Is Asia the new gold mine for French fashion?

Corporate Finance - 5/2/2016

In the past few years, numerous French brands have targeted the Asian market.
Christophe Marchand, Managing Director, and Christian Ménard, Member of the Board, at Edmond de Rothschild Corporate Finance, explain why the Asian market is particularly appealing for French fashion brands, and the obstacles they have to overcome.

Focus on China

Three big trends are helping French brands become even more popular and successful in Asia, making the Asian market, notably China, particularly attractive.

  1. The Asia-Pacific region will be home to 21.2% of High Net Worth Individuals in 2017. With a yearly growth rate of 10.3%, HNWIs in the Asia-Pacific region are expected to be an important driver of HNWI wealth worldwide by 2017.
  2. With a growth rate of 6.5% expected for 2016, China is consuming more and more. China's unprecedented growth over the last few decades has increased the buying power of the booming middle class. Consumption in China is expected to increase by $2.3 trillion by 2020 (see Table 1), reaching $6.5 trillion annually1. Specifically, the Chinese clothing market is one of the fastest growing markets in the world. According to Euromonitor2, the Chinese market is expected to surpass even the American market by 2017.
  3. China had a 56% urbanisation rate in 2015, and the rate is expected to reach 60% by 2020, or close to 900 million inhabitants3. "Those inhabitants include so many consumers who are travelling more and more, explains Christian Ménard. China has gone from being a global workshop to a global marketplace."

Table 1

Source : Economist Intelligence Unit ; BCG analysis.

It is important not to underestimate the difficulties that arise from setting up shop internationally, especially in Asia. “Don't go it alone”, insists Christophe Marchand, who highlights the physical aspect (locations, stores, etc.) of conquering new markets. He insists that it is very important to have the support of the right partner where international locations are being set up, in order to benefit from the partner's human means and in-depth knowledge of the local market.

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