The Bedrock of Internet Fashion Brands

The report

"The Bedrock of Internet Fashion Brands" is one of the series of insight reports jointly issued by China Chain Store & Franchise Association (CCFA) and Deloitte. This report aims to understand the development status, challenges and development trends of domestic fashion brand enterprises by comparing and analyzing representative online fashion brands and domestic/international fashion brands, to get deeper insights into the development of this industry.

Viewpoints / key findings

The rapid development of online retailing is in sharp contrast to declining physical retailing. Different trends of online and offline retailing give rise to changes in operation model and thinking on future development model. As one of the earliest, largest and most mature categories of online shopping, apparel online shopping has achieved continuous high-speed growth and cultivated a batch of renowned Internet fashion brand enterprises. With constant scale expansion, these enterprises have gradually grown as the vital force of market segment, and are trying to establish exclusive ecosystems with unique operation philosophy. Our research findings are as follows:

• Under the impact of digitization and network, customers have become the center of the whole industry chain. The direction and process of industry development will be greatly affected by the rise and growth of middle class and the new generation of customers. Customer groups, behaviors and preferences changed constantly, and have developed into a core force in shaping and driving market development. Besides, customers' focus on quality, experience, personalization, etc. will exert influences on their final choices.

• The explosive growth of online retailing breeds a batch of excellent Internet fashion brand enterprises, and unique Internet genes provide strong support to their rapid growth. Internet not only offers these enterprises a broad development platform, but also gives them great support directly or indirectly in terms of management, customer interaction, capital markets linkage, etc. By leveraging Internet, these enterprises are expected to make further progress in resource integration and utilization, to establish unique ecosystems.

• Compared with domestic/international traditional fashion brand enterprises, Internet brand enterprises have different operation models and management systems, and vary in state of operation. Network enables Internet brand enterprises to be comparatively flat and efficient. However, the enterprises have weak profitability at present due to a series of reasons like rapid expansion, cost structure, and brand awareness, and rely heavily on external funds owing to the lack of stable operational cash flows and capital reserves.

• After rapid growth, Internet fashion brand enterprises will still be faced with a series of development issues. Disappearance of demographic dividend, fierce homogeneous competition, changes in main customer groups, and predicament in omni-channel construction are likely to be the key factors for the future development of Internet brand enterprises.

• Deloitte suggests to develop Internet fashion brand enterprises in three areas: platforms, segments and contents. Platform - build ecosystems, and achieve further growth via scale-up development and the extension of industrial chains. Small but beautiful - penetrate into market segments, and cement enterprise position by gaining major share of market segments. Content is the king - attract customers via IP operation, and develop powerful brands and contents to be highly valued by customers.