Clash of the Fashion Titans: Bosideng vs Inditex
12 Nov 2013
“China is a big state of clothing, but not yet a powerful state of clothing,” said Mrs. Gao Mei Zhen, who is a member of the family behind one of China's most famous brands and largest holding company's Bosideng, at the 29th IAF world fashion conventionin Shanghai.
to analysts at global advisory company Price Waterhouse Coopers, the economic crisis in Europe has not affected China's demand for consumer goods and the country is set to become the world's largest retail market within the next three years. This makes China a main focal point for companies like Inditex, the parent company of fast fashion brand Zara. Ashma Kunde, apparel analyst at Euromonitor International points out that 'despite the country's slowing economy, [China] was by far Inditex's most important market in terms of retail expansion in 2012.' So with the majority of western companies and business setting their sights on the growing potential in the Chinese market, where does this leave emerging Chinese brands?
Bosideng set to enter global market
The Chinese government is actively encouraging its exceptional companies to go global. Bosideng International Holding Company, best known for their 500 yuan down jacket, recently acquired British men’s wear brand Greenwoods, after opening up its first flagship store out of China in London last year. The company sealed the deal for 40 million yuan (estimated 4 million pounds) and holds 96 percent of the company in hopes that the British label will help strengthen and solidify their position in the UK and aid its expansion into other European countries. However, Bosideng has so far remained largely under the radar within the EU in comparison to other holding companies. Spanish based holding company Inditex is currently seen as the world's largest retail holding company, with its founder, Amancio Ortega, listed as the world third richest man on Bloomberg's billionaire index, with an estimated fortune of 47.6 billion euros. Inditex market value is estimated at impressive amount of 80 billion euros. In comparison, Bosideng's founder Mr.Gao Dekang, was listed as Forbes 12th richest CEO and the company has a much smaller, lower market value, just over an estimated 2 billion euros.
But, “there is room for 20 companies like Inditex in the world,” according to chief executive of Spanish label Desigual, Manel Jadraque, with Bosideng setting its sights on becoming one of the worlds largest holding companies next to Inditex. However, in order to content with Spanish based company Inditex on a leveled playing field, Bosideng has still a number of hurdles to over come. Even though Bosideng is one of the top selling brands in China in terms of sales, with the total value of all the company’s brands an estimated 24.5 billion RMB and has over 14,343 apparel stores located throughout China (as of March 31st 2013), the company has yet to achieved the same level of global recognition as Inditex. Outside of the Chinese and English markets, Bosideng has little presence.
Inditex on the other hand has 6,104 stores (as of July 31st 2013) in 86 countries around the globe and has successfully introduced it winning sales model in all 5 continents. According to a recent report published by international bank ING ‘Fashion 2025’, Inditex’s leading brand, is the pioneer of fast fashion and its unique supply chain is helping the band out pace other competing fashion retailers like H&M and Primark. Zara draws in hordes customers with its promise of ‘new items in store every 15 days’ and even with higher production costs due to sourcing from ‘onshore’ factories, the brand stays well ahead of its competitors. Inditex reported sales last year of 16 billion euros, with most of the sales drive coming from its leading label and revealed plans to open another 1,000 stores around the world, with Zara accounting for half the number of new stores. Inditex estimated sales of 19 billion euros and net profits of 3 billion euros with the addition of these new stores and show little signs of slowing down its expanding business.
wins fashion fans over with promises of new items every 2 weeks
Surprisingly, Bosideng has taken on a different business model to entering new markets. According to Kunde, the Chinese based company took the opposite path. “Rather than jumping on the fast fashion bandwagon, [Bosideng] has chosen to focus on the premium menswear market.” Last year Bosideng opened its first UK store, on the corner of Oxford Street and South Molten Street, in London. The brand decided to introduce a new premium line of men’s wear in the store, rather than one of their existing four brands and named the range Bosideng London. In order to understand the UK market better and what men wanted to wear, Bosideng hired British designers directors Nick Holland and Ash Gangotra to help develop the new range. Mrs. Gao Mei Zhen explained that by inviting foreign designers to work alongside with Chinese designers, the company hopes it will be able to launch the brand successfully in new markets.
