Topic: The current situation and historical development of the second and third-tier markets
Participants: Lengyun Fashion Community 10th Group
Time: April 18th 2021
Publisher/Reporter: Darren – Hefei – Retail
Background on Darren: Clothing retail industry for 10 years, engaged in casual wear, affordable luxury, women’s wear brand management, operation of direct, affiliated and franchise brand management.
The Current Situation and Historical Development of The Second and Third-Tier Markets
1. Use 3 keywords to describe the situation of your second- and third-tier cities
My city is characterized by large changes in the city business centers while the traditional channels are still stable. Retailers and affiliated brands take up most of the market. Now the mall attracts large traffic, but the traffic on the street shops is unstable because the passenger flow is hugely impacted by the weather and the holidays.
The market has its ups and downs and evolution. Have you ever thought about the rise and fall of our market and its development reasons? I will share my thoughts in Anhui’s clothing industry.
2. My current city, Anhui’s introduction: the new and current top-three clothing center cities replacement
Our earliest clothing center in Anhui is Bengbu. Since the completion of the Jingpu Railway in the early 1920s, the railway has become the transportation center of Anhui Province, and it has established its position in the garment market with geography advantage.
In the 1980s, Anhui’s largest wholesale commodity market was built. At its peak, there were more than 3,000 merchants. More than 100 counties and cities in Northern Anhui, Jiangsu and Shandong have gathered here for passenger flow and goods. The second road market in Bengwu was once the top ten wholesale commodity markets in China before Yiwu took place.
Audience Jinxing: Where have all the clothes gone?
Reporter: There are three channels: inventory, sale, and clearance. In the wholesale center, a lot of goods are fully returned, not all were paid but return to the factory. Second market is Wuhu. Unlike the wholesale center in Wuhu, Wuhu has a commercial clothing center.
The picture above belongs to the local well-known commercial pedestrian street. The holiday traffic is particularly strong. It’s well developed now, but this commercial pedestrian street was a landmark of the city at the time. Wuhu City Business Card is Zhongshan Road pedestrian street, completed in 1999. It is a shopping, tourism, leisure culture, catering integrated commercial pedestrian street; In addition, Nanjing Road in Shanghai, the model of the commercial pedestrian street and the most recommended Hangzhou’s West Lake business circle is a model of the combination of the culture and business environment.
The third center now Anhui’s clothing center is the provincial capital Hefei. Hefei has a combination of a first-class wholesale market and commercial center. That is, the combination of the two properties of Bengbu and Wuhu. In 2004 Anhui white-haired clothing city first phase of business, the location of the back of Hefei station, convenient transportation. Subsequently, the second phase and the third phase has been built into the province’s largest clothing market, but also become a brand hosting investment center. I used to be in Baima. Anhui is one of the largest women’s clothing agents, operating agent Hangpai clothing. Many customers look for brands and buy goods in this market.
3. Types and changes of retail terminals:
Pedestrian streets and street shops: High rental and commission are also under pressure.
Community Stores: Changes in the residence demographic
Store: The main type, relying on the traffic of the mall complex
Basically, our shops are divided into three types, due to the high rent, the most pressured is pedestrian streets, and community shops.
Community stores were stable in second- and third-tier cities before 2010, but with the development of the city and the fluctuation of housing prices, the number of visitors became very unstable. The original community shops rely on customers. Now many replaced with the community, home ownership, housing sales, and changes are very large. At present, little of community shop retained. Most are private stores where the community’s members start their businesses.
What about the market in which we are located?
Audience Jingxin: I have both street shop shop and community shop. Shopping mall shop has a large area with low rent. We have two commercial shops. The biggest problem now is that there is no business.
Reporter: There is few pure community shops because now in the second- and third-tier cities, many neighborhoods occupancy rate is not high. And the mobility of people is high, buying, selling, and renting transaction are more frequent now. So, the development of community stores in recent years is not good. For many shops in the high-end community, passenger flow is very low. The occupancy rate of the middle and high-end districts is much lower than that of the newly needed districts. So, they are faced with purchasing power and passenger flow problems, as well as people’s management.
What are the good shopping malls in the area?
AUDIENCE Liang Siqi: Guangzhou Tianhe City is very busy, belongs to the kind of commercial complex.
AUDIENCE TOMORROW: To name Beijing’s SKP, Tianjie’s Lebin, Xi’an, they are tens of millions level stores.
