1、Retail PracticeWinning in China:Top priorities for global apparel and fashion brandsDespite a challenging landscape,China remains one of the most attractive markets in the world for multinational companiesif they strike the right balance between global and local.March 2023by Alice Scalco,Michael Str

2、aub,Jacob Wang,and Daniel Zipser BJI/Blue Jean Images/Getty ImagesWinning in China:Top priorities for global apparel and fashion brandsThe apparel,fashion,and luxury(AF&L1)market in China remains one of the largest and most dynamic in the world.After a difficult 2022,the industry is likely to resume

3、 double-digit growth,fueled in part by a rising middle class(see sidebar“Why brands cant afford to ignore China”).However,for multinational companies(MNCs),doing business in China is getting harder.Strict pandemic-imposed restrictions were not the only cause of the countrys dampened consumer spendin

4、g in the first half of 2022.According 1 For the purposes of this article,AF&L includes apparel and footwear,beauty,fashion,sportswear,urban outdoor,and luxury.2 China National Bureau of Statistics.to the National Bureau of Statistics,the China Consumer Confidence Index fell by 28 percent from Octobe

5、r 2021 to October 2022(Exhibit 1).2 Chinese champions are increasingly outpacing their global peers,and many are adopting a more agile operating model and supply chain to enable greater responsiveness to changing consumer preferences.They are also adept operators of the various social-media and-comm

6、erce channels in China,engaging local key opinion leaders and consumers(KOLs and KOCs)to connect directly with consumers(see sidebar“About the research”).2Exhibit 1Web Exhibit of Consumer confdence index,monthly15014013012011010090807060Jan 2019Jan 2020Jan 2021Jan 2022Jan 2023Source:China National B

7、ureau of Statistics2022 consumer optimism has decreased due to COVID-19 outbreaks and unpredictable lockdowns.McKinsey&CompanyWinning in China:Top priorities for global apparel and fashion brandsMeanwhile,domestic consumers have been shifting their spending away from international brands over the pa

8、st decade.Chinese apparel brands expanded their market share by almost ten percentage points from 2013 to 2021(Exhibit 2),while the portion of 3 According to research by Fidelity International and China Market Research Group.consumers who prefer local over global brands increased 1.5 times from 2016

9、 to 2022.3 This trend is particularly true for apparel and footwear,though domestic shoppers of beauty goods still prefer international brands(Exhibit 3).3Exhibit 2Apparel market,top 20 Chinese local brands vs international brands,%of total salesSource:Euromonitor;Fashionscope;McKinsey analysisThe s

10、ales contribution of top local brands has risen steadily over the past ten years.McKinsey&CompanyInternationalbrandsLocalbrands201320142015201620172018201920202021474743444645454640605455555456575353Exhibit 3Share of consumers who prefer local brands over foreign ones,%consumers1Question:“When buyin

11、g the listed categories,will you prefer foreign brands or Chinese brands?”Source:McKinsey 2022 China Consumer Research survey,2011 China Consumer Research survey Chinese consumers prefer Chinese brands over global brands in apparel and footwear.McKinsey&CompanySports apparelFootwearApparelBeautySpor

12、ts footwear5656545242Winning in China:Top priorities for global apparel and fashion brandsWhy brands cant afford to ignore China 1 High income cities are defined as cities with a per capita GDP higher than$12,695.The World Bank uses this thresholdwhich was last updated in July 2021to designate a cou

13、ntry as high income.Its measure,however,is per capita gross national income;we used per capita GDP as a proxy due to data availability.2 National Bureau of Statistics data;McKinsey Global Institute analysis.Despite a challenging landscape,China still holds unrivaled potential value for global busine

14、sses because of its rapid urbanization,expanding upper-middle class,and increase in cosmopolitan cities.1 Chinas urbanization rate expanded from 50 percent in 2010 to 63 percent in 2021.2 By 2030,this figure is expected to reach 70 percent.Income growth is propelling more households into the upper-m

15、iddle income bracket of more than 160,000(about$22,000)in annual disposable income.In 2021,China had more than 100 million upper-middle-income households,about four times as many as a decade prior.This figure is projected to rise to about 200 million by 2025,with upper-middle-income households accou

