The brand for fashion and lifestyle. Fashion supply chain strategies for China China’s rapidly swelling ranks of style-conscious consumers, with money to burn on the latest fashion, represent an exciting prospect for international brands. Established names such as Chanel, voted China’s favourite luxury brand for 2013 1, are growing alongside fast fashion giants such as H&M and Zara. And this year, China overtook the USA as the world’s largest digital retail market, with Chinese shoppers spending an estimated USD296 billion compared with the USD252 billion spent by US e-shoppers. 2 The apparel sector sales make up around 13 percent of e-commerce purchases 2. Western fashion e-tailers have been keen to enter the market and take a slice of the pie already enjoyed by Chinese e-commerce giants such as Taobao and Tmall, two of e-commerce giant Alibaba’s biggest businesses, Vancl, M18 and JingDong. www.kerrylogistics.com © Kerry Logistics Network Ltd. All rights reserved. Getting the balance The UK’s largest on-line fashion retailer, Forecasting and understanding demand is key. right between bricks ASOS, launched its Chinese web-site in the second week of November. Chinese shoppers are historically frugal and and mortar stores and like a bargain. They expect a high level of e-commerce is Kerry Logistics is supporting its service and speed when it comes to shipping, important. e-commerce platform in Shanghai, and expecting costs to be minimal or free, and managing freight from the British retailer’s UK orders to arrive the next day, or even the global hub into China. same day, at no additional cost. They expect to be able to pay Cash on Delivery (COD) and We are operating more than 6,300 square they demand a slick Returns process. metres of warehousing for ASOS, providing import agency services, managing import Balance customs brokerage and providing domestic Getting the balance right between bricks and e-fulfillment. mortar stores – retail real estate is incredibly expensive – and developing e-commerce is Value-added services will range from important. re-conditioning of consumer returns to product localization. At Kerry Logistics, we have witnessed a shift in trends on this. The model two or three years Market challenges ago was to open up retail stores, but now the But the Chinese market comes with its own trend is to open a flagship store in Hong Kong, challenges, and brands wanting to launch Singapore, or Shanghai, for example, and set there need to do their homework. up an e-commerce platform to supply the rest of Asia, with a hub for distribution close to the China has vast regional differences, for a start, largest percentage of suppliers. and Chinese consumers are different shapes and sizes to Western buyers, and have Dependent on volume and supplier location, different spending patterns and expectations. that hub is traditionally in Hong Kong, which is www.kerrylogistics.com © Kerry Logistics Network Ltd. All rights reserved. Distribution and delivery are the next challenges. There are well-established warehouses and Distribution Centres (DCs) in properly- equipped logistics parks, and brands can expect to be able to choose from a suite of services including, for example, Garment on Hanger, which might involve anything from steaming to ready for sale delivery. Distribution challenges But beyond the warehouse, come the challenges of distribution across vast distances. There is a good network of roads, but these are Expansion in China easier to operate in, although more expensive costly to use. Airfreight is an option, but again, requires a nuanced than, say, Shanghai. costs are high. understanding of the Expansion in China requires a nuanced Expensive retail real estate means that stores regulatory and tax understanding of the regulatory and tax regimes. often hold minimum stock, meaning regular regimes. replenishment is needed. City centres are very Before starting to trade, companies need to congested and there are often tight establish a Wholly Owned Foreign Enterprise regulations around when deliveries can be (WOFE) or a Foreign Invested Commercial made to malls. Enterprise (FICE), a process which can take months and involve hundreds of pages of At Kerry Logistics we manage over 11 million supporting documentation. sq ft of bonded and non-bonded logistics facilities across China, and a pan-China Local partners distribution network of over 1,400 self-owned There are multilayered tax and Customs issues, vehicles to service these needs. and regulations often change or are updated, sometimes at short notice, so it is important to Huge potential work with a local partner who has experience China holds huge potential for international on the ground. fashion brands, but there are a host of considerations, from understanding and China Inspection and Quarantine (CIQ) forecasting demand, to building a