American Apparel to open in Sanlitun

The other day, I helped carry boxes at the new American Apparel (AA) at the Sanlitun Village. The new shop is scheduled to open before the Olympics along with another branch at the World Trade Center. These will be the first two AAs in China.

As with many middle-market foreign brands operating in China, their plan is for the brand to be slightly more upscale than it is in the US. This will be accomplished mainly through the locations and appearance of the shops.

The products will be exactly the same ones that sell in the US market. I don’t want to dwell on the funny contradiction of having “made in USA” clothing selling in China. Several media stories explore this and discuss AA store openings in China. Hopefully AA will help reduce the trade defecit. AA believes the origin of their products will have a certain caché with young urban people here in China.

Prices will be slightly above the US, but this is only because of import taxes and shipping costs and not because of an increase in profit margins. At first, it struck me as odd that foreign clothing brands sell their products at prices higher than those in the West in a country where the average wages are, very roughly, one-fifteenth of Western levels. The Western levels of pricing for fashion products serve to remind us of the income disparity here and the fact that what we often refer to as “the middle class” is actually an elite in comparison to the rest of the population.

Prices will be slightly above the US, but this is only because of import taxes and shipping costs and not because of an increase in profit margins. At first, it struck me as odd that foreign clothing brands sell their products at prices higher than those in the West in a country where the average wages are, very roughly, one-fifteenth of Western levels. The Western levels of pricing for fashion products serve to remind us of the income disparity here and the fact that what we often refer to as “the middle class” is actually an elite in comparison to the rest of the population. Urban white collars working for foreign firms and the children of government officials and entrepreneurs will have no trouble affording AA or luxury brands. But it is critical that the right techniques are used to attract the people who can pay. Prices so out of sync with the average salary are one reason why foreign fashion brands all must make some effort to pitch their brand as high-end.

The prices for the raglan tops, polo-type knit shirts, and hoodies are all above RMB 300 – in general around 50 dollars per piece. This unisex and super skinny cords and denim are RMB 700 – some people in Beijing still make only this much every month (and never consider shopping at AA or anywhere beyond the vegetable market). Sales will only be online. The styles remain the same from season to season, so stock apparently does not need to be moved as fast as in stores like H&M and Zara. It will be interesting to see how this somewhat “anti-trend” approach goes over with the fashion-obsessed locals.

The prices shouldn’t be a problem if the marketing and positioning are handled properly. Uniqlo, H&M and Zara on sale are at a somewhat lower pricepoint, so it will be important to ensure that consumer don’t see AA as in the same class as these fast fashion brands. Clearly, these brands (with perhaps the exception of Uniqlo) are much more tied to fashion whereas AA’s products are both more original and more versatile. Since it is sporty, AA may be viewed as more akin to Adidas, Nike, and Kappa, which tend to have a higher pricepoint. These sports brands succeed mainly because their products are covered with brandnames and logos.

Wearing an AA tee-shirt or hoodie will not proclaim anything haughty to peers. Rather than targeting status-conscious businesspeople and their spouses and lovers, AA will have to succeed with young people focused on improving their own style through using well-cut basics or the activist/socially conscious message. The former group seems easier, and AA does offer something they need. Solid, well-made basics without a brandname or some obnoxious Chinglish message are hard to find in China. Also, the slim fit is perfect for the Chinese physique.

I am anxious to see if the social message approach is attempted and if it gains any traction. One potentially hopeful sign is that the spoiled younger generation isstarting to care about social causes, much like American youngsters who are selfish and not overly concerned about family but quite interested in the broader world. Of course, there could be political repercussions for attempting to bring AA’s activist message to China in any form.

Three of the future sales staff and some college students came in for the day to fold the clothing that will be in the stock room. The three future staff members are all graduates of foreign universities – always in great demand here in China. All of the floor staff will be able to speak English. AA described this as their first requirement. They evidently want people who are cool and internationalized – not those who just got in from the provinces. Staff must also be attractive and have a sense of personal style. To attract this calibre of staff, they will be offering hourly pay that is somewhere around the US minimum wage. This is much higher than what the average sales assistant makes in China, and on par with entry-level pay in foreign companies. It seems that the sales staff will be from the same socio-economic group that will be shopping at AA.

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