Market Analysis: Fast Fashion Wants To Sink Into The Third And Fourth Tier Cities

As a low-cost version of UNIQLO with more than 100 pieces, Gu, which combines several labels such as low price, simple design and keeping up with the trend, is undoubtedly the best player to fulfill the great wish of FMCG in China.

According to the official data of Gu, all its 12 stores in the mainland are open in first tier cities. Recently, after opening a new store in Shanghai, it has opened another store in Hong Kong. After entering the mainland market for seven years, Gu has never been shocked by the low-level market.

Low level cities, which were neglected in the past, are now seen as a consumer market with the rise of young people in small towns. They are gradually becoming another battlefield of fast fashion clothing brand "happy horse enclosure".

According to McKinsey's China consumer survey report 2020, from 2010 to 2018, the compound annual growth rate of households with annual disposable income of 140000-300000 yuan in the third and fourth tier cities will reach 38%, higher than 23% of the first and second tier cities. The new generation of consumption in medium and low-level cities has become a new engine of growth.

In those years when fast fashion brands have grown rapidly in the first and second tier cities, the trend of consumption upgrading in the third tier and lower tier cities is also rising, and is becoming the second pole of fast fashion brand growth.

UNIQLO, Zara, H & M and other fast fashion brands know that whoever has mastered the customs clearance secrets of the low-level market will be able to maintain the momentum of sustained growth in the future.

However, the fast fashion brands, which have been chanting for several years, are moving slowly.

01、 It's not easy for Gu, which started with 60 yuan jeans, to sink

Gu was born in the bottleneck period of UNIQLO development.

In August 2002, the annual report of Fast Retailing was released. The sales volume decreased by 18.4% year-on-year, and the profit before tax fell by 46.9% year-on-year, facing the double drop of sales and profit since the listing of Hiroshima in 1994.

After three years of hard work, the situation has not improved significantly. At present, Liu Jing was back in September 2005 to "start a second venture" and Gu began to emerge. In October 2006, Gu No.1 store opened in Chiba Prefecture, Japan.

30% - 40% lower than UNIQLO

Through the use of functional fabrics to increase the added value of goods, UNIQLO has shifted from sticking to low prices and attaching great importance to product quality. Liujing thinks that if UNIQLO lets out the "low price" market, Gu can make up the position.

With the slogan of "unbelievable low price", Gu opened the market with "990 yen jeans" (about * * 60 yuan). The original plan to sell 500000 pieces was changed to 1 million pieces.

Fashion, fashion, POP products out of the circle

It is hard to resist the temptation of low price. Gu also has young, fashionable and popular models.

Unlike UNIQLO, which focuses on basic and practical styles, Gu keeps up with the latest fashion trends and sells seasonal styles. After 990 yen low-cost jeans came out of the circle, Gu subsequently launched more popular products reflecting the brand's tonality, such as Pajama pajamas, Gu shoes lab, etc.

Following the Japanese style of playing, Gu first entered China in September 2013 and settled in the middle of Huaihai Road in Shanghai, located on the lower floor of UNIQLO stores. Last year, it opened its first store in South China on the first floor of Guangzhou's vt101 square. Above the store is a UNIQLO single store with four floors.

At first glance, Gu, with its "high quality and low price", is a full sinking player. It should have opened up a coveted low-level market for fast sales, but it is expected to "sink" and flinch. Such caution is not without cause.

On the one hand, it was because of its sinking attempt that the halberd was broken in Suzhou in 2018. At present, public comments show that the store has been closed.

On the other hand, those fast fashion brands who have threatened to enter the sinking market have always been thunderous, and the bright and smooth road has not yet appeared.

According to incomplete statistics of commercial real estate headlines, although the number of stores in the first tier cities of UNIQLO, Muji, Zara, H & M, gap, C & A, ur and mjstyle has dropped from 85 in 2017 to 34 in 2019.

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Data source / fast fashion official website, wechat public account, microblog and other graphics / commercial real estate headlines

However, when they go down, most of them sink into the new first tier and second tier cities. In the past three years, the number of stores in these two regions has been basically equal, at about 110, and the proportion has increased from 46% to 53%.

While the number of stores in the third and fourth tier cities has increased slightly year by year, but the proportion is still hovering below 35%. In the third and fourth tier cities where the consumption growth rate continues to be higher than that of the first tier cities and increasingly surpasses the second tier cities, the sinking pace of fast fashion people obviously does not match their ambition.

Specific to the brand point of view, fast fashion sinking, the situation of resistance, different forms of expression.

Mjstyle and H & M, rapid explosion and rapid cooling

Mjstyle and H & M have been "sinking hard" since 2017. In this year, there were 54 mjstyle stores in the fourth tier and below cities. The total number of third, fourth and lower stores is 91, far surpassing 76 of the first and second tier stores in New China.

