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article imageOld Navy’s lack of brand awareness means uphill battle in China

By Nat Sanderson     Mar 26, 2014 in Business
Shanghai - China is the land of opportunity from the viewpoint of major Western retailers like Old Navy. Its huge population and rising median income means there's major money to be made selling clothing to the emergent urban middle class.
Old Navy, which specializes in fashionable and affordable family apparel, will open five brick-and-mortar retail locations in China this year — starting with the all-new store in Shanghai it recently launched in late February.
But it's not all low-hanging fruit; saturated markets and cultural gaps must be addressed. That's why Old Navy's leadership is buzzing with strategies for taking on the challenges that lie ahead.
Old Navy is owned by Gap, Inc., which is investigating the best ways to tap Asian retail markets, especially China. Gap began doing business in China in 2010, nipping at the heels of competitors like Forever 21 that had already set up shop. In the world's most populous nation and second-largest economy, spending power is amping up and companies are seeing dollar signs.
“This is an extremely exciting time for Old Navy,” notes Executive Vice President for Old Navy International Robert Frank. “With our recent entry into China and continued growth in Japan, the openings in the Philippines position us for further growth in Asia and beyond.”
Although China's apparel markets clearly offer opportunities, it could be an uphill battle. Key challenges must be overcome. The label's recent online survey quickly unearthed one of the biggest of these issues: lack of brand awareness. When asked whether they had even heard of Old Navy, a majority of Chinese consumers gave a resounding "No" in response.
The new Chinese consumer is just that — new, and therefore much less aware of how to differentiate Western products and brand offerings from each other. Since the apparel industry in the country is already saturated, the question of brand differentiation can't be put off to a later date.
A good place to start cultivating brand awareness is online. The meteoric rise of the Chinese apparel market depends heavily on e-commerce. Chinese consumers buy their clothes on the Internet in massive numbers, so businesses want to make shopping for clothing and accessories as seamless as possible by establishing a robust digital presence.
Social media plays a major role in this digital strategy. Company executives say earning a large following on social media is obligatory for success in China, especially when it comes to the nation's up-and-coming, tech-savvy youth. Old Navy will need to establish a foothold on networks like Sina Weibo, the most popular social media platform in the single-party state.
In North American markets, retailers can take for granted shopping norms that have been nourished over decades of marketing and brand development. American buyers, for example, can be appealed to on the basis of the varying fashion demands of different social settings.
For most Chinese consumers, in contrast, even those with discretionary income, wardrobes are generally modest and monolithic according to global management consultancy McKinsey & Company. Additionally, Chinese consumers don't place much of a premium on foreign brands. Although it's not necessarily harmful, the Westernized image of a foreign brand like Old Navy is not a great wedge, either.
To solve these challenges, Old Navy will be closely watching the response of Chinese consumers and vigorously recruiting fashion buyers from the world's top schools who readily grasp the complexities of marketing in the China context. The coming years will be instructive as to the apparel maker's success in reaching out and developing the Chinese consumer psyche.
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