Can This British Retailer Conquer China?
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New Look, a fast-fashion retailer bearing a striking similarity to Forever 21, is aiming to boldly go where many chains have gone before but few have succeeded.
The British retailer’s chief executive officer, Anders Kristiansen, has made no secret of his intentions in China, announcing plans in June to open 50 more stores there by March, which would bring its total number of locations in the Asian nation to 150. That’s 10 times the number of stores it had in China in 2015. But a Reuters report last Thursday revealed that New Look’s owner, South African billionaire Christo Wiese, has a more ambitious expansion in mind—500 stores within three years.
New Look currently has more than 850 stores around the world, two-thirds of which are in the U.K. Despite a challenging first quarter that saw revenues fall 4.2% to 354.2 million pounds ($431.9 million), Kristiansen insisted the retailer would stay the course in China, where there had been a “strong local reaction to our affordable, fast-fashion offer.”
According to Reuters, Wiese plans to conquer the Chinese market using a local-for-local manufacturing model, meaning most of the clothing it will sell in China will be made there to ensure locally relevant products are delivered to stores quickly. It’s a sourcing strategy that Zara owner Inditex has down to a tee and many other companies, including Under Armour, are trying to replicate around the world.
“New Look currently has more than 850 stores around the world, two-thirds of which are in the U.K.”
“South Korea and Japan drive a lot of the trends that the Chinese customer seeks, so our ability to be able to identify those trends, source them locally and get them into our stores quickly is key,” Sven Gaede, managing director of New Look’s international business, told Reuters, adding that 85 percent of what the retailer already sells in China is made there.
Local sourcing aside, some experts are skeptical about the retailer’s bullish growth plans. Franklin Yao, managing partner at strategy consultants Smith Street, described them as “virtually impossible,” noting that New Look is unlikely to find 500 empty retail stores, given the fact that H&M and Uniqlo also want to open hundreds more locations in China in the coming years.
That being said, Chinese consumers are notoriously fickle and several big-name brands have failed to gain a foothold there, including Gap, Marks & Spencer and Walmart. In an effort to test the waters before committing to a brick-and-mortar presence, most international retailers first launch on the likes of JD.com or Alibaba’s Tmall and Taobao.
But New Look appears to be covering all its bases in China: After opening its first locations in Shanghai and Beijing in February 2014, it launched an online store on Tmall seven months later and debuted on JD.com earlier this year.
Questions & Answers
Q.What is New Look's current retail presence in China, and how does the CEO's short-term plan compare to the owner's long-term vision?
What is New Look's current retail presence in China, and how does the CEO's short-term plan compare to the owner's long-term vision?
New Look currently has 100 stores in China. The CEO plans to open 50 more by March, reaching 150, while the owner aims for a more ambitious 500 stores within three years.
Q.How does New Look plan to address the challenge of delivering locally relevant products quickly in China?
How does New Look plan to address the challenge of delivering locally relevant products quickly in China?
New Look intends to use a local-for-local manufacturing model, similar to Zara. Most of the clothing sold in China will be made there to ensure quick delivery of relevant products.
Q.What reservations do experts have about New Look's ambitious expansion plans in China?
What reservations do experts have about New Look's ambitious expansion plans in China?
Experts are skeptical, citing the difficulty of finding 500 empty retail stores given competition from H&M and Uniqlo. They also note Chinese consumers are fickle, and several brands have failed there.
Q.Beyond physical stores, how is New Look establishing an online presence in the Chinese market?
Beyond physical stores, how is New Look establishing an online presence in the Chinese market?
New Look launched an online store on Tmall seven months after its first physical locations opened. It also debuted on JD.com earlier this year, covering major online platforms.
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