16、nting for more than half of Chinas total consumption(Exhibit 1).Despite a challenging landscape,China still holds unrivaled potential value for global businesses because of its rapid urbanization,expanding upper-middle class,and increase in cosmopolitan cities.4Exhibit 1Lower-middle income(85,000160

17、,000)Number of urban households by income group,millionsSource:MGI Insights China macro modelThe growth of Chinas upper-middle-income and afuent households will fuel demand.McKinsey&CompanyAnnual household income in China,RMB,2020 realLower income(160,000)192201563341442021731381142025E63209%of uppe

18、r-middle income and afuent vs total123954Winning in China:Top priorities for global apparel and fashion brandsMany members of this newly affluent cohort live in cities such as Chengdu,Hangzhou,and Suzhou,which are emerging alongside the traditional commercial hubs and global metropolises of Beijing

19、and Shanghai.The share of upper-middle-income households in tier 3 and 4 cities has now reached the same proportion of such households in top-tier cities as measured four years ago.As one indicator of lower-tier city growth,by 2030,Chengdus and Hangzhous clothing markets will reach the same size as

20、Madrids;Shenzhens will be as large as Pariss;and Wuhans will be as large as San Franciscos(Exhibit 2).5Exhibit 2New York12.414.2San Francisco 3.13.8Clothing market size by city,$billionsBooming Chinese cities such as Hangzhou and Shenzhen are expected to reach the size of Western fashion hubs within

21、 the next decade.McKinsey&Company2030(projected)2020Source:McKinsey FashionScopeRest of worldChinaShenzhenLondon10.714.22.75.2MadridShanghai5.59.82.43.0WuhanBeijing4.98.72.13.8ChengduParis4.45.11.83.3Hangzhou1.63.0Milan3.14.1Winning in China:Top priorities for global apparel and fashion brandsSome M

22、NCs have struggled to keep pace and adapt to the changing environment,while others have strayed too far from their global identity in an effort to reflect local preferences.To improve their odds of success,global brands need to strike the right balance between global and local.In this article,we dis

23、cuss how global AF&L brands can strengthen their long-term competitiveness in the Chinese market.Companies should start by clearly defining and communicating their brand position,ensuring consistency across online and offline channels.They can then reevaluate their strategies for both physical-store

24、 networks and digital platforms and can invest in omnichannel and direct-to-consumer(D2C)engagement.Last,enablers ranging from product development and supply chain to technology and digital infrastructure could also help global brands boost their efficiency and relevance for the local market.Elevate

25、 brand positioning and communications To resonate with Chinese consumers,global brands need to know what those consumers like.Preferences in China are constantly evolving and often follow a different path than other markets.While Chinese consumers have historically been loyal to well-known large bra

26、nds,Gen Z consumers are more open to smaller brands.This pattern also applies to the luxury category,in which consumers rank quality and durability among their top purchasing factors(Exhibit 4).These market 6Exhibit 41Question:“I have favorite designer brands that I am very loyal to.Do you agree or

27、disagree?”2Question:“In general,I prefer smaller brands over larger well-known brands.Do you agree or disagree?”Source:McKinsey 2022 China Consumer Research survey,2011 China Consumer Research survey Chinese consumers value quality and tend to be loyal to large well-known brands,though Gen Zers are

28、more open to smaller brands.McKinsey&CompanyTop buying factors considered when purchasing luxury products,%of Chinese consumersShare of Chinese consumers who defne themselves as brand loyal,by country,%of respondents who strongly agree or agree1Share of Chinese consumers who prefer small brands over

29、 large ones,by age group,%of respondents who strongly agree or agree2Gen X(age 4054)22Millennials(age 2439)28Gen Z(age 1623)31South Korea11Japan19Australia23Quality and craftsmanship64Style and design55Value for money48Sustainability25Brand name25Brand origin17Resale value17Key brand icons13Manufact

30、uring site10China32Winning in China:Top priorities for global apparel and fashion brandsdynamics are due,in large part,to the structure of Chinas social-media landscape,which is insular and populated by homegrown KOLs and KOCs.Chinese consumers spend an average of six hours a day sifting through soc

