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May 27, 2020

China apparel market could see US$60bn contraction in 2020

The Chinese apparel market could contract by US$60bn in 2020, according to a new study.

By Hannah Abdulla

The Chinese apparel market could contract by US$60bn in 2020, according to a new study.

In its latest survey, global management consultancy Oliver Wyman said more than 75% of Chinese consumers reduced or postponed purchases on apparel and footwear and their total spending decreased by 45% in the first quarter of 2020. The survey also found that there was little retaliatory spending in April and May.

The largest apparel market is expected to see a 15% contraction in 2020, equivalent to about $60bn in market value.

“It is going to be a turbulent year, with structural and longer-term shifts in the apparel and footwear market in China,” said Imke Wouters, partner of Oliver Wyman, who led the survey, which was fielded between 30 April and 12 May. It surveyed 1,000 consumers in China who had purchased apparel and footwear products in 2019.

“Despite the industry downturn, we are seeing the further growth of e-commerce, with an accelerated penetration into sub-segments, such as high-income customer groups. The post-Covid market is expected to be more polarised across income levels and city tiers.”

The Covid-19 outbreak has exacerbated the spending gap between the high and low-income groups. The low-income group tends to buy less and trade down for essentials. More than 70% of the low-income survey respondents said they would prefer good value for money, and more than 60% said they would purchase essentials only.

On the other hand, respondents from the high-income group said they would trade up and go for both value and quality, with 54% of them saying they would still look to buy products offering higher quality and functionality, and 56% of them saying they also preferred items offering value for money.

The survey also revealed a greater shift to e-commerce and Oliver Wyman predicts that online channels could take up to 50% of the entire market in 2020, rising “significantly” from 34% in 2019. Shoppers from the high-income group have jumped to become the biggest online spenders during the outbreak, carrying out 64% of their spending online.

While some growth was seen in the share representing pure online shoppers, dominated by the younger generation, most of the survey respondents said that they would still like to do their shopping in multiple channels.

More than 40% of the survey respondents said they would still like to try on the products they are interested in and make sure of their quality hands-on. In particular, new features such as new technologies, exclusive offline products, and personalised services would encourage more than 60% of the respondents to visit and possibly make a purchase in an offline store in future.

“The offline stores are still important, but it is imperative for retailers to re-examine the role and footprint of their offline presence, and fundamentally change the offerings and experience for their customers,” explained Wouters.

“The impact of the Covid-19 outbreak on China’s high-street fashion market has been material. We have seen the market recover to some extent as people’s lives have started getting back to normal, but retaliatory spending was not widely observed right after the outbreak began to subside.

“For the remainder of the year, we believe the market’s overall growth will still be lower than the historical level. Fashion retailers need to adjust their proposition to address consumers’ changing behaviors, rationalise their store networks, and take cost-control initiatives to minimise their losses while also prepare for the future.”

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