Brand Development Project Merve Edis BA Fashion Marketing & Communication, Level 6, 2019- 2020 6FAMK002C International Branding and Sustainability CWK2 Clara Mallart, Sergio Costa, Alejandro Gonzรกlez Word Count : 1544 (excluding charts and bibliography)
I N D E X WHY EXPAND? Chinese Market
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EnvironmentalAnalysis
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The Company
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Pest - China
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Ethics And Sustainability In China
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Competitor Analysis
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Purchasing Behaviours
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Key Success Factors
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Market Entry Strategy
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Marketing Strategy And Sales
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Sustainability Efforts
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Distribution Map
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Calender
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Conclusion
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Bibliography
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Why Expand? Outdoor Voices Founded by Tyler Haney in 2014, Outdoor Voices is a fast-growing activewear brand that is already expecting to open 22 new stores across 6 locations in United States (Fernandez 2018). Outdoor Voices has become the first activewear line to be sold at J.Crew. The Brand’s specialty is to create functional and technical innovation garments; rather than focus on the fashion and style aspect, the brand choses to put its focus on the functionality. The Brand focuses on ‘activity specific’ collections, such as tennis-wear specialties and swimwear collections (Fernandez 2018). The main target of the brand remains to be Millennials - as that is the highest spending Generation when it comes to activewear. The CEO, Haney, believes in expanding the brand to its core - expanding to different locations all the while the activewear trend remains. As still a newer brand, China is the perfect growing environment in the brand niche area.
Chinese Market Sportswear growth in China is at its highest in the past decades, outperforming the growth in womenswear and menswear segments (Euromonitor 2019).
Sportswear has witness a sales growth of 19.5% yoy in 2018; which is above the total sales growth in apparel industry; showcasing its potential for drastic growth. Euromonitor (2019) estimated that the activewear category will pass the luxury goods market by 2020 in China. Euromonitor International also estimated a steady growth of 11% in activewear in China by 2022; however estimations may get even higher due to the rapid growth in Chinese population. According to Mintel (2019); sportswear is the highest growth in Chinese market.
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The Brand’s Local Environment Political ✴ United States is the home country for Outdoor Voices, which houses exceptional policies for growth in corporate level, such as low-interest rates and well-arranged international taxation deals.
✴ Companies that serve goods to consumers are always under threat of facing differences in taxation and manufacturing laws based on the political beliefs of the President’s, and United States is close to its election time and currently faces many political instabilities as the current President Donald Trump is facing impeachment danger.
Economical ✴ Sportswear market size has grown extensively within the past couple of years (Euromonitor 2018). ✴ United States economy is rather stable and a big recession is not foreseen in the near future (Business Insider 2019).
Socio-Cultural ✴ One of the biggest social trends globally and locally at the moment is sustainability, and Outdoor Voices is a sustainable brand that is built around the belief of longitivtiy in garments.
Technological ✴ The United States is undoubtedly a global leader and innovator when it comes to technology. Currently America has given birth to Microsoft, Google, Facebook and countless other technology leaders monopolizing the economy. ✴ China is the biggest competitor in technology field to the United States (David 2019).
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The Company Mission The Outdoor Voices’ mission is to ‘Get the World Moving’. The brand insists on its belief that not everybody has to be an athlete, and working the hardest is not what matters, what matters is showing up often and doing it. This mission value contributes to the shopper - according to WGSN, consumers want transparency and a clear mission from brands.
Organisational Chart CEO Tyler Haney
COO Pamela Catlett
Chairman of the Board Millard Drexler Supply Chain Director Nicolas Jammet
Director Kirsten Green 3
The Company Vision The Outdoor Voices is committed to 3P’s. People, Planet and Product. The Brand develops its products with the best product quality, working with manufacturers that share their values for human rights and environmental impact. The focus of it all is people - and equality for all.
Ultimately, their vision for this world and their brand shares similarities. They believe in building a community of ReCreationalists, people who go out and do things. That belief is also expressed within the brand; the brand is quite reactive; from organising Skii lessons to accepting return orders with specific criticisms to improve and thrive.
