how to improve and expand tommy hilfiger

Transcription

HOW TO IMPROVE AND EXPAND
TOMMY HILFIGER
WOMEN’S UNDERWEAR
IN THE CHINESE MARKET?
MADE IN CHINA
BIYUN HU
STUDENT NUMBER: 199696
INTERNATIONAL FASHION MANAGEMENT
BACHELOR GRADUATION THESIS 2011
How to improve and expand TOMMY HILFIGER women’s underwear in the Chinese market?
-Biyun Hu-
Amsterdam Fashion Institute – Final Thesis
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How to improve and expand TOMMY HILFIGER women’s underwear
in the Chinese market
Biyun Hu
Amsterdam Fashion Institute – HvA
International Fashion Management
Amsterdam, 25th May 2010
Coach: Mr. Henny Jordaan
Second Reader: Joop Smit
Declaration of authorship
I, Biyun Hu, declare that the work presented in this thesis is original and done by myself. Any
usage of the work from other author or organization within this thesis is properly recognized
in the footnotes and a list of references is included.
Amsterdam Fashion Institute – Bachelor Thesis
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Table of contents
SUMMARY.............................................................................................................................................................7
PREFACE ..............................................................................................................................................................9
CHAPTER 1
1.1
1.2
1.3
1.4
PURPOSE OF THE THESIS ......................................................................................................................10
PROBLEM DEFINITION ............................................................................................................................10
RESEARCH OBJECTIVES ........................................................................................................................11
RESEARCH METHODOLOGY ...................................................................................................................11
CHAPTER 2
2.1
2.2
TOMMY HILFIGER UNDERWEAR......................................................................................13
TOMMY HILFIGER UNDERWEAR .............................................................................................................13
TOMMY HILFIGER IN CHINA ....................................................................................................................14
CHAPTER 3
3.1
3.2
3.3
INTRODUCTION .....................................................................................................................10
THE CHINESE UNDERWEAR MARKET............................................................................19
UNDERWEAR MARKET POTENTIAL IN CHINA .........................................................................................19
COMPREHENSIVE MARKET SHARES IN CHINA ......................................................................................21
THE CHALLENGES IN CHINA ..................................................................................................................21
CHAPTER 4
SUPPLY CHAIN MANAGEMENT ........................................................................................23
4.1
GARMENT MANUFACTURER....................................................................................................................23
4.2
HUMAN RESOURCES ..............................................................................................................................24
4.2.1
Logistic Coordinator ....................................................................................................................25
4.2.2
Sales & Marketing Coordinator..................................................................................................26
4.2.3
Buying & Planning Coordinator .................................................................................................27
4.2.4
Production Coordinator...............................................................................................................28
4.3
LOGISTICS ..............................................................................................................................................29
4.3.1
Distribution Process ....................................................................................................................29
4.3.2
Pick and Pack Service ................................................................................................................30
4.3.3
Incoterm ........................................................................................................................................31
4.4
BRAND PROTECTION ..............................................................................................................................31
CHAPTER 5
ELEMENTS OF THE MARKETING MIX .............................................................................33
5.1
PEOPLE ..................................................................................................................................................33
5.2
PRODUCT ...............................................................................................................................................34
5.2.1
The collection ...............................................................................................................................35
5.2.2
Size offering..................................................................................................................................38
5.2.3
Garment Fitting and Grading .....................................................................................................40
5.2.4
Packaging .....................................................................................................................................54
5.3
PLACE.....................................................................................................................................................55
5.4
PROMOTION ...........................................................................................................................................58
5.4.1
Sales Personnel...........................................................................................................................58
5.4.2
E-commerce .................................................................................................................................59
5.5
PRESENTATION ......................................................................................................................................60
5.6
POSITION ................................................................................................................................................62
5.7
PRICE .....................................................................................................................................................66
5.7.1
Cost and Price in Europe ...........................................................................................................66
5.7.2
Price strategies at Chinese market ...........................................................................................67
CHAPTER 6
SWOT ANALYSIS / MATRIX ................................................................................................70
CHAPTER 7
CONCLUSION AND RECOMMENDATIONS.....................................................................71
REFERENCES ....................................................................................................................................................73
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Summary
China is well known for its manufacturing capabilities. For decades many companies around
the world have delegated their production to the factories in China. The words “Made in
China” have become one of the most recognizable labels in the world today and can be seen
on a huge range of goods from electronics to clothing. Meanwhile the economy in China has
kept on growing and is no longer just a country with low-cost labour. Having a huge
population (1.3 billion people) and a growing economy, China is becoming a very important
market in the world. Taking notice of the economic growth in China and the government’s
intension to stimulate the domestic market, many foreign companies have been triggered to
explore and seize the market opportunities there. Tommy Hilfiger is one of these companies.
By realizing that the development and expansion of the business in this important market is
better supported by assuming direct control, Tommy Hilfiger Group reacquired the direct
control on wholesale and retail distribution in China from Dickson Concepts and set up a new
branch in China called Tommy Hilfiger China, which will start operating in January 2011.
Tommy Hilfiger has already been active in China for many years and its apparel is generally
well-received by the Chinese consumers. On the other hand, its lingerie business has limited
success in the Chinese lingerie market. The women’s underwear collection was introduced to
Chinese retailers in 2008, however to date only one Tommy Hilfiger retail store located in
Hong Kong has started selling women’s underwear products next to its huge apparel
collection. Therefore the main question of this thesis has been raised:
“How can Tommy Hilfiger improve its supply chain, product image and sales of
women’s underwear to become more successful in the Chinese market?”
The following sub questions are:
What is the current situation and comprehensive market shares in the Chinese local
lingerie market?
What are the main challenges that Tommy Hilfiger women’s underwear is facing in
China?
How can Tommy Hilfiger efficiently improve its supply chain in the local market?
Who are the consumers of Tommy Hilfiger women’s underwear in the local market? What
are the buying behaviour, preferences and body type for this group?
What are the possibilities for implementing and expanding the business in China?
Who are the competitors in the local market?
Why is it beneficial for Tommy Hilfiger to invest in the local market? And what will be the
long-term goal for Tommy Hilfiger women’s underwear business in China?
Through investigating the challenges inside the local supply chain, researching the potential
in the Chinese lingerie market and studying the existing Tommy Hilfiger lingerie products,
five recommendations are summarised:
It is advised to prioritize the constructing of a professional body wear team in Tommy
Hilfiger China. Though close cooperation with the European head office, this team is
expected to be able to handle the local market independently in 2~3 years by creating
design, product development, advertising and sales completely customized to the local
market.
Via exploring the direct distribution routes to the local customers and utilizing the
advantages offered by a local carrier will minimize logistics costs and lead-times.
Adjusting the styling, fitting packaging and price of the existing garments to the local
market can lead to a positive brand perception.
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The business of Tommy Hilfiger women’s underwear will discover more opportunities at
the second tier cities in China once it finds solution to a few problems in these regions.
Presenting unique “shop-in-shop” concepts and offering high quality customer service will
make the Tommy Hilfiger women’s underwear collection more competitive in the Chinese
mid-high level lingerie market.
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Preface
In 2008 I started my internship at Tommy Hilfiger Europe B.V in Amsterdam. I was assigned
to the Bodywear department which is a small and new department within in the whole
company. The division handles sales, design, production, and logistics for its product line.
Currently Bodywear have four main product categories: women’s underwear, women’s
loungewear, men’s underwear and men’s loungewear. After my internship of 5 months I was
employed as Production Coordinator in Bodywear. In the coming 2 years I have experienced
the improvement, growth and strategies in this division.
Although living, studying and working in Europe for many years, I am always expecting to
connect my career to the region where I come from – China. The country’s GDP has kept on
growing and is no longer just a country with low-cost labour but a very important market in
the world. This has inspired me when I started to write final graduation assignment to
complete my study at Amsterdam Fashion Institute.
I would like to thank to Mr. Henny Jordaan– my coach; Ms. Marian McLaughlin, Mr Stephen
Fetherston and Mr. Joop Smit – the readers and advisers of this thesis.
I would like to thank the following people from Tommy Hilfiger Europe B.V for their support
and input:
Annique van der Zande, Director of Bodywear
Christine Ngin, Senior Product Developer of Bodywear
Katrina Hardy, Senior Product Developer of Bodywear
They have been inspiring, supporting and advising me throughout the whole process.
Last but not least, I would like to thank to Albert who has accompanied and supported me
from the beginning till the end.
Biyun Hu
May 2010
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Chapter 1
1.1
Introduction
Purpose of the Thesis
Since China’s “Reform and Opening Policy” in 1978, the Chinese economy has become one
of biggest in the world. The Chinese government had focussed mainly on the modernisation
of industry and export, until the recent economic crisis in the Western world and its effect on
the Chinese economy. As a reaction to these events, the leaders of the government have
decided that the development of a Chinese domestic market should have priority in the next
five year plan.
Taking notice of the economic growth in China and the government’s intension to stimulate
the domestic market, many foreign companies have been triggered to explore and seize the
market opportunities there. Tommy Hilfiger is one of these companies.
Tommy Hilfiger is famous in China for its casual wear, sportswear, denim, and accessories.
Its women’s underwear business has four years of history in the European market and has
become more and more competitive within the European mid-high level lingerie segment.
However, the business has limited success in the Chinese lingerie market. The women’s
underwear collection was introduced to Chinese retailers in 2008, however to date only one
Tommy Hilfiger retail store located in Hong Kong has started selling women’s underwear
products next to its huge apparel collection.
The purpose of this thesis is to analyse the challenges and opportunities for the development
of Tommy Hilfiger women’s underwear business in China and to draw conclusions that will
benefit its business in the long term.
Recommendations in this thesis will focus on helping Tommy Hilfiger women’s underwear to
achieve the following:
- A more efficient supply chain for its products
- Providing more satisfaction to its target group
- Minimizing complete modification of its existing European products
- Having its existing products smartly and swiftly adjusted for the local market
- Better sales at developing cities in China
- Competing in the high level lingerie segments
1.2
Problem Definition
Many mid-high level lingerie brands (including Calvin Klein, Triumph, Chantal Thomass, etc.)
have successfully entered the Chinese market while the activities of Tommy Hilfiger lingerie
are still restricted to the European regions.