31、ial-media platforms such as Bilibili,Douyin,Red,and WeChat.Because activity on these channels is mostly centered on domestic stars and influencers,Chinese consumers are the primary trend shapers in their country.Global brands must be prepared to adapt their strategy to ensure they are positioned to

32、appeal to local consumers.Two actions can give them the necessary capabilities.Tailor brand positioning and value proposition to local consumersInternational brands must speak the same language as Chinese consumers and must align their image with those consumers evolving values.They can no longer ge

33、t by with simple adaptations of global campaigns;instead,they should retain elements of their overarching branding while adjusting their messaging to appeal to the Chinese market.In this way,the brands DNA can be protected while incorporating local tastes into the mix.Develop a true local marketing

34、and communication engineTo achieve this balance,some companies have established local branding,marketing,and communication functions.This model enables global brands to be consistent in their positioning and use local capabilities as an execution engine.Local teams have a deep understanding of Chine

35、se consumers;they develop content that reflects local preferences(for example,higher interest in short videos compared with other formats),and they disseminate that content through China-specific social channels.LOrals dedicated China Consumer Research Center is a prime example of this model.Launche

36、d three years ago,the center is investing in channels that improve its understanding of various facets of consumerssuch as their purchasing habits,4 Christine Chou,“LOral China CEO on innovating consumer experiences this 11.11,”Alizila,November 19,2020;Sky Canaves,“How LOral won Singles Day,”China F

37、ilm Insider,November 26,2019;“LOreal China CEO on innovating products with TMIC,”Alizila,June 4,2021;Sarah Jia,“LOral:How an international brand integrates China consumer insights,”WARC,January 20,2022.lifestyles,and cultural preferences.For example,after research results revealed that younger consu

38、mers respond better to contemporary culture instead of Chinas traditions and heritage,the center shifted its marketing focus to collaborations with subculture artists and fashion designers.4 Optimize store networks and formatsTraditional department stores and stores in low-traffic areas are dealing

39、with deteriorating sales performance.With online shopping becoming more prevalent,physical stores in nonprime locations that lack a differentiated experience are rapidly losing relevance in the eyes of shoppers.In some areas,declining foot traffic and falling occupancy rates are sparking a vicious c

40、ycle.Yet consumers are flocking in droves to shopping malls in premium locations that boast a wider and more interesting array of lifestyle experiences and food and beverage options compared with department stores.The rising popularity of malls has allowed many operators to command a premium in rent

41、.Global brands in China could adapt to changing consumer preferences by deploying the following strategies.Realign store network and operationsA data-driven approach that continually tracks traffic and growth patterns can help companies evaluate their physical presence.Brands can use these insights

42、to determine the volume of traffic and types of consumers frequenting certain areas and can select the best locations within cities as part of their national strategies.They can also use these data to calculate the potential value of each location and determine how much they should be paying in rent

43、.Drawing on this information,they may find opportunities to renegotiate their leases in areas with low foot traffic and decide to pay a premium in busy shopping malls.7Winning in China:Top priorities for global apparel and fashion brandsExplore a variety of store formats with the consumer journey in

44、 mindEach store format should have a distinct purpose and strategy in the consumer journey based on location-specific consumer profiles.Flagships have shifted from being large stores with a broad product assortment to being novel,immersive in-store experiences that can strengthen connections with co

45、nsumers.For example,Chinese beauty retailer Harmay has carefully designed its stores with innovative warehouse-style architecture,making them a destination where consumers can take photos and engage with the environment and products.Meanwhile,other formats,such as pop-ups,could be an effective way t

46、o create awareness in new areas by shifting from the oversaturated Shanghai market toward emerging trendy hubs with less competition,such as Changsha,Chengdu,and Wuhan.Adopt an omnichannel D2C approachChinese consumers have embraced the omnichannel approach:before making shopping decisions,they will

47、 interact with an average of five omnichannel touchpoints.They commonly jump between offline and online channels as they move from awareness and evaluation to purchasing.About 50 to 60 percent of AF&L consumers purchase in an omnichannel way(Exhibit 5).8Exhibit 5Product searches and purchases by cha