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Pest - China Chinese Government has several regulations for products to enter and be able to sell in the country (United States Fashion Industry Association 2019). First and for most; China has a number of chemical and physical requirements that are musts for any product to penetrate the market. While the requirements are specific to garment types such as plastic shoes, they are as follows below.
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Chemical Requirements Labeling Requirements Product Segmentation
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Over the last decade; China’s economy has grown 5%; suggesting it is close to passing that of United States’. Growth in urban areas and low labour cost has attracted many foreign investor; strengthening the economy. The purchasing power of the average citizen has also increased due to the growth in economy. However the current issues involving Hong Kong may damage this.
Population growth and higher educated rate influences the buying habits of the Chinese shopper, and the wide range of digital formats and social media channels used by the average Chinese person has increased significantly; with 430 million internet users around. Ecommerce has taken shape and increased with these trends.
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Digital use when it comes to retailing has increased significantly; with e-commerce websites taking leads when it comes to selling and how selling is done. However; the old school values attached in the society make it almost impossible for brands to rely simply on e-commerce channels.
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Ethics And Sustainability In China In the recent decades; China has increasingly showed its commitment to sustainability, with the Chinese Government spending over 370 Billion Dollars in 16 big environmental initiatives. Through 2015; over 300 billion dollars were invested; recovering 620 million hectares which covers about 60% of China (Bryan 2018). The current President Xi has continuously expressed his concern towards the environment. “Building high quality. sustainable, risk resistant, cheap will benefit countries to fully utilize their resource endowments” the President stated (2018). An interesting finding suggests that 19% Chinese shoppers do not ‘understand’ what sustainable truly means; and look at brands to teach them (Smith 2019). However; TrendCenter (2019) believes that one of the key drivers for Chinese shopper will be sustainability by 2020; with the younger generation paying more for impact and functionality. The 2018 China Sustainable Consumption Report by Yili Group suggests that especially those under 21 have a special attraction towards ethical fashion; accounting for 80% of the survey applicants (Smith 2019).
In 2017; Shanghai Fashion Week also witnessed a first; with a temp local called Green Code; with the aim to introduce sustainable fashion. The venue was in two sections; pop-up stores and a catwalk. When leaving the building; many people witnessed garment recycling boxes, where they can throw out unwanted items to be recycled. This event opened the doors for the Chinese customers to learn more about environmentalism and the impact of the fashion industry on the environment. Mintel (2019) suggests that consumers in China nowadays seek brands that can help their well-being while helping the environment. China is even developing an entirely self-sufficient neighborhoods where all buildings are covered with plants and trees in order to clean the areas in which they are in. China also faces an air pollution problem that kills 1.6 million people every year as a main cause of death (Mintel 2019). These atrocities encourages the newer generations to lean towards ‘greener’ brands; where they can make an actual impact (Mintel 2019).
58% of Chinese consumers agree buying ethical makes them happy. (Mintel 2019) 6
NGO’s Prior to 1994, China had no environmental NGOs. The very first was registered in March 1994, Academy for Green Culture, now renamed Friends of Nature. More have followed, with Global Village of Beijing, and Green Home, becoming the pioneer NGOs in environmental area in China. Since then 2000 environmental NGO’s have been put in place with millions of contributors (China 2019). The NGO’s are also taking key parts in legislation making influence. Many NGO’s such as the Friends of Nature have dedicated their times to making laws based around environment and the following have resulted from their efforts.
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Environmental Protection Law. Wild Animal Conservation Law. Environmental Impact Assessment Law. Atmospheric Pollution Prevention and Control Law. Water Pollution Prevention Law.
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Competitor Analysis As the highest growing apparel segment in China, the biggest competitor are Nike, Adidas and Li Ning.
Nike
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Strong Brand Awareness : Nike currently dominates the highest market share in activewear in China; and has the highest brand recognition amongst competitors.
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Already produces 26% of its manufacturing in China.
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Provider of jobs : Nike provides over 170.,000 jobs to those in their Chinese factories.
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Innovative products are possibly the biggest opportunity for Nike in China. Chinese consumer are tech-savvy, they enjoy functionality and innovation behind a product.
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Product diversification is quite possible for Nike, stepping outside of the comfort zone and into new product segments could attract different customer bases.