However Kunde argues that the first UK store ‘should have had a bigger impact than it did,’ and points out that ‘branding remains a major concern.’ She says, “Despite its high-quality product offering and competitive pricing, brand awareness remains cripplingly low.” Even though Bosideng’s recent acquisition of British men’s wear chain, Greenwoods, it’s partnership with Tottenham Hotspur and its new UK e-commerce site will help the company localize itself in the UK market, Kunde concludes, “Acquisition does not address Bosideng’s primary predicament – its eponymous brand’s identity on foreign shores.” If Bosideng is seeking to expand to further shores and become ‘internationally renowned integrated apparel brand operator,’ as Mr. Gao Dekang, company chairman and founder stated in a message this year, then this is an issue that the company must deal with.
Mohammed Mirza, Founder and Managing Director at Luxury Recruit, agrees with Kunde. “I think it is fair to say that Bosideng's European adventure has gotten off to a rather slow start. In the year and a half it has been open at its hugely expensive South Molton Street site, it has faced challenges engaging customers and generating significant footfall. Whilst the product is attractive, well styled and well merchandised, it very much sits within the competitive mass premium space led by established brands such as Reiss. As a new entrant to the UK premium apparel scene with an unfamiliar name and little in the way of appealing heritage to leverage, the brand has somewhat fallen off the radar.”
Bosideng's Mirza also points out that the company is 'far from short of cash, being China's largest home grown fashion brand by sales,' and certainly has the means improve its current standing point in the UK, with the help of the right marketing and public relations team. But first the company would have to over come the “huge mismatch between the public face that Bosideng is trying to present in London and the model and liabilities it will be engaging as it beds in with Greenwoods.” There is a big difference in the business models and brands that Bosideng has introduced in the UK versus China, as the Bosideng brand in its home country is ‘broadly compared to something like Gap,’ while in the UK the brand is known as exclusive and premium. According to Doreen Wang, head of client solutions at Millward Brown in China, Chinese companies are looking to create a new international presence because brand image in China is ‘hard to change or upgrade.’ With the introduced of a men’s wear premium line, Bosideng has the chance to change its customers’ perception of its brands.
mismatch between Bosideng London and Bosideng China
Unfortunately, although in China consumers tend to turn to Western brands for luxury goods, in the UK the majority of consumers do not look the East for luxury goods or brands, especially if the brand is largely unknown outside of Asia. This preconceived notion that the west offer better quality goods on the other hand has only helped Inditex expansion into China and other Asian Markets. “The majority of Chinese consumers still prefer Western brands and products over local ones,” said Julie Sun, Bosideng’s vice-president for corporate strategy and investor relations, in an recent interview. Kunde points out that the key advantage for Inditex in China is the Chinese appreciation for ‘European fashion-forward design aesthetic.’ She does note one challenge Inditex may face in the future in the Chinese market is 'its longer supply chain, on account of production being focused near Western Europe. This means that its core competitive advantage of speed has been compromised.' In order to compete with other fashionable brands in China, like Bosideng and Uniqlo, Inditex will have to consider moving its manufacturing facilities closer to its Asian markets, or risk falling behind with its speedy business model. With China now Inditex’s second largest market after Spain, it won’t be too long until the company opens its own ‘onshore’ production facility in order to keep with the growing demand for the brands fast-fashion recipe.
But as Mrs. Gao Mei Zhen said at the world fashion convention, “Only by facing ourselves to stronger competitors, can we better understand ourselves, and keep motivated for progress.”Without competitors like Inditex to push companies like Bosideng forward, there would be no struggle for global domination in the worlds retail markets.
Photo's: Zara store in China
Zara jacket (right), Bosideng jacket (left)
Bosideng in London
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