Giordano Offers Many Lessons For Retailers Interested in China
HONG KONG -- Foreign players are entering China's retail-apparel market in greater numbers following last year's loosening of regulatory restraints. What can they learn from Giordano International of Hong Kong and other early arrivals?
For starters, pickings may not be as rich as hoped. True, China's consumer market is expected to grow rapidly as incomes rise and people spend more on cars, entertainment and clothes. Retail-apparel consultancy Kurt Salmon Associates estimates that revenue for China's leisurewear retail sector -- where Giordano is a major player -- will nearly double between 2004 and 2010, to 468 billion yuan ($58 billion).
But some analysts say the sector already has too many players. China's casual dressers can now choose from more than 2,000 brands, according to analyst estimates. And that's not counting newcomers Zara from Spain, part of Madrid-listed Inditex, and Tokyo-listed Fast Retailing's Uniqlo chain, which are swelling the market. They have come because of the 2005 Chinese rule allowing wholly owned foreign retailers; previously, they had to have a local partner.
China's apparel space is "overcrowded, with literally hundreds of copycat brands quick to spot the latest trend," says Vineet Sharma, a retail analyst at J.P. Morgan in Hong Kong.
Giordano has been dubbed the "Gap of Asia" for emulating the San Francisco giant's formula of strong visual store displays and sales of trendy basics. The retail arm of Giordano entered China in 1992. Today, it has 680 outlets in the country, accounting for about 45% of its total operations.
But the company's sales per square foot -- a key indicator in retail -- have been falling since 2000, and growth in stores open at least a year, so-called same-store growth, is "sluggish," says Jenny Chan of Sun Hung Kai Securities in Hong Kong. "I don't see much growth," says the analyst, who has had a "sell" rating on the Hong Kong-listed shares since August -- the same month they hit a 52-week high of 5.94 Hong Kong dollars (76.5 U.S. cents).
Ms. Chan has a 12-month target price of HK$4.50 on Giordano shares. On Thursday, they fell 1.2% to close at HK$4.28.
In 2004, the latest full year for which figures are available, Giordano's China sales fell to HK$2,400 per square foot from HK$3,000 in 2003. China sales growth for the first nine months of 2005 was 7%, lagging behind the group's overall retail sales gain of 10%, according to Giordano.
Analysts' projections for Giordano's China retail growth are relatively modest, ranging from 3% to 6% per year through 2008, when Beijing hosts the Summer Olympics.
William Yue, Giordano's head of investor relations, says sales per square foot has fallen partly because the company added stores in China's second- and third-tier cities, where per-square-foot sales tend to be lower. "We do believe [the situation] is stabilizing," he says. He declined to comment on 2005 full-year results, which Giordano will report in late March.
Still, Giordano's performance isn't necessarily something many foreign retailers -- facing sluggish sales in mature home markets -- would scoff at. In 2004, the company reported a 48% increase in net profit to HK$393 million, partly because of a recovery in Hong Kong's market following the 2003 SARS epidemic. But China also played a role, with sales there rising 17% to HK$852 million.
China overtook Hong Kong as Giordano's main market in 2001. The company doesn't give profit numbers by location, but says China operations have been profitable for the past five years.
Atiff Gill, an analyst at Kurt Salmon, cites one page that newcomers to China's retail sector could take from Giordano's playbook: Maintain a strong local sourcing base and good manufacturing relations.
Part of the company's growth has stemmed from the high gross margins, or the difference between retail price and production cost, that it enjoys from manufacturing garments in China. Giordano's overall gross margin was 50.8% in 2004, compared with the market average of between 40% and 42%, thanks largely to the fact the company makes 80% of all its clothes in China.
Giordano has also rolled out different brands for different segments of China's middle-class consumers, employing a strategy similar to what Gap has done in the U.S. with the more high-end Banana Republic line for its maturing clientele and lower-priced Old Navy for teens. Giordano has Giordano Ladies to target more affluent working women in big cities like Shanghai and Beijing and BlueStar Exchange for more price-sensitive consumers.
Interim results for the first six months of 2005 showed that revenue growth for these two lines, at 13.5% for Giordano Ladies and 12.5% for BlueStar Exchange, outstripped that of the core Giordano brand, which totaled 12.2%. The two lines collectively made up less than 15% of group revenue.
And with Giordano outlets now scattered across China, the company plans to focus on going upscale. Mr. Yue, the investor-relations chief, says Giordano plans to add only 30 China locations this year, compared with an average of 60 in the past few years. He says the emphasis is on improving profitability instead of just chasing top-line growth, as Giordano is "slowly repositioning upmarket, so we don't compete on the lower end."
