Chinese firms target fashion brands

More Chinese clothing companies are trying to take over Korean fashion brands in order to advance their design and marketing know-how. / Korea Times file

A growing number of Chinese companies are expanding investment in Korean fashion brands to learn their marketing and design and to eventually develop a high-quality homegrown brand in China.

Over the past few months, some cash-rich Chinese firms have taken over leading Korean brands, while others have established funds to purchase sizable stakes in those businesses.

The ownership of several domestic brands has already fallen into the hands of Chinese companies. Dishang Group, one of China’s leading textile firms, became the biggest shareholder of Korea’s mid-tier fashion brand Avista last month by purchasing 4.8 million shares or 36.9 percent for 27 billion won ($25.1 million).

Avista owns several popular women’s clothing brands such as BNX, Tankus and Kai-aakmann that are available at nearly 80 stores in China.

Another Chinese textile firm, Inna, purchased Intercrew from Korea’s The Shinwha. Under the deal, the Chinese firm will retain employment of all the unit’s, 30-odd staff members and the unit chief will continue to control it under the new ownership.

This indicates that Inna is looking to make full use of the deal to secure not only tangible assets but also intangible ones of the Korean brand, such as design and marketing know-how.

In October, China’s Shandong Ruyi acquired a 70 percent stake in Korea’s YeonSeung Apparel. YeonSeung, which posted 133.4 billion won in sales last year, owns several popular clothing brands such as GGPX, Top Girl and CLRIDEn.

Rumors have it that Hong Kong-based trading firm Li&Fung has raised funds worth 200 billion won in a preparatory move to take over a domestic fashion company.
Industry insiders say such a move reflects Korean fashion companies’ superiority to Chinese competitors in terms of products design, marketing strategies and sales network among others.

In that sense, to win ownership of a Korean fashion brand is to possess not only the company’s tangible assets but also invisible assets that are crucial in the fashion industry, they say.

“China is a magnet for the world’s leading fashion brands. They keep increasing the number of stores on the Chinese territory but there is no indigenous fashion brand whose brand and products quality are good enough to compete with imported ones,” said a market insider familiar with the matter.

“But the reality is that it’s all but impossible for China to have a fashion brand with proven competitiveness in the near future. Considering this, it would be reasonable for China to become aggressive in buying foreign fashion brands in a bid to strengthen basic health of its fashion industry.”

Another insider forecast more aggressive move of Chinese firms to win Korean brands.

“Korean clothing products are widely perceived as high-quality and high-priced in China. In the long run, more Chinese companies will join the buying race in a bid to expand beyond their country.”

Meanwhile, more Korean clothing companies are shutting manufacturing facilities in China and heading to Southeast Asia, in seeking cheaper labor and loose business regulations. Among companies pulling out of the neighboring nation are underwear manufacturer BYC and SBW, children’s clothing maker Dong-il Renown and hiking boots manufacturer Treksta.

More of the companies in this business are expected to return to receive benefits from the Seoul-Beijing free trade agreement that is under negotiation. <The Korea Times/Park Si-soo>