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Nike has specialised on footwear for years, however current trends suggest companies must do product diversification to remain relevant
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Chinese customer desires a ‘handson’ approach with brands and their reputation and Nike has poor reputation due to poor labour conditions and the unequal pay between men and women, causing many law suits.
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As Nike sells in China, it is bound to be affected within the Chinese economy. If/when the rates begin fluctuating, Nike will have to spend more on manufacturing in China, and will begin losing revenue.
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Counterfeit Nike products are rather common in China, which may create a Burberry chav cap effect within the society, associating the brand with low quality.
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Competitor Analysis
Adidas
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Adidas works hard to develop environmental friendly products, which is on a rise in the Chinese market as well as sportswear. Many collaborations (aka stella mccartney etc).
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China also shows trends of the growth in luxury markets, Adidas can collaborate with luxury brands and create special collections dedicated to Chinese customers
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Unable to capitalize on upcoming trends due to slow turnaround - it takes 18 months from design to sale point for products. Chinese consumer is quite demanding, requires trends to their door instantly. Lack of endorsements within Asian markets (China)
With 37% of its manufacturing done in China, Adidas is dependent on the duty and tariffs for its pricing strategies. Adidas manufactures over 1/3s of its production in China, hence giving the suppliers and manufacturers a bargaining power.
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Competitor Analysis
Li Ning
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Associated with Chinese ‘nationality’ due to sponsoring Chinese national themes in sports events .
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Innovative with producing over 600 different shoe styles per annum
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The brand does not have a clear identity and style with designs and marketing strategies changing frequently.
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The brand focused on second-tier cities instead of Shanghai which is the trendsetter city, losing a sizable market share.
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Customers are increasingly becoming aware of environmental impact their purchases have and are beginning to choose brands that are environmentally friendly or environmentally conscious over those that are not and Li Ning is currently not offering a transparency report in terms of their impact unlike its competitors such as Nike and Adidas.
Lower prices in comparison to competitors keep customers around
Badminton is the highest done sport in China, and the brand is already creating badminton related garments - however moving the focus to a specialized area may benefit the brand as Chinese customer likes to go out there and use the garments functionality.
O
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Competitor Analysis
Li Ning
S ✴
Associated with Chinese ‘nationality’ due to sponsoring Chinese national themes in sports events .
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Innovative with producing over 600 different shoe styles per annum
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W ✴
The brand does not have a clear identity and style with designs and marketing strategies changing frequently.
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The brand focused on second-tier cities instead of Shanghai which is the trendsetter city, losing a sizable market share.
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Customers are increasingly becoming aware of environmental impact their purchases have and are beginning to choose brands that are environmentally friendly or environmentally conscious over those that are not and Li Ning is currently not offering a transparency report in terms of their impact unlike its competitors such as Nike and Adidas.
Lower prices in comparison to competitors keep customers around
Badminton is the highest done sport in China, and the brand is already creating badminton related garments - however moving the focus to a specialized area may benefit the brand as Chinese customer likes to go out there and use the garments functionality.
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Competitor Analysis
New Entrants
Power Of Suppliers
New entrants in the market could challenge Outdoor Voices; as even though the Brand has a unique image and vision; it can be copied. Best way to tackle this problem would be to innovate often and give prior consumers a reason for return. Manufacturing quality and functional products while keeping the consumer mentally engaged with the brand can benefit in the threat of new entrants.
While suppliers may become challenging in the long-term for Outdoor Voices as they are based in Australia; one way to handle this problem would be to develop a supply chain protocol that eases up the process in the newfoundland.
Buyers are who the brands work for at the end of the day – and the Chinese consumer is not easy to impress. In order to keep the buyers satisfied, Outdoor Voices must focus on an interactive and entertaining promotional ideas such as contests, events. In order to keep the customer satisfied, the Brand must constantly improve on the feedback received from the client. As discussed, Chinese customer value a direct communication with brands on social media channels; and are more likely to follow a brand online than their counterparts in other countries.
Threat of Substitutes
Another way to tackle it is to experiment with products and use different materials to not be dependent on one supplier in case of further challenges as the brand enters the new market.
