'Retail is lost skill in China'

European fashion companies whose aim is to sell directly to Chinese consumers are facing a difficult time. "It's a huge market. China is vast and, because of the big economic and cultural differences between the various regions, its

inhabitants are difficult to divide into target groups," says Simon Wei, independent advisor to enterprises such as Vipshop.com, an online Chinese shopping community. This past summer he spoke to FashionUnited about China and about the developments in the fashion industry.

After twenty years in paid employment - among other positions, he used to be the Operations Director of Mbaobao.com - Simon Wei decided to turn to independent consulting. "My parents were teachers. And in my opinion, you're a better teacher when you're older and have more life experience. The role of coach suits me. I enjoy helping people. And it feels good to watch businesses grow thanks to my tips. I am very much encouraged by people who improve their behaviour."

Data is a goldmine

These days Wei primarily advises Chinese online retailers. For example, on how to generate more traffic to their web shops and how to increase conversion. According to Wei fashion companies collect all sorts of data about their digital customers. However, a common problem for fashion companies on the web is how to use this data. "That's a new area, very interesting. It could possibly become my future specialty. Data is a goldmine. Some online stores are sitting on that goldmine, and posses a great deal of information about their customers and about online shopping in general, but don't know how to use or interpret this information."

Not every online fashion company has the same questions for Wei, because enterprises simply develop at different rates. But one subject keeps coming up. Wei: "The biggest problem for the online fashion industry in China is the huge supply. Fashion brands make mistakes when estimating how much needs to be produced." He takes this opportunity to recommend his client Vipshop.com - a shopping community comparable to the European Vente-Privée.com or ShopVip.com. "I see the beauty in this business model. Because the community is closed-off and the discounts aren't visible to non-members, the brand image remains intact. But Vipshop will face new challenges once the stock problem is solved. I'm giving that a lot of thought."

China as Nirvana

Many European companies regard China as the new paradise, full of potential buyers for their apparel. In the past year the number of Chinese online buyers increased by 43 percent to roughly 250 million. And although Wei believes that 35 percent of all Chinese retail will take place online by 2020, he still wishes to temper the enthusiasm of European players. "Yes, the time is ripe for doing business in China, but think hard about your strategy. Do you want aggressive expansion or cautious growth?" He laughs. "No, there isn't just one formula for success in China." According to the advisor, it is important for foreign companies to find a local partner, in order to get to know the country and the consumers. Furthermore, the Chinese value foreigners who help grow Chinese companies.

"Retail is a lost skill in China. Many shop owners actually earn their money in real estate. Those who wish to open physical stores should think long and hard about the number of square meters. More isn't always better, because it makes putting the consumer first, impossible."

There are also opportunities for retailers, thanks to the mobile phone. Wei provides an example. "You walk into a store with your family, your phone connects to the Wifi and is able to identify which target group you belong to based on your phone number. You receive special deals." Wei believes that mobile phones are going to determine the future of shopping. "Consumers in a store are already receiving more information via their smartphone than through the staff."

Text: Yasmine Esser

Translation: Wendela van den Broek