Is Topshop’s failure in China a fast-fashion problem?

COVID-19 has hurt one fashion brand after another, and now it’s classic British fashion label Topshop’s turn.

Its 14,000 square-foot flagship store in Hong Kong will close when the lease comes up this October, making the brand yet another in a string of international fashion retailers that have exited the territory. Up to this point, all of Topshop’s business has left China, although it will continue to sell online in Hong Kong despite not having any physical store presence.

In 2013, Topshop formed a partnership with Lane Crawford and launched in Hong Kong, and the grand opening of its central flagship drew countless fans. At the time, the company said the launch was the first step in Topshop and Topman’s full expansion into mainland China. However, thanks to the coronavirus, it wasn’t meant to be.

Arcadia, Topshop, and Topman’s mother company initially set foot into China in 2014 via the Topshop and Miss Selfridge brands by launching them on the online luxury retailer ShangPin.com, and after that, the China-based online marketplace Tmall. At the time, it was equipped with ambition and solid strategies aimed at the huge potential of the Chinese market.

But in August of 2018, the strategy began to fail. Topshop split with its Chinese franchise partner ShangPin and stopped selling products on its e-tail website and Tmall.com. According to Topshop, the partnership with the fashion and luxury retailer ShangPin had been terminated early by mutual agreement — four years after the e-tailer had introduced the brand tp mainland China through an exclusive partnership.

Why did Topshop fail? Although it’s a well-known, UK-based fashion company, Topshop didn’t choose the right partner to collaborate from the beginning. As a new e-commerce platform, ShangPin desperately needed Topshop, since it was a big name that could attract Chinese investors. During their partnership, Shangpin claimed that its website was home to 30 million users. But some in the Chinese finance media disclosed that the actual number was closer to 5 million, at most.

Topshop then launched a virtual store on Tmall, as ShangPin wasn’t meeting its retailing needs primarily due to financial problems. But Topshop had already missed its best window for development on the world’s most powerful e-commerce platform. Ironically, its revenue increased by over 900 times at its first Taobao Double Eleven shopping day event.

Other than the unimpressive partnership, Topshop was unable to find out what Chinese customers wanted. First, there was no real localization for clothing sizes and styles in China, and no updates were made based on Chinese customers’ needs. For Western brands, sizes matter in China, since body types are the key to adjusting designs. Also, XS and S products were always out of stock due to supply chain issues.

Second, Topshop’s online stores didn’t function properly. Digitalization isn’t simply about opening an online store and delivering clothing. It’s more about integration through KOL/KOC marketing, customer engagement, and brand building in China. Topshop was missing all of this although it did attract a lot of spontaneous customer interaction.

Third, its offline stores didn’t sync with its overall business development strategy. The openings of Topshop’s physical flagships were delayed again and again until eventually, its partner got involved in an investment scandal. Arcadia was having trouble with its operations in the UK and other parts of Europe, and its sales volume decreased by 5.3 percent year-on-year while profits declined to 124 million pounds in 2017.

“What Chinese domestic customers care about most is quality, style, and price,” said Joanna Wang, who owns several trendy boutiques in Beijing. Joanna said fast fashion’s quality doesn’t hold up in China, as its styles aren’t customized for China’s younger generation. Also, its prices, which used to be fast fashion’s ace in the hole, cannot compete with Chinese e-commerce products.

She can’t speak for the entire industry, but she said that even her small boutiques could compete against Topshop’s prices and styles. That is perhaps why Topshop had to give up in China. Chinese women are no longer simple villagers yearning for any Western fashion brand; their aesthetic standards require uniqueness, personality, and independence.

But for others, fast fashion is working in China. According to McKinsey and Co., low-cost clothing is now in high demand there, as demonstrated by the success of Topshop’s market competitors: Zara, H&M, and Uniqlo. “Chinese consumers are not solely driven by international status or brand name, especially in the low-cost division,” said fashion critic Gu Chenxi. “[Being an] international brand will not do much in driving sales, especially when the competition continues into 2-tier and 3-tier cities. The brand needs to have an organic understanding of the market.”

Even though international fast fashion brands are still in the game, their heyday seems to have already passed. But someone’s failure is always someone else’s success, and H&M, Zara, Uniqlo, and others are still standing after the pandemic. When fast fashion is concerned, there will always be opportunities in China — maybe even for Topshop.