#localisation The Necessity of International Fashion Retailers Implementing Localisation in China Case Study of ASOS.cn
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Abstract This report contributes to the growing challenges faced by fashion retailers that fail to expand in China. This issue will be considered by exploring the strategic process of localisation. Previous studies have confirmed the necessity of localisation for long-term development in China with regards to several aspects, while few studies have systematically analysed localisation with specific examples within the fashion industry.
Winchester School of Art University of Southampton WN25 BA (Hons) Fashion Marketing ARTD3038 Final Fashion Marketing Project
Localisation is specifically significant for international brands that need to bridge the gap between Western and Eastern cultures. This report illustrates this topic using the case study of ASOS.cn. After reviewing and summarizing the research on localisation in China, this report then proposes the research combined with the practical example of ASOS.cn.
The purpose of this research to investigate the importance of localisation in China. The analysis involved five steps: identifying ASOS's consumer group, determining the external challenges in the Chinese market, and then based on two previous steps creating methods for a localised and adapted product and service. The research methods include designing a questionnaire, document analysis, and case study. The results reveal that a series of strategic errors have been made by ASOS.cn during the process of localisation, which caused its failure. localisation This once again emphasises the importance of localisation within China.
Keywords: localisation, international fashion retailers, case study, China, Asos.cn
Chuwei Tang STUDENT ID: 27155498 Project Name: The Necessity of International Fashion Retailers Implementing Localisation in China - Case study of ASOS.cn Words count: 5293 words
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introduction
literature review
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research methods
research actions & result
conclusion
bibliography
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appendix
table of contents 5
The increasing globalisation and rapid growth of the economy offer multiple opportunities for fashion businesses to globally expand. China is the fastest growing consumer market (Baylis, Smith and Owens, 2013). It also has the greatest purchasing power internationally (Imf.org, 2014). The majority of Chinese individuals are attracted to international fashion companies and, thus, China's fashion industry is dominated by companies from France, Italy, United Kingdom, United States, Japan, etc. (HKTDC, 2016). However, despite the economic reforms that liberalized this huge potential market, many fashion retailers struggle to gain a foothold in China due to not understanding this complex market (Yen and Abosag, 2016). One significant focus for numerous international companies within the Chinese market is localisation. Previous studies have intensively demonstrated how international brands could adapt and reorient their business approaches and practices for the Chinese market including their advertising, culture (Ferle, Edwards and Lee, 2008), or strategy implementation (Fryxell, Butler and Choi, 2004).
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However, previous examinations have not specifically examined the current fashion market in regards to the Chinese market. Given the referential value and practical significance of case studies (Gillham, 2010), an exhaustive examination should inevitably assist international brands to appropriately localise their businesses to the local market. ASOS, as the best example of a Western company, is the object of this investigation. ASOS has been hugely successful in most Western countries, but has not been successful in China. The following sections review the literature on the necessity and importance of localisation in China and fully argues the advantages of localisation for long-term development. Once the examination techniques have been established, this examination explains the results and outcomes before providing a conclusion that summarises the results, restrictions, and implications..
Introduction
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2. literature review The term 'localisation' emerged in the early 1990s and could be contextually different as it is widely applied in translation, IT, medical, chemical industry, etc. (Dunne, 2006). Localisation, globalisation, language engineering, and software internationalisation have all become key issues for companies that often operate in international markets. However, localisation is also regarded as the core element for products to become globalised (Esselink, 2000). International brands strengthen their competitiveness and improve their performance with efficient localisation strategies (Czinkota and Ronkainen, 2013). Nicholson, Gómez, and Gao (2011) suggested that the cost of localisation is different due to regional variations, which produces a long-lasting affect on financial results and competitiveness. Examinations, such as Calantone (2006) and Shoham (1996), have explored localisation within combined advertising within various markets. Other studies have focused on the level of localisation that is managed by different international brands (Lihong and Goffin, 2001). Meanwhile, some examinations have investigated the challenges in regards to how foreign partners' strategic choices and relational capabilities also affect localisation (Steenkamp and Geyskens, 2014).