佐丹奴的启示
自从去年政策放开以来，有越来越多的外资公司进入了中国的服装零售市场。这些公司从佐丹奴国际有限公司(Giordano International Ltd.)和其他先期进入中国的公司身上能学到些什么？
对初来乍到者而言，中国市场也许不像期待的那样理想。无庸置疑，随著收入水平的提高，人们在汽车、娱乐和服装上的花费越来越多，中国的消费市场将迅速扩张。服装零售业顾问公司Kurt Salmon Associates预计，中国的休闲服零售业──佐丹奴是这个领域的佼佼者──在2004至2010年间收入将增长近一倍，达到4,680亿元（合580亿美元）。
不过有分析师认为，在中国从事休闲服零售的企业已经太多了。他们估计中国的休闲服品牌如今已超过了2,000种，这还不包括刚刚进入中国的西班牙Inditex旗下Zara品牌和日本Fast Retailing旗下的Uniqlo品牌，它们的到来将壮大中国的休闲服零售市场。这些企业此时进入中国的原因是：中国从2005年开始允许外商独立投资经营，而之前，外资企业必须有中国合作伙伴。
JP摩根(J.P. Morgan)驻香港的零售业分析师夏尔玛(Vineet Sharma)表示，中国服装业的发展空间“非常有限，实际上有成百上千个品牌全靠抄袭来紧跟最新潮流。”
佐丹奴有“亚洲Gap”的称号，因为它模仿Gap将店内布置得富于视觉冲击力，销售的服装也是流行的简约款式。佐丹奴的零售业务在1992年进入中国。如今，它在中国拥有680家店面，约占总店面数的45%。
新鸿基证券有限公司(Sun Hung Kai Securities Limited)驻香港的分析师Jenny Chan说，佐丹奴每平方英尺的销售额──零售业的一个关键指标──自2000年开始下滑；至少开业1年的店面的销售增长，即所谓同店销售增长也表现“疲软”。 Jenny Chan说，“我认为它的增长空间有限，”自8月以来她对这家香港上市公司的评级都是“卖出”── 8月佐丹奴的股价创下每股5.94港元（合0.765美元）的52周高点。
Jenny Chan将佐丹奴12个月的目标价定为4.5港元。周四，佐丹奴股价下跌1.2%，收于4.28港元。
在2004年──能获得完整数据的最近一年，佐丹奴在中国的销售额从2003年每平方英尺的3,000港元下降到2,400港元。在2005年的前9个月，中国的销售增长为7%，落后于集团整体零售10%的增幅。
分析师预计佐丹奴在中国的销售将有相对温和的增长，至北京举办奥运会的2008年，预计年销售增长在3%至6%之间。
佐丹奴投资者关系主管William Yue表示，每平方英尺销售额下降是因为公司在中国的二、三级城市开设了店面，那里的销售额相对较低。他说，“我们相信情况会稳定下来。”公司将于今年3月下旬公布2005年的全年业绩，不过他拒绝对此表态。
不过，许多外商零售企业──这些企业在成熟的本国市场形势并不乐观──也许不该小看佐丹奴的表现。该公司2004年的净利润增长了48%，达3.93亿港元，部分原因是香港市场在2003年SARS过后出现复苏，中国内地市场也表现不俗，销售增长17%，达8.52亿港元。
2001年，中国大陆取代香港成为佐丹奴的主要市场。公司并不公布各个地区的利润数字，不过表示中国大陆业务在过去5年一直盈利。
Kurt Salmon的分析师吉尔(Atiff Gill)说，初次进入中国零售业的公司应该从佐丹奴身上学到的一课是：保证拥有强大的本地采购网络、和生产商建立良好关系。
佐丹奴的利润增长与毛利率高有很大关系，而这是在中国生产服装的优势所在。毛利指零售价格和生产成本之间的价差。佐丹奴2004年的整体毛利率为50.8%，而市场的平均值是40%至42%，这和公司80%的服装在中国生产有很大关系。
佐丹奴还为中国各类中层消费者推出了不同品牌，这和Gap在美国的策略相似。Gap面向成熟消费者推出了高档的Banana Republic，而对青少年则推出了价格较为低廉的Old Navy。佐丹奴的Giordano Ladies品牌对准上海、北京等大城市富有的白领女性，而BlueStar Exchange则面向对价格敏感的消费者。
2005年前6个月的中期业绩显示，Giordano Ladies和BlueStar Exchange的收入增长分别为13.5%和12.5%，超过了佐丹奴核心品牌12.2%的增幅。Giordano Ladies和BlueStar Exchange品牌的总收入占集团收入的比例不足15%。
佐丹奴的店铺如今遍布中国各地，公司计划将发展重点转向高档服装领域。投资者关系主管William Yue说，公司计划今年仅增加30个店面，而过去几年公司平均每年要开设60家新店。他说，公司现在看重的是提高盈利水平而不只是追求店铺数量的增加，因为佐丹奴“将逐渐把重心放在高端市场，所以我们不会纠缠于低端市场的竞争。”
