Fast-fashion growth bubble is on the verge of bursting

Speaking of retail opportunities in emerging markets, Asia is like a blouse and China is like a crown jewel.

According to the ATKearney Global Retail Development Index, although the economic returns of China's retail industry have been in the doldrums for more than two decades, it suddenly broke out last year with a growth rate of 11.6%. In general, economists believe that retail growth has been strong between 3% and 5%.

This survey report is based on the analysis of 24 retail subdivisions and economic indicators in 30 countries in the global emerging markets, and China, which has never been ranked first in five years, has regained the top spot in this report. This year's report also includes an analysis of the attention of luxury brands. Analysts classify countries based on the status of luxury brands in each market.

In the overall ranking, analysts pointed out that in the next seven years, China's retail market is expected to grow to 8 trillion US dollars, which will be twice that of the United States. The analysis also shows that although Asia experienced an economic recession earlier, it will still perform best in the intercontinental range. As the news headline shows, emerging markets have experienced harsh experiences.

According to Mike Moriarty, partner of ATKearney and partner of GRDI, “As the economic turmoil in the Middle East, Latin America and Russia has resulted in companies choosing to be more cautious in the past year, they decided to expand globally in these developing markets. However, retailers We hold long-term views on emerging markets. They will not withdraw from the market, but will choose targeted growth areas for investment."

In China, the authors claim that retailers are “adapting to the slowdown in economic growth.” This adaptation is centered on strategic adjustments in market share and profitability, and the company has closed stores due to “optimized store portfolio” due to several recent brands. The incident will be evident. Last year, there were about 200 stores closed by leading brands, and in 2013, only 35 were closed.

Most of the closed stores are supermarket chains and department stores. And when it comes to specialty stores and luxury stores, the situation is very different. The investigators stated that Apple will continue to expand its number of stores in the next two years. The target is to expand from the current 15 to 40. At the same time, the fast fashion growth bubble is already on the brink of collapse. According to the author, “Global fast fashion retailers opened 264 new stores in 2014, including 80 Uniqlo stores, 60 H&M stores and 16 Zara stores.

Luxury brands are still adhering to the pace of expansion, although some believe that they will curb purchase demand because of China’s anti-vanity consumer policies. Hermes has opened the world's fifth Maison Hermès in Shanghai, and Lane Crawford has opened its third store in China in Chengdu. ”

At the same time, Asia is experiencing a strong wave of e-commerce. The e-commerce market in the region reached 525 billion U.S. dollars, which is more than 483 billion U.S. dollars in North America. According to the authors, “With the popularity of the Internet and the innovation of e-commerce products, Asia e-commerce brand revenue will increase at a rate of 25% per year. In the next few years, online channels will continue to be the retailer’s business focus. ”

For other regions, socio-economic fluctuations have always been a key issue. The authors stated that “for example, in the Middle East and Latin America, social unrest has caused brands to be cautious about international expansion in the region, but at the same time, there will not be a large number of retailers withdrawing from the market.” The author also adds that Russia is an exception. Due to the "high political risk", it led to "a considerable number of brands closing stores or making decisions to completely withdraw from the market, such as adidas, franchisees Maratex and Mexx, etc."

Going higher, analysts point out that retailers have increased their awareness of emerging markets and know how to run their business under “economic and political trends”.

In terms of luxury goods, the authors stated that it is important for brands to enter emerging markets because these regions account for 30% of the global luxury goods market. According to Hanta Ben-Shabat, partner of ATKearney and GRDI's co-editing editor, “luxury goods can still shine in emerging markets because the rich are less vulnerable than the average person to the economic crisis.”

In the case of admission based on luxury brands, this report divided the country into three categories. The first category is the “mature market”, with 11 to 15 brands entering, and the countries under this category are: Brazil, China, Kuwait, Malaysia, Qatar, Russia, Saudi Arabia, Turkey and United Arab Emirates; the next category It is an "intermediate market," with 6 to 10 brands entering the country. Countries under this category include: Azerbaijan, Colombia, Jordan, Kazakhstan, Mexico, India, Indonesia, Panama, and the Philippines; the last category is the "emerging luxury goods market." There are five brands entering the country. Countries in this category include: Angola, Botswana, Chile, Mongolia, Nigeria, Oman, Peru, Sri Lanka and Uruguay.

The author stated that "for luxury brands, no matter where you look, there will always be opportunities, but the strategy of luxury brands must be based on localization of the local market environment to be successful."

The report pointed out that developed countries such as China and the United Arab Emirates will have a lower risk in the luxury market, but at the same time they will also place more emphasis on competitiveness. “In an intermediate market such as India, brands need to actively build their brands and be ready to seize the opportunity to become top brands. For those emerging markets that are more brave to break through, if they can overcome the initial difficulties, they will gain in the long term. Greater interest.