will go through many changes in order to maximize the opportunities brought by the changing landscape of China’s retail industry. In view of this, CBRE Research has launched a report series, “China Retail: A Changing Landscape” to explore and discuss the key challenges, opportunities and emerging trends in the China retail market, along with the implications for the property market.”
In Part I of this report series, CBRE will focus on Fast Fashion, followed by subsequent reports on Luxury Brands, Department Stores and other noteworthy retail formats.
Fast Fashion Speeds Up
Over the past decade, fast fashion brands have been expanding rapidly and have become one of the most active market performers on the China retail market. According to CBRE Research’s data, the total store numbers for 4 major fast fashion brands, including UNIQLO, ZARA, H&M and C&A, had reached 523 by June 2013. Among these, 40 percent have been opened in the past 18 months. CBRE analysts have isolated ‘Cascading’ Development and ‘Decentralized’ Development as two of the major trends in China’s fast fashion development.
“Cascading” Development: With rising purchasing power as well as increasing brand awareness in tier 2 and 3 cities, a growing number of fast fashion brands have shifted their growth focus toward these cities following successful launches in tier 1 cities. In addition, abundant supply, lower rents and more attractive leasing terms are all propelling the expansion of fast fashion brands in China’s tier 2 and 3 cities.
”Decentralized” Development: Tier 1 cities, particularly in Beijing and Shanghai, are the first choices for fast fashion brands. However, facing a limited supply of retail facilities, soaring rent and intensifying competition in core areas, together with the demographic shift from central to decentralized areas, improving transport and emergence of new shopping malls in decentralized areas, an increasing number of fast fashion brands are opening new stores in decentralized retail facilities. They have adopted a different strategy in the core retail areas by opening flagship stores to highlight their brands.
Given the low market penetration rate of fast fashion brands in China compared with their countries of origin, and the robust fundamentals of China’s consumption market, CBRE expects, fast fashion brands will enhance their presences in domestic cities. The upcoming supply peak of shopping malls in China will offer plenty of choice for new store locations. There are concerns, however, about aggressive competition among landlords, overpressure on operations as well as inefficient utilization of fast fashion brands’ resources in China particularly considering constraints on the skilled managerial and sales force and logistics networks during this period of rapid growth. Thus, CBRE suggests that both landlords and fast fashion brands should be insistent on rational development in the potential China retail market.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
