H&M now expanding Into Second-tier Cities

Luxury brands and fast fashion brands such as H&M and Zara are now expanding into several second-tier China cities.


“Retailers do not have their eyes solely on first-tier cities, where the pace of consumption growth has begun slowing. They are now looking to second- or third-tier cities such as Dalian, Chengdu and Changchun, where they see the emergence of a growing consumption power,” Tam said.


China last year became the fifth-largest market for consumer spending in the world, behind the United States, Japan, Britain and Germany. The Ministry of Commerce has predicted the nation is likely to become the biggest consumer market by 2015.


“When H&M opened its first Qingdao outlet in April this year, its first-day sales went over 500,000 yuan (RM235,441.55). That was very impressive,” Tam said.


That turnover compared with first-day sales of two million yuan when H&M opened its first China flagship store in Shanghai, added Lawrence Wu, who left Sun Hung Kai Properties and joined Tam’s consulting operation as joint managing director in 2006. H&M is now planning to expand into western China, while Zara has opened stores in Dalian and Changchun, and Japanese fashion brand Uniqlo recently opened a store in Qingdao.


It is not only fashion retailers that are beating a path to China’s consumer market. Restaurant operators such as Hong Kong’s Lee Gardens have joined the stampede.


Their expansion across the border has been fuelled by several factors, says Wu, including the nation’s rapid economic growth and the policy support shown by Beijing for consumer spending as a pillar of that growth.


China retail brands were also expanding at a fast pace, and would play an increasing role in the country’s retail market in future, Wu said.


To support this growth, TCBL is planning to open offices in more inland cities including Hefei in Anhui province, Kunming in Yunnan province, and Changsha in Hunan, according to Tam.

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