China’s retail scene never ceases to amaze me. What is of special interest to me is how ruthlessly competitive the market is. The market we have been operating in with our own fashion accessories brand TWICE for the last ten years. And a market that our team at OmniChannel China is now continuously scouting and examining on behalf of European and US brand clients eager to start their own China story.
Competition exists on different levels: between foreign and Chinese brands, Chinese brands among each other, and lastly, the online versus offline variety of competition. Lately I have been reading, again, in the Chinese press about the founder of Miniso 名创优品. For us, Mr. Ye Guofu 叶国富 is an old acquaintance and competitor of ours. He started and built cheap fashion accessories chain Ayaya 阿呀呀 into a 1500-store franchise behemoth, now operating under a new name - MixBox 美爆.
I remember, back in the day, sitting in a business meeting in Shanghai with some top execs from American accessories brand Claire’s. At the time they were doing some early reconnaissance on a potential China market entry. I warned them that they are in the country where most of their cheap products are being manufactured and that a cheap clone had already emerged and would be a tough competitor. They ignored the advice and started opening stores in Shanghai only to leave the country after a short time admitting defeat. The old “Crocodile in the Yangtze” analogy made famous by Jack Ma comes to mind.
Meanwhile, Mr. Ye has not wasted his time and honed his craft which resulted in the successful launch of Misono. He ensured quick publicity - good and bad - by blatantly knocking off Uniqlo's famous logo and business wise modeling itself after Japanese brand Loft and MUJI, and otherwise pretending to have Japanese pedigree with his token Japanese partner.
Lately, he has made a lot of noise, in particular aimed at the likes of Alibaba and JD accusing them of not protecting brands’ intellectual property and just winning by providing a platform. He alleges that only a place like China would allow abusive quasi-monopolies like the one Alibaba can call its own. In his words, this phenomenon has turned China’s ecommerce into an abnormal, monstrous thing. So far he has refused to do any online selling at all, while still reaching 10bn CNY in annual sales after only three years! He claims that this is only possible based on his philosophy that service, physical shopping environment and product innovation are key to survival. Looking at the shameless beginnings, this sounds strange coming from him. But one has to cut this man some slack. It takes courage in China to attack Jack Ma like that in public speeches. In turn he gets attacked in online forums as well for being a copycat with no innovation and a big mouth that, to top it all, plays the old game of cheating franchisees out of their money again. Again, my shopping mall contacts tell me that sales are strong in many of his stores, of which by now he has opened more than a thousand across the country. If his website is to be trusted he has already opened internationally in Malaysia, Philippines, Laos, Vietnam, Australia, Singapore, Japan, Turkey, Russia, Mexico and Canada. However, pressure to grow to large daily volume must be enormous considering the low average basket value in what many call his “10 Yuan Stores”. Apparently this is the reason why a number of his stores had already to close down in high rent places like Hong Kong. But he claims publicly that revenue in his international stores his 2-3 times higher than his domestic stores. Only the future will tell how far Mr. Ye Guofu can go this time around. One thing is for sure: the competition never sleeps, especially not in China. And it won’t stop in 2017 either. He already has a new formidable competitor who copied the copycat. The brand is called Ximiso 熙美诚品 and the logo seems kind of familiar even though you could argue there is innovation as this time it is a play on Korean pedigree. Funny sidenote: Ximiso ranks number one on Baidu when you search for the “original” Miniso. Well done, Ximiso! What also connects the two is their place of origin: Yiwu. As every seasoned China sourcing professional can attest, this is the city in Zhejiang province that the United Nations, the World Bank and Morgan Stanley all call the “largest small commodity wholesale market in the world”. It’s not exactly a tourist attraction but worth a visit if only to see the magnitude of the offering. Mind-boggling.
I am sure you thought the story ends here. But yet another copycat has now emerged in the race to be the strongest….uhhh, copycat. Name is Yosun 优尚诚品. And it is not from Yiwu but nearby Hangzhou. The point of differentiation stops here. Tough competition is here to stay for sure in 2017. Make sure you have a uinque and ever evolving brand if you plan on entering China. Please don’t count on the courts of law to save you here in China. Be practical. Be invincible. Just by bringing to life your brand. And thenm fight. As Frank Sinatra sang back in the day: “If you can make it there, you gonna make it anywhere”.
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