The document discusses how fast fashion brands (FFBs) are expanding in China. It explains that online shopping is popular in China due to convenience, lower prices, and China's large population and technological infrastructure. While FFBs are growing online, they are also opening many physical stores in Chinese cities to gain brand awareness, take advantage of cultural changes, and address lack of trust in online payments. To balance online and offline expansion, the document recommends FFBs conduct market research and consider various distribution channel options to determine the most efficient approach in different markets.

1. International Masters in International Business (IMIB)
School of International Trade & Economics (SITE)
Jiangxi, PR China

2. FFB / 12 November, 2015 2
Dr. Chen Qi
Ph.D. in Economics
Presented ToPresented To
Presented by: Group # 1

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1. China has become the world’s leading online shopping
market, why is online shopping so popular in China?
2. Why are FFBs opening so many costly stores in more
Chinese cities when expanding business online?
3. How should FFBs balance online shopping and offline
expansion?
-Presentation on--Presentation on-
Fast Fashion Brands Expansion in China

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Overview of the CaseOverview of the Case
While online purchase intentions around the world have doubled in 14 out of 22
product categories over the past three years, China is the key leader in the Asia
Pacific region, and therefore the world.
Compared with the 2013 online shopping survey, among the four types of online
shoppers, the percentage of price-sensitive shoppers (most of who are aged 40 and
older with comparatively lower income) remains the same at 16%. The ratios of
potential online shoppers (mostly early 20s, enjoy online shopping, but have limited
income) and online dependent shoppers (mainly aged between 30-40, with higher
education backgrounds and incomes) witnessed a small drop of 2 and 3 percentage
points to 32% and 26 % respectively.
However, the percentage of rational online shoppers, sometimes referred to as
“cautious” shoppers, saw a healthy increase of 5 percentage points from 24% in 2013
to 29% in 2014. These shoppers are primarily male, aged 26-30 with good income
and generally have a high standard for quality when shopping online. They have the
money and desire to make premium purchases, however they sometimes end up not
buying due to mistrust of sellers or quality within the e-commerce environment.

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Four types of online shopperFour types of online shopper
Source : www.nielsen.com

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Fast Fashion Brands Expand in ChinaFast Fashion Brands Expand in China

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Why is online shopping so popular in China? ...Why is online shopping so popular in China? ...
• Convenience & Comparatively lower-prices
- It is much more convenient for persons to go online to make purchases; online
shopping can be done in the convenience of the Chinese home, work, school. While
they eat and talk with friends. Online shopping in China like in many other countries is
also cheaper.
• GLOBAL MARKET
- Even though China has just started in recent years to utilize the ecommerce platform
in many countries globally export from China making them the leading online market
in the World. Buisnesses globally buys from China using ecommerce.
• Expansion of e-commerce and technological infrastructure
- The new generation of Chinese who are the target group of FFB are more exposed to
use of mobile and internet services than 15 years ago which is another contributing
factor especially with the boosting of ecommerce by the Chinese Government which
saw a shift from 2 million users in the year 2000 to 600 million currently. Many
persons in China now has access to smart phones and social medias which are used
as a marketing platform for many companies making it easier for persons to shop
online from their smart phones.

8. FFB / 12 November, 2015 8
…… Why is online shopping so popular in China?Why is online shopping so popular in China?
• Size of China’s population and inadequate Shopping Malls
- The population in China is approximately 1.37 billion which provides a huge market,
and online marketing provides larger market access to consumers.
• Unplanned culture change has facilitated online shopping
- Considering the target market of most FFBs, the shift in the culture dynamics in
favour of the post 80s and 90s provides a better opportunity for online marketers.
• Enhanced Infrastructure or online platform
- China has a unique online shopping platform and most of the population between
ages 20-35 are exposed to the use of the internet and enjoy the convenience of
online delivery.
• China is a high Power Direct Index culture country
- Chinese population general believe in their public institutions, and the
pronouncement of a 5 years plan to boost ecommerce by the Chinese Government
also provided the basis for public interest in online shopping.

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Online Shopping!Online Shopping!

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Why FFBs are opening so many costly storesWhy FFBs are opening so many costly stores
in more Chinese cities when expanding business online?...in more Chinese cities when expanding business online?...
• Before answering this question we have to ask ourselves where are FFBs
opening these stores?
• FFBs are opening more stores in Tier 2 and Tier 3 cities with a decline in Tier 1.
• Tier 1 cities have seen a reduction in new stores because tier 1 cities in China which
consist of Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou are all over
populated and highly developed cities this results in a high degree of
competitiveness. To rent or purchase stores in Tier 1 cities are very expensive when
compared to Tier 2 and Tier 3 plus the legal requirements are more stringent. The
availability of space is greater in Tier 2 and Tier 3 because these areas are under
developed and so the FFB’s can get store locations easier and cheaper than in Tier 1
making investment cheaper.
• Tier 2 and Tier 3 cities are developing cities to which many Chinese are now
migrating due to the high competitiveness and difficulty associated with finding jobs
and gaining access to university education within the tier 1 cities and so the FFB
stores such as H&M are moving to where the people go. This creates a new market
place for FFB’s who can build and broaden brand awareness through the
construction of physical stores.