However, in the following two years, with the recession of the fast fashion industry, the number of outlets opened and sunk by mjstyle and H & M dropped sharply. By 2019, the number of stores opened by mjstyle and H & M in all tier cities was single digit.

Zara, H & M, Muji, gap, ur, turn head upward when sinking

This group of players is the mainstream. In the first two years, there is no achievement. In 2019, it will turn around and expand stores in cities above the second tier. Gap and Muji are especially obvious.

After the adjustment period in 2018, by 2019, there will be 12 new first tier and second tier cities, only 3 in the third tier and 0 in the fourth tier.

In 2017, Muji's all line markets were fully developed. In 2018, the number of stores in the third tier cities (8) was even slightly more than that in the second tier (7). However, by 2019, the main force of Tuodian will obviously return to the second tier (23), the third tier will be reduced to 4, and the fourth tier and below will be 1.

UNIQLO continues to sink, but its pace slows

UNIQLO stands out in the war of sinking. However, when the particle size is reduced, the fatigue state can still be seen.

In terms of the total number of stores, in the cities above the second tier, there were 55 stores in 2017, 62 stores in 2019 and 59 stores in 2019, and high-speed cities were still the main store expansion areas.

However, in the third and fourth tier cities, the number of stores opened in the third and fourth tier cities increased slowly from 20 in 2017 to 27 in 2019; the number of stores in the fourth tier and lower tier cities remained stable at 13-15, but rapidly cooled to 3 in the year of black swan epidemic (as of September this year).

To sum up, fast fashion brands are still in the first and second line, dare not sink. After struggling with them, it seems to have understood that low price is never the key to decoding the low-end market.

02、 Low level cities are difficult to sink and the business environment is hard to be damaged

It is the open secret of fast fashion to bind shopping centers to open stores. In the first decade of the 20th century, the fast fashion group entered China. From 2011 to 2016, its rapid expansion period coincided with the prosperity of China's commercial real estate. With the rise of domestic shopping malls and shopping centers, fast fashion can be spread rapidly.

According to incomplete statistics of yingshang.com, about 60% of the eight new fast fashion brand stores settled in new shopping centers in 2017. In 2019, 218 new fast fashion stores will be opened, with more than 90% of the stores in shopping centers, among which the newly opened shopping centers account for about 48%.

In addition, according to Yingshang big data monitoring, UNIQLO has settled in 553 shopping centers. As of the end of August this year, the number of UNIQLO stores in Huamen was 767, that is, more than 70% of the stores are located in shopping centers.

It can be seen that fast fashion brands are heavily dependent on the shopping center scene, so they must sink with the shopping center. At present, the operation mode of some new shopping malls is not mature in the third tier and lower tier cities, especially in line 4-6. Fast fashion brands have doubts about their future adaptability and future prospects.

It is obviously not a wise move to rush out. And in these indecisive places, they also need to face the rampant "hegemony" of the low-line market, the strong siege of domestic clothing brands.

Now in the old wardrobe of the post-90s, who has not a Samma, metsbawi clothes. 2006 is a year of life and death for domestic and foreign fashion brands in China.

Zara and other European fashion killers attack China crazily, relying on the ability to follow the fashion trend and the agile supply chain management system based on e-commerce, "criticizing" the first and second line.

Samma, Meibang, these well-known "big brands" of domestic clothing, have turned to low-level cities.

As early as 2014, SEMAR shifted its development focus to the third and fourth tier cities, and the company's overall services and superior resources also inclined to the third and fourth tier cities.

According to the big data obtained by wincom from Volkswagen reviews, the proportion of stores in the third tier and lower tier cities in the mainland of SEMA will be about 58% in 2019.

According to the third quarter report in 2019, the revenue of SEMAR was 13.261 billion yuan, up 35.82% compared with the same period last year, and the net profit increased by 1.307 billion yuan year on year. This year, SEMAR announced plans to open 600-800 stores in the third and fourth tier county-level cities to expand its Balabala children's clothing business layout.

In addition to the advantages of scale and popularity, local clothing brands have adjusted store expansion strategies in low-end markets, from street shops to shopping centers.

Meibang adopts the strategy of "one hundred cities, one thousand stores" + shopping centers to develop low-level market. Taipingniao and SEMAR rely on outlets to increase the proportion of stores in shopping centers and further improve their layout in low-level cities.

Hailan home is also increasing the number of shopping centers, adjusting and optimizing the marketing network layout of street stores to maintain the store coverage in the third and fourth tier cities.

Domestic brands such as SEMAR, Meibang, Hailan home, taipingniao and other domestic brands poured into the shopping center, further squeezing the survival space of fast fashion brands in the sinking market.

However, if we go deeper into the market, the immature commercial environment and fierce competition are the direct reasons for the difficulty of major fast fashion brands to sink.

