Challenges galore at the high end

First, they should learn from local high-end brands about their management, operation strategy, pricing, channel distribution, product design and development, terminal management and customer services.

In terms of management, Chinese companies are not as weak as European companies think they are. They are skilled in the use of advanced management methods and tools, familiar with the rules of the marketplace, respect talent, focus on product development and customer services, and thrive on fierce competition. If some European premium brands are strong in product design, but weak in market competition, cooperation with local Chinese clothing enterprises would be a wise move. Local Chinese business owners are smart, and most of them are farsighted. They consider the integrity of company operations as their primary goal.

Second, these companies have to find and use local talent. European brands tend to prefer hiring those who speak better English or who understand the European management model, but these managers often lack experience in the Chinese domestic market, especially in-depth understanding of the market in second- and third-tier cities.

Due to the success of local enterprises in the high-end market, local Chinese managers earn a good income. European premium brands should acknowledge that hiring them may not be cheaper than hiring similar people in Europe.

Third, in order to better adapt to the high-end apparel pricing system in China and to ensure product margins, European premium brands should take advantage of China's strong production capacity, and buy local raw materials and set up local production. This will reduce costs, and improve market responsiveness and customer experiences. To better understand customer demand, product design and development teams should also transfer to the Chinese market.

There is nothing wrong with sticking to the concept of "Made in Europe", but China's strong domestic production and processing advantages are obvious. Introducing Chinese manufacturers into their supply chain might bring more benefits to these European companies than their mere presence in the Chinese market would. Actually, the majority of the world's best clothing companies have already been benefiting a lot from such an approach.

In this globalized arena, the Chinese market is full of opportunities, but the competition can be more intense. Entering this market is not simply about selling products to China. Companies need to become firmly established in the country to truly absorb the nutrients from this fertile soil. If they do that, some day they will grow into towering trees.

The author is director of Beijing VOGUEAD Branding & Marketing Consulting. Contact the writer at voguead@163.com. The views do not necessarily reflect those of China Daily.

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