Realizing from this fact, it is interesting to investigate the main research question:
“How can Tommy Hilfiger improve its supply chain, product image and sales of
women’s underwear to become more successful in the Chinese market?”
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To support the final conclusion of the main research question, the following sub questions
are defined:
- What is the current situation and comprehensive market shares in the Chinese local
lingerie market?
1.3
-
What are the main challenges that Tommy Hilfiger women’s underwear is facing in
China?
-
How can Tommy Hilfiger efficiently improve its supply chain in the local market?
-
Who are the consumers of Tommy Hilfiger women’s underwear in the local market?
What are the buying behaviour, preferences and body types for this group?
-
What are the possibilities for implementing and expanding the business in China?
-
Who are the competitors in the local market?
-
Why is it beneficial for Tommy Hilfiger to invest in the local market? And what will be
the long-term goal for Tommy Hilfiger women’s underwear business in China?
Research Objectives
Starting from January 2011, Tommy Hilfiger group has reacquired the direct operating on
wholesale and retail distribution in China. Therefore, this thesis will investigate in depth the
factors, prospects and complications that Tommy Hilfiger women’s underwear business are
facing in the Chinese lingerie market. The conclusions and recommendations will be
supported by the research outcomes, experiments and several comprehensive proposals.
The main aim of this research is to offer a new management, marketing and merchandizing
approach for Tommy Hilfiger women’s underwear business to successfully operate in the
local market in China.
1.4
Research Methodology
Many primary and secondary data are used in order to answer the main question and sub
questions. Primary data includes internal meetings, interviews and target group research
from the company. Secondary data is collected from the books, journals, sales report, lecture
materials, newspapers and websites. A long time spent working at the company and daily
contacts with the clients and personnel offer direct access to practical information.
After this introduction chapter, the chapters that follow will each focus on one or more
research questions. The outlines of the chapters are as follows:
Chapter 2 – Tommy Hilfiger underwear
This chapter will introduce briefly the background and the development history of Tommy
Hilfiger underwear collection. The data from the graphics in this chapter will show that
Tommy Hilfiger lingerie is not doing well in the Chinese market.
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Chapter 3 - Chinese underwear market
This chapter will first describe the current Chinese women’s underwear market and the top
10 lingerie brands in the local market. Afterwards, the challenges that Tommy Hilfiger
women’s underwear are facing will be identified.
Chapter 4 - Supply chain management
This chapter will analyse the main existing problems within its supply chain to the local
market such as: lack of qualified personnel, inefficient logistics routes and brand imitation.
Possible ways to improve its supply chain management will also be investigated in this
chapter.
Chapter 5 - Elements of marketing mix
This chapter will research and analyse the 7 marketing Ps. Several ideas will be suggested
regarding target group, styling, packaging, fitting, location, promotion and pricing in order to
adjust to the local market and improve sales.
Chapter 6 - Swot analysis matrix
This chapter will present the swot analysis matrix in which the internal and external factors
will be listed in the form of “bullet points”.
Chapter 7 - Conclusion and Recommendation
This chapter will draw conclusions on Tommy Hilfiger’s women’s underwear business in
China. Recommendations will be made at the end of the chapter.
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Chapter 2
Tommy Hilfiger underwear
This chapter will give a brief introduction of Tommy Hilfiger women’s underwear business and its
current performance in the Chinese market.
2.1
Tommy Hilfiger Underwear
Tommy Hilfiger is a lifestyle brand founded by Thomas Jacob “Tommy” Hilfiger in 1984. The
brand targets consumers with a taste for classic American fashion with a twist. The brand
covers a wide range of products for men and women including: clothing, underwear,
footwear, swimwear, accessories, fragrances and bedding products. These are sold at
dedicated retail stores, department stores and specialty stores worldwide.
Tommy Hilfiger Summer Collection advertisement
The department that is responsible for the brand’s underwear collection is called “Bodywear”
in Tommy Hilfiger. It is situated in the European head office based in Amsterdam and it
handles sales, design, production, and logistics for its product line. Currently Bodywear have
four product categories: women’s underwear, women’s loungewear, men’s underwear and
men’s loungewear. Men’s and women’s underwear represent 70% of the total bodywear
collection.
Before 2008, a manufacturing company called Delta Galil Industries LTD was responsible for
the entire body wear collection of Tommy Hilfiger. This means all designs, development and
logistic were arranged by Delta Galil. Unfortunately, the designs and quality delivered by
Delta Galil did not meet the expectations. At that time, the entire line experienced long lead
time, unprofessional fittings and postponed deliveries. As result, Bodywear was losing
business, especially for women’s underwear. Therefore, beginning of 2008 it had been
decided for Bodywear to do everything internally instead of relying on Delta Galil. Design,
product development, quality control and logistics are all done internally in the head office in
Amsterdam.
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2.2
Tommy Hilfiger in China
Tommy Hilfiger Asia-Pacific is a branch of the Tommy Hilfiger group founded in 1998. It owns
and operates free standing Tommy Hilfiger stores and concessions within big department
stores (also known as “shops-in-shops” concept) in Asia.
Since the opening of the first Tommy Hilfiger retail store in Hong Kong in 1998, the brand has
achieved strong recognition and a growing customer base not only in Hong Kong but also in
other Asian markets including Taiwan, China, Singapore and Malaysia where retail and
wholesale networks have been established.
Its success led to a HK$396 million acquisition by a company called Dickson Concepts
(International) Ltd. in August 2006.1 As result of this acquisition all brand operations in Asia
are no longer controlled directly by the Tommy Hilfiger Group.
Four years had passed and the Tommy Hilfiger group came to the realization that the
Chinese market was becoming increasingly important. Fred Gehring, the CEO of Tommy
Hilfiger Group, is convinced that the development and expansion of the business in this
important market is better supported by assuming direct control.2 Therefore Tommy Hilfiger
Group reacquired the direct control on wholesale and retail distribution in China from Dickson
Concepts and set up a new branch in China called Tommy Hilfiger China, which will start
operating in January 2011. Meanwhile Dickson Concepts will still continue as Tommy Hilfiger
authorized licensee at other areas in Asia including Hong Kong, Macau, Taiwan, Singapore
and Malaysia.
Tommy Hilfiger has currently 103 selling points in China including its own retail stores and
shops-in-shops. The chart on page 6 shows the Tommy Hilfiger retail stores located in China
A Tommy Hilfiger store in Hong Kong Time Square shopping mal
1
Dickson Concepts, press-release. From: http://www.dickson.com.hk/doc/pressrelease/Release%20-E.pdf [retrieved 11-112010]
2
PR Newswire, news-releases. From: http://www.prnewswire.com/news-releases/tommy-hilfiger-to-assume-direct-control-ofdistribution-in-china-89578017.html [retrieved 11-11-2010].
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City
Store & Location
Tommy Hilfiger store
Products
menswear, womenswear, accessories, handbags
wangfujing avenue
Beijing
Tommy Hilfiger outlet
dong si huan road(e.)
xiang jiang road(n.)
First tier cities
west nanjing road
Shanghai
menswear, womenswear, denim men, denim girls, accessories,
handbags
menswear, womenswear
pu qing ping road
changle road
Shenzhen
menswear,womenswear,accessories, handbags
shen nan road(e.)
new town plaza
Special
administrative
regions
Hong Kong
the landmark central
menswear, womenswear, fragrance childrenswear, accessories,
footwear, underwear, socks, handbags, watches
menswear, womenswear, fragrance childrenswear, accessories,
footwear,underwear, socks, handbags, watches
childrenswear, footwear, socks
harbour city
pu qing ping road
Macao
menswear, womenswear, denim men, denim girls, accessories,footwear,
underwear, handbags
sportswear
the grand canal shops
Changsha
menswear, womenswear, accessories,footwear, socks, handbags
huang xing road(m.)
Hilfiger Denim store
Chongqing
hilfiger denim, accessories, footwear, socks, handbags
metropolitom plaza
Hilfiger Denim store
hilfiger denim, accessories, handbags
Beichengtian street
Chengdu
menswear, womenswear
Da ke jia lane
Fuzhou
Second tier
cities
yang qiao road
Nanjing
zhong shan road
Shaoxin
east shengli road
Wenzhou
guozheng mansion plaza
Wuxi
Xi’an
menswear, womenswear, denim men, denim girls, accessories,
handbags
zhongshan road
menswear, womenswear, accessories, handbags, fragrance
century ginwa (gaoxing)
Suzhou
menswear, womenswear, accessories, handbags, fragrance
guanqian street
15
Core – Fall 2011 Licensees buy quantity overview ( in units ) for body wear products
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China is already well known for its manufacturing capabilities. For decades many companies
around the world have delegated their production to the factories in China. The words “Made
in China” have become one of the most recognizable labels in the world today and can be
seen on a huge range of goods from electronics to clothing.
Meanwhile the economy in China has kept on growing and is no longer just a country with
low-cost labour. Having a huge population (1.3 billion people) and a growing economy, China
is becoming a very important market in the world. So it is definitely worthwhile for Tommy
Hilfiger to pay more and more attention to the fashion purchase power from the Chinese
market.
From Spring 2009 till now Tommy Hilfiger Body wear has clients (called Licensees) in the
following regions: China, Hong Kong, Korea, Japan, Panama, USA, India and Canada. The
graphic on page 13 and 15 are the buying data in the recent years regarding China and
Hong Kong as well as other licensee regions.
Although Tommy Hilfiger has already been active in China (and Hong Kong) for many years
and its apparel is generally well-received by the Chinese consumers, the women’s
underwear business isn’t particularly successful. From the figures it is evident that in the
recent years the buy quantity for Tommy Hilfiger women’s underwear products in China is
very low, especially when compared to the quantities bought by clients for other regions.