48、nnel,1%of respondents1Questions:“Which best describes how you have purchased the following categories over the last 3 months?Which best described how you have researched the following categories over the last 3 months?”2Apparel,fashion,and luxury.3Over-the-counter.Source:McKinsey COVID-19 China Cons

49、umer Pulse Survey,August 18 to 29,2022,n=1,442,sampled and weighted to match Chinas general population,1865 years oldMore than ffty percent of AF&L consumers purchase in an omnichannel way.McKinsey&CompanyAF&L1 categoriesResearch and purchase only in storesOmnichannelResearch and purchase only onlin

50、ePersonal-care products254827Household supplies224929Skin care and makeup176320Home improvement and gardening supplies177013Toys and baby supplies147412Consumer electronics126919Books,magazines,and newspapers87319Accessories88012Apparel275815Fitness and wellness54739Vitamins,supplements,and OTC3 pro

51、ducts441640Jewelry38656Sports and outdoors equipment and supplies371053Footwear331255Groceries or food for home301060Food takeout or delivery29764Winning in China:Top priorities for global apparel and fashion brandsWhile most online sales still happen through third-party platforms,omnichannel D2C ha

52、s gained significant traction since 2020 because of declining offline traffic and rising customer acquisition costs in e-commerce marketplaces.By having full ownership of platform data,consumer experience,and commercial decisions(such as assortment and discounts),brands can better understand consume

53、rs and use these channels for branding,engagement,and sales.Omnichannel D2C engagement is especially effective because it caters to the desire among Chinese consumers for more personalized engagement.A McKinsey survey found that 69 percent of Chinese consumers prioritize personalization,compared wit

54、h 40 percent of US consumers(Exhibit 6).Global brands can take targeted actions to implement an effective omnichannel D2C strategy and capture the value at stake.Upgrade your apps and mini programs for better experienceD2C digital touchpoints have a wide range of functionsfrom branding,commerce,and

55、consumer engagement to complementing offline channels.Brand-owned apps are often favored by a global brands headquarters to capitalize on investments made in other markets.However,adoption can be a challenge because Chinese consumers will download apps only if they offer a truly superior experience.

56、In China,WeChat mini programssubapps within the WeChat ecosystemare largely used by brands instead of apps because of their commerce,media-sharing,group chat,and one-on-one conversation functionalities.The experience,however,is not always seamless,because many brands have accumulated multiple mini p

57、rograms and functionalities over time.Therefore,they must seek to streamline their portfolio of mini programs to create a fluid consumer journey.Whether global brands choose to pursue the mini programs or brand apps,a seamless and innovative experience is critical for their success.9Exhibit 6Likelih

58、ood to prioritize personalized wellness products or services,1%of respondents1Question:“In general,how much more likely are you to prioritize a personalized wellness product or service now versus one year ago?”Source:McKinsey Future of Wellness Survey,August 2020,n=1,500+per marketConsumers in China

59、 increasingly want more personalization and are more comfortable with data privacy trade-ofs.McKinsey&CompanyLikelihood to prioritize personalization2Likelihood to prioritize privacy3ChinaUnited StatesUnited KingdomGermany69403328791114Winning in China:Top priorities for global apparel and fashion b

60、randsEquip store staff for better customer engagementConsumer engagement is often better managed by store staff members,who have direct interactions and personal trust with consumers.Brands could bring the effectiveness of consumer engagement to the next level by letting store staff members communic

61、ate more directly with consumers and guide them to apps and mini programs.WeChat Enterprise,for example,provides infrastructure and tools to enable personalized communications.To do this well,brands need to build necessary capabilities across a few crucial areas,including content operations between

62、the company headquarters and the front line,third-party agency management,campaign planning,and digital tools such as content management systems.For example,Lululemon uses WeChat to establish store-level communities within its ecosystem of about 100 stores across China.In its model,the store manager

63、 acts as the CEO for the mini program,taking responsibility for generating content,organizing community events,and sharing relevant information on new products.In turn,customers can reach out directly to the store,which helps the brand maintain its private traffic base.Encourage omnichannel customer