Existing competition is undeniable in Chinese market; however none so understanding of Chinese culture and buyer. Chinese shopper has an in-depth worth for traditional values and nationalist selling points; proving successful to one of its competitor brands. Best way to succeed in a competitive environment could be to do collaborations with competitors; or go into brand diversification and in China it is quite possible for brands to expand within their product range and dive into product diversification.
Existing Competition
Power Of Buyers
Porter’s 5 Forces
China is a fast growing economy and new brands emerge on daily basis with similar values and identities to other brands. In order to secure a position without a permanent competitive threat is to focus on servicebased business models than product based. While the product is the end selling point; Chinese customer values how brands bring them to that point. In order to differentiate the brand in the eyes of the Chinese customer, Outdoor Voices must understand the core values of the buyer and take them into account as the brand evolves.
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Differentiation Between Competitors Outdoor Voices Biggest differentiation factor with Outdoor Voices is their vision of their customer. Outdoor Voices does not promote its products for athletes or the hardest working, but it encourages the customer to ‘Just do one thing’ and ‘Just get out more’, hence creating a more sincere tone for the ‘everyday’ person who does not strive for marathons but for ‘getting out as much as possible’. Chinese government is quite focused on sports, as well as Chinese customer. The ‘lesson’ based angle of the Outdoor Voices will provide a distinction point for the brand.
Nike Nike is an established brand with the highest brand recognition for sportswear and gear in the world. Nike’s main differentiation is lightly dependent on its brand image, however sponsoring of athletes and sports professionals is also quite important for the Nike image; eg: Jordans. Nike is also very strong in tech-wear and innovations.
Adidas Adidas is a leading brand with its environmental collaborations with brands such as Stella McCartney, but also creating innovative products; which proves essential for the new Chinese shopping mentality.
Li Ning The biggest differentiator for Li Ning is that it is a Chinese company, and the Chinese customer value nationalism factor supported by their government. Li Ning can always push nationalist promoting factors to win the customer - hence they are also a national sponsor for Chinese national teams.
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Purchasing Behaviours Target Group : Little Emperors/Empresses The most influential and accepting of foreign goods within the market in Chinese trends remain to be Gen X, those born between 1995 and 2002, now the youngest approaching their 20s. This generation has been noted as the least likely to save money; due to their constant spending habits. In 2023, total spending in China is expected to grow 6.9%; with the Chinese customer spending most of this on sportswear (Mintel 2019). Another trend is that Chinese customer tends to prefer brands that provide them through an experience; rather than simply the purchase of a product. Experiential marketing has become a high trend in China, with brands providing contents, games and competitions to attract the interest of the customer. Chinese customer of Gen X also value promotions and marketing campaigns done on social media channels; with a staggering number of 872 Million people in China accessing the internet via cellphones. Mintel (2019) research revealed that 1/3 of Chinese shoppers appreciate it when brands reply to their comments on social media channels, representing a significant opportunity for brands to create longlasting relationships with customers and creating loyalty. While in the past price was a main baseline for purchasing; nowadays it has gotten more complex due to the constant exposure of digital marketing strategies of brands. While the customer still believes higherprice-equals-higher-quality, the shift towards interactive marketing has been coming into focus rather than the pricing stategies (Mintel 2019). Foreign products tend to catch the focus of the Gen X due to the diverse marketing strategies foreign brands expose Chinese buyers to (Sephora beauty days etc) 75% of Chinese shoppers agreed that they post online feedback on purchases; with over 50% more than that of in United States (Mintel 2019). Chinese shopper is more likely to purchase products online than global shoppers; with figure below. Chinese shopper values the internet, with many browsing products pre-purchase online to read reviews, and many shopping online only.
On average, how often do you buy products online?
Key Words Communicative Experience Driven Sportswear Focused Digitally Influenced
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Key Success Factors
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Chinese shopper craves experiences brands provide them with rather than focusing on the end product; hence carrying the ‘lesson based’ activities Outdoor Voices already has to China will prove beneficial.
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Chinese shopper still believes in price-equals-quality, hence creating a fitting price strategy is key. Chinese shopper does not mind paying more as long as the end result fits into their lifestyles and shopping habits.