2 Figure 1: ASOS China in its close-of-business sale
Consequently, these formal studies have largely confirmed the significance of localisation. The following review mainly focuses on the necessity of localisation for international brands that intend to trade in China. The beginning of the 21st century witnessed a tremendous increase in China's status as a global market leader. China's rapid growth has had a crucial impact on the global economy (Paulet and Rowley, 2017). According to Choi and Choo (2016), the rapid growth within China's economy resulted in significant employment opportunities and increased disposable income levels, which then caused greater purchases and desires for fashion products. The Chinese fashion market is worth £98 billion and is liable for 30% of the global fashion market's growth. According to the report from PureLondon, Chinese consumers spent $228 billion (≈£1.7 hundred million) on clothing, footwear, and jewellery in 2013 (PureLondon, 2015). Alexander and Doherty (2010) explained that within this circumstance numerous fashion companies have become drastically globalised to implement one international plan, which included domestic advertising methods to specifically reach Chinese customers. However, the quick growth within the Chinese market has not progressed like other markets. Therefore, identifying methods for operating within regional markets and supplying suitable methods is substantially difficult. As many brands have found, an energetic performance within the principal market does not guarantee success elsewhere. Many successful companies have failed in the Chinese market because they did not have an effective localisation strategy. Fayol-Song (2011) explained that 25-30% of companies within the Chinese market fail. Lasserre and Ching (1997) explained implementing localisation in China as 'simply too overwhelming' due to three primary reasons.
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The main reason is cost monitoring. Generally, without proper localisation, the cost may be three times higher than local business costs and sometimes these costs can be ten times higher and even fifty times greater (Kobrin, 1988, Wong and Law, 1999, Selmer, 2003). However, localisation could be reduced by 50% with tax protection, loan venues, equipment costs, and transportation (Lasserre and Ching, 1997). The investigation into ChinaBiz (2005) indicated that China is one of the most expensive countries for international brands; specifically within first-tier cities such as Beijing, Shanghai, and Shenzhen. As a result, appropriate localisation strategies could fairly reduce management costs (Fayol-Song, 2011). Secondly, localisation is conducive for brands to gain a thorough knowledge of the local market. According to Buckley, Clegg, and Tan (2006), localisation helps international companies to overcome challenges and cultural and language conflicts with China as cultural differences immediately impact customer's actions and decisions. China is characterized by its language environment, which has high class differences and increasingly brand loyalty. Faced with these cultural gaps, foreign companies need to gain a proficient, in-depth understanding of the local market. Likewise, the regulative and political environment represents a huge challenge in China. Even if improvements increasingly occur, the constant changes in the environment and the publication of new regulations and legislations must be constantly understood and applied to foreign businesses. As a result, local managers have an edge over foreigns, which enables brands to better adapt their strategy to maximize the opportunities as well as avoid making legal errors (Fayol-Song, 2011).
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Regardless of the various benefits, localisation also has numerous drawbacks. For instance, although local employees have a better understanding of local issues, expatriates thoroughly understand the brand's essence. Additionally, localisation includes high up-front investment s for customization, which applies to companies that see cost reduction as subordination (Peng, 2009).
One method for international companies to improve their relationship with the Chinese government is through localisation as the Chinese government provides preferential treatment to regional companies. Authorities may treat localisation as foundation of foreign brands in China (Lasserre and Ching, 1997). Finally, localisation serves to retain local managerial talents and may boost the morale of Chinese staff. The unavailability of local managerial talents is a major problem and the difficulties with retaining recruited employees is an even greater concern. According to Taylor (2014), employment turnover rate is 25% higher in China than other nations. Gaining the loyalty of local employees is inevitable for international brands. Properly allocating responsibilities is considered an effective approach for increasing the loyalty of Chinese local employees (Selmer, 2004).
More significantly, it is evident that localisation has both advantages and disadvantages in China and the advantages far outweigh the disadvantages in regards to long-term development. International brands should trade-off discreetly based on its own conditions (Wong and Law, 1999). The peculiarities of the issues in the Chinese market require different business approaches and practices are recognised in this report. This report adopts a case study of the British online-only retailer ASOS.
As a global fashion brand, ASOS is committed to inspiring around twenty fashion followers. According to ASOS. PLC (2016), ASOS stocks over 85,000 high-end brands and own-brand goods. It provides these products internationally from warehouses located within the United Kingdom, United States, and Europe. The noticeable growth of online fashion retailer ASOS internationally reveals consumers' desires for fast fashion brands as well as the profit opportunities available to companies that emerge into new markets. As early as 2011, Nick Robertson, the Chief Executive of ASOS, announced that they were working on emerging into China (ASOS.PLC, 2011). ASOS then opened an international office in Shanghai in 2013 and the ASOS online Chinese site launched during the same year (ASOS PLC, 2005). Although ASOS invested many financial resources and a large workforce into developing its Chinese market, ASOS, after struggling with the market for three years, decided to remove the company from the Chinese market (Alibhai, 2016). The annual reports from 2014 to 2016 revealed the issues encountered by this British fashion tycoon. Since 2014, ASOS lost ÂŁ8.6 m in the Chinese market (ASOS PLC, 2014). China was then ranked 26th in the global retail stores in 2015 and incurred costs of ÂŁ5.2m (ASOS PLC, 2015). In May 2016, ASOS made the decision to stop conducting business in China as its operations had incurred a total loss of ÂŁ3.6m (ASOS PLC, 2016). ASOS is distinctly positioned 'As Seen on Screen' and has unique operating techniques, which has allowed it to obtain a dominant status within the international fashion industry. However, this originally small company encountered significant issues within China. The question must be asked what essential error occurred during the localisation process? Therefore, the next section introduces the research methods of this study.
