International apparel retailers are looking to strengthen their presence in lower-tier cities in China amid increasing competition, a report by the Li & Fung Research Centre has found.

Luxury brands including Gucci and Louis Vuitton, which used to expand in tier 1 cities such as Beijing, Shanghai and Shenzhen, are now looking to lower-tier cities like Wuhan, Wuxi, Changsha, Fuzhou and Xiame, according Li & Fung's 2012 China's apparel market report.

In addition, both sportswear retailers Nike and Adidas revealed plans to expand into lower-tier cities because people in these areas and getting wealthier. As a result, these cities are becoming the "major battlefields" for apparel companies.

In 2011, Spanish fashion brand Zara opened 29 new stores in China, while Swedish retailer Hennes & Maurtiz (H&M) opened 29. More than 80% of these were located in tier 2 and 3 cities.

The report also found that Chinese apparel retailers including Youngor, Fuguiniao, Joeone and Septwolves are keen to enter lower-tier cities, while consolidating their foothold in tier 1 cities.