Is China’s fashion industry recovering after the lifting of Covid-19 lockdowns? – WWD

No one wants to miss out on China’s opening opportunities. In the year By the end of 2022, most of the Covid-19 restrictions have been lifted, creating a new phase of recovery as the Chinese economy, including the fashion industry, is expected to bottom out. However, both consumer psychology and market demand have changed significantly. When will business return to normal and the Spring Festival travel that is currently underway will generate strong spending? Can the fashion market bounce back?

“Recovery” is a word that has been mentioned frequently in the past three years. However, a full recovery – from consumption to supply chain – may actually take three more years. To what extent was the fashion consumer market represented by luxury goods before the real recovery? Is the shoe supply chain in China, a major shoe producer, ready for recovery? What kind of conditions do domestic fashion companies face in China?

Chinese New Year significantly increases luxury consumption in many parts of the country. Even with a weakened consumer market due to the pandemic in 2022, the luxury industry has been hit lightly. Despite price hikes, out-of-stocks and parades, the country’s secondary and tertiary markets are seeing the opening of luxury shops and the acceleration of fashion brands.

China’s luxury market may recover faster than expected, according to analysis by Barclays Bank. In the year The bank estimates that growth will peak in the second quarter of 2023, with annual growth of 15 percent possible, which is more than 9 percent higher than the global luxury market average.

Global textile and apparel demand is expected to increase in the second quarter. According to the 2022 Trade and Development Report published by the United Nations, global economic growth is expected to slow to 2.2 percent in 2023. As the economy entered a downward spiral, demand for textiles and clothing weakened. But the current situation provides an important window for textile companies to clear their excess inventory. As a result, downstream demand is expected to pick up in the second quarter of 2023.

But what about the first quarter? How can companies stabilize quickly before they can return to growth? This is a question that every fashion company deeply involved in the Chinese market must answer.

Can fashion retail make a comeback during Chinese New Year?

Thanks to policy reforms and consumer stimulus, nearly every commercial center in China is experiencing a “recovery,” with people bustling and almost every city regaining its former vitality. Be it the Pixar-themed Christmas tree at Shanghai’s Grand Gateway 66 or the Pixar-themed Christmas tree at Chengdu’s Forest and New Beauty Collection in Chengdu, holiday-themed events and art exhibitions drew crowds late last year. Fairy-tale to winter.

Once known as the “world factory”, Suzhou is quietly changing. A new commercial complex is making its debut. Dong Jianfeng, general manager of Suzhou Renheng Business Center, told WWD China: “It is time for the real economy to make a proper plan for the real ‘recovery’, to get out of the stress of the epidemic and start a new phase of development.”

However, there is no shortage of challenges. Xu Wenjun, director of the TX Huaihai/Youth Power Center Mall in Shanghai, said: “The overall policy adjustment for this recovery has made us feel different than before. But at the same time, the challenges that come with it are completely different.

Market confidence has been hit hard and many brands are facing economic pressure. Most companies are still in the waiting and waiting and adjusting stage. Therefore, companies should focus more on adjustment than on recovery.

A spokesman for Yintai Commercial, which operates more than 100 department stores and malls across China, echoed the sentiment: “Policy changes will not bring a big boost in the short term, but the real economy can make a big difference.” Extinction and mutation lead to the birth of ‘new species’.

In fact, almost all retail businesses in China have been continuously adjusting over the past three years. They are always under pressure and pay close attention to market and consumer sentiment. Take TX Huaihai as an example. As the first retail space in China, the mall’s efforts to regain life revolve around the multicultural lifestyle that young consumers want.

How can China’s supply chain, including shoe companies, achieve new growth?

China is a very important market for footwear manufacturers and distributors worldwide. The shutdown of supply chains and sales networks during the pandemic has hit global brands hard. With the rapid growth of emerging markets in Asia-Pacific, part of the supply chain has shifted.

But there is no denying that the chaos of the past three years has provided a relatively large opportunity for small and medium-sized shoe brands. In a market where the entire industry is looking forward to recovery, will China’s shoe supply chain see a new dynamic?

A spokesperson for Abbottik, a Chinese independent shoe designer brand, told WWD China that it is important to remain realistic when it comes to recovery. He believes that the Chinese shoe market will see a wave of consumption after the new year or in early April.

Maximus Lu, the owner of Tsubo, another high-end lifestyle and fashion footwear brand, believes that China has one of the most complete supply chain systems in the world, which allows for good design, good sales systems, and living. Completely domestic production. Having the most complete and stable supply chain system in one country, from design to production to sales, is an irreplaceable advantage.

But he offered a more important insight: “Of course, the market is still uncertain, so you have to find the most suitable development path in your own field.” Many brands are focusing on the ‘China market’, but of course there are many markets in China, such as the Southeast and the Northwest. Each market has its own climate and culture… Brands need to find the right territory, the right customers and the right climate for themselves, and then expand step by step.

In the process of expansion, brands should pay attention to the sustainability of the supply chain, from raw materials to production models, especially for wastewater treatment and waste recycling, and the continuous search for technological innovations. A healthy recovery, like long-term growth, must be built on environmental protection and open and equitable consumer interaction.

Are China’s domestic brands better placed to seize the opportunity?

So far, Chinese society has been relatively cautious about global economic trends and the growth rate of the Chinese economy in 2023.

Private enterprises are regarded as the “foundation of the Chinese economy”. It is believed that “the private economy has grown in quantity, volume and quality and has become a pillar of the national economy in China.” Most of China’s domestic fashion enterprises are privately owned, which are the backbone of the industry and the “foundation of the Chinese economy.” Will they have a chance to take a step forward when the whole world competes for profit to reopen?

In the year At the end of 2022, the Chinese government released the Strategic Plan for Expanding Domestic Demand (2022-2034), which emphasizes the importance of strictly implementing the strategy of expanding domestic demand and developing a comprehensive domestic demand system. By changing epidemic prevention and control policies, recovery will be gradual and rapid. And some recovery in consumption is expected in the larger consumer market.

With a history of 43 years, the Chinese jacket brand K-Boxing has made its position and benefits more clear and developed a comprehensive development path based on this background – the value of high-end products is more reflected in the unique experience of high-quality products and services than prices or channels. Despite the growth of online retail, K-Boxing is creating a model that meets its own characteristics, especially offline retail, with a high-quality service experience. With seasonal stores opening on Tmall and TikTok and an emotional connection with consumers to drive online retail, K-Box understands the connection between online and offline sales. He shared with WWD China that this amount will not fundamentally change, but the structure will continue to be optimized in 2023 and will continue to evolve, explore and innovate.

While targeting the domestic market, a large number of Chinese brands are participating in international events such as the Winter Olympics and the Tokyo Olympics to demonstrate their commitment to exploring international markets. For example, Hengyuanxiang participated in the Tokyo Olympics and Paralympics after the Beijing Winter Olympics.

The resilience of the fashion industry makes it more capable of breaking through in times of crisis. But there is no denying that the landscape of the world has changed dramatically. Even now, while all parties agree that China’s economy will see rapid growth and the industry will gradually recover, there is still a different voice: 2023 is the start of an even more uncertain era.

Editor’s note: China Insight is a monthly column from WWD’s sister publication WWD China that analyzes developments in that important market.