H&M looks to China with ambitious expansion plans despite economic uncertainty

Endaba Group

The world’s second biggest clothing brand plans to open 240 new stores before the end of the year, with the majority of them located in China. The Swedish retailer already has 299 stores located there and shows no signs of slowing down despite a third quarter slow down in the market. Their sales were up 11% in the third quarter and are predicted to reach nearly $80 billion by year’s end. As part of their strategy, H&M is planning to target the upper-middle class by selling its premium brand Cos in its new stores, including a flagship sore for the line in the heart of Beijing’s shopping district. Chief executive and chairman Karl-Johann Persson said that the firm’s “position there is strong, as is our profitability”. H&M is continuing its plans despite widespread concern over Asia’s volatile economy.

UK businesses are wary about launching into China’s aggressive market, and these worries were exacerbated by the devaluation of the yuan in August and talk of a slowdown in its economy. However, this is not stopping brands from eyeing China as a potential market for growth. Young fashion brand Lipsy is looking to open a concession in a Chinese department store next year, whilst New Look is planning to expand its 30 Chinese stores to 80 by the end of this year and Superdry is looking into a bricks-and-mortar launch for 2016.

“Like H&M, we have invested in China as we can see the continued growth of retailers despite the uncertainty of the market. H&M has found its niche in the market, as they offer what local Chinese competitors cannot,” says Patrick Egan, Managing Director of Endaba. “As China is moving away from traditional luxury brands, the market is opening up to more possibilities. The Chinese customers have an appetite for British brands and the growing clothing market presents unmissable opportunities. Like H&M, it is also important to adapt to the China’s growing demographic, the upper-middle class.”

Despite slowing growth across China, the apparel industry has remained a bright area. Clothing sales in China have risen 11.6% to $187m (£121m) since 2013, with online sales also up 42% in the last two years, according to Fung Business Intelligence Centre. China’s fashion market is set to overtake the US to become the world’s largest by 2017.