What luxury slowdown? Premium children’s clothing sales trend higher in China
While China’s luxury sector continues to be affected by an economic slowdown and the anti-corruption campaign, one brand is eyeing expansion - all because it makes shoes and dresses for children.
For Italian kidswear brand Gusella, operated under Hong Kong firm Dragon Crowd Enterprise, a typical customer will be a wealthy mother in Beijing.
It’s not uncommon for a patron to Gusella’s retail shop in the Chinese capital to pay up to 2,000 yuan (US$290) for a pair of leather shoes suitable for a toddler, even though they may be outgrown in just three months.
“They don’t mind spending,” said Caroline York, executive director of Gusella. “They just want what is good for their children. They want the best.”
Thanks to rising household incomes, young parents in China are spending more on their children’s shirts, dresses and shoes, making kidswear one of the fastest growing segments in the country’s consumer sector.
Fashion labels and retailers are trying to catch up by increasing their retail offerings of high-end children’s wear.
In addition to stores in Hong Kong and Milan, Italy, Gusella has four outlets in Beijing and one in Hangzhou. This year, the brand plans to open another shop in Nanjing, as part of a plan to boost its annual sales in China by 40 per cent to about 15 million yuan.
York said premium adult brands have enjoyed great success in China, and she is confident consumers would be as demanding and generous when it comes to premium footwear for children.
The decade-old one-child policy, which was only abandoned last year, also make Chinese parents more willing to spend on the next generation, she said.
“The mentality of the Chinese family is: ‘I have one child, this is my treasure,’” York said. “Not to mention Chinese people usually give birth quite young, so what you have are very affluent grandparents, who also filter into the system.”
Still, on average mainland parents spend less on kidswear than their peers in developed countries. In 2015 for children below the age of 14, average spending on clothing amounted to US$92 per child on the mainland, compared with US$435 in Japan and US$487 in the US, according to a report by Credit Suisse.
Chinese upper middle class households, defined as those earning US$16,000 to US$34,000 a year, will account for 54 per cent of urban households by 2020, up from 14 per cent in 2012, according to Nomura. The annual disposable income per capita is projected to reach US$6,393 in 2020, equivalent to 7 per cent annualised growth from 2015 to 2020.
Huang Jingjing, a 30-year-old mother from the southern city of Xiamen, regularly travels abroad to shop for her two sons.
Huang, who spoke to the South China Morning Post while shopping in the kidswear zone at an upmarket shopping centre in Causeway Bay, said in Xiamen it was difficult to find children’s clothing in her favourite brands such as Kenzo, Polo Ralph Lauren and Prada.
Huang and her husband, both government employees, together earn more than 1 million yuan a year. The family spends about 30,000 yuan buying clothes and shoes for their children every season, mostly on shopping trips to Hong Kong and Taiwan, she said.
“My older son is going to kindergarten, so he has to look good,” she said. “The domestic products are expensive and just ugly.”
Raymond Ching, an analyst at Credit Suisse, said sales of children’s clothing would grow 10 per cent annually in the coming two years, outperforming 7 per cent annual growth of the entire apparel sector.
But a large piece of the market is still up for grabs, as few listed companies are devoted to the children’s clothing sector while international brands have yet to take it as their focus in China, he added.
“The childrenswear market is mainly made up of many low-end local brands,” Ching said. “Major players are the key beneficiary of industry consolidation as the consumer trades up.”
Retailers in major cities have started to fill the void by bringing in overseas brands like Gusella. In October 2016, the high-end shopping centre LaPerle Plaza in Guangzhou offered the city’s first department store zone for luxury children’s wear, offering products by brands including FENDI, Armani and Hugo Boss.
The expanding market has also prompted apparel companies already present in China to invest more into the design and quality of children’s products.
Shenzhen-listed Semir Group, the largest kidswear company in China, has seen its revenue rising at an average 33 per cent annually from 2008 to 2015, according to Credit Suisse.
Sales of its children’s line will continue to grow at over 20 per cent annually in the coming two years as the company strengthen its brand awareness to win over better-off consumers, analysts say.
Last year, Nike formed a partnership with the Ministry of Education to support physical education in China, aiming to reach 2 million children.
In a similar move, Adidas in 2015 signed a three-year deal with the Chinese government to develop a football programme for 20 million students in 20,000 schools across the country.
“In the last five years kids hasn’t been a big focus for us,” Colin Currie, managing director of Adidas in China, told CKGSB Knowledge in an interview last year. “In the next five years kids will be a big growth driver for us.”
This story has been amended to reflect that the Semir Group is listed in Shenzhen.