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Buy quantity overview for China (in units)
Buy value overview for China (in US Dollars)
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Chapter 3
The Chinese underwear market
This chapter will analysis the current Chinese lingerie market and describe the challenges that prevent
Tommy Hilfiger women’s underwear business from operating in the market successfully.
3.1
Underwear Market Potential in China
In the 1980s~1990s foreign lingerie was quite rare in China. The market was dominated by
local brands which offered products that were rather of simple/boring design and poorly
manufactured from knitted cotton.
However, changes have taken place in recent years following the opening-up of China. With
the improvement of people's living standards, international underwear enterprises have
begun to enter the Chinese market. Intimate brands from the US and Europe are eager to
sell their products in the Chinese market, instead of only doing the mass production in China.
As a result, consumers have far more choices and better products nowadays, which have
innovative designs, quality fabrics and, more importantly, finer workmanship.
Nowadays, in the Chinese underwear market, the average growth rate of sales amount and
sales volume of bras, briefs, bodies is keeping 15%-20% per year, far exceeding the growth
level of China's Gross domestic product (GDP).3
China, as an emerging lingerie market has seen a great growth rate during the same time.
The lingerie market is estimated to be of a total value of 2 billion euros, and industry experts
predict a further positive increase of 20% every year. The country is the third largest for
luxury consumption and is expected to catch up with the position of Japan in the next 10
years.4
Although Chinese lingerie manufacturers are looking at the global market, the rest of the
world is giving more and more attention in the Chinese market. Major lingerie brands in
China have reconsidered their market positions. They are now offering fashionable lingerie at
lower prices and are putting a lot of marketing efforts to sustain their brand image in China.
Products from different sources now share the Chinese Lingerie market, each dominating a
different segment of it. The medium-to-top end is controlled by brands produced through joint
venture companies, bringing together western technology and local manufacturing capacity.
These brands have a significant presence in shopping malls. Then there are brands
designed and manufactured domestically, mainly targeting the medium-to-low end of the
market. Imported brands of women's lingerie are usually sold at fashionable department
stores, with price tags at several hundred to over a thousand Yuan (about 100 euro), internal
products in local boutiques sell for about Rmb100 (around 10 euro). Inner-city consumers in
China can usually afford underwear cost Rmb100 to Rmb200 (10 to 20 euro). Products
within this price range account for 60% of total sales. Most are manufactured by joint venture
enterprises.5
60% of the underwear consumers who are buying lingerie are females aged between 15 - 45
years old. At the beginning female consumers were focusing on comfort, body form, ultra-thin
and other major functions from the brand while taking into consideration regarding the cost.
3
China Research & Intelligence, December 2010,”Research Report on China's Underwear Industry, 2011-2012”
4
Fibre2fashion, Lingerie and lingerie's only–A global report (Part II - China). From: http://www.fibre2fashion.com/industryarticle/15/1418/lingerie-and-lingeries-only-part-ii1.asp [retrieved May 2011]
5
Liu Xianguang,”Foreign brands lead China's underwear market”. From: http://info.hktdc.com/imn/01062802/lingerie01.htm
[retrieved May 2011]
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Currently Chinese female consumers have higher requirements to their underwear, in
addition to comfort, adjustable and body formed. They expect their underwear to be
fashionable and add more fashion and feminine elements to their entire outfit. Lingerie has
become part of outwear as much as underwear. The hundreds underwear sales people from
main Chinese department stores in international cities such as Shanghai, Shenzhen, Nanjing
etc all agree that underwear is now developing closer to a fashion product from the design,
material, production technology aspects. Moreover, with the improvement of Chinese living
standards, it's a trend to match underwear with fashion. Besides for beauty, women's
underwear is also expected to function as body beautification and body strengthening.
Lingerie is increasingly becoming one of the most desirable items in the wardrobe of Chinese
women. Chinese woman spend on average 8% of their fashion budget on lingerie annually.
Though 8% doesn’t sound much, China has a huge population and so it is very promising to
do business in China.
International brands including CK, Triumph, Esprit, Aubade, Christian Lacroix, Eminence,
Cacharel and Janine Robin have entered the Chinese market, focusing on its potential and
believing that China's market is as important as the European market. "I don't see any
difference between Chinese women and French women who look at the same movies and
read the same fashion magazines," said the famous lingerie designer Chantal Thomass
during an interview. "Chinese women also want to be seductive; it is the same all over the
world."
China is a major target of many international brands. The main target is the first tier cities like
Hong Kong, Beijing, Shenzhen, Shanghai, Dalian, Chengdu, and Guangzhou. Demand for
branded lingerie in these cities is always very high and the trend is slowly spreading to
smaller cities as well.
Shenzhen is considered as the new 'fashion capital' of China. Many popular brands sold in
the global market are being exported from here. Many domestic lingerie brands and
international lingerie brands (including Topform, Calvin Klein, Triumph and Victoria's Secret)
are having their production base in Shenzhen.
Another leading manufacturing centre for lingerie is the city of Shantou in the Guangdong
province. Its port is one of the leading harbours in China and shipping of goods to many
foreign countries are relatively cheaper. Lingerie exports of Shantou average around $650
million for a year. Associated towns of Gurao, Chendian, Liangying and Xiashan are also
leading manufacturing cities. Gurao has more than 440 intimate wear manufacturers.
Xiashan and Chendian produce $100 million worth of intimate apparels annually.
To put it briefly, China has the fastest expanding underwear industry in the world. It is
estimated that domestic underwear sales will hit 500 billion Yuan (US$62.27 billion) in the
year 2012.
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3.2
Comprehensive Market Shares in China
According to the statistics of China National Commerce Information Center by end of 2010,
there are 10 top brands who are leading the local lingerie market. These top 10 lingerie
brands in China is account for 64% comprehensive market shares of the total Chinese
lingerie market. Amier leads the market with 13.85% of the comprehensive market share.
Followed by Maniform, with 9.63%. Triumph and Embryform ranked No. 3 and No. 4
respectively by their comprehensive market shares over 5% of. Then Wacoal and Ordifen,
whose comprehensive market share nearly 5%; From No. 7 to No. 10 were Gujin, Sunflora,
Gracewell and Haoby, whose comprehensive market share less than 5%.
3.3
The Challenges in China
To improve and expand Tommy Hilfiger women’s underwear in the Chinese market, Tommy
Hilfiger will have to face the following challenges:
Supply chain
Need to set up the system of organizations, people, technology, activities, information and
resources involved in moving Tommy Hilfiger Women’s underwear products from supplier to
customer.
Brand protection
There are a lot of illegal imitations of Tommy Hilfiger underwear on the market which are sold
much cheaper.
Asian taste vs European styling
It is important to filter the European collection to what is suitable for the Chinese market.
Understanding that Tommy Hilfiger just began its exploration to the women’s underwear in
the Chinese market, it is not wise to completely modify existing designs and shapes all at
once.
Target group aiming
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In general Tommy Hilfiger targets young adults to women around 45 years old for its
women’s underwear products. However the products are only affordable for people with a
relatively high income which is uncommon for young adults in China.
Sizes offered and fitting
This is the most difficult subject to realize in this whole project from both technique and
production aspects.
Competitors from same specialization
Tommy Hilfiger is still unpopular with its women’s underwear products in China compared
with other famous lingerie brands.
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Chapter 4
Supply Chain Management
This chapter will analysis the current problems inside the local supply chain of Tommy Hilfiger
women’s underwear business and detailed advices will be given accordingly.
4.1
Garment manufacturer
Tommy Hilfiger women’s underwear collection is handled completely by a manufacturing
company called ‘Sunlane International Ltd’ based in Hong Kong. 70% of Tommy Hilfiger’s
underwear bulk garments is produced there. Therefore Sunlane is the most important direct
vendor for Tommy Hilfiger underwear and has been working with Tommy Hilfiger Europe for
4 years under very good cooperation and a close relationship.
Sunlane’s head office is located in Hong Kong while its production factory is over the border
of China in Shenzhen. Sunlane is specialized in the production of bras, swimwear and all
kinds of knitwear. Besides Tommy Hilfiger, they also have other clients from famous brands
like Ralph Lauren, Esprit, Triumph (for Chinese and Japanese market) etc.
Shenzhen is the third busiest container seaport in China, ranking only after Shanghai and
Hong Kong. Having a factory in Shenzhen, Sunlane can offer a great convenience to the
transportation and competitive cost price per product which will benefit the project of Tommy
Hilfiger women’s underwear expansion hitting the Chinese market.
Port of Shenzhen viewed from Shenzhen Bay
Sunlane provides the service from the preparation, sampling and production until the
garments are completely labelled, packed for departure from the factory. The company has a
good merchandising team that follows up with clients from design, fabric selection, price
quotation, pattern making and packaging instructions. Furthermore, Sunlane is a part of the
Sun Hing group. The Sun Hing group consists of many companies and factories that produce
from accessories, fabric to packaging. In a word, being a member of the Sun Hing group
Sunlane has the direct access to all internal suppliers of everything related to clothing.
Sunlane works closely with Tommy Hilfiger Europe underwear department for the entire
production process. From the moment the design packages are handed over, the
merchandize team from Sunlane starts immediately with fabric, trimming sourcing. In the
meantime, translated technical information will be passed to its sample room in Shenzhen to
start with pattern making, arranging proto types, lab dips etc.
The sample room becomes extremely busy each year during May – June and DecemberJanuary. During these periods the sample room is completely occupied for Tommy Hilfiger’s
underwear salesmen samples. Tommy Hilfiger’s underwear has many clients in Europe and
per season the salesmen sample quantities needed is around 16,800 pieces. Aside from
these samples, Sunlane also needs to arrange the Chinese specific fitted salesmen samples
for the international sale meeting held in Amsterdam at the same time. Even with this
enormous demand of salesmen samples, Sunlane hardly ever uses its production line to
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produce salesmen samples. This line is strictly reserved in order to keep their production
capacity up and stick to the standard lead time for Tommy Hilfiger’s bulk underwear
garments.
