Mainland consumers are increasingly fashion conscious. What kinds of clothing are they looking for? This survey finds that for garment shoppers in Southern, Central and Western China, mainland fashion trends are most influential when they consider the styles of clothes. Shoppers are brand sensitive, and they are never content with established brands. They will switch brands if they find the branded products of low quality and outdated styles. Consumers in Central China are particularly enthusiastic about new brands. Generally speaking, Hong Kong clothing brands are attractive to mainland consumers in both quality and price in higher-end and mid-range segments than in the low-end.

Meanwhile, Hong Kong clothing accounts for a fair share of the overall clothing sales of retailers in Central China. Its importance is however relatively lower in Southern and Western China. Mainland retailers expect the sales of Hong Kong clothing brands to grow significantly in the coming two years. In the next three years, Hong Kong and international franchised brands will also gain increasing importance in the mainland clothing market. In addition to the potential of clothing franchises, the survey brings to light the opportunity of promoting clothes as gifts to others, which is most commonly practised by consumers in Central China.

The implementation of the Closer Economic Partnership Arrangement (CEPA) between the mainland and Hong Kong offers new opportunities for the Hong Kong clothing industry.  According to the arrangement, a total of 37 Hong Kong-made clothing items, subject to CEPA's rules of origin, enjoy duty-free access to the Chinese mainland from 1 January 2004. Under CEPA, eligible Hong Kong clothing companies are allowed additional market access plus removal of specific restrictions in the mainland market. Eligible companies are permitted to engage in commission agents' services, wholesale, retail and external trade in the mainland on a wholly-owned basis. In addition, Hong Kong permanent residents of Chinese nationality can set up individually owned retail stores in Guangdong Province.

This survey study is devoted to examining the characteristics of garment markets in six cities of Southern, Central and Western China. Six cities in three regions were covered in this study. They include i / Fuzhou (福州) and Shenzhen (深圳) in Southern China; ii/ Changsha (长沙) and Wuhan (武汉) in Central China; and Chongqing (重庆) and Xian (西安) in Western China. In order to give readers a more comprehensive understanding of clothing shoppers in these regions, this report refers, where appropriate, to the corresponding findings of the survey in Chengdu (成都) and Guangzhou (广州) conducted in 2002.

This study was composed of two interlocking surveys. The first survey (survey of shoppers) successfully interviewed a total 1,200 shoppers of garments in these six cities. The second survey (survey of retailers) interviewed managers/officers-in-charge of major department stores and chain stores in these six cities. The main survey findings are as follows:

CONSUMER BEHAVIOUR

When to Buy?

• Visiting clothing stores is a habit. Chongqing consumers showed the highest tendency to visit clothing shops, with 62% of them indicating a habit of visiting clothing stores once a week.
• Shopping on the weekends is common. Major shopping occasions include Labour Day (1^st May), National Day (1^st October), and Lunar New Year (Jan/Feb).

Why Buy?

• Consumers in Chongqing, Fuzhou, Wuhan and Xian are more enthusiastic over fashionable clothes. While Shenzhen consumers view good cutting as the most important criterion for clothing selection, those in Changsha put price as the top priority.
• TV commercials, advertisements in newspapers/magazines and promotional stands in shopping malls are the most popular promotional and sales activities, followed by clothing fairs.

How Much to Buy?

• Average expenditure on clothing equal RMB 2,056 in Southern China, RMB 2,654 in Central China and RMB 3,159 in Western China.

Where to Buy?

• Generally speaking, department stores and clothing chain stores are the most preferred types of retailers, followed by shopping malls.
• Female executives in Central and Western China are particularly interested in shopping at department stores.
• Guaranteed quality, product variety, availability of brands and credibility are major reasons for visiting a clothing store.

What to Buy?

• Mainland fashion trends are most influential when shoppers consider the styles of clothes, followed by the trends in Hong Kong.
• Shoppers are highly receptive to new brands, particularly those in Central China.
• Good cutting, guaranteed quality, style and image are the top factors behind brand selection.
• Poor quality, outdated styles and limited selection are the major reasons causing shoppers to switch brands.

MOST IMPORTANT MARKET SEGMENTS

• In the clothing market for males, white-collar workers are and will be the strongest buyers of casual wear in Southern and Central China. However, university students are expected to be the segment with the best potential for casual wear sales in Western China. Professionals and managers are and will be the biggest spenders on male office wear.
• Female office workers (not necessarily executives) have the greatest interest in female office wear.

