Across The Border

Chinese lingerie makers urged to innovate to survive

Market remains too fragmented with around 3,000 manufactures operating across the country, none of whom hold more than a three per cent share

PUBLISHED : Monday, 22 August, 2016, 5:48pm
UPDATED : Monday, 22 August, 2016, 10:35pm

Over the past year, Wang Junyi says she has spent 3,000 yuan on lingerie.

But the 24-year-old accounting assistant still doesn’t have a favourite brand, as most products are just too similar, she says.

“There are lingerie stores all over Shenzhen.

“But most of their products and displays look too similar. I don’t think there is any real differences in the brands.”

And there lies the biggest ongoing problem facing Chinese lingerie producers.

There is no lack of spending power among consumers.

But experts say there is most definitely a lack of innovation in the domestic market, which has now resulted in a huge glut of average products aimed at the mass market, none of which offer anything distinctive to the customer.

According to data from research firm Frost & Sullivan, that problem is compounded too, by the fact the market remains too fragmented with around 3,000 lingerie manufactures operating across the country, none of whom claim to have more than a three per cent share.

The five biggest firms account for about six per cent measured by sales revenue. And with new firms still entering the fray, analysts are now warning we could be about to see a wave of failures, as many struggle to bring in the income they need, simply to survive.

The most recent figures, from the country’s two largest players, illustrate well how tough a market it is at present.

Cosmo Lady sells bras from 50 yuan and is focused on the mass Chinese market. But it has just announced a 35.6 per cent plunge in interim profit to 174.02 million yuan, which the firm’s chairman Zheng Yaonan blamed on fierce competition and the sluggish economic development.

The surge of the Micronet – a multi-level pyramid distribution scheme based on Wechat – during the first half also affected the performances of mass market players like us, because there is little to distinguish between the products in terms of design and functionality, Zheng said.

Eugene Mak, an analyst with China Merchants Securities, said this “over expansion” in the number of operating stores is why Cosmo Lady has struggled. The company also said it had closed 238 retail outlets in the first half.

All their products are too similar in terms of design and function. Without innovation, they are just not competitive
Dickie Wong, executive director of research at Kingston Financial Group

Cosmo’s main rival, Hong Kong-listed lingerie maker Embry Holding, meanwhile, also saw an 18 per cent fall in sales during the second quarter, and again blamed its slump on tougher competition.

Dickie Wong, executive director of research at Kingston Financial Group, says he sees no early signs of a recovery, especially for these focusing on the mass market.

“All their products are too similar in terms of design and function,” said Wong.

“Without innovation, they are just not competitive.”

To solve the problem, Wong says expenditure is urgently needed to improve product design and function.

According to Euromonitor, China’s female underwear market is expected to be worth US$25 billion by next year, double that of the United States, and will grow to $33 billion by 2020.

“The Chinese underwear market has fantastic potential and is growing tremendously,” said Joakim Gip, marketing director at 6IXTY8IGHT, which targets its fashion and lingerie products at females aged between 15-30 years old.

“I don’t think China’s slower economic growth will hit our business because our products are in lower price bracket and are aimed at younger customers,” added Gip.

“A least 50 per cent of our sales come from underwear, which is less sensitive to a weak economy.”

Gip insists all its stores in Hong Kong and the mainland are profitable, and revenue is so strong now it plans to open another 50 more in Macau, Taiwan and South Korea this year. The company also has plans to expand the number of accessories it sells.

But Gip said his biggest challenge lies in finding enough sales staff to work in its stores, and coping with higher rental costs.

He certainly won’t be taking on the risk of trying to upgrade his brands, however, a segment which is still dominated by many foreign makers.

Wong added that with China’s ongoing policy against conspicuous consumption, consumer tastes have matured, but he sees no slowdown in women’s purchasing power.

One significant change, he added, is that some buyers are shifting their spending from flashy branded bags and accessories, to sportswear and more discreet lingerie.

US brand Victoria’s Secret is set to open its first store in the mainland, and other companies including Italy’s ultra-luxury La Perla and Germany’s Triumph are adding sites.

Chinese firms including Beijing Aimer, Maniform and Ordifen (bought by Cosmo Lady last year) are already chasing the higher-end of the market, by raising their quality.

“I think the time is right now for some companies to either develop their own or buy quality foreign brands,” said Wong.