How would you describe the evolution of the Chinese consumer towards fashion retail since you first arrived here over a decade ago?
The seemingly constant miracle that is the Chinese economy entered a new phase over the last decade in which the rise of the middle class became the dominant narrative. The number of consumers has increased exponentially as well as their sophistication in terms of knowledge of brands and personal style. This consumer has also seen the quality and variety of choices available multiply in a very short period.
Ten years ago, the retail market, online and off, was divided between very low quality brands and knock-offs on the one hand, and aggressively priced luxury brands on the other. Fast fashion and brands from Zara to GAP and Uniqlo have now expanded from first to fourth-tier cities, and premium brands have entered the market. Meanwhile, a universe of local independent designers has exploded while the style options on Taobao and other online marketplaces have grown at an unprecedented pace. Most people – the young in particular – dress much better today than they did 10 years ago. They show not only an awareness of global trends but often also a greater sense of personal style.
What distinguishes Chinese youth from their Western counterparts? Would a young urban millennial’s profile differ markedly from one in the U.S.?
Millennials are very educated about brands and style. They possess ample discretionary income, and handbags, fashion and beauty products are a key focus. Chinese consumers keep up with fashion trends more keenly than their U.S. counterparts and are generally more interested in fashion. They are more inclined to shop online and get their fashion ideas there. The groups that embrace avant-garde styles are a greater percentage of the population while more mainstream trends are also adopted faster and in a more widespread way. There is less of an established sartorial tradition here, so young people tend to be much more adventurous and aspirational. This means items like jeans, elements of preppy style, and more standard cuts can be less popular here. Whereas in the West, slim styles tend to dominate, we see much more experimentation with volume here. At the same time, more stylish Western consumers can be more driven by fabric and quality of items than style or perceived uniqueness.
Your company operates in a space that is very new to China. What sort of opportunity for growth do you see in the market here?
This is a challenging space but that presents a few key opportunities that are not so prevalent elsewhere. Home sizes are smaller on average than in most Western countries and customers demand trendier fashions, which means they will cycle through fashion more rapidly. This may not be good for the environment, but it does mean there should be an increasing amount of secondhand stock available with increasing speed, though the quality of the stock and therefore its salability is a challenge. Additionally, the comparative similarity of physiques and slimness in China means that sizing is less of a challenge than it is in the West. There is more of a range of ways in which an item can be worn.
You had mentioned that in markets like Japan, second-hand retail is huge. Why is it so undeveloped in China? Is there something about the consumer’s mentality here?
China’s middle-class fashion consumer is a new phenomenon. Personal style was not widespread at all just a decade ago and almost all the familiar brands that many young consumers now regard as a given were not here. I attended the openings of the first shops in China for everything from Zara to Theory. Back in 2008, there was mostly just luxury and very low-end products on the market. There was neither an available stock of products that could become secondhand goods nor a consumer group that had travelled widely and developed into sophisticated buyers of style. Now countless customers enter our shop who have visited similar shops in other countries. The notion that Chinese are inherently opposed to secondhand as a culture is not true. Any group of people that has recently become wealthy will go for the newest and shiniest. That is a stage. The bigger challenge for us is the extreme low cost and increasing variety and style of products on Taobao.
Ecommerce and the many companies that operate in it accrue huge profits from the market. How does a small business like yours compete?
It’s difficult in an environment dominated by very large players that have the budget to spend on customer acquisition. We are the secondhand channel on a major ecommerce platform called Mogujie – it combined with Meilishuo and is likely to list on the NASDAQ this year – and use live streaming as the main way to drive traffic there. We also must rely on creative product lines and events. Our upcycling program is key: we collaborate with independent designers to create products that give components of earlier products a new lease on life. We are working with some significant local fashion brands like JNBY and hope to work with major corporations outside of the fashion arena. This could potentially connect to their CSR program since these are comparatively sustainable products.