REPORTER: Now the development is mainly shopping mall complex. With the provincial capital city and economically developed cities grow over time, it will attract more clothing brand companies to enter, Mixc City Mall, Yintai, Wu Yue and other mall brands opened more and more commercial centers, Sand Boat, Aiqin Hai and other good mall complex is also entering. The new mall policy should be supportive. After all, not all like Yintai and Mixc City Mall, they have good conditions with high cost.
AUDIENCE JINGXIN: The main shopping malls we are in have only geographical advantages.
Current Situation of The Dealer Sector
1. The Strategy of Differentiation Between Camp Distribution and Market
Second and third-tier city clothing industry is mainly made up of agent dealers, what types of local agents, distributors?
Many companies have more than 20 brand agents, these companies in the channel and shopping malls have a lot of bargaining power. Every year, Mixc City Mall’s New Year bell-ringing event invites our boss. Because we have nearly 8 stores in the Mixc City Mall.
General distribution agency companies are divided into two categories.The first category is a shopping mall platform as the main battleground of retail dealers. The main layout of second- and third-tier city centers, regional dealer, direct selling, mainly engaged in brand like foreign luxury, domestic brands, tide brand and group goods. I call this a retail dealer. This model is direct-oriented, shopping malls-based, meaning the store is their properties. The company in the picture is typical of this model.
The second category is the street shop as the main battleground of wholesale dealers. The main layout of third-tier cities and county-level market. Agent dealer formed the joint venture with a small number of direct and group buyers. I call this model as wholesale dealers.
AUDIENCE JINGXINThis is our company’s internal training session and the snap of employees. We have about 30 people.
REPORTER: This kind of training is more in the dealer company, and this is strong in the region.
2. Dealers internal management model
Wholesale dealer team composition:
marketing department (operations manager, merchandise dealder) and retail support (district director, supervisor, salesperson), merchandise and retail support, talent acquisition and training, and data.
Wholesale dealers pay more attention to two blocks: marketing and merchandise. But the three or four tier cities, in fact, is to seize the high-quality customer base, retain excellent sales staff, implement employee incentives and member maintenance. Because younger population don’t work here, there’s no strong purchasing power or loyalty.
Current Situation of Brand development
1. Historical Brand
Historical brands: Yi Zhi, Peace Bird, Hangpai women’s clothing (Hopeshow, 3Color, ChiuShui), Girdear, Amass. Peace Bird channels expanding, in the market is one of the mainstream brands, direct-run and agency stores a lot. Peace birds in the city attract younger customers, in the fourth line and county-level cities attract middle-aged customers. In the three or four lines and county areas, Hangpai (lady dress) accounted for more. These areas are relatively traditional, preferring both women and professional styles.
Friends who use Tik Tok can pay attention to the second- and third-tier cities. Because the second- and third-tier cities have huge traffic demand, there are less brands available comparing to the first-tier cities, and there are less styles. For wholesale category, their buying price is often higher than the first-line brands. General provincial agent’s purchase discount is 30%-45% discount, lower-level dealers is 40%-50% discount. Second and third-line customers are basically facing the lower-level dealers, so selling prices can not be too low. For example, brand of the new model in the current season, Guangzhou has 50% discount sale, Hefei 40% has discount, the county-level city may need 30% discount.
If the brand development speed up, the disadvantage is that the goods are prone to problems. There is no commodity planning by buyers, and if they can not find out the best-selling items, this season’s products will be a problem, negatively affecting the next quarter and resulting in the financial crisis. Girdear, Amass, you should all know, right? They are mainly members, to explore high-quality customer system. Girdear and Amass did very well. The product is not particularly competitive and the price is higher than Hangpai. But they are in the third or fourth line, so they can grasp the high-quality customer base, retain excellent sales staff, implement the employee incentives and member maintenance. Young population do not work in these cities, without strong purchasing power and loyalty.
2. Emerging strong brands
Are you familiar with the new brand of second- and third-line women’s wear in the last 5 years? What do you think of the two brands, Mai Meng and ONEMORE? Mai Meng is owned by eifini and ONEMORE is owned by GXG.
AUDIENCE JINGXIN: DIESEL.
AUDIENCE LIANG XIQI: I know Ledin.