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Although previous research has demonstrated the importance of localisation in China from various aspects, few studies have investigated the fashion industry in regards to concrete cases. A case study could solve the specific research problem and consider integrating evidence and results (Gillham, 2010). ASOS, as a representative of Western companies, was selected as the object of an in-depth examination to reflect the universal problem encountered by most foreign brands.
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research methods
A successful localisation could increase brand awareness to some extent (Park, Shintaku, and Amano, 2010). As a result, a survey was designed to examine the brand awareness and consumption experience among its consumers. The survey includes 15 questions: the first 1-3 questions collects the information from respondents while the following 4 and 5 assess the general perceptions and brand awareness and the remaining questions are geared towards consumers that have shopped the ASOS Chinese site previously. The survey covered Chinese consumers between the ages of 16-34 as the target market groups of ASOS. The 200 subjects were selected from both genders by stratified random sampling. The questionnaires were distributed online. It attempted to gather information on customers for localisation and their feedback is supported by information obtained through the examination and ultimate evaluation.
4. Research actions & result The process of the localisation includes three primary considerations: identifying local target consumers; gaining knowledge of external factors in the Chinese market; and adapting the core products, prices, and sales channels. Each of these three aspects will be considered within the following section.
4.1 Characteristics of Modern Millennial Chinese Consumers 4.2 External Challenging Factors in the Chinese Market 4.3 Adaption to Products and Services 4.4 Result and Discussion
In addition to the previous academic journals and books, this report widely adopted a document analysis. Few academic studies focus on modern Chinese millennial consumers and ASOS in China. Documents are obtained from reliable management consulting firms, such as McKinsey & Company and Deloitte China, international organisations, such as International Monetary Fund (IMF) and World Economic Forum (WEF), and ASOS' official annual report. It offers the latest data on certain aspects of localisation and visually reflects the relative information that can be adopted by this report.
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· consumption trends 4.1 Characteristics of Modern Millennial Chinese Consumers The discussion of localisation begins by recognizing local customers' needs and then satisfying them (Quelch and Deshpande, 2004). As the Chinese market has been successfully evaluated for decades, the emergence of China as a favourable consumer market has generated massive opportunities for overseas fashion brands. Therefore, Kaynak and Chan (2014) argued that companies must comprehensively understand Chinese customers to achieve brand competitiveness and ensure sustained success. ASOS’s key consumers in China are individuals between 16 to 34 years old also known as millennials. "Chinese millennials are a complex group", said David Lung from Deloitte China (Allen, 2015). Although the regional disparity has gradually reduced, consumption patterns differ between consumers living in different areas (Wong and Yu, 2003). So this chapter will analyse modern millennial Chinese consumers' consumption trends, purchasing approches, and channels.
Chinese millennials are more willing to pay for premium products (O'Cass and Choy, 2008). 59% of Chinese millennials are currently attracted to high-end goods and international companies, as evident in Appendix 4, continue to have a dominant status in the high-end market (Zipser, Chen, and Gong, 2016). O'Cass and Choy (2008) explained that Chinese customers typically consider foreign goods to be superior to local goods. Furthermore, Chinese millennials assimilate Western concepts of increased brand loyalty. Given the short history of consumption culture in China, Chinese consumers are criticised for lacking early brand identity and loyalty (Zhang and Stening, 2010). However, some changes are evident. According to Zipser, Chen, and Gong (2016), the amount of customers keens to consider buying from unfamiliar brands decreased by 10% between 2012 and 2015 from 40% to 30%. ASOS surrendered its biggest advantage of an abundant supply of third-party brands, including medium and high-end brands, that could appeal to modern Chinese millennials consumers' taste. Chinese millennials currently have greater degrees of brand loyalty, but ASOS, as an unfamiliar brand, was not visible and disregarded the developing circumstances.