Due to the large population of the country and the relevancy of wanting
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to learn more about the product, it is key to create campaigns in order to increase brand awareness before the brand enters the Chinese market, focusing on interactive advertisements for social media ; and creating in-store events/competitions and inviting people at least 6 months prior to launch. The New Chinese Shopper (Gen X) values digital communication and feedback/criticism on digital channels. It is key to use digital media to communicate with consumers constantly.
Creating a campaign that involves Chinese-heritage celebrities may prove beneficial due to the underlying nationalism belief that competitors take advantage of.
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Market Entry Strategy Still fairly a new brand, the best strategy for market penetration in China remains to hiring an agent; due to its lower-cost nature. As an initial entry strategy; Outdoor Voices will hire an agent; with China being the first Asian country of entry, a more experienced figure and/or company will benefit Outdoor Voices with the minimal budget spent. While other options such as franchising and co-branding may give more fertile results initially, the current Brand placement in the market and the inexperience in Asian countries provide the initial entry strategy; and if successful in the Asian market the brand may dive into joint ventures and franchising options. Other options such as franchising may also result in long-term partnerships and complex partner relations; however an agent provides a breathing-room for the brand to gain initial awareness in China before stepping into bigger commitments with the help of an ‘expert'.
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Marketing Strategy And Sales Outdoor Voices is a brand that environmentalism and humanism run through the their marketing strategies and approaches. The brand is niche; but also promoted as ‘for everyone’ and ‘every body’. The Brand is already quite affordable for its current target; and the best way to succeed in China depends on keeping an affordable pricing strategy based around value-for-money; attracting shoppers from all budgets. The Chinese shopper does not mind paying for the price as long as there is an end result to their satisfaction; however due to the vision of Outdoor Voices; it is essential to stick to brand identity and carry the brand within a similar price range. The brand will however hire a distribution agent; which in the end will determine the best value-formoney in the new market to keep the brand relevant.
Positioning Map
Environmentally Friendly
Brand Awareness
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Sustainability Efforts Chinese customer has shown that throughout the analysis and the research; many times due to lack of commercialization of sustainability in Chinese market; Chinese shopper require to be taught about impacts of fast fashion and help the customer make the wisest decision. Sustainability is not currently the highest factor in mind for the Chinese customer, however it has been improving on daly basis. Outdoor Voices is already a very proactive brand in terms of customer-to-brand-to-customer relations; hence creating interactive events with the Chinese shopper will provide beneficial results.
Distribution The selected distribution channel is the indirect-long channel through using an agent in China; as Outdoor Voices is new in the Asian market and a maximum amount of support is needed; while keeping the brand identity and the distribution chain.
MANUFACTURER
AGENT
RETAILER
CUSTOMER
Manufacturers in US
Hired 3rd Party
In China
Point off Sale
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Distribution Map
Fac
tory
Other textiles pro
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Ethic ally
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from
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ACTIVITY
TIME
Calendar 1
MARKET RESEARCH DATA AND ANALYSIS
Marketing Department
CONSUMER TRENDS CUSTOMER ANALYSIS
Marketing Department
MARKETING STRATEGIES DEFINE
Marketing Department
BUDGET PROPOSAL
FINANCE Department
HIRING AGENT
Human reso. Department
PRICING STRATEGY
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4
Buying merch. Department
PRODUCT STRATEGY
Buying merch. Department
STORE LOCATING
BRAND MANAGER
SETTING DISTRIBUTION
LOGISTICS DEPARTMENT
DEVELOP PROMOTIONAL CAMPAIGN
ADVERTISING DEPARTMENT
SOCIAL MEDIA FOCUSED
MEDIA MANAGEMENT DEPARTMENT
OPENING STORE and FEEDBACK ANALYSIS
3
MEDIA MANAGEMENT DEPARTMENT BRANCH MANAGER & TEAM
BRANCH MANAGER & TEAM DATA MANAGER
RESEARCH AND DEVELOP FURTHER IF NEED BE 20
Conclusion As discussed throughout the paper; China is a viable and lucrative market to penetrate for a sportswear brand due to the rapid growth in the market; as well as the predicted market trends by several agencies such as WGSN, Mintel and McKinsey.
