New Look seeks fashion edge in China with local designs

Thu Oct 20, 2016 7:19pm EDT
 
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By Emma Thomasson and Donny Kwok

BERLIN/HONG KONG (Reuters) - As Europe's fashion giants brace for what could be the toughest leg of their expansion in China, a South African retail tycoon has launched a bold assault on the world’s most populous nation.

Christo Wiese is promising to open 500 of his New Look stores in just three years, catapulting the British brand into the same league in China as the world's top fashion chains - Spain's Inditex (ITX.MC: Quote) and Sweden's H&M (HMb.ST: Quote).

His plan is to make most of the clothes in China to ensure they cater to local tastes and can get to stores quickly - a strategy similar to the one successfully pursued in Europe by Zara-owner Inditex.

The arrival of New Look - and its local sourcing strategy - poses a new risk for the likes of H&M and Inditex, already suffering from slower growth in China, fierce competition for real estate and the cost of investing in ecommerce.

H&M is opening more stores in China this year than anywhere else in the world and the country is already the second biggest market for Inditex outside Spain.

China is a big draw for retailers who hope to tap the aspirations of a fast-growing middle class, with mid-range names benefiting as consumers trade down from luxury brands since Beijing's clampdown on corruption and conspicuous spending.

But recent history offers plenty of examples of failure. Western brands that have struggled in China include Gap Inc (GPS.N: Quote), Abercrombie & Fitch (ANF.N: Quote) and Marks and Spencer (MKS.L: Quote), which decided last year to close five stores in smaller cities to focus on flagship stores in large cities and online.

"Most of the Western fashion labels that are mid-range fail in China. A large part of it is that the styles and the fit are so completely different," said Shaun Rein, founder of market intelligence firm China Market Research.   Continued...

 
Women hold New Look shopping bags on Oxford Street in London, Britain, February 12, 2010. REUTERS/Suzanne Plunkett/File Photo