After the international sales meeting in Amsterdam, Sunlane will receive the garment
development comments together with the actual bulk orders for each kept option. The bulk
orders consist of 2 parts:
Part 1 European order
This is a consolidation of all the European buy quantity. The bulk garment will finally be
delivered to the Tommy Hilfiger European bulk warehouse located at Venlo in the
Netherlands.
Part 2 International order
This includes licensee orders from Panama, Japan, Korea, USA and also China. All these
non-European buys are considered as a tag-on to European orders, they must follow exactly
the European way of sizing and styling. For factory it is not cost and timing effective at all to
satisfy each Non-European client with their different requests on styling or fitting of the
products.
However orders for the Chinese market receive a special treatment. This is because over the
past years Sunlane have enjoyed working smoothly with Tommy Hilfiger Europe’s underwear
department and the owner of Sunlane sees great opportunity in Tommy Hilfiger underwear’s
potential in the Chinese market. Therefore they are willing to stimulate Tommy Hilfiger’s
expansion in China by offering more flexibility on sampling, fitting, production, packaging and
most importantly, lower production minimums.
Compared with other underwear vendors, Sunlane has a shorter lead time and offers lower
minimum quantity on underwear garments. The following minimum order quantities are
normally applicable for Tommy Hilfiger:
Bras: 500 pieces per colour, minimum 20 pieces per size.
Bottoms, cami tops and t-shirts: 500 pieces per colour, minimum 20 pieces per size.
Being motivated by Tommy Hilfiger entering the Chinese underwear market, the owner of the
Sunlane garment factory is willing to lower the above minimum for Chinese buy portion to
300 pieces per style per colour with a minimum of 20 pieces per size on some of the solid
cotton lycra or lace all over styles.
4.2
Human Resources
Even with today’s technological advances in computer systems and the huge amount of
information available on the internet, a company still needs qualified personnel with
specialized knowledge to keep the company running. This is especially true for the new office
in China.
The employees in Tommy Hilfiger European body wear department are all very well
educated, highly qualified and productive. However, the workload will be much heavier if they
have to focus both on the European market (where the current profit comes from) and the
Chinese market at the same time. Even though the employees are highly motivated, they will
be facing many difficulties to monitor the activities in China over long distance. The business
will demand extra marketing research, order consolidation, delivery tracking and sales
activities in the local area. These can’t be done efficiently in Europe without bringing the
efficiency down on the current tasks there.
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It is therefore important and urgent for Tommy Hilfiger to find employees for its new office in
China. Not just anyone, but people with professional knowledge and trustable for decisionmaking. They are expected to handle the daily communication with Europe head office, sales
in local market and customer services.
For the time being design and product development will take place in the European head
office, despite the bringing the efficiency down there in Europe. Instead of relying on the
personnel in Europe, Tommy Hilfiger China office should consider to start building up their
own body wear team to focus more on the demands from local market and meanwhile
closely cooperate with European head office. This way it will not only reduce the working
pressure on the European side but also by having its own complete body wear team (from
design to production to customer service) will provide a good foundation for Tommy Hilfiger
China when it launch its own underwear products in the local market in the near future. A
good example to be inspired is from the famous underwear brand Triumph with its matured
underwear team that is located in China, which is specialized in design, fitting and sales
towards the local market.
The Body wear department for Tommy Hilfiger China office will need to hire employees for
the beneath job titles:
-
Logistic coordinator
Sales & Marketing coordinator
Buying & Planning coordinator
Production coordinator
4.2.1 Logistic Coordinator
Logistics is defined as a business-planning framework for the management of material,
service, information and capital flows.6 It includes the increasingly complex information,
communication and control systems required in today’s business environment. The main task
of the logistic coordinator is to take care of the whole inbound and outbound activities. It
includes, salesmen samples inbound & outbound, bulk cartons packaging and shipping
marks, distribution, checking and approving all inbound & outbound invoices.
Responsibilities and job functions of the logistic coordinator are:
Salesmen samples inbound & outbound
The salesmen samples are supplied for sales personnel to promote Tommy Hilfiger
underwear products to its clients before the season starts at the market. Salesmen samples
are very important for the whole underwear team. Not only do the sales personnel need to
review the collection in advance but also the production coordinator has to use them for
development purpose. Besides, some of the key clients might require salesmen samples for
photo shoot or other promotion activities. On many occasions the sales personnel take the
samples with them and travel to the clients, therefore it is the responsibility of the logistic
coordinator to make sure there are enough salesmen samples in the office at any given time.
Bulk cartons packaging and shipping marks
The logistic coordinator is responsible to give directions to the factory on the bulk packaging.
This has to meet the standards set by Tommy Hilfiger and what has been agreed with its
clients. The cartons used for bulk shipment should be filled but not over packed. Over
packing will lead to bruising and impressions on garments during shipment. Underutilizing
carton causes the carton to collapse and burst open at the sides. The outer cartons must be
6
Logistix Partners Oy,1996, Helsinki, FI
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clearly labelled for forwarder to scan on the barcode to register the product and the
destination per carton. The goods need to be distributed to different clients without fail.
Therefore, the packing units must be well checked and labelled before being picked up by
the forwarder. The logistic coordinator is also required to visit the factory’s warehouse during
the peak season before the goods leaving the factory to make sure there are no problems
with the pick and pack.
Bulk distribution
When the bulk garments are packed, they are delivered to the nominated forwarders.
Tommy Hilfiger forwarders will take over the shipment to distribute the products to it’s clients.
The bookings of the shipment will be sent in advance to the logistic coordinator for approval
on four aspects:
- estimated time of delivery
- estimated time of arrival
- packing units per purchase order
- freight mode
The delivery progress needs to be closely followed by the logistic coordinator. In case of
delivery delay or products damage happen, the logistic coordinator will take action to adjust
the planning and inform affected clients as soon as possible. If the delay and damages are
caused by a third party, the logistic coordinator has to found to what extend the third party
can be held liable for. In a word, the logistic coordinator is expected to be on top of inbound
& outbound and is responsible to resolve any issues happening during the distribution.
Logistic invoices
The logistic coordinator is responsible to review every logistic invoice received from the
forwarders. The amount on the invoice must match the actual shipped carton units and
freight mode. Once the logistic coordinator approved these invoices, the finance department
of Tommy Hilfiger China can proceed with payment.
4.2.2 Sales & Marketing Coordinator
The sales coordinator directs the sales programme for Tommy Hilfiger China Body wear
department. He assigns the sales territories, sets goals for sales and establishes training
programs for the sales representatives. The sales coordinator is expected to instruct sales
representatives on how to improve their sales performance and he makes sure the expected
quotas will be reached. The sales coordinator will be leading the marketing research
projects. His other tasks are: communicate with the clients, arrange photo shooting, making
promotion booklet. By end of the season he reviews all feedback from the market to offer
suggestions for improvement.
Responsibilities and job functions of the sales coordinator are:
Marketing research
The sales coordinator will have to assess marketing potential of new and existing store
locations based on statistics and expenditures. He will also analyse the competitors and the
market percentage of the competitors.
Closely communication with Clients
One of the most important tasks of this position is to travel a lot between different clients and
introducing the seasonal collection to them. Therefore it is important to carry the samples
while travelling. The sales coordinator has to monitor customer preferences to determine
focus of sales efforts. He has to resolve customer complaints regarding sales and services.
He visits big department stores to stimulate interest in establishing “shop in shop” projects
and discussing with them regarding equipment needs and also give advice on types of
equipment to purchase. Besides, the sales coordinator is required to confer or consult with
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department heads to plan advertising services and to secure information on equipment and
customer specifications, such us photo shooting, special promotion capsules, events etc.
Reviewing feedbacks and reports
The sales coordinator will review operational records and sales reports to determine the
profitability. He reviews activities in sales and service accounting and recordkeeping. In
addition, any feedback he has regarding on the product (for fitting, shape, and/or styling)
need to be passed to production coordinator on time.
Store personnel training
The sales coordinator plans and directs training programmes to improve sales and services.
4.2.3 Buying & Planning Coordinator
A buying & planning coordinator oversees and organizes many facets of the division. He is
good at working with numbers and he is responsible for the buying of each season. He also
has to handle other tasks, such as: making sure orders are tracked, shelves are stocked,
books are balanced and invoices are mailed.7
Lastly while the sales coordinator is absent (because of travelling), the buy & planning
coordinator will take over the communication with the clients.
Responsibilities and job functions of the buying & planning coordinator are:
Forecasting and planning
The buying & planning coordinator is closely involved in the manufacturing/production
processes. He ensures that the resources required to make the products are in stock and
available. He has to plan the flow of supplies based on the given budget and the constraints
on quantity and quality.
The buying & planning coordinator have to forecast the buy quantity for a collection. This
forecast is important, because orders will be placed to the garment manufacturers before
receiving all buy data from the clients to shorten the product lead-time.
For this he will review the collection with the sales & marketing coordinator to analyse
specifications, sales performance history and stock level data in order to do the calculations
for the forecast.
Purchase order
After the forecasting has been made, purchase orders have to be placed to factory on size
break level. The buying & planning coordinator has to work closely with European side to
consolidate the purchase order from both side for better pricing and production planning.
Finally, he will enter the final data into the system which will send the official purchase order
to the garment manufacturer.
Reporting and Analysing
The buying & planning coordinator will take care of making seasonal reports. The reports are
usually an overview of numbers and analysing on several points including; margin, buy
value, buy quantity, sales value, sales quantity, best-selling products, stock level. In addition,
it is important to coordinate the resolution of discrepancy reports, initiates replacement
orders for lost, damaged or discrepant items and resolves problems utilizing acquired
knowledge & analytical abilities.
7
Sam Amico, “Job Description for a Supervisor or Manager”, From http://www.ehow.co.uk/about_6326904_job-descriptionsupervisor-manager.html [retrieved May 2011]
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The main task of the production coordinator is to make sure the production is running
smoothly without any delays or problems. He instructs the factory on the correct packaging,
labelling and ticketing. He handles all production related invoices. He tracks on the important
sample and bulk delivery dates. He reviews all issues on fitting and sizing.