· purchasing approaches
Chinese consumers encourage global innovations and creative digitalisation and social media (Ng, Lyons and Schweitzer, 2014). According to Chiu, Lin, and Silverman (2012), social media has had a recognisable impact on Chinese customers' buying decisions as customers have a greater probability of buying a good or service based on positive Internet or social media reviews from their friends. Millennials consider the Internet as a major resource for considering new products (Randau and Medinskaya, 2015). Furthermore, Chinese millennials are synonymous with digitalization and have enthusiastic expectations for technology. These millennials also enjoy far more choices and privileges than any other generation (Accenture, 2014). Some fashion retailers have noticed the important of technology from luxury brand Dior sell its handbag via WeChat to Coach allows online and in-store product exchange services (Pike, 2016 and Pan, 2017). In this context, ASOS appealed to Chinese smartphone users with a transactional app. The app was designed especially for China’s 700 million smartphone users and are fully shoppable using Hybris and Alipay platforms. Parry (2015) explained that successfully utilising Chinese e-commerce platforms obtained 60% of online traffic. Retailers need to remember that social media and digitalisation have become two powerful approaches for success in the Chinese millennial consumer market.
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9 Figure 2: A woman carries shopping bags as she walks past a mall in Beijing, 2015
¡ purchasing channels
Dixit and Sinha (2016) explained that despite China being the biggest international e-commerce market, physical retailers continue to dominate. 72% of Internet purchases, as evident in Appendix 3, from millennials continue to shop in physical retail locations due to the buying attraction (Zipser, Chen, and Gong, 2016). Consumer perceptions of the physical store environment is accepted as an important factor for retailers' success (Lin and Yeh, 2013). It also plays an important part in physical stores retaining customers and increasing their trust of online stores (Mangalindan, 2006). A study from Jap, Walters, and Kuo (2014), revealed that most consumers require a seamless experience across online and offline purchasing channels. Moreover, fashion retailers now are more willing to make full use of technology and effective technical equipment in the store. To further attract Chinese millennials, retailers tend are often focused on entertainment and technological aspects (Sha and Lai, 2013). However, ASOS is unwilling to have physical retail stores. Its founder Nick Robertson insists that the notion is "counterintuitive" (Bold, 2013). Although ASOS launched its business both on the official site and in partnership with Tmall store, it struggled to build a reputation among Chinese consumers without a physical store (Sudhakar, 2012).
4.2 external challenging factors in Chinese market
To be able to succeed in the Chinese market, brands should identify the challenging factors that may occur including socio-cultural, legal, political, technical, digital, and economic factors. These four elements of the Chinese market will be discussed in greater depth in the following sections (Singh, 2012).
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11 Figure 3: central business district in Beijing, 2011
· Legal & Political factor Wei, Clegg, and Ma (2014) explained that the Chinese government progressively regulates and monitors the business market and safeguards regional companies. This immediately affects localisation via legislation, jurisdictions, financial regulations and laws, and additional aspects. The legal factor presents tricky challenges when conducting business in China. ASOS established a warehouse in Shanghai to stock its products for distribution in China. ASOS.cn could, therefore, process orders directly from this local warehouse to provide delivery and return services to consumers rather than shipping its products from Britain. Hooi Lean, Huang, and Hong (2014) explained that despite companies opening Chinese stores, previously consumers did not need to pay import fees as the warehouses were located locally. ASOS.cn continued to encounter problems relating to the specific standards of care labels that explained the product materials and washing instructions (Imbruno, 2016). ASOS’ own brands were easier to manage, but it proved difficult to organise hundreds of designer brands. The complex regulations of the garment trade in China resulted in a loss of £4m in the last financial year for the company (ASOS Plc, 2015). In order to offset these extra costs, ASOS was forced to transfer the cost onto Chinese customers, which had a severe impact on the price and products of ASOS.cn.
· economic factor
Different countries have different culture and communication styles (Singh and Pereira, 2012). Before emerging onto a new market, Neil Saunders, a retail analyst at Conlumino, stated that Chinese and Western popular culture are very different so ASOS.cn should make changes based on the Chinese culture and society (Kharpal, 2013). ASOS.cn, however, ignored the vast cultural gaps that exists between Chinese and Western cultures; for example, backless dresses and high waist crop tops are rarely worn by the majority of Chinese consumers. The models on ASOS websites are not Chinese, which indicates that ASOS has not contemplated the physical bodily differences between Westerners and Asians. Furthermore, Chinese shoppers are accustomed to opening a new page when browsing new products, while on ASOS. cn users must click onto a new page which conflicts with consumers' behaviour. There are many details that ASOS.cn needs to consider to enhance its level of localisation.