The fundamental reason is that there is a significant time lag between the concept and mode advocated by fast fashion brands and the existing consumption concepts and methods in the low-end market.

03、 The essence of fast fashion is different consumption concepts

This kind of time difference comes from sun Zhengyi's "time machine" theory.

According to the theory of "time machine" put forward by sun Zhengyi, when a business model that appears in a developed economy is applied in an emerging economy, it is like taking a time machine back decades ago and can be repeated according to the original logic. This set of logic is usually used to interpret the inter generational difference of economic development among the United States, Japan and China.

In fact, if the granularity is further reduced, this set of theory can also be used to interpret the evolution of commercial development and consumption patterns of different tier cities in China.

Using the time machine theory, Michael Fang, a former Jingdong investment department, proposed that it would take 10 years for the commercial development in rural areas, the fifth and sixth tier, the third and fourth tier, and the first and second tier cities to evolve upward in turn when sharing the history of the evolution of Japanese consumer society.

According to this theory, combined with the development path of fast fashion in China, we can draw a conclusion: at present, fast fashion has just begun to rise in the third and fourth tier cities, just like the first and second tier cities around 2010. The fifth and sixth tier cities, after 2030, began to accept fast fashion brands.

Even in the third and fourth tier cities where fast fashion is initially popular, it is easy to observe some similar consumption phenomena

Although the shopping center is rising initially, the traditional pedestrian street is still an important consumption place for local residents. Every holiday, the pedestrian street has the most family travel, crowded. On the streets of small cities without UNIQLO and Zara, there are usually old shops of SEMAR, metsbawi and Hailan house.

Fast fashion brands are weak, while Samma, Meibang, Hailan home and other brands have long understood the preferred shopping experience of low-end market, such as the human relationship shopping consumption link.

The more sunken the market, the more I believe in the recommendation of acquaintances when shopping. This is why Alibaba, Jingdong, Suning and other giant companies have launched social e-commerce projects to penetrate the sinking market.

In the physical stores, shopping guide is a kind of embodiment of human relationship shopping. In small cities, the flow of population is relatively small. Most of them have lived in old neighborhoods for decades. Shopping guides may be neighbors and relatives. Even if the shopping guide is not relatives and friends, it is easy to mix face familiar with more times.

In a small town with strong human feelings, the shopping guide smiles sweetly, "welcome, what style do you need to see?" "This is a new model just launched. Would you like to have a try?" It is still one of the reasons why consumers pay.

The Post-70s and post-60s in small cities are more adaptable to the "shopping guide culture" than the post-80s and 90s, because the former grew up in an era of underdeveloped consumer culture and Internet, and they are less receptive to consumption patterns such as offline shopping and online shopping.

However, in the major fast fashion stores, there are almost no shopping guides. Because the major fast fashion brands generally adopt standardized management and advocate pure optional shopping without shopping guide and service, which caters to the consumption habits of most young people in the first and second tier.

In addition to human consumption, like lively, is also one of the main consumption culture of low-level cities.

Every new year's festival, trumpet big promotion, loud sound in the ear, red characters "jump price" come. In the bustling atmosphere, the residents of the small town are happily rummaging through piles of clothes. There are many people, go to the supermarket to buy vegetables, see that the clothes sold inside are good, so they buy one.

However, in UNIQLO and Zara, the scene of putting up a loudspeaker and shouting in front of the store is a strange illusion, and no one will carry a basket to buy clothes.

As for fashion aesthetics, there is a big gap between the fourth and sixth tier cities and the first and second tier cities. In the first and second tier cities, consumers who choose fast fashion brands like the brand concept of brandless, and tend to have a "sense of design" with simple lines, simple patterns and no design. Fast fashion brand transmission of aesthetic, for a considerable number of low-end consumers, is not adapted.

Of course, the sinking of fast fashion faces a complex situation, which essentially reflects a folded Chinese consumer society. In the first and second tier cities, the third and fourth tier cities and the fifth and sixth tier cities, the consumption portraits of each segment are different, and the consumption concept of residents in the low-level market can not be generalized. The above is just to provide some possible thinking dimensions.

However, in recent years, the sinking and popularization of e-commerce, social networking, payment, logistics and other infrastructure has accelerated the influence and penetration of high-speed consumption mode in low-level cities. And the influence of the economically developed areas on the less developed areas is also accelerating.

UNIQLO, Zara, H & M and other fast fashion brands also continue to make efforts to integrate online and offline. Taobao, Jingdong stores and palm flagship stores were launched to reach low-end consumers from online channels and enhance their popularity.

Therefore, although the current low-end market is still faced with many known and unknown problems, it is an irreversible trend for fast fashion brands that need to find new growth markets. Regardless of the enterprise's own profit considerations, the mass consumption mode is bound to sit on the "time machine" and roughly repeat the story that happened in high-speed cities.