beyondbrics

By Elizabeth Paton

The Chinese economy might be heading for a slowdown and Chinese consumers might be reining in spending. Yet the steady stream of foreign brands still willing to try their luck has continued unabated into 2012.

The latest in the long line is Marimekko, a quirky, off-the-wall Finnish design company which on Monday announced plans to open 15 stores across China and Hong Kong by the end of 2016.

It’s a bold move by the Helsinki-based clothing and textiles brand, traditionally known for its colourful and playful prints but now, increasingly, its aggressive overseas expansion strategy. It currently operates in 40 countries with 84 stores and concessions – over half of which were opened in the last six years.

2011 alone saw numerous shops appearing in Oslo, Stockholm, Copenhagen and London as well as across the US, including a flagship store on New York’s 5th Avenue and six high profile ‘shop-in-shops’ at American homeware giant Crate & Barrel. These moves have undeniably helped growth – international sales were up 8.9 per cent in 2010, even as overall sales stood at €73.3m, a measly year-on-year increase of just 1.1 per cent.

The potential rewards of a successful entrance into China are well known. Yet Marimekko would also do well to heed its pitfalls, as experienced by some of the over-hasty European brands that have been left stung and disappointed.

Mika Ihamuotila, group president and chief executive, is confident about the company’s decision, citing a common vision with Hong-Kong-based partner Sideframe (previously responsible for importing Prada, Furla and Anteprima into the Chinese market) and a full awareness of the “ signs of overheating in the Chinese retail trade” as concrete foundations for future success.

In his words:

China is expected to overtake the US as the world’s biggest consumer market in the next few years and we want to boost our recognition in time, whilst the market still clearly has room for new and attractive brands. We want to build our network of stores step by step on a firm basis and without rushing. It will take years to achieve the position we’re aiming for, and results should not be expected to early.

In other words, Ihamuotila sees Marimekko’s strategy as akin to that of the tortoise rather than the hare. But investors should take heart from the company’s performance elsewhere in the region – its 22 stores in Japan and South Korea saw sales boom by over 50 per cent in the January-September period of 2011, making the Asia-Pacific Marimekko’s second-biggest market after Finland, overtaking Scandinavia.

These achievements are important. Tokyo and Seoul set benchmarks across the continent when it comes to luxury shopping; seen as hubs of refined taste and sophistication, millions of aspirational Chinese flock to the two cities each year to imitate and purchase the trends seen there.

It’s where they also learn about many of Asia’s recently imported Western brands, who wisely prefer to enter the region by dipping their toes into these safer markets before diving headfirst into that of China.

Yet some industry observers still seem unconvinced that Marimekko’s unconventional and eccentric aesthetic will appeal to mainstream Chinese tastes, including the FT’s fashion editor Vanessa Friedman. She told beyondbrics:

Whilst Marimekko’s humorous and playful prints appeal to Western markets and have seen a revival in popularity in recent years, the joke might well be lost on your average Chinese customer. Expensive purchases there still signify more about projected social status than personal stylistic preferences. Most foreign fashion collections sold there are awash with branding and logos designed to cater for this type of Chinese demand. So Marimekko may initially struggle to get the sales they hope for.

Ihamuotila, not surprisingly, disagrees. As he tells beyondbrics:

We are very confident that there is a growing number of Chinese consumers who are now looking for new, authentic and vibrant brands like our own. The last 15 years has been all about the “bling-bling” luxury brands. Increasingly however, we are seeing more and more demand for fashion and home decoration brands that carry strong values, more understated touch and a courageous visual identity.

Ihamuotila said market research had found that in larger cities, the “self-esteem of female consumers” has been strengthening, as well as a piqued increase in what goes on behind a brand in terms of values, heritage and its environmental footprint.

It would seem therefore, that not being understood aesthetically by a new culture of consumer is a risk that Marimekko, like others before and after it, will be prepared to take.

Related reading:
Fungs: more European style to China, beyondbrics
Barbie says bye bye to Shanghai, beyondbrics
Selling in China: be unique or don’t bother, beyondbrics
China’s luxury consumer comes of age, beyondbrics
Chinese shop till they drop in Japan, beyondbrics