64、 acquisition outside of physical storesEven after the end of COVID-19 lockdowns and the return of offline traffic,maintaining a strong digital customer acquisition capability remains critical.Beyond the simple media buy,a few approaches have emerged.Some brands have established an integrated members

65、hip program to attract members from e-commerce marketplaces.Others are connecting with broader digital platforms to migrate public traffic(such as RED city accounts,Douyin store live streaming,Alipay,and Dianping)to their private domains.Still others are increasing their reach through a“member get m

66、ember”approach that encourages existing loyal customers to spread the word.Last,brands are partnering with mall operators,banks,streaming platforms,and other vertical playersfor example,by colaunching campaigns,exchanging member benefits,or exploring intellectual property(IP)collaborations.Harness t

67、he power of consumer dataPrivate domains provide brands with access to huge volumes of data that are not otherwise fully available when engaging with third-party platforms.To maximize the effect of consumer data,brands need to have a localized tech infrastructure(a customer data platform)with unifie

68、d identification across platforms and a consumer-tagging system in place.Customer data can then empower a wide array of use cases,ranging from customized campaigns to precision marketing and loyalty program benefits.All these use cases provide consumers with a more personalized experience,enabling g

69、lobal brands to keep pace with dynamics and trends.Seize opportunities in the convergence of e-commerce and social media More than 25 percent of Chinese consumers daily mobile phone usage is spent on short videos and live streaming,which is five times more than they spend on online shopping.Shopping

70、 on social platforms has become a natural shift for consumers,with a seamless experience from short video-based content seeding to live streamingbased transactions.Shopping on social platforms has become a natural shift for consumers.10Winning in China:Top priorities for global apparel and fashion b

71、randsE-commerce platforms are becoming more diversified,with blurred boundaries.Social platformsespecially Douyinhave been disrupting the market.Through the third quarter of 2022,sales in the apparel and beauty and personal-care categories on Douyin more than doubled compared with the previous year.

72、Market leader Tmall is also elevating the importance of content and engagement and is increasing the portion of data-and algorithm-based traffic distribution.Over the past several years,the apparel and fashion industry has been an innovator and disrupter,with leading brands already building a mature

73、 business across platforms such as Tmall,JD.com,VIP.com,and private domains(such as WeChat mini programs).Recently,they have shifted the focus of traditional shelf-based e-commerce platforms from aggressive top-line growth to stable growth with sustainable profitability.Meanwhile,leading brands are

74、seizing the opportunity to expand their business on live-commerce platforms such as Douyin.To achieve sustainable growth in e-commerce business,brands should focus on two areas.Developing tailored channel roles along the consumer decision journeyAs consumers use various online platforms for differen

75、t purposes along their decision journey,brands need to develop an end-to-end view and define a clear positioning of each platform.Social and content platforms,such as RED,are effective at the awareness and interest stages,and they are playing a more important role in driving traffic to traditional e

76、-commerce platforms and lifting the conversion rate.We have seen brands boost their marketing spending on RED to increase search on Tmall.Tmall,which has a proven and mature business model and the most comprehensive offerings,accounts for the majority of e-commerce revenue for many brands.It also pr

77、ovides brands with the most detailed data support across platforms.Winning on Tmall requires brands to actively build data-driven operational excellence in the product life cycle,including product tagging,consumer mapping,precise pricing,and promotion management.Other traditional shelf-based e-comme

78、rce platforms,such as JD.com and VIP.com,still have a unique value proposition for brands.For example,JD.com has a higher portion of male consumers,and its leading logistics service is a key criterion for many consumers.Many companies view VIP.com,which is famous for its discounts with big brands,as

79、 an effective liquidation channel.As a disruptive platform,Douyin combines content to pique consumer interest and direct sales conversion within the same channel.Leading companies,especially local brands,have used Douyin to generate substantial awareness among target audiences and build a profitable

80、 business.Brands have also used the platform to build a consistent image through high-quality content tailored for each account and its underlying 11 BJI/Blue Jean Images/Getty ImagesWinning in China:Top priorities for global apparel and fashion brandsconsumer groups.Meanwhile,brands have redefined

81、their assortment-planning strategies to push new-product launches on a regular basis.Some have even started to use the platform for new-product testing,thanks to its rapid consumer feedback.Building new capabilities to drive operational excellenceTo navigate the increasingly complex e-commerce busin

