Selling Americana to China: Abercrombie and Old Navy Take on the Mainland

China is a Huge Opportunity for Apparel Brands; That Doesn't Mean Success is Guaranteed

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Selling the all-American image in China.
Selling the all-American image in China.

Abercrombie & Fitch launched its brand of sporty, Ivy League-inspired Americana in April in mainland China with a new flagship store in Shanghai. For anyone wondering if the brand might tone down its provocative image for China, the answer is no: The dimly lit store pulses with dance music and features murals of half-undressed young men posing with sports equipment and trophies.

Just down the street from the Abercrombie on West Nanjing Road is another new shop playing up the Americana theme – it's the mainland's first Old Navy. Here the ambiance is sunny and family-oriented. One of the mannequins is a canine mascot wearing a sunhat.

Abercrombie and Old Navy, which entered the market within weeks of each other, are the latest brands to transition from America's malls to China. Both are offering an almost identical retail experience to what consumers would get in the U.S. On a recent weekday afternoon, both were packed.

Big potential

China is a huge opportunity for Western clothing brands, and not just because it has 1.35 billion consumers. A.T. Kearney estimates the apparel sector will grow 10 to 15% annually in China for the next five years (for comparison, 2013 GDP growth in China was 7.7 %) .

Abercrombie & Fitch sees potential for more than 100 stores in China for its main brand and Hollister, an offshoot.

"China is our primary growth driver and will be our company's focus for the next decade," Craig Brommers, Abercrombie & Fitch senior VP for marketing, wrote in an email.

Mr. Brommers added: "Now is the perfect time to open A&F in China, as consumers are looking for more authentic heritage and differentiated shopping experience."

Brand stories

For brands, explaining their heritage to local consumers is necessary to stand out in a market flooded with new choices from at home and abroad. But how do you explain Abercrombie to someone who has no idea what it is?

Abercrombie issued a helpful "brand heritage" primer for media, explaining how a company that got its start in New York in 1892 selling gear for camping, hunting and fishing eventually became known for its buff male sales staff.

"The iconic image of the 'hot guy' honors the longstanding heritage of strength that Abercrombie & Fitch has been known for since 1892," the statement said, tying it all together.

Old Navy has taken its wholesome, family-oriented vision of Americana to China.
Old Navy has taken its wholesome, family-oriented vision of Americana to China.

Old Navy's China web site also highlights its brand story, which dates back to 1994 in California and includes high points such as the launch of performance fleece. (Some brands have more backstory than others.)

Late to the game?

If the potential is vast, it doesn't mean selling things in China is simple. Home Depot shut its big box stores here, Best Buy retreated, beauty brands Revlon and Garnier pulled out and Mattel closed down a Barbie megastore in Shanghai.

Apparel shops face inexpensive competition from local brands. And the market for foreign clothing is more competitive, now that Uniqlo, Zara, H&M and Gap (which also owns Old Navy,) have built strong brands in China.

Some asked why Abercrombie and Old Navy waited until now.

"Perhaps they are hoping that the major kinks have been worked out by competitors and they are now thinking they can reap the benefits of a more educated consumer base?" said Mary Bergstrom, founder of The Bergstrom Group insights consultancy on China.

"In my eyes, they are late to the game," she said, in part because "the cache of being a foreign brand is fading and domestic competitors are becoming much more adept. For brands like Old Navy and Abercrombie, they have to prove their worth in a crowded marketplace.

American influences

Sherri He, a partner at A.T. Kearney Shanghai who has extensive experience in the China apparel sector, said sportswear brands overexpanded around the Beijing Olympics in 2008, and the issue has spread to some other apparel sectors in the last two years. Apparel brands have faced rising rental and labor costs, and some have struggled to adjust amid China's e-commerce boom.

Abercrombie and Old Navy may have one natural advantage – they're casual, a segment seeing faster growth.

And those brands' American identity may be appealing "especially to the younger generation, which have more and more influence from American sports and TV shows," Ms. He said.

Meanwhile, another American mall brand is planning to enter China this year: Victoria's Secret. While Abercrombie is keeping it sexy, Victoria's Secret is calming things down. Its first China location will be a brand subset selling beauty products and accessories -- meaning Chinese consumers will have to wait for its bras and panties.

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