REPORTER: DIESEL is a traditional women’s brand. Hangpai is currently concentrated in the development of the region in the third and fourth lines, their policies and support is very good. Product line is not fashionable, but the style is very stable, the customer stickiness is also good. Design is not particularly strong, but the quality of production is still good, Most of the Hangzhou independent production and quality is good. So, the customer base is women over 30s. Customers who care about quality and practical use often consider Hangpai.
Mai Meng’s current development is very good and has accumulated a lot of customers. ONEMORE is in its infancy because many markets are still small. ONEMORE stores are now selling low prices, mainly to attract young customers. What local brands do you have in your area? It can be non-famous, but it’s done well locally.
AUDIENCE LIANG XIQI: Guangzhou has a love suit doing quite big.
Reporter: This channel is doing very well, mainly go to the city business supermarket and county-level shop, the price is very low. We have a lot of their stores here, belonging to fast fashion wholesale type companies.
3. Deeply cultivate in the local market
I share a brand in our region that is doing a better job.
Anhui Memorable Group Inc., which is a multi-faceted development of the integrated enterprises, including women’s clothing, trinkets, handicrafts collection shop. It is mainly a Memorable Day department store (similar to the famous products) and ENJOY women’s clothing. ENJOY is the first and most influential women’s clothing buyer store in Anhui. All the goods in their stores, from clothes, accessories, table and chair bench furniture, lamps and so on, can be sold. Memorable Group Inc. in Guangzhou, Wuhan, Nanjing, Chongqing have offices and branches. Outside of the local market, the store performance is not very good, but the local recognition is very high. The mainstream shopping malls will be ENJOY, they need to attract local customers. Memorable Group Inc. brings all businesses together, has a large collection shop in Hefei and owns its parking lot.
From the basement floor to the fourth floor, it is all the company’s real estate properties, not rental property. On the first floor there are two restaurants connected the Chinese and Western food, and in the middle is a fresh market. On the second floor is the ENJOY womenswear, and on the third floor there is a barbershop and anniversary accessories. The fourth floor is a cultural industry, with small and medium-sized exhibitions, art collaborations and lectures. Along Hefei China Resources Mixc City Mall, there is an L-shaped street, The Memorable Group on the street bought the façade, the building in Tuli, about 1/10 of the street. The building is self-managed, all the rest are rented out, but only to her industry supporting businesses, such as cake shops, women’s clothing, and catering. This street is back to the Hefei’s high-end community with the average house price of about $4-5 million, so the group’s goal is to have a complete community circle. I’ve seen him go this way since two years ago, and now the neighborhood is taking shape. It seems that the leader’s ultimate goal is to make himself a fashionable business district.
Now this street has been slowly formed, in Hefei Administrative District, China Resources Vientiane City opposite Wanfu Lake Road. There is a chance you come to Hefei, we can go shopping together. These two photos are on both sides of the L-shaped, two streets.
The Exploration and Prospect Of The Future Of The Second And Third-Tier Markets
What do you think will happen in the future in the second and third-tier markets?
Liang Siwei: I think that in the future, we will slowly return to life itself, second- and third-tier cities have great development.
REPORTER: I think on the one hand, the brand will expand more and more, agents will turn to associates or be acquired, of course, this time may take longer, perhaps 10-20 years; The product of this neighborhood is a living business. Neither a street shop nor a traditional shopping mall, can give people a better experience.
First, second and third-line market status quo overview and historical development
1.3 keywords: channels, agents, emerging buyers.
2. Anhui: the replacement of the three major garment center cities.
3. Types and changes of retail terminals. Pedestrian streets and street shops: huge rents are also under pressure. Community Stores: Changes in the number of guests on the property. Store: The main type, relying on the traffic of the mall complex.
Second, the status quo of the dealer plate
1. Camp distribution and market differentiation strategy: second- and third-tier urban clothing industry is currently mainly to agent dealers.
2. Business management model: wholesale dealer team composition: marketing department (operations manager, merchandise) and retail support (district director, supervision, high sales), commodity and retail support parallel.
Third, the status quo of brand development
1. Old brands began to focus on the country and rural level markets.
2. The emerging strong are seizing the young consumer power.
3. Deep-cultivated local strong people form their business closure.
Fourth, second and third-line market future exploration and prospects
1. Brand country and rural level markets and agent transformation.
2. The local strong people’s closed-loop kingdom, living in the business community.