82、ess,global brands could shore up their capabilities,especially on content,KOLs and KOCs,and live streambased store operations.1.Content.Brands could benefit from form local content units to adapt global branding initiatives for the local market,as well as create original,local work.Content often nee

83、ds to be tailored to each platform.On live-commerce platforms,for example,brands need to create a nicely decorated live-streaming room and make periodic refurbishments in sync with a marketing calendar.Projecting“newness”can consistently attract consumers,since short video clips of live-streaming se

84、ssions generate sizable traffic.Content production also needs to be fast to respond to the latest consumer and platform trends,given the narrowing window for content to be effective.Iterative testing of content is a must,and brands should track and analyze key performance metrics to continually enha

85、nce content quality.2.KOLs and KOCs.Brands could carefully build a KOL and KOC matrix to influence consumers along their decision journey.Brands should define the selection of KOLs and KOCs with a clear purposewhether to generate brand awareness,curate new products,acquire new customers,or liquidate

86、 some SKUs.Brands typically need to select KOLs and KOCs whose follower profiles are similar to the defined target audience.Brands also need to select the best matching product and prepare a detailed set of product briefs for KOLs and KOCs to ensure consistent content quality.Some leading brands are

87、 also training internal staff as influencers to post content on RED,Douyin,DEWU,and other platforms.3.Live-stream operations.Large brands are using service agencies to run their daily live-stream operations.These arrangements will require brands to set clear contract terms to regulate agencies,defin

88、e metrics to monitor performance(for example,gross merchandise value GMV per thousand views,transactions per minute,and average stay time),and improve performance.Meanwhile,as the industry becomes more mature,leading local brands have been actively building in-house live-stream operations teams,whic

89、h include streamers,assistants,and on-air operators.This move can reduce the dependency on agencies capabilities and lift profitability.Localize product development for greater relevanceMany global brands tend to make superficial attempts at product localization because most of their R&D teams are b

90、ased at their headquarters rather than in China.Because these teams are removed from the Chinese market,and because they can sometimes lack an intuitive understanding of the consumer dynamics,they often fall back on cultural stereotypes or cliches.Brands used to be able to pass off red-and-gold colo

91、rs or traditional Chinese motifs such as dragons and phoenixes as a way to localize product designs.These days,however,such attempts to adapt products are likely to draw criticism for being culturally insensitive.Today,the savviest brands start with their global assets and IP as the foundation and t

92、hen incorporate design elements that reflect local tastes and trends.Chinese consumers want to feel as if they have access to the most sought-after products in other markets but slightly adapted to reflect their preferencesa sentiment particularly true in the luxury segment.As Chinese consumers beco

93、me more affluent,they are seeking sophisticated,thoughtful designs and better quality.Global brands are finding they need to honor Chinese consumers desire to voice their own creative identity and individuality.However,they often struggle to keep up with fierce competition from local brands,which te

94、nd to be more agile in launching new products.12Winning in China:Top priorities for global apparel and fashion brandsCompanies could take specific actions to hone product development for local markets.Reconfigure organizational structure to bridge the cultural gapEven if the main R&D team is based i

95、n the companys headquarters,creating a local team for design,insights,and product development could be critical.This team can synchronize with its global counterparts to create products that cater to the unique needs of Chinese consumers and prevent cultural missteps in the process.Accelerate time t

96、o marketA“test and chase”development approach can boost production speed and agility,empowering brands to keep pace with local competitors.Data and analytics help identify the products and features that have the potential to become the next trend.In this model,brands quickly develop new products and

97、 test them with smaller rollouts or on social-media platforms such as Douyin.For example,LOrals R&D team uses digital partnerships to gain access to consumer insights that inform product development.Focus groups and a survey of 1,000 consumers who bought facial cream on Tmall uncovered specific skin

98、-care needs.One key insight was that consumers wanted 5 “Innovating customer experiences,”November 19,2020;“How LOral won Singles Day,”November 26,2019;“Innovating products,”June 4,2021;“LOral:How an international brand,”January 20,2022.a product they could use when staying up late.In response,LOral