robust requirements are stringent, and checks on supply chain. garments involve a destructive test, leaving merchandise unfit for sale and so affecting Choosing a partner who understands the stock levels. The tests can also hold up goods market and can not only navigate the complex from clearing. compliance landscape, but can also build a slick supply chain coping with distance and The China General Administration of Quality cost and able to handle COD and smooth Supervision, Inspection and Quarantine returns process is a must. Bureau requires Chinese language labelling, including care labels and a Chinese Information Tag (CIT), as well as ticket 1 2013 World Luxury Index, produced by Digital Luxury Group (DLG) printing and tagging. 2 data from Forrester Research and iResearch www.kerrylogistics.com © Kerry Logistics Network Ltd. All rights reserved. Kerry Logistics is a leading logistics service provider in Asia with extensive operations across Greater China and other countries in the region. It is principally engaged in the integrated logistics and international freight forwarding businesses and currently has more than 400 service locations in 35 countries and territories. Kerry Logistics provides customised supply chain solutions to a wide and diversified global customer base. It serves more than 40 of the Top 100 Best Global Brands across a spectrum of industries. Kerry Logistics Network Limited is a wholly owned subsidiary of the Hong Kong- listed Kerry Properties Limited. If you require local expertise, you can reach us by email contact.uk@kerrylogistics or call the Manchester office on + 44 (0) 161 873 8777 or the London office on +44 (0) 1322 296050. We provide professional, cost-effective and trusted supply certification as well as dedicated China Market Testing chain solutions tailored to each brand’s needs, serving tens of services: GB18401-2003 standard, regulatory, performance thousands of outlets every day. and eco-textile. Our world-class fashion and lifestyle logistics solutions include Nationwide Warehousing & Distribution buyers’ consolidation, freight and PO management, combined Leveraging our global network of world-class bonded and non- U-turn model and more. bonded logistics centres, we support your continual expansion and growth in key consumer markets. Secured packaging for In-depth Consultancy on Government high-fashion transportation and Cash-On-Delivery (COD) Regulations capabilities further add value to your business. Our thorough understanding of government regulations enables an immediate response to policy changes. Return Management Furthermore, we offer swift solutions to international We provide simultaneous handling of replenishment and customers meeting new requirements, such as on fabric test return point of purchase, quality check at store or in and standard code application. distribution centre, repacking for re-sales as well as disposal with environmental care or through donation to achieve Local Import and Export Services maximum value for your fashion and lifestyle products. We can act as import or export trading agent for foreign- invested brands, helping customers to explore new and Value-added Services challenging markets in all parts of Asia. Our value-added services include Garment-On-Hanger (GOH), steaming / ironing, creaseless garment transportation Duty and VAT Payment to ready-for-sale delivery, reduction of waste disposal and Our solutions cover consultation of duty and VAT payment unpacking time and minimal packing costs, plus add-on issues, flexible arrangements on duty, VAT prepayment and options satisfying additional requirements for Chinese speedy EDI tax payment, ensuring you are ahead of your Information Tag (CIT), Chinese Care Label in the China market. competitors every season. With our sophisticated KerrierVISION supply chain visibility Quality and Safety Testing system, we provide seamless integration and guarantees full Together with Intertek, the leading provider of quality and transparency and control throughout the supply chain. safety solutions, we provide comprehensive services from Delivering peace of mind to clients is our top priority. auditing, inspection and testing to quality assurance and DISCLAIMER: Although this white paper is designed to provide accurate and authoritative information with regard to the subject matter covered, the authors and their organizations accept no responsibility for errors and omissions. The paper contains information about Fashion and Lifestyle supply chain issues in China. The information is not advice and should not be treated as such. If you use any information found in this White Paper to make decisions or take actions, you do so at your own risk and acknowledge that the information carries no warranty, express or implied. www.kerrylogistics.com © Kerry Logistics Network Ltd. All rights reserved..