In regards to the economic factor, companies need to understand various issues related to the economic development of the targeted country such as its tax structure, income distribution, economic growth rate, and patterns of foreign direct investment (Singh and Pereira, 2012). The economic conditions of the target country could affect the localisation and development process of retailers. After experiencing torrid economic growth for more than a decade, China's economy has drastically slowed down since 2014 (Economist.com, 2015). Freddie George, an analyst at Cantor Fitzgerald, suggested that this has had affect on the purchasing power of the burgeoning middle classes (Butler, 2016). According to Barton, Chen, and Jin (2013), China's recently emerged middle class is commonly composed of teenagers or individuals under 25 (i.e. born post mid-1980s) also known as millennials. This population is similar to ASOS' main consumers. Given the circumstances, this ultimately means that consumers often search for the best price. ASOS.cn does not have an advantage in terms of products or prices, which caused its initiatives in China to stall.
· Technical & Digital factor
As the most advanced digital market in the world, Chinese consumers may be one of the most tech-savvy groups of consumers (See Appendix 5). Some reports argue that Western fashion companies have been largely successful within China due to their inability to progress as quickly as the recent growth in digitalisation (ContactLab and Exane BNP Paribas, 2017). Digital fashion has been dominated by local competitors, while the most well-known company is Alibaba. Alibaba is the largest Internet company as it owns 80% of the Chinese e-commerce market (Gervasi, 2016). It is obvious that Alibaba's domination has created difficulties for ASOS.cn, as ASOS is an obscure new brand on this new market.
· Socio-cultural factor
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Figure 4: ASOS ss 2016 press day, 2015
¡ products localisation
ASOS currently sells over 85,000 designer brands and self-owned products on its UK main site. ASOS' increasing impact and luxury labels has caused a greater amount of companies to partner with this influential e-commerce site. Moreover, ASOS' initial own-label collection was introduced in 2003 in order to meet consumers' demands. Its own-label products were a huge success as they offered high fashion at affordable prices.
4.3 Adaption to Products and Service Localisation techniques attempt to comprehend local customers' desires and then alter the company's advertising techniques to match these desires as closely as possible. ASOS.cn, as an example, has not considered how its own condition can lead to major business errors and how these errors could highlight why implementing a localisation strategy is important (Singh, 2012).
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The questionnaire within this research included 200 participants with 46 participants that had previously bought items from ASOS. cn. 47.83% and 19.57% of shoppers expressed desires in a large amount of products and third-party brands respectively (See Appendix 1-8). However, ASOS' local warehouse in Shanghai offered a range of 6,000 products and did not often provide updates (Financial Times, 2016). In addition, the third parties’ brands represented only a slight portion of the market when ASOS initially introduced its products to China. Instead, its own-brand products are widely available. However, its own-label products had low visibility in this new market. Therefore, consumers preferred to purchase other fast fashion brands rather than products from this new, unfamiliar platform. ASOS.cn failed to fully utilize its comparative advantage of offering f many selective types of clothes. It is, therefore, apparent why ASOS experienced difficulties in selling its products.
Figure 5: cartoon from ASOS's microblog, 2015
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· Price Localisation
ASOS increasingly attempts to provide the hottest trends with excellent standard products at acceptable prices. According to ASOS's annual report and accounts for 2016, its average selling price per unit is £25.09 (ASOS Plc, 2016). Its products from third party brands have different prices, while its own-brand products range in price from £1.00 to £250.00. ASOS also offers a 10% discount to students, while the outlet and sale section can be found online throughout the year and they occasionally offer 50–80% discounts. Localisation should not just be applied to the company's products, but should also be applied to the prices of its products to ensure that these prices reflect local market demands. ASOS established the price of its Chinese site and Tmall as Chinese Yuan, which helps the customer to browse and select products. Nevertheless, in the survey of this report, 19.57% of consumers stated that the price was unreasonable when compared to the UK's official site (See Appendix 1-10). For example, its own-brand men's hoodie costs ¥323 (≈£36.2) on the Chinese site, but is on sale for ¥186.55 (≈£20.9) on the UK site (See Appendix 2). This means that there is a 50% price difference between the main site and Chinese site. As ASOS lacks sufficient products and has high prices, it not only missed the opportunity to target new Chinese consumers but also lost clients who regularly bought products on the UK site by cross-border shopping. Overall, price is the most common reason that shoppers abandon a purchase (McTaggart, Findlay and Parkin, 2013). Consumers in China have plenty of choices so ASOS may need to re-consider its pricelocalisation standard or must continuously innovate and improve product competitiveness to compete with similarly priced products.