Responsibilities and job functions of the production coordinator are:
Garment packaging and ticketing
At the beginning the design and styling of Tommy Hilfiger women’s underwear will closely
follow the European collection. But the product will have its own tailored packaging for the
Chinese market. The production coordinator needs to make a packaging manual to instruct
factory the correct position to attach the labels, how to fold the garments and box them
properly to avoid damage on both the garment and the outside packaging.
Ticketing will have the UPC barcode for scanning in local stores. The production coordinator
is responsible for developing the packaging and issuing the UPC ticketing from Tommy
Hilfiger global system.
The packing and ticketing lead-time needs to be followed up closely. It is important for
production coordinator to make sure that no delays with packaging and ticketing supplement.
Invoices controlling
The production coordinator will have to work closely together with Buying & Planning
manager to check on debit and credit notes for any production related costs. This includes
the salesmen samples costs, bulk invoices that need to pay back to factory, and the
commissions for design and product development which need to be paid to Tommy Hilfiger
European head office.
Production planning & tracking
For the bulk order tracking the production coordinator needs to work closely with both the
factory and the production coordinator from European head office. The factory will purchase
the materials, start the production and finish the production in one lot for both European and
Chinese order when both product groups have the same fabric and trimmings. However
European order have to sail to Europe which add one and half month to the total lead-time
while the lead-time for distributing Chinese order to local clients or Tommy Hilfiger selfowned retail stores in China is estimated to be maximum 12 working days. Therefore, it is
important to instruct the factory on the production priority. It also important to direct the
factory based on: the production quantity, different packaging lead-time and the required instore date by clients. If the China office and the European office can mix and coordinate their
production planning together well, it will not only boost the efficiency, but also avoid extra
storage charges due to early shipment or charges on expensive freight mode (by airplane)
that has to use to compensate the production delay. This job function requires the production
coordinator to be open minded, flexible, quick responding and creative towards any
unpredictable issues during production.
Fitting and sizing
Same as with design and styling, at the beginning product development will be handled by
the European head office. Currently the European head office has more expertise and it
already has experienced all kind of technical issues with women’s underwear. Nevertheless,
the production coordinator from Tommy Hilfiger China has to assist the product developers
from European head office on improving the Chinese fitting per product.
Detailed actions are:
- Joining the European team the proto & production meeting in Hong Kong where fitting
session will be arranged each season.
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4.3
Reviewing all the positive and negative fitting feedbacks received from the local
customer. Discuss the issues together with the European product developers and
adjust the Chinese fitting accordingly.
Study the fitting from competitive brands and give advice to European product
developers.
Logistics
Tommy Hilfiger logistics is about creating value-to-value for its clients and suppliers. Value of
logistics is expressed in terms of time and place. Products and services have no value
unless they are in the possession of the customers at the time and place they wish to
consume them. Logistic management views each activity in the supply chain as contributing
to the process of adding value. For the project of Tommy Hilfiger women’s underwear
expansion in the Chinese market, logistics has become an increasingly important valueadding process. It is suggested that Tommy Hilfiger will offer the most complete and
convenient services to its clients, however the distribution route needs to be planned wisely
to lower the costs.
4.3.1 Distribution Process
Although from 2011 Tommy Hilfiger has taken its full ownership of the Chinese market, the
underwear garments are still distributed following Tommy Hilfiger’s regular route. Once the
goods were departing from the garment factory located in Shenzhen, they are transported
across the border to Tommy Hilfiger distribution centre in Hong Kong. Afterwards, from the
Hong Kong distribution centre garments are picked & packed following per client’s order then
are distributed to the stores accordingly inside the Chinese mainland. The current distribution
method has the following advantages:
- It is easier for Tommy Hilfiger European office to handle.
- The goods for China mainland and Hong Kong area can share the same warehouse.
- The goods are better consolidated.
- The quality of the shipment to clients are well controlled by Hong Kong distribution
centre, for instance any packaging or ticketing issue can be checked and fixed at the
distribution centre before goods leaving to shops.
Nevertheless, a couple of disadvantages are expected to reconsider for improvement with
the aim of benefiting the development of Tommy Hilfiger women’s underwear at the local
market.
- Higher cost prices. Firstly, goods need to be transported across the border which
means additional logistic cost will be included. Secondly, the cost prices are
calculated in USD but the local currency is RMB, so always rate differences need to
be taken into account.
- The delivery route is repeated. Most of the Tommy Hilfiger sales points are located in
Shanghai, Nanjing, Shenzhen, etc. However the goods have to transported to Hong
Kong first and then distributed to the mainland stores. This will not only increases the
ground transportation cost but also increases the lead-time.
- Easy to cause damage to the product. The goods will be moved around multiple
times, cartons received from the factory will be opened and allocated. All these
activities increase the risk that the products will be de-shaped or be damaged during
the operations.
- Inefficient logistic management. The logistic coordinator from Tommy China office will
have to instruct the factory, forwarder and the personnel at Hong Kong distribution
centre. This is likely to cause confusions as the communication line is extended by
having more operators involved.
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It would be ideal to have the goods distributed from the same city where they are produced
from. However it will exceed the budget to set up a warehouse in Shenzhen just for its
underwear distribution. Thus, for the starting seasons it is worthwhile to apply new transport
procedure to reduce the lead-time and minimize the costs.
4.3.2 Pick and Pack Service
“Pick and pack” is a part of a complete supply chain management process that is commonly
used in, but not limited to, the retail distribution of goods. It entails processing small to large
quantities of product by truck or train and transports the relevant products to its destination.8
Garment factory Sunlane has the capacity for pick and pack. The garments will be split into
different portions in the factory and will be collected by the forwarder. Once the domestic
forwarder picks up the orders, they will be delivered directly to different stores. The
preconditions that this distribution plan is considered suitable for Tommy Hilfiger are:
- Women’s underwear orders are produced in one garment factory and the total order
quantity is not expected to reach a very high volume that surpasses the brand’s
apparel products in short term. So the factory is able to handle the pick and pack
internally.
- The underwear garments are occupying less space and are weighted much lighter
compare with apparel garment.
- The garment purchase order quantity will be 90%~100% from the actual sold quantity,
so it is not expected to have stocks per purchase order. The small portion of leftovers
will be stored in the factory till the end of the season and will be distributed to Tommy
retail stores or E-commerce department for seasonal sales.
The recommended domestic forwarder who will handle the shipment process is DHL. DHL is
not only well known as its offering a world wide courier, but also as a logistic forwarder who
is experienced and reliable in handling textile transportations.
Furthermore when the garment factory has to face heavier work flow during the peak season,
DHL also offers comprehensive warehousing and distribution solutions for fashion
companies which includes;
- Distribution to stores with door to door service and time specified deliveries.
- Manage E-commerce transactions and deliveries
- Pre-retailing services to ensure that stock is available for sale immediately following
delivery.
- Re-work or redress is the customization or modification of products, often to suit a
local market. It covers the re-packing of finished product to support customers’
product launches and promotions.
- Garment processing activities to fashion garments to make them ready for the shop
floor: unpacking and de-shrouding, steam pressing, hanging and folding.
- Pick and pack service for garment before distribution to stores.
8
Wikipedia, “Pick and pack”, From http://en.wikipedia.org/wiki/Pick_and_pack [retrieved May 2011]
30
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4.3.3 Incoterm
The delivery term will be FCA (free carrier). FCA term is suitable for all modes of transport. In
this case, the garment factory is considered as the seller; Tommy Hilfiger China is the buyer;
DHL is the carrier. No duty needs to be paid as it will be domestic shipment. Free carrier
refers to the seller delivers the goods to the carrier nominated by the buyer at the named
place. The delivery will be occurring at the seller’s premises; therefore the seller is
responsible for loading. The transportation method is ground transport by truck or rail. Below
is the chart regarding the documentation, fee and cost responsibility at the seller and buyer’s
side.
Documentation
Fees and Costs
Seller—
Sunlane garment factory
- Proforma Invoice
- Packing List
- Certificate of Origin
- Bill of Lading
- Commercial Invoice
- Buyers Product Cost
- Packaging
- Certification Fees
- Inspection Fees
- Loading Fees
- Cartage Fees
- Buyers Bank Fees
Buyer—
Tommy Hilfiger China
-
Re-consignment Fees
Pier Delivery Charges
Loading Cost
Forwarding Fees
Consular Fees
In-Land Freight at
destination
Insurance
Unloading Fees
Cartage from Pier
Warehousing
4.4 Brand Protection
Thanks to the good relationship between Tommy Hilfiger and its garment manufacturer
Sunlane, both sides are in close contact to report for any illegal imitations appearing on the
market.
Illegal imitations sold in local markets
Besides supporting Tommy Hilfiger’s legal department, the garment factory should
encourage its employees and material suppliers follow strictly on the several rules to protect
the brand name:
- The local supplier for embroideries should follow accurate workmanship of Tommy
Hilfiger’s flag logo.
- Garment factory pays attention on Tommy Hilfiger’s underwear garment quality and
stresses fine workmanship as top priority.
- The factory and its supplier follow closely Tommy Hilfiger’s internal artwork for any
Tommy Hilfiger’s print or branded trims and protect its copyright.
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-
-
The factory works closely with Tommy Hilfiger’s underwear only nominated brand
label suppliers to make sure global care labels, brand labels are correctly purchased
and stitched on the garment -- each brand label there is a security feature inside the
letter “O”, which is only visible under the micro scope.
Any Tommy Hilfiger branded trims products or packaging that are determined to be
second or third quality should be strictly prevented from showing up in the local textile
market.
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Chapter 5
Elements of the Marketing Mix
This chapter will research on the essential marketing elements. Proposals are given from different
aspects with the aim of achieving a successful improvement of Tommy Hilfiger women’s underwear
position at the local market.
What will be the best way for Tommy Hilfiger to use marketing mix in the process of
implementing the strategies of cost leadership and differentiation for its women’s underwear?