99、 developed Midnight Cream,which was rolled out first on Tmall as part of the test-and-chase approach.After selling more than 100,000 units of Midnight Cream on launch day,LOral quickly scaled up production.5 Adapt supply chains for increased agilityDemand patterns are more dynamic in China compared

100、with mature markets,for several reasons.Chinese consumers are accustomed to faster new-product design cycleswhich can be as fast as a few weeks for select categories.In addition,omnichannel activities,from live streams to nationwide shopping events such as Double 11,can result in massive surges in d

101、emand in short time frames.Last,a complex mix of offline stores in different regions along with online channels leads to multiple business units that can strain limited supply chain resources.To cope,technological innovations can enable supply chains to move with greater speed and agility.For exampl

102、e,Alibaba opened the Xunxi Digital Factory in Hangzhou in 2020,pioneering a new manufacturing model.Harnessing the power of the internet giants cloud-computing infrastructure,13 Prasit photo/Getty ImagesWinning in China:Top priorities for global apparel and fashion brandsthe factory now achieves rea

103、l-time resourcing and production of small-batch orders at low cost and high efficiency.AI helps forecast demand and sales needs,minimizing revenue loss from excess inventory.Given the Chinese markets unique needs,companies should be prepared to tailor their supply chain strategy accordingly.Embrace

104、data-driven planningThe pace of consumer trends means that companies cant rely on historical data alone.Instead,they should integrate market and frontline insights and implement an analytics-driven solution to inform supply chain planning and manage this highly dynamic demand.Data-driven planning al

105、lows brands to prioritize resources for critical goods and deplete less-popular products as fast as possible.Segment supply chain capacityBecause China will continue to be one of the main production bases for global apparel,companies have an opportunity to build a dedicated“China for China”supply ch

106、ain while leveraging their existing infrastructure for all other global markets.Using data-driven insights,brands may be able to develop specific supply chain strategies by product segment,create different production speed lanes,and set up required supplier partnerships.Prioritize tech and digital l

107、ocalization for enhanced resilience Having the right technology and the right digital infrastructure and team in place is necessary to create seamless,localized experiences for consumers.The bar to compete has risen for multinational brands,which must now match the comprehensive and innovative digit

108、al functionalities of their Chinese counterparts.The Chinese regulatory landscape is also changing;for example,the the Data Security Law and the Personal Information Protection Law were implemented in 2021.We expect growing attention toward restrictive privacy regulations,stringent laws on cross-bor

109、der data access and transfer,and multilevel protection schemes and compliance requirements.Brands can make targeted investments in technology to ensure they have the necessary capabilities to keep pace with local market trends.Respond to shifts in data regulationsGlobal companies in China could buil

110、d greater flexibility into their operating models so they can respond quickly to regulatory changes.They could also migrate required systems and localize data access,storage,and processing to bolster resilience if regulations on cross-border data transfers become more restrictive.Deliver digital pro

111、ducts,potentially through strategic partnershipsFor front-end experiences,user interfaces(UI),and user experience(UX),it can be nearly impossible for an overseas-based tech team to design effective digital products for China,given the insular nature of the countrys social-media and online channels.F

112、urther,while global consistency remains critical to a holistic brand experience,Chinese consumers are increasingly expecting hyperlocalization.Differences between Chinas digital preferences are often subtle,ranging from the cosmetic(such as the use of colors and button arrangements)to the functional

113、(including live video chat functionality and integration with local channels).Companies with a local tech stack and capabilities are also better equipped to explore integration with strategic players and superplatforms in the Chinese digital ecosystem,such as AliPay,Tmall,and WeChat.14Winning in Chi

114、na:Top priorities for global apparel and fashion brandsEnable collaboration between global and local functionsCompanies operational models would have to evolve to enable localization,and leaders must balance the need to respond quickly to shifts on the ground with the ability to tap into their globa

115、l innovations.A China-based team would be better positioned than global teams to support the migrated stack,optimize and maintain operations,and use data to inform decision making.However,new governance and processes would be needed to guide global and local collaboration.Breaking into the Chinese m