ASOS refers to the concept as 'As Seen on Screen', while consistently insists that has always operated as an online business. As of August 2016, there are 1,348.7m visits annually, while there was a 22% growth in 2016 (ASOS Plc, 2016). As a result, ASOS utilizes direct routes to reduce distribution costs while the store also directly sells its products to consumers and the warehouse allows it to provide efficient deliveries and return services.
· Place Localisation
Distribution, logistics, retail infrastructure, and merchandising vary globally so retailers need to adapt localised strategies based on local consumer preferences (Singh, 2012). ASOS generated a dual sales channel after expanding into the Chinese market by launching an official Chinese site and teaming up with Tmall. However, customers want to try products to ensure they are appropriate, which restrains online fashion retailers' potential for growth (Hsiao, 2009). The report from Zipser, Chen, and Gong (2016) revealed that consumers are increasingly shopping online, but physical stores remain important sales channels. Physical retail locations and Internet platforms provide methods for customers to engage with companies. Customers' happiness with physical locations is overall greater than Internet platforms. 72% of Chinese online shoppers visit physical shops before making a purchase (See Appendix 3). ASOS, as an unfamiliar brand to most Chinese shoppers, lacks the support of a physical store, which means that it has an average competitive edge in contrast to other fast fashion brands that have high visible and plenty of stores (Hsiao, 2009).
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17 Figure 6: ASOS on sale, 2015
Figure 7: ASOS's app, 2015
200 Chinese people were investigated for the "ASOS Chinese market awareness and consumer" survey (see table 1 and table 2). The randomly surveyed audience included 142 women and 58 men from China. However, not all the questions were answered by the participants. As evident in Appendix 1-2, the majority of participants are students.
Figure 8: At The Altar of Innovation: How ASOS Changed Our Commitment To Millennial Buyers, 2016
147 of the participants work or study overseas, which implies s that ASOS as a foreign brand is certainly popular among overseas Chinese individuals. However, when asked “have you heard that ASOS launched its online store in China?� more than half of participants were unaware, which reveals that ASOS.cn lacks proper advertising in China. Meanwhile, 89.5% of consumers have never shopped the ASOS Chinese site. A more substantial impact, as evident in Appendix 1-4, 1-5, 1-6, and 1-7, is that only nine of the participants made more than 20 purchases from ASOS, which composes only 16.07% of ASOS' sales. Customers are most concerned with the price, diversity of products, and service. Simultaneously, ASOS promised to improve its products, price, after-sale service, delivery, and discounts. Furthermore, according to respondents, 45.24% of people reached the brand by social media, 35.71% of individuals were aware of ASOS due to search engines, and 11.9% of individuals were recommended by friends. Among the respondents, 78.57% of them never participated in any activities or sales launched by ASOS and only 15 respondents followed ASOS both on Tmall store and Microblog (See Appendix 1-8, 1-10, 1-11, 1-12, 1-13). The assessment of participants' general happiness produced surprising results as 2.44% of respondent stated they were somewhat dissatisfied and 73.17% of respondent expressed a degree of satisfaction. Specifically, consumers were satisfied with ASOS' payment methods, customer service, and return service. Four consumers were dissatisfied with the overall quality of issue handling (See Appendix 1-14, 1-15). In summary, the results of this survey indicate that ASOS lacks presence in China and has issues in its products, prices, and services. The lack of in-depth knowledge of Chinese consumer requirements has caused ASOS to be unable to supply adequate goods at suitable prices. According to the above analysis, ASOS failed because of improper localisation strategies. Other foreign brands that intend to expand to China should be warned by ASOS's circumstances.