The marketing mix approach is one model of constructing and implementing marketing
strategies.9 It strains the “mixing” of various decision factors, in such a way that both
organizational and consumer objectives are attained.
The 4Ps model is one of many marketing mix lists that have been developed over the years.
Its elements are the basic, tactical components of a marketing plan.10 To extend the
marketing mix, the organizational objectives of Tommy Hilfiger Women’s underwear will be
represented in 7Ps, which stand for the seller’s view of the marketing tools available for
influencing buyers. From a consumer viewpoint, each marketing tool must deliver a customer
benefit for which will be used the corresponding Cs. The marketing mix consists of the seven
Ps and seven Cs.
Seven Ps
People
Product
Price
Place
Promotion
Presentation
Position
5.1
Seven Cs
Consumer oriented
Consumer needs and fits
Cost
Concern of A location
Communication
Convincing customers
Competitors
People
The first step of a marketing analysis is defining the target group of Tommy Hilfiger for its
Women’s underwear in China. This is needed in order to filter in the European collection for
what is suitable for this consumer group. The more existing designs from the European
collection being reused for China, the better it is on the budget planning.
Tommy Hilfiger Women’s underwear will be aiming for women between the age of 25 ~ 45.
This is a group that wants trendy & casual underwear of good quality and can afford to buy
underwear at medium – high price level.
The group of female consumers that Tommy Hilfiger underwear will be target on is
independent and self-confident. They are the women that look within their own abilities and
resources to build their life, career, assets and personal happiness. They are socially and
politically aware of issues, events, and world news. They work hard and reward themselves
with luxury and quality. Moreover they are style conscious and addicted to fashion.
9
Christian Grönroos, 1994, Management Decision, Vol. 32 No. 2, 1994, pp. 1
Authority Directory, “Marketing Mix and the Four Ps”, From: http://www.authoritydirectory.com/blog/marketing-mix-and-thefour-ps [retrieved May 2011]
10
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The majority of them have a middle to high income which is 8.000 ~ 20.000 Yuan (about 833
~ 2082 euros) monthly. Therefore this group of women is economically independent and
therefore they can afford to visit high-priced shopping malls weekly.
Some core characteristics of the customers:
• Females 25– 45 year old
• Fashion conscious
• Have good income
• Expects value for money
• Knows who she is, what she wants and how to get it
• Willing to purchase good quality lingerie to take care of her body and boost her
confidence
5.2
Product
The product is the most important aspect of marketing mix. Products have both tangible and
intangible benefits. 11 Tangible benefits include benefits which can be measured such as the
quality of the product itself. The quality is subjective to every person expectations. In the case
of Tommy Hilfiger it will be the quality of the materials, production and fitting based on local
market standards. Intangible benefits are benefits that cannot be measured physically such
as the enjoyment the customer will get from the product. It is important that the product is
changed as necessary to bring it up to date and prevent it from being overtaken by
competitors.
Positioning the product correctly can make a significant difference in the success of the
marketing campaign.
There are three positioning alternatives;
- The first strategy suggests strengthening the brand’s current position in the mind of
the consumer.
- The second strategy is to search for a new unoccupied position that is valued by
enough consumers.
- The third strategy is to deposition or reposition the competition.
Having spent four years of developing and maturing at the European market, Tommy Hilfiger
women’s underwear is not only well known for its good design, but is also appreciated by the
customer on the quality of fabrics and detailed finishing. Now it is time to introduce Tommy
Hilfiger women’s underwear collection to China.
The most important aspect to work on is how to stimulate the consumer to desire the
product. The way to do this is to make use of existing quality, shape and concept of Tommy
Hilfiger women’s underwear products and make improvement based on these aspects to fit
into the Chinese market.
Tommy Hilfiger women’s underwear consists of 2 collections: Fashion & Core. The
collections include padded bras, brief, shorty, brazilian, cami tops, corset. In the collection of
each season there are different stories which will be expressed through colours, fabrics and
shapes. The products are always designed using good quality fabric combined with a full
brand awareness design.
Currently the bras are available in size 70A- 85D, while tops and bottoms are available in
11
Project Alevel, “Marketing mix”, From: http://www.projectalevel.co.uk/as_a2_business_studies/marketing_mix [retrieved May
2011]
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size S-XL. The collection exists for 60% of casual and sporty styled products and 40% of
classic but fashionable styled products.
As a starting point for Tommy Hilfiger women’s underwear exploration in Chinese market, it
is more proficient to closely follow the EU collection on its design, delivery stories and
existing shapes. At the same time invest on the fitting, size offering and packaging to adjust
for the local market. On one hand, by combining the EU quantity with the China quantity
together the production quantity per style per colour will be easier to reach the minimum
order quantity. On the other hand, it will ensure that Tommy Hilfiger will always get the best
offer from the factory on both the quality and price especially under the current cotton price
rising situation.
Normally for underwear the minimum order quantity is much higher than outwear. This is
because underwear garments are small, fabric and trims consumption is much less if
compared with apparel garments. In underwear production, it is not only the production
minimum which needs to be reached but also the fabric, material dying, trims and
accessories surcharges all need to be avoided.
5.2.1 The collection
Tommy Hilfiger women’s underwear collection is divided into Core and Fashion. The Core
collection will be sold for couple of seasons, while the Fashion collection is designed per
season.
Core Collection
It is a basic collection that will last at least several seasons. Core collection is also called the
“Never out of stock” collection and will be only updated once per two years. This collection is
composed by the basic solid colours; black, white, nude and grey heather. The Core group
has around 60 SKUs (stock keeping unit, option per style per colour). The styles are clean
but sophisticated. From material and design aspect, it has one group of cotton/lycra story
with repeated “Tommy Hilfiger” branded elastic which represents simple and sporty; one
group of microfibre story branded by a silver Tommy Hilfiger accessory hanger attached on
the white/navy/red elastic (the Tommy Hilfiger flag colours), which represents clean and
classic; 2 groups of lace stories branded by a small tommy metal flag or a 5mm elastic with
small “Tommy Hilfiger” repeats, which represents feminine and sophistication.
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“Never out of stock”
colour theme
Cotton Lycra
Micro fibre
Lace
Fashion Collection
Unlike the Core programme, the Fashion collection is covering a wider colour and style
range. Besides, it is also divided into several shipping groups. The products under different
delivery groups will have different in-store dates. For instance, the latest fall 2011 collection
has around 600 SKUs over 4 shipping groups. Delivery group I, II, III is accordingly expected
to be in store in July, August and September 2011 while the last delivery group” Holiday “is
expected to be in store in October for the peak period before Christmas.
Colours used in the Fashion collection are vivid including white, red, navy, pink, green, brown
etc. Except the solid colours, the Fashion collection is also enriched by various pattern such
as all over prints, yarn dyed stripes, jacquard, checks, heather etc. Fabrics are including
cotton lycra, modal, micro-fibre, mesh and lace. Therefore the Fashion collection has not
only represents the casual and preppy image from the Tommy Hilfiger brand but also reflect
the classic and feminine side of lingerie products
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“Fashion collection” ( example )
colour theme
Cotton Lycra
Micro fibre
Modal
Lace
Cotton Lycra
Micro fibre
Modal
In the European market the best sellers from Tommy Hilfiger women’s underwear are often
ones with the branded all over prints, stripes or checks. Also selling well are the ones with
solid colours as these are easy to combine with outer wear.
However in China the female consumers are more interested in colourful underwear with
lace. Chinese women begin to enjoy more sophisticated lingerie which means that laces are
more and more popular. In Europe the solid colours are also fairly popular and easy for them
to accept as the solid colours give the impression of casual, clean and easy for
combinations. In the meanwhile, it is an ongoing trend that Chinese consumers are willing to
pay more for the story of the brand than for perfect techniques. They value more the inner
spirit of the brand that is put in its creation.
Thus, during the sales meeting it is not contradictory to present the entire collection to the
buyers from Chinese local market. It will be easier for them to understand the seasonal
stories. The buyers will be appreciated as well as be motivated when they are offered plenty
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of choices. However it is still essential to highlight the potential groups in the collection to the
buyers. For instance the ones with potential can be presented on the fashion models during
the sales meeting to impress the buyers. Additionally, the product will be introduced in more
detail regarding the design, function and material to convince the buyers.
Secondly, it is helpful to use different advertising images in the Chinese market. In Europe
the advertised underwear sets are usually colourful prints. However it is better to propose a
solid lace set for the Chinese market.
Finally, it is wise to use the red colours often. Influenced by their culture, red colours are the
favourite of Chinese consumers. The colour red corresponds with fire, symbolizes good
fortune and joy. The colour red is found everywhere during Chinese New Year and other
holidays and family gatherings. For instance, a red envelope is a monetary gift which is given
in Chinese society during holiday or special occasions. The red colour symbolizes good luck.
5.2.2 Size offering
What size ranges should the women’s underwear products offer? What size range fits the
majority of its target group on both bras and bottoms?
Bra sizing is calculated by two separate body measurements:
First is the measurement of rib cage immediately below the bust. This is called under bust
length for using to decide the band size. 12
Second is the measurement of the fullest part of the chest. This is measured across the full
part of the breasts by crossing the breast points. 13
The “Alphabet bra cup size system” was introduced in 1935 with 4 cup sizes to each band
size designated: A, B, C & D.
A = Youthful
B = Average
C = Large
D = Heavy
The current Tommy bra grading uses a “cross grading” system which is the most common
used worldwide for the last forty years. The essence of this system is that the complete front
of the bra (side seam to side seam) is also used for three other sizes. Hence, the cup of a
75B is also the front section of an 80A, 70C. This system also relates to wire sizes. Tommy
Hilfiger bras are available in 14 sizes over 7 cups, 4 band sizes.