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• To maximise their revenue
By expanding their business, FFB will be able to cover more cities and make
their producct more accessible to make people, thereby increasing their
revenue
• To widen their channels of distribution
- FFBs are opening many costly stores to facilitate the distribution of products to end
users. And, take advantage of the planned culture change of urbanization through
infrastructure development.
• Gathering market knowledge
- The establishment of more costly stores by FFBs move the manufacturers closer to
the market and involves the companies more closely with problems of language,
physical distribution, communications, and financing in China
• Brand awareness and Local Contact
- The creation of new market place for FFBs who helps to build and broaden brand
awareness, and facilitate the face saving culture of wealthy Chinese consumers.
FFBs are also creating more physical stores to ensure that the Chinese consumers
can get immediate feedback to queries or complaints.
…… Why FFBs are opening so many costly storesWhy FFBs are opening so many costly stores
in more Chinese cities when expanding business online?...in more Chinese cities when expanding business online?...

12. FFB / 12 November, 2015 12
…… Why FFBs are opening so many costly storesWhy FFBs are opening so many costly stores
in more Chinese cities when expanding business online?in more Chinese cities when expanding business online?
• China being a Cash Society
– While it is true that Ecommerce is expanding in China and FFBs are successful
with online shopping, there is much more room for growth in the usage of credit
card in China even though the banks and the consumers are catching up China
remains a cash society.
• Lack of trust using online payment method
– Many Chinese are still apprehensive about making online payment due to the
security shortcomings associated with ecommerce such as identity theft and
scamming.
• Cultural Adaptation and Unplanned and Planned cultural change
– With the construction of many shopping malls such as the Wanda Plaza similar
to those in the western world the Chinese who were born in the late 80s and 90s
have adapted to a western culture of visiting the malls as a recreational activity.
As well as the adaptation of the trendy western fashion.

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Physical Brand ShopsPhysical Brand Shops

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How should FFBs balance online shopping and offline expansion?...How should FFBs balance online shopping and offline expansion?...
• Conduct a proper market research.
- In order to strike a balance between online and offline expansion, FFBs need to conduct a
market research to have a fair appreciation of the market in order to decide on the
distribution channel that is most efficient and cost effective.
• FFBs need to consider the six C’s affecting choice of channels.
- Considering the six Cs affecting choice of channels, FFBs have to develop a strategic
market plan for both online and offline expansion which focuses on key locations rather
than just multiplying their outlets in cities.
• Alternative to FFB is to Utilization of middlemen in some areas rather than fully
establishing a specialty store (Channel Management).
- In areas where more online shopping are done and the stores are being used as fitting
rooms, FFBs need to take advantage of channel management and select a middleman to
save the cost of investing and maintaining an outlet. These distributors will incur/share the
cost of warehousing.

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…… How should FFBs balance online shopping and offline expansion?How should FFBs balance online shopping and offline expansion?
• Utilization of online shopping
- Utilization of online shopping and courier services in other areas where the
establishment of a retail store distribution channel would be costly and difficult to develop
an efficient channel from existing middlemen such as their existing B2C partnership with
Tmall which allows FFB stores to have full control of their distribution channel, promotion,
marketing and pricing etc.
• Cost consideration
- FFBs such as Gap, H&M and Zara established a distribution channel with T-Mall an
online retailer in China. This makes it cheaper for these FFB stores to get their
products to the consumers without having to incur the cost associated with having a
physical store.

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Online Brand ShopsOnline Brand Shops

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E-Commerce Channels: ChinaE-Commerce Channels: China

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ConclusionConclusion
• China is the world’s largest online shopping market because of it’s
population size, it is convenient and cheaper for Chinese to shop online due
to the lack of adequate shopping infrastructure.
• FFBs have gained a significant market in China especially among their
target consumers between 20-35. Even though FFBs are gaining
momentum on the internet they are still engaging in offline expansions to
gain full market penetration, to capitalize on the cultural change, brand
awareness and maintain local contact.
• FFBs can balance online and offline expansion through market research to
be able to make the decision on the distribution channel method to be used
especially since no single method can be used through out China.

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