I’m going to make a very bold statement here–soon China will dictate global fashion and will have more influence than Paris, Milan, and New York City will. Obviously, this isn’t happening this year, nor will it happen next year, but given the macro and micro economic factors that will drive China’s growth coupled with the country’s billion-plus population, fashion companies are already paying very close attention to the country.
By 2020, China’s affluent population is expected to reach 270 million, making the Chinese fashion market the largest in the world. The Chinese population already has an affinity toward high-end fashion, and China’s consumers are more than eager to spend a lot of money on Western fashion brands.
Michael Kors Holdings Ltd (NYSE:KORS) is known for its high-end bags, shoes and accessories. Its target market is typically professional and successful 20-to-35 year-old women.
Michael Kors Holdings Ltd (NYSE:KORS) recently launched a Chinese website and adorned some of the most famous influential Chinese celebrities with Kors’ clothing and accessories.
Source: Jing Daily: Model Shu Pei Qin decked in head to toe with Michal Kors.
Judging by recent financial results, Coach, Inc. (NYSE:COH) is struggling with its faded, old, “passé” image in North America and Europe. Analysts are missing the fact that Coach, Inc. (NYSE:COH) is amongst the largest and most popular luxury retailers in China.
In the first three months of this year, Coach, Inc. (NYSE:COH) proved its dominance in the Chinese market by increasing sales by 60%, while global sales only grew 17%. Analysts are estimating sales in China to exceed $400 million in 2013, up from around $300 million in 2012.
With over 100 locations in China, and a recently expanded offering to online retailing, Coach, Inc. (NYSE:COH) is perfectly positioned to continue dominating the Chinese market through its advanced multi-distribution channel.
Source: Jing Daily: Coach marketed towards Chinese clients.
The popular American retailer The Gap Inc. (NYSE:GPS) has ambitious plans to expand its many different lines to China. Old Navy and Banana Republic will soon be available to Chinese consumers, as currently Gap has 33 stores under its flagship name.
The Gap Inc. (NYSE:GPS) hopes to have as much as 85 stores in China, representing an aggressive push in to the coveted and highly-regarded market. While The Gap is considered to be somewhat late to the party, there is no doubt that the company can succeed even if the market is crowded with competition. In addition to playing the Chinese growth story, The Gap Inc. (NYSE:GPS) is also expanding aggressively to other emerging markets, such as Brazil and India.
Source: Here & Now and AP: Western brands, such as Gap plays a part of daily life in China.
Conclusion
Just how sexy can returns be? Well, it’s important to put things in perspective. Just three years ago the Chinese luxury goods market represented 2% of global sales. In only seven years from now, this number is projected to be close to 20% of global sales. This essentially implies that for every $100 in global revenue from a luxury-goods maker, $20 will come from China. Investors will be greatly rewarded with a little bit of patience while we sit back and watch hundreds of millions of Chinese people enter the middle class and demand luxury products.
The Chinese fashion market is receiving a lot of attention, and it is a remarkable story to follow. Rapid economic growth is changing the dynamics of the population, and in addition to fashion items, other luxury goods, such as high-end spors cars, are in great demand. Companies with a successful Chinese presence can leverage less-than-stellar sales from other key markets and can still provide shareholders with respectful returns.
The article 3 Fashion Companies Expanding in China That Offer Sexy Returns originally appeared on Fool.com is written by Jayson Derrick.
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