Table 1: Summary of the survey
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conclusion
Table 2: Summary of the survey
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The case study examined the localisation process of ASOS.cn to review its experiences in China. The results revealed numerous strategic localisation mistakes within the Chinese market, which caused a deficit of £10m. The first step is to identify the local consumers. Chinese millennials are ASOS' target group and have also emerged as a key group in the world's second-largest economy (Daxueconsulting.com, 2017). This group has significant different consuming behaviour compared to Westerners, which requires further analysis of their consumption trends, purchasing channels, and approaches. Chinese millennial consumers desire premium products of non�local origins with increasing brand loyalty. They enjoy the convenience of both online and offline stores and follow new crazes on social media. As evident within the survey, they also favour recently developed technology and digital consumption channels. The external challenges of the Chinese market should then be determined. China E-Retail Market Report jointly released by Deloitte China and China Chain Store & Franchise Association (2016) verified that due to consistent rapid growth China has the largest share of the global retail market. However, the Chinese market has never been easy to penetrate due to some challenging factors such as the declining economic trend, complex regulation of foreign fashion brands, a distinct social-cultural environment, and local company's digital retail domination. The above research shows that any of these factors could seriously influence the process of localisation. Finally, after understanding consumers and eliminating the external challenges, fashion retailers must consider the selection of their core products, prices, and sales channels.
5.1 main finding
Overall, the research firstly uses a practical example to explain the importance of implementing localisation to international fashion retailers. The whole localisation process is worth considering and investigating thoroughly for all fashion brands.
5.2 limitations As always, this study may have some limitations that should be considered when explaining its findings. The research questionnaire collected insufficient feedback of specific consumer shopping experience with ASOS.cn due to its low name recognition. These figures fail to accurately represent ASOS' negative results. Additionally, to compare the strategic differences, ASOS's competitors ZARA and New Look were questionably introduced as the positive examples of localisation by a direct feature comparison chart in Appendix 6. However, there is limited data about these company's profitability in China because of commercial confidentiality, which does not clearly demonstrate the benefits of localisation. Furthermore, this case study focuses on ASOS to reveal the importance of localisation strategies for foreign brands that operate in China. The examination specifically considers ASOS to provide cautionary advice to other companies. In practice, the details should be adjusted by each enterprise according to its own situation and demand.
Adaptable to ASOS.cn's situation in China and its own condition, a "Mini Virtual Fitting room" is designed as a final creative output. It is aligned with the brand essence and all the relative, previously discussed, research. It is shaped like a telephone booth and is normally located at underground stations, shopping malls, and recreation centres as a live advert. It conforms to ASOS' principle of a solely online company and no offline advertising, as well as assure client confidentiality. However, the previous research indicates that is hard to establish a reputation without a physical store (Sudhakar, 2012). A minivirtual fitting room could address this issue to some extent while enjoying a favourable location could attract consumers. Secondly, the process of using this machine is technological and digital. By making an appointment on ASOS's official WeChat account, a code is provided to access the machine, or order directly, which caters to Chinese millennial consumers' high-tech tastes. Meanwhile, it avoids direct competition with local companies. This machine could help ASOS drive brand awareness and sales in a new way as well as encourage follow-up promotions. It can be employed from first-tier cities and uses usage to determine the following plan. The tactics suggested above are low cost tactics that can drive a lot of buzz to improve brand awareness. Certainly, this mini virtual fitting room is the first step for ASOS to open China’s market, the following adaption of products and services should be concern as well.
5.3 implication
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23 Figure 9: Illustrate by Chuwei Tang, 2017
6. bibliography Images: Figure 1 Clode, J. (2016). ASOS China in its close-of-business sale. [image] Available at: http://socialbrandwatch.com/wp-content/uploads/2016/04/ASOSsChina-Brand-Fail.png [Accessed 11 May 2017]. Figure 2 Wang, Z. (2015). A woman carries shopping bags as she walks past a mall in Beijing. [image] Available at: https://specials-images.forbesimg.com/ imageserve/490470474/960x0.jpg?fit=scale [Accessed 10 May 2017]. Figure 3 studiosuit (2010). central business district in Beijing. [image] Available at: http://studiosuit.nl/wp-content/uploads/2015/11/Beijing-CBD-1.jpg [Accessed 10 May 2017]. Figure 4 ASOS. Plc (2016). ASOS ss 2016 press day. [image] Available at: http://photo.weibo.com/3198152780/wbphotos/large/mid/3915271317757989/pid/be 9ff04cgw1eyk7isk9dlj21kw11xqg1 Figure 5 ASOS. Plc (2015). cartoon from ASOS's microblog. [image] Available at: http://www.weibo.com/3198152780/D3epTm8EU?from=pa ge_1006063198152780_profile&wvr=6&mod=weibotime&type=comment#_rnd1447152754710?affid=weibo [Accessed 12 May 2017]. Figure 6 ASOS Plc (2015). ASOS on sale. [image] Available at: http://www.asos.com/ [Accessed 10 May 2017].