116、arket is not without its challenges.Yet for every brand that has tried and failed,others have succeeded.Whether a brand or company wins ultimately depends on truly knowing Chinese consumers,market dynamics,and competitors and on harnessing global IP and assets.The levers we have highlighted can help

117、 global companies gain an accurate and robust understanding of the Chinese landscape and adapt accordingly,thereby opening the door to one of the worlds most exciting markets.15Designed by McKinsey Global PublishingCopyright 2023 McKinsey&Company.All rights reserved.Alice Scalco and Michael Straub a

118、re associate partners in McKinseys Hong Kong office,Jacob Wang is an associate partner in the Shanghai office,and Daniel Zipser is a senior partner in the Shenzhen office.The authors wish to thank Achim Berg,Lambert Bu,Cherry Chen,Asina de Branche,Johnny Ho,Connie Leung,Ray Liu,Doris Lu,Alex Sawaya,

119、Zheng Sun,Kevin Wei Wang,Rebecca Zhang,Cherie Zhang,and members of the China research team for their contributions to this article.Scan Download PersonalizeFind more content like this on the McKinsey Insights AppWinning in China:Top priorities for global apparel and fashion brandsAbout the researchT

120、he following sources greatly aided our analysis in this article:State of Fashion 2023.The State of Fashion is an annual report by the Business of Fashion(BoF)and McKinsey that provides a comprehensive,global perspective on the fashion industry and major industry themes.This edition was published on

121、November 30,2022.McKinsey China Consumer Annual Survey,20052022.McKinsey China Consumer Annual Research combined a comprehensive survey of Chinese consumers with ethnographic research.The latest wave of the survey was conducted in July 2022 and is part of a series of comprehensive surveys of Chinese

122、 consumer behavior from 2005 to the present.The sample for the latest round included 6,700 respondents from 44 cities and nearby rural areas,representing approximately 90 percent of Chinas GDP and more than half of its population.McKinsey Gen Z Survey,2019.Generation Z(born 19962012)is coming of age

123、.By 2025,the group will make up a quarter of the AsiaPacific regions populationthe same as millennials(born 19801995).To understand the distinctive ways that Gen Z researches,considers,purchases,and uses products,McKinsey surveyed more than 16,000 consumers in six countriesAustralia,China,Indonesia,

124、Japan,South Korea,and Thailandin the second half of 2019.The results were compared across three generations:Gen Z,millennials,and Gen X(born 19651979).McKinsey Luxury Consumer Survey,2022.McKinsey has conducted both quantitative and qualitative research on luxury buyers in China,South Korea,and Japa

125、n.The quantitative research was conducted in March 2022 with 3,500 luxury consumers across the three markets,covering more than 130 cities and regions with a balanced gender split and age distribution across respondents.In addition to the survey,we launched luxury consumer ethnographic research in M

126、arch and April 2022 consisting of in-depth interviews,in-situation observations,and shopping based on persona segmentation.McKinsey Future of Wellness Survey,2020.Our Future of Wellness research captures the attitudes of wellness consumers within and across markets,allowing us to generate unique ins

127、ights with 1,500 samples in China.McKinsey COVID-19 China Consumer Pulse Survey,2022.Since the outbreak of COVID-19 in 2020,pulse surveys have helped develop longitudinal understanding of consumer behavior related to spending and purchase patterns and evolving channel preferences.We have launched su

128、rveys in more than 40 countries globally,including China,India,Japan,the United Kingdom,and the United States.So far,we have accumulated more than 50,000 samples across 15 waves of research.The latest wave was conducted from August to September 2022.McKinsey Global Institute(MGI).MGI Insights China

129、is a proprietary econometric model containing more than 30,000 equations simulating Chinas demographics,economy,income levels,and consumer demand to 2040 at both the national and city level.The model also performs customized segmentation analysis on regions and clusters and combines economic measure

130、s with Chinese consumer survey data,tracking their behavior and preferences.McKinsey FashionScope.FashionScope is a proprietary city-level forecasting tool for the fashion industry.It provides forecasted market sizes for five major market segments:clothing,footwear,jewelry,personal accessories,and sports apparel.It leverages in-depth analysis of various economic drivers for each market and covers about 2,500 cities globally.16