Digital Transformation in Fashion: Lessons from China

November 2022

China’s apparel and footwear market has seen a surge in e-commerce penetration since the COVID-19 outbreak, and is expected to continue to grow, driven by the diversification of the e-commerce landscape led by the emergence of interest-based e-commerce. Tailored digital solutions are provided by domestic technology conglomerates to drive the digitalisation throughout the industry chain involved marketing, operation and manufacturing.

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Key Findings

E-commerce an engine of post-COVID-19 growth

COVID-19 significantly increased online penetration in China’s apparel and footwear industry, from 25% in 2019 to around 35% in 2021. With more fashion players ramping up their deployment in online distribution, e-commerce is set to continue to outperform all other channels in the post-COVID-19 era, though at a slower pace of expansion, fuelling the recovery of the apparel and footwear industry in the post-COVID-19 era.

Short video platforms dominate the social media landscape

Short video platforms, such as Kuaishou and Douyin (the Chinese version of TikTok) are changing the way brands engage with consumers. The interest-driven business model, which calls for a better understanding of consumers’ implicit needs, further amplifies the importance of digital marketing, and three significant approaches are emerging, namely virtual spokespeople, online fashion shows and livestreaming.

Tech giants develop increasingly localised marketing tools

Domestic technology conglomerates Alibaba, Tencent and JD.com form the tech backbone of China’s digital fashion industry, and offer digital marketing solutions using big data and AI that are increasingly localised and tailored to the cultural and social needs of Chinese consumers, from customised e-commerce solutions to deployment in omnichannel digitalisation.

Supply chain digitalisation and omnichannel intelligence

Beyond e-commerce and the transformation of front-end operations, digitalisation is also accelerating throughout the Chinese fashion industry’s supply chain. After the COVID-19 disruptions and strict lockdowns the country underwent in spring 2022, manufacturers, retailers and brands are all very aware of the importance of being agile. This has led to investment in AI and other technologies to help with omnichannel fulfilment, pricing, real-time stock management and even on-demand production.

Scope
Key findings
E-commerce penetration has surged since the pandemic
Short video platforms increase their focus on “interest-based e-commerce”
The three pillars of interest-based e-commerce
Virtual influencers have taken on even greater importance since COVID-19
From online fashion shows to metaverse fashion shows
Livestreaming propels interest-based e-commerce
Bosideng’s launch on Douyin illustrates the marketing power of livestreaming
Omnichannel intelligence is key to thrive in an increasingly complex retail environment
The three pillars of omnichannel intelligence and supply chain digitalisation
WeChat: Best-positioned social commerce for digital membership
Nike: Upgraded membership experience on Tmall
Smart stores link the online and offline worlds to provide a seamless shopping experience
Anta: Building smart stores as part of DTC strategy
Agile supply chains to power the push towards direct-to-consumer business models
Lining: Digital supply chain to meet data-driven and on-demand production
Key takeaways
What’s next

Apparel and Footwear

Apparel is the aggregation of clothing and footwear. This dataset covers retail sales of apparel through both store-based retailers and non-store retailers. Excludes black market sales (i.e. untaxed, generated within informal retailing)and duty free sales (travel retail). Items must be new when sold to the consumer; second-hand/used items are excluded. Antique and/or vintage clothing and footwear is also excluded.

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