Outdoor Voices is a unique company; with its transparency and commitment to serving and helping everyone, everywhere; and with its CEO/Founder being so committed to expanding the brand only shows viability and opportunity for successful market penetration.
Recommendations In order to penetrate the market as such a young brand; Outdoor Voices must capitalize on its strengths and unique selling points, take advantage of the hands-on approach preferred mostly by the new Chinese shopper; Gen X.
The success of such initiative is possible if followed through on the key success factors discussed previously.
Chinese consumer is interested in foreign products; however the right strategy; mostly focused on digital promotion is required for success.
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Bibliography China Business Review. (2017). Understanding Chinese Consumers.Available: https:// www.chinabusinessreview.com/understanding-chinese-consumers/. Last accessed 7th Dec 2019. Elven. (2019). Key sustainability trends for 2019: what consumers expect from fashion brands. Available: https://fashionunited.uk/news/fashion/key-sustainability-trends-for-2019-what-consumersexpect-from-fashion-brands/2019040242509. Last accessed 6th Dec 2019. Kelly J. (2019). Chinese Consumer Behavior: 7 Key Features For Brands To Know. Available: https:// www.dragonsocial.net/blog/chinese-consumer-behavior-7-key-features-for-brands-to-know/. Last accessed 1st Dec 2019. McKinsey Consulting. (2016). Style that’s sustainable: A new fast-fashion formula. Available: https:// www.mckinsey.com/business-functions/sustainability/our-insights/style-thats-sustainable-a-newfast-fashion-formula. Last accessed 29th Nov 2019. McKinsey Consulting. (2019). The end of ownership for fashion products?. Available: https:// www.mckinsey.com/industries/retail/our-insights/the-end-of-ownership-for-fashion-products. Last accessed 9tt Dec 2019. McKinsey Consulting. (2019). The State of Fashion 2019. Available: https://www.mckinsey.com/~/media/ McKinsey/Industries/Retail/Our%20Insights/ The%20State%20of%20Fashion%202019%20A%20year%20of%20awakening/The-State-ofFashion-2019-final.ashx. Last accessed 9th Dec 2019. Mintel. (2018). CONSUMER TRENDS 2018 . Available: https://reports.mintel.com/static/trends/ documents/Chinese_Consumer_Trends.pdf. Last accessed 6th Dec 2019. Smith. (2019). Back to the core: Reinvigorate experience-driven retail at a time of uncertainty. Available: https://www.pwccn.com/en/retail-and-consumer/global-consumer-insights-survey-2019-chinareport.pdf. Last accessed 11th Dec 2019. Statista. (2017). Manufacturing labor costs per hour for China, Vietnam, Mexico from 2016 to 2020. Available: https://www.statista.com/statistics/744071/manufacturing-labor-costs-per-hourchina-vietnam-mexico/. Last accessed 8th Dec 2019. Statista. (2019). Education in China - Statistics & Facts. Available: https://www.statista.com/topics/2090/ education-in-china/. Last accessed 2nd Dec 2019. Statista. (2019). Textile production in China from October 2018 to October 2019. Available: https:// www.statista.com/statistics/226193/clothing-production-in-china-by-month/. Last accessed 10th Dec 2019. United States Fashion Industry Association. (2017). Navigating China’s Textile, Apparel, & Footwear Regulations. Available: https://www.usfashionindustry.com/news/member-news/navigating-china-stextile-apparel-footwear-regulations. Last accessed 1st Dec 2019. WGSN. (2018). The Future of Chinese Fashion? Going Green. Available: https://www.wgsn.com/blogs/thefuture-of-chinese-fashion-going-green/. Last accessed 5th Dec 2019. Yang. (2018). Chinese consumer trend shows instant purchasing habits. Available: https:// www.chinadaily.com.cn/a/201908/01/WS5d4284bda310cf3e35563598.html. Last accessed 1st Dec 2019. Zheng. (2019). Can China Become a Leader in Sustainability?. Available: https://jingdaily.com/can-chinabecome-a-leader-in-sustainability/. Last accessed 9th Dec 2019.