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appendix 1: designed question Questionnaire
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appendix 2: pricing difference between ASOS.cn and the UK site
appendix 3: chinese millennial buying channles
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appendix 4: chinese millennial purchasing trend
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appendix 5: technology boom among chinese consumers
Table 3: camparision bwteen three brands To better target its Chinese audiences, many companies have forwardly adapted and localized its service and marketing mix. Some examples are from Spanish clothing and accessories retailer ZARA and global fashion retailer New Look, also from the British. Having entered the mainland China market in 2006, now it has 166 physical stores in over 60 cities. Inditex, the owner of clothing retailer ZARA, expressed optimistic about the future of ZARA in the Chinese market. New Look as a late-comer that opened its first two stores in China in 2014. As one of New look's core market, it was promising to open 500 of his New Look stores in just three years (Adegeest, 2016). The figure demonstrates the comparison between ASOS, ZARA and New Look by its marketing mix.
appendix 6: Best practice of 53 localized in China
appendix 7: SWOT analysis strengths One of the reasons why ASOS has achieved such great success in the UK and European market is due to the fact that it has extensive experience of promoting its platform through various publicity channels. Although ASOS.cn failed to sufficiently advertise its products which resulted in the company failing to succeed in the Chinese market, the brand can use this experience to its advantage and apply it to future work. For example, as a market-orientated company, ASOS’ Customer Relationship Management system helps ASOS to understand its customers and their buying behaviour, as well as collect information about its clients from the site registrations. By analysing a database of what its customers typically purchase along with the frequency, ASOS can directly target consumers and offer promotions by examining segments of consumers and evaluate the type of products which will attract individual consumers; the company will then target customers on a caseby-case basis (Fisher, 2008). This mechanism can be adopted to eliminate the culture barrier when ASOS selects products for Chinese consumers so as to allow ASOS to understand what kind of fashion consumers need and offer them suitable products.
weaknesses The questionnaire that has been designed for this report evidently shows that half of the interviewees are unaware of the fact that ASOS previously launched the online store. This situation occurred for two reasons. Firstly, ASOS.cn does not advertise on any marketing platform. ASOS is a niche brand which entered the Chinese market relatively late in comparison to its competitors. Without the advantages which a successful marketing and advertisement campaign can bring, the store was overwhelmed by vigorous advertising campaigns of other brands and therefore missed out on the opportunity to target a new client base. In addition, there are no physical stores for customers to visit therefore they are unable to feel the material and try on the clothes before making a purchase. ASOS's online-only service is fairly strange, especially when considering the fact that its competitors such as H&M have over 300 stores in China (H&M Group, 2015). There is one less channel enabling consumers to familiarise themselves with ASOS products. Since ASOS.cn has only recently introduced its brand to Chinese consumers, the company is lacking in effective advertising strategies as well as physical stores; therefore, a lack of recognition has resulted in ASOS being unable to efficiently develop the business which is unrelated to time. As outlined above, a relative questionnaire revealed that ASOS has limited awareness amongst Chinese consumers. The Chinese Ministry of Education reports that 523,700 Chinese students travelled abroad to study in 2015 while between 70 and 80% of outbound students return to China following their studies abroad (IECF Monitor, 2016). A former operating and marketing officer in China announced that overseas students, and fashion and trend followers are the company’s primary target market. If ASOS.cn can attract these groups of overseas students, including potential clients and loyal customers; this could result in a remarkable turnaround for ASOS if they decided to relaunch their brand in China.
In the Chinese market, ASOS.cn appears to have suffered losses due to its various competitors. For example, one of its biggest competitors, Zara, is operated by Spanish retail giant Inditex SA. Zara opened its first physical store in 2006 before launching its official site in 2010 and entering Tmall in 2014 (FashionUnited, 2014). This reveals a positive momentum in the last decade; Zara’s sales increased by 4.5% after Zara joined Tmall, while Inditex is optimistic about long-term growth in China despite the fact that the country’s economy is on a downturn (Fortune.com, 2015). In comparison to with ASOS failing to take advantage of this critical market, Zara’s strategy serves as a template to those brands who intend to expand into China. Moreover, ASOS.cn’s customer service policy was not as humane as its competitors. ASOS offered free global delivery service on its main site, although advantage was removed following its expansion into China. ASOS provided free shipping when customer purchases reached ¥249 on both the Chinese site and the Tmall store. Zara provides a completely free shipping service; New Look online spending reached ¥200 (See Appendix 6). Therefore, they are not as effective in online selling as ASOS.cn who depends solely on an online-only sales channel. threats
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