COMPETITIVENESS OF HONG KONG BRANDS

• The strengths of Hong Kong brands mainly rests on styles, quality and brand image.
• Generally speaking, Hong Kong clothing brands are more attractive in both quality and price in higher-end and mid-range segments than in the low-end.
• The presence of Hong Kong brands is less evident in Xian.

RETAIL ENVIRONMENT

• Generally, branded casual wear generates higher profit margins.
• Discount strategy is common for male office wear.
• Mainland retailers are optimistic about the prospects of Hong Kong and international brands. Local brands presently account for the lion's share of retail clothing sales; this proportion will drop in the next three years given the expected increases in Hong Kong and international brands.
• The proportion of Hong Kong and international franchised brands will increase in the next three years.

SUMMARY OF DIFFERENCES AMONG CITIES/REGIONS

Shoppers interviewed in central locations of these cities would tend to show certain common purchasing habits, which are consistent with their higher average incomes than the average urban city dwellers. However, the classes of the selected shopping malls and department stores within and across cities may not be identical, which may have a bearing on the profile of respondents, such as incomes and spending pattern. While recognising the possible similarities among garment shoppers in central locations of different cities and regions, there are in fact certain differences.

• The survey shows that consumers in Western China visit clothing stores more frequently than those in Southern and Central China. This implies that garment shoppers in Western China are more inclined to monitor fashion trends than their counterparts in Southern and Central China.
  
  
• In terms of types of clothing purchase, T-shirts and jeans are likely to be the daily wear for many consumers in Central China. Relatively speaking, consumers in Western China tend to be frequent buyers of jackets and trousers. In addition to T-shirts and jeans, consumers in Southern China show great interest in blouses.
  
  
• Department stores are the prime shopping places for consumers in Central and Western China. The availability of a wide variety of clothing chain stores in Southern China probably underpins the stronger preference for this store category there.
  
  
• Consumers in Wuhan and Shenzhen show stronger interest in Hong Kong brands. This may have something to do with the established reputation of some Hong Kong brands in these markets, while brands of other countries are still catching up. In comparison, consumers in Fuzhou and Changsha are less aware of Hong Kong brands. In view of a weaker recognition, Hong Kong companies have to enhance their marketing efforts to increase brand popularity when exploring these markets.
  
  
• Hong Kong brands are more important for retailers in Central China, taking up higher proportions of their total sales. Relatively speaking, the presence of Hong Kong brands is less evident in Xian.
  
  
• Franchising commands higher importance in sales in Southern and Western China than in Central China. While local brands currently command a dominant position in sales, their status will be taken up partly by international and Hong Kong brands in the next two years, particularly in Central China.

RECOMMENDATIONS FOR HONG KONG COMPANIES

Hong Kong clothing brands generally enjoy a good reputation for their design as well as quality on the mainland. When promoting clothing to the mainland market, attention however has to be paid to local fashion trends, which exert the greatest influence over the tastes of mainland consumers. In addition, quite a number of mainland consumers do not know whether or not they are interested in Hong Kong brands. As such, appropriate marketing strategies have to be launched so as to arouse the interests of prospective mainland consumers. Given the preferential treatments of CEPA, eligible Hong Kong clothing companies should make efforts to establish wholesale and/or retail businesses on the mainland, as mainland retailers are ready to bring in more non-local brands. Other specific suggestions include:

• Customers are well aware of clothing trends and prices. It is necessary to make an effort to offer differentiated products as well as to study market prices carefully.
• Choose shopping locations that best attract holiday shoppers.
• Allocate sufficient resources for advertisements, including the use of movie/TV stars as brand spokespersons.
• Make use of counters/stores in department stores and shopping malls for marketing activities.
• Be attentive to the affordability of consumers in setting price points for different clothing categories and in different cities.
• Keep abreast of market trends and use fabrics and materials that are in vogue.
• Step up efforts in product design, quality and variety, and launch new brands strategically.
• Brand owners can consider developing franchise businesses on the mainland.
• Explore the opportunity of acting as an agent of foreign clothing brands to develop franchise businesses on the mainland.
• Target male white-collar workers for the promotion of casual wear.
• Hong Kong brands stand a better chance in the higher-end and mid-range market segments. Hong Kong companies have to stay away from the low-end segment, as they are not competitive with mainland companies.

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