TOMMY BRA AVAILABLE SIZES
Cup 1
Cup 2
Cup 3
Cup 4
Cup 5
Cup 6
Cup 7
12
13
70A
70B
70C
70D
75D
80D
85D
75A
75B
75C
80C
85C
80A
80B
85B
85A
David Morris, 2009, IA Technical Vol. 1, pp. 9-10
David Morris, May 2010, IA Technical Vol. 1, pp. 9-10
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Research 1
Recently a survey was done on a total of 9462 females from the age 20~45 in China. The
purpose of the research is to find out how Chinese consumers definite their bra cup sizes
and what the actual cup sizes are according to their actual body measurement. The result of
the first research shows that most of the women chose B cup as their bra size – 37,7%, then
following by A cup 31,8%. The result from the second research on the actual cup sizes
percentage is: A 15%，B 30%，C 30% and D 25%14
The following points can be concluded from this survey:
- The majority of Chinese women do not have correct realization of their breast size.
The main way they use to judge their breast size is either by comparing themselves
from the model image of any brands’ products promotion booklet or simply come to a
decision after purchasing one bra from one brand that fit their breast the most. This
on one point also reflects the common bra consuming habit that once the fit of a
brand is acceptable by female consumers they will be in a quite long period sticking
to the bra of this brand without trying other brands.
- A lot of women even do not have the basic knowledge on A, B, C, D cups.
Research 2
Another research was done on the current cups sizes sold overall on Chinese underwear
market. Female consumers between 20-45 years old were picked randomly to do a survey.
Accordingly to the results, it was found that many women were advised when shopping to
buy bras which are marked one size bigger cups than their actual breast size. For instance
one female consumer’s actual breast size should be fitted in a 75A cup of a certain brand,
but in the latest collection she was advised to buy a 75B cup instead. However after
comparing the 2 piece of bras, the 75A from previous collection is of the same cup as the
75B from current collection.15
In China they generally use the same size identity as in Europe for bras. Next to the under
bust length “70, 75, 80, …”, “A, B, C, D” is the cup size and is identified by under bust length
minus the total breast volume. Normally A cup means that the difference between under bust
length and breast volume is 10~12cm, and B cup means that the difference between under
bust length and breast volume is 12.5 ~15cm. However, in the above case the 75B cup bra
has only 10cm difference between under bust and breast volume.
Why are they selling an A cup bra as B cup bra? “A cup is too hard to sell them” said Ms
Chen who is the Chinese women’s underwear marketing manager from Triumph Fashion Co,
Ltd International. As A cups always give consumers an idea of tiny breasts, therefore
retailers have to fully meet consumer’s vanity in order to keep the business running smoothly
in China. So most of the brands start selling from B cup which is actually an original A cup. A
cup is starting to disappear on the local market and is re-labelled as B cup. By simply
changing the size label, it seems to satisfy the clients while making the original small cup
bras easier to sell.
Research 3
According to a recent report from the Beijing College of Clothing Technology, who has
studied the changes in figure for Chinese women in the past decade, the chest
14
53meirong.com, “What are the most suitable bra cups for the Chinese females”. http://www.53meirong.com/zatan/20102/83257.html [retrieved May 2011]
15
nzw.cn, “Is there a difference between 75A and 75B?”. From http://www.nzw.cn/2007/0514/13423.html, [retrieved May 2011]
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circumference of Chinese women has increased by nearly 1cm in the past 10 years. The
study also found that Chinese women are 0.5 centimetres taller than in the previous period.
The research, which focused on women aged 18 to 30, discovers that the average height of
women in China measured round 163cm and their average breast volume is 83.54cm. While
their frames may remain smaller, the average cup size of Chinese women has grown two
centimetres over the last four years.
The college has concluded with data collected from nearly 6,000 women in the last six years
that Chinese females are inclined to boast an S-curve silhouette, something that is
commonly regarded as an attractive feature.
These positive changes owe a great deal to a more balanced daily nutrition and participating
in more sports activities. They also contribute to tremendous markets of underwear products.
Many bra manufacturers have started to produce larger undergarments as women are
wearing more B and C cup bras than before.
Conclusions of the researches
Conclusions based on above researches while taken into consideration the target group and
the fact that Tommy Hilfiger woman’s bras presently starts coming into sight of Chinese
female consumers, below 8 sizes are suitable to offer at this moment.
Cup 1
Cup 2
Cup 3
Cup 4
Cup 5
Cup 6
Cup 7
TOMMY BRA AVAILABLE SIZES FOR CHINESE MARKET
70A
70B
75A
70C
75B
80A
70D
75C
80B
85A
75D
80C
85B
80D
85C
85D
The benefits can be concluded as:
- Sufficiently use the cross grading system to avoid cup, padding and wire minimum.
- Cover the main sizes of Tommy Hilfiger women’s underwear target group in Chinese
market
- Satisfy consumers from both physical and psychological aspects
The sizes for underwear bottoms will be offered in S, M, L, XL as these are the most
common sizes correspondent to the local market.
The bras and bottoms will be sold separately.
5.2.3 Garment Fitting and Grading
International lingerie products are getting less popular among Chinese women than local
brands according to industry insiders. One of the most important reasons is the difference in
size of the breasts and hips between the Chinese and Western women.
Push up bras
“Chinese women's chests are not as large as Westerners, I'm a 75 B. Once I tried on a same
size bra of a European brand. I found it still very big," said a sales woman from brand Aimer
lingerie at Zhongyou Shopping Mall. “Chinese women have smaller breasts compared to
Western women. And I think the foreign lingerie companies should consider the big
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difference in bra sizes.” “Most Chinese women prefer padded bras. These bras come with
padding inside the cup linings, making the women appear to have larger breasts. The most
popular bra size in the store is 75 B cup”, said the sales woman, who declined to be
identified. "Padded bras are most popular worn by females aged from 20~30, who might
otherwise stuff their bras with cotton to make their breasts look bigger, fuller and more
protruding”. 16
In current Tommy Hilfiger women’s underwear collection, 4 types of bra are currently sold in
the EU market. They are moulded bra, balcony bra, padded plunge bra and push up bra.
The moulded bra and balcony bra shape are more suitable for EU target group as both bra
shapes require more upper breast volume of the wearers. Therefore, as a start at Chinese
market, it is more realistic and budget wise to first focus examining the push up bra and
padded plunge bra in order to discover the most appropriate fitting to be competitive with
other EU brands, which are already well acknowledged by Chinese female consumers.
Although both padded plunge bra and push up bra are sharing the same type of wire, and
use the same grading rate, but it is apparent that the cups and the fitting created are
different.
16
China Daily, May 2010, “European lingerie products not popular among Chinese women”
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A
B
Point of
measure
Top wing length
C
Bottom wing
length
Side length
D
Armhole
E
Cup volume
F
G
H
Cup edge
Wire length
Back distance
I
Shoulder strap
length
Yoke width top
Yoke width
bottom
Yoke hight
Under bust
length
J
K
L
M
Description
Excl. wire case
and Hook & eye
Excl. wire case
and Hook & eye
Measure where
wing joints cup
From cup edge
incl. wire case
Cross the
highest point on
the cup, incl.
wire case
Incl. wire case
From shoulder
strap till hook &
eye
Cup measurment 75B (
in cm )
Padded
Push up
Plunge bra
bra
Grading ( in cm )
Padded
Plunge bra
1.2
Push up
bra
1.2
1.2
1.2
0.5
0.5
9
8.5
0.5
0.5
20
21,2
1.2
1.2
18
18.2
18
18.2
0.5
1.5
0
0.5
1.5
0
0
0
0
0
0
0
0
4
0
4
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After comparing the most common Chinese measurements, the following chart shows the
differences of current Chinese measurement to indentify a bra size with Tommy Hilfiger
European measurement.
Under bust length
In cm
68-72
73-77
78-82
83-87
Breast Volume (Chinese)
In cm
+/-80
+/-83
+/-85
+/-88
+/-85
+/-88
+/-91
+/-94
+/-90
+/-93
+/-95
+/-98
+/-95
+/-98
+/-100
+/-103
Breast Volume (Tommy )
In cm
82-84
84-86
86-88
88-90
87-89
89-91
91-93
93-95
92-94
94-96
96-98
98-100
97-99
99-101
101-103
103-105
Bra size
70A
70B
70C
70D
75A
75B
75C
75D
80A
80B
80C
80D
85A
85B
85C
85D
From this comparison, it is obvious that the band size is of the standard from both Chinese
and EU way. The band size is decided by the centimetres measured from total under bust
length. So for instance, in both Chinese and European of measurement if the under bust is
between 73~77cm, it will be considered as a 75 cm band. However for cup sizes, European
standard of breast volume per cup range is 1~2 cm more compared with Chinese body
measurement. Which means same labelled bra 75B, the under bust length will be the same
measurement for both EU and Chinese, but it seems that Chinese cup size is 1 size smaller
compared with EU cups.
Chinese consumers prefer bras with a cushion inside and the cushion is flexible to be taken
out. Presently this kind of push up bra is the best seller among the Chinese market.
In order to research further on a proper fitted bra based on existing Tommy Hilfiger cup
shapes and wires, a couple of bras were analyzed through fitting experiments. In these fitting
experiments a Chinese with size 70B, 75B is asked to fit the following bras:
- 1 Triumph push up bra with size 75B (Chinese fitting),
- 1 Cherry push up bra 70A (European fitting)
- 2 Tommy Hilfiger push up bras 70A, 75A (European fitting).
The brand Triumph has been very successful in China and is known to have a good Asian
fitting. Cherry is an intimate brand found in the Spanish El Corte Ingles department stores. Its
bras are considered having a suitable push up fitting for Asian body from which Tommy
Hilfiger can be inspirited from.
The current Tommy Hilfiger push-up cups are not suitable for its Chinese target group. There
are four main points that came out of the experiments:
-
The push up padding is not of enough volume for small breast. Chinese women
expect the padding to be more filled in order to push the breast up.
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Cherry push up bra
Tommy push up bra
Triumph push up bra
-
The cup volume is too much. The cup is too covered as Chinese women in general
have less tissue at the upper breast. The highest cup point is too deep, it often leads
to an obvious space between the upper breast tissue and the cup edge.
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Cherry push up bra
Tommy push up bra
-
The push up padding is not adjustable or removable.
-
The wire is not soft and flexible enough. The best wire quality for this target group
should provide better softness and return to original form after stretching.
The current Tommy padded plunge bra is more suitable for Chinese women as the cup
volume is less deep compare with the push up bra, but it will not be easy to sell as it is lack
of a push up cushion. Besides, same as the push up bra, the softness and the flexibility of
the wire are the crucial points.
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Triumph push up bra
Tommy padded plunge bras
According to this experiment, it is not enough to just simply grade down 1 cup size to have
Tommy Hilfiger bras well fitted for its Chinese market.
Additional approaches which can be considered are:
1. Tommy Hilfiger should focus on selling push-up shapes, which is the most popular in
Chinese market. This is needed in order to have its women’s underwear products quickly
known and speeding up the turnover.
2. Tommy Hilfiger can start with using the padded plunge cups in Chinese market but based
on the plunge cup the flexible cushion needs to be added to create a push up effect.
The order quantity of padded plunge cups will increase after combining the orders from
Europe and China. On one hand it is easier for factories to adapt to this new approach
quickly. On the other hand the cup prices can be negotiated with better order quantities.
From the fitting side, plunge cups have lower cup volume that is more suitable for Chinese
target group. With the help of the push up cushion, it will support the breast but have no extra
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space between breast tissue and cup. The cushion is movable so consumer can decide to
keep or take out the cushion according to their body. Another advantage of this is that the
fitting group is enlarged from people who are less full at upper breast tissue to people who
are comparably fuller at their breasts.
To approach this point, it is suggested to use thin lightweight cotton lycra as cup lining and
have the opening arrange at the side. Chinese consumers are more found of cotton lined
underwear as it feels healthy and comfortable, with lycra composition it is easier to stretch
out the opening and insert the cushion. By inserting the cushion from the side will keep the
workmanship clean, smooth while not irritating the body.
3. Use softer but formable wires. Wire composition is usually 100% nylon-post coated
carbonised steel wire with nylon powder coated tips. The post coasting is a process where
the raw wires are first formed, heated and then nylon coated. Once adequately coated and
heat treated, their shape is stable and offers good anti-distortion, higher flexibility and
excellent rust prevention.17
When choosing the wire, it is important to identify the bras potential market by: country of
sale, customers’ body shape profile, cup shape, range of intended sizes and flexibility of fit.
The current Tommy using wire is having a flat section, which is a popular choice for
European targets as it can offer more strength, support and stiffness.
17
David Morris, 2009, IA Technical Vol. 1, pp. 9-22
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However, it is suggested to use the oval cross section of the wire as it provides better
comfort and softness against the body plus an advantage of smooth wire insertion into the
wire casing. Although in this case the wire ordering cannot be combined with EU order, but it
will not be a problem to order enough wire quantity to reach the order minimum and use
these wires through several seasons for the Chinese fitted bras.
After having applied the above 3 points and grade down one cup size, the modified bras
should be well fitted for the Chinese market.
Additionally, it is wise to add the function of racer back at the back shoulder strap. The
consumers can freely choose when they would even like to have their breasts more lifted up
by simply connect the hook and ring at back shoulder straps. So far Tommy Hilfiger’s
competitor does not often use this idea in Chinese market.
Example of Tommy Hilifiger existing padded plunge bra
with racer back hook & eye
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After observing what the Chinese intimate market is still lacking of while combining the
Tommy Hilfiger concept, one last suggestion is to introduce Padded triangle bras to Chinese
market.
Tommy Hilfiger offered padded triangle bra in its Spring 2009 and Fall 2009. However, from
season spring 2010 this sportive bra shape did not continue in the European market.
According to its European target group it was more fitted for teenagers (around 13-15 years
old) and it was not supportive enough when compared with wired bras.
Although the Triangle shape was not selling well in Chinese market either, it does have the
potential in the Chinese market. It is sportive, easy to wear, comfortable and healthier than
wired bras for the target group with a smaller breast volume. Hereby it is suggested for
Tommy Hilfiger to introduce padded triangle bras as a new shape to the Chinese market.
To achieve a better fitting for its potential consumers, the below points have to be
comprehended:
-
Keep the triangle bra un-wired, thus the size offer range will be in 3 sizes S, M, L Size
XL will not be offered as consumers with bigger breasts are suggested to wear wired
bras.
Make the padding into push up cup. The push up padding has thick volume at the
side and turns smoothly into the cup point. This way it will push the breast up and
more to the centre.
Use often the spagatti strap to give a young and sportive feeling.
Under bust taping needs to be supportive.
Use hook and ring for racer back option; therefore the clients can adjust freely the
breast shaped effect under their preferences.
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The suggested grading and fitting group are as below. Triangle bras are not aiming breasts
with big volume. Therefore, it should focus on consumers that are of 70A, 70B, 75A, 75B,
80B cups when wearing a wired bra. This group of consumers are often more skinny and
have less tissue at their upper breast, when wearing the wired bras they are more sensitive
to the pressure at their under breast from the wires. In case they cannot bear the pressure
then this type of triangle bras can be an option.
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A
B
C
D
E
F
G
H
Point of measure
Under bust length
Top wing length
Bottom wing length
Cup height
Cup volume
Cup edge length
Cup bottom length
Shoulder strap length
Triangle bra size
S
M
L
Description
Under bust measurement
( in cm )
67-72
73-77
77-82
Grading
4cm
1,2cm
1,2cm
1cm
1,2cm
1cm
1cm
0cm
Breast volume
( in cm )
82-86
87-91
92-96
Consider the first time that Tommy introducing this new type of padded triangle bras at
Chinese market, it is advisable to apply the Tommy Hilfiger underwear general used cotton
lycra as main body fabric. Cotton lycra material not only represent an healthy, casual feeling
but also it is less easy to have pilling on the surface if compared with fabric in Modal. They
can be solid or printed and as one additional shape to the existing groups to easily combine
the main fabric and trimmings.
Bottoms
4 basic shapes of women’s underwear bottoms are sold in the European market. They are
Shorties (boyshorts), Thongs, Briefs and Brasilians.
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Briefs and boyshorts are easier to sell in Chinese market as they are coverable and
comfortable to wear. Brasilians are relative more difficult to sell due to its transparency at the
lace part, however this shape still has its own group of consumers who would like to have a
classic and sexy feeling or to match up the bottoms with their laced bras. Thongs are almost
not selling in Chinese market for Tommy Hilfiger underwear target group.
The Chinese fitting and grading of the bottoms are less complicated to adjust if compared
with bras. Especially the sales will focus on the brief and boyshort shape, both shapes in
cotton lycra , modal or microfiber fabric are more flexible with fitting because of the
stretchiness from the main fabric. After comparing the Chinese sizing versus hip width, it is
suggested to grade down one size from European pattern to create a proper Chinese fit.
Therefore EU size XS, S, M, L is accordingly correspondent to Chinese size S, M, L, XL.
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Point of
measure
A
½ waist length
B
Side seam length
C
Front rise
D
Back rise
E
½ leg opening
F
Back crotch seam
G
Front crotch
seam
Hip Width ( Chinese )
84-88
90-94
96-100
102-106
Description
Grading
Brief
(in cm )
2
Grading
Boyshorts
(in cm )
2
Grading
Brasilian
(in cm )
2
Styles that do not have
side seam, no need this
measurement
Measure from front top
waist edge till seam
Measure from back top
waist edge till seam
Fold the front and back leg
opening in one line and
measure
0.5
0
0.5
1
1
1.2
1
1
0.8
1.5
1.2
1.2
0
0
0
0
0
0
For Brasilian
Hip Width ( Tommy )
90-94
98-102
106-110
114-118
Bottom size
S
M
L
XL
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5.2.4 Packaging
Boxed packaging for Tommy Hilfiger underwear is more suitable for its Chinese market than
having the garments flat packed in poly bag. Flat packaging offers less protection to the
products. During transportation bras cups are prone to be miss shaped caused by the
pressure of piled up cartons. Also once the bras are displayed in the stores the poly bags will
be taken out, therefore the padding from the lighter colours (white, creamy …) will get
yellowish after being fully exposed in air.
Besides offering better protection, boxed packaging also emphasises the casual, sporty and
preppy styling from the brand. The boxed products will be distinguished from its surrounding
competitors (majority of them are using hanger display) and attract the attention of the
consumers.
The suggested box idea for bra and bottoms is as per image below. The packaging consists
3 parts:
- PP plastic box with “Tommy Hilfiger “logo.
- Inserted card with model image.
- Size sticker and product information sticker (with the product image and fabric
composition )
The PP plastic box will keep as transparent, so it can be produced in big quantities in one lot
to lower the cost price. The packaging can be customized for each season by simply
changing the insert card. By offering separate size and production information stickers
makes the packaging combination more flexible.
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5.3
Place
Place represents the location where a product can be purchased and is also known as
distribution channel, market coverage and intermediary. Place decisions are made for
getting the products to its target consumers. The two components that will be looked in to are
Location and Distribution channels.
Location
First tier cities such as Beijing, Shanghai, Shenzhen and Hong Kong always have been the
prime expansion targets for many high profile international brands over the past few years.
Apart from the shop-in-shop inside big department stores, Tommy Hilfiger has 10 of its retail
stores highly concentrated in these cities. The competition between the brands is getting
increasingly intense in the first tier cities. However after realizing the wide space required for
expansion and evaluating the lower operational costs, many high profile brands are now
growing intrest in China’s second tier cities.
The potiential of second tier cities should not be under estimated. Synovate, a market
research firm, has made a survey on 68,000 consumers across 66 cities and rural areas in
China from December 2009 to June 2010.18 The outcome of the survey reflects the average
annual spending on apparel by Chinese consumers aged 15-64 living in different level of
cities in China:
- First tier cities; +/- 3900 yuan ( +/- 390 euro )
- Second tier ~ fourth tier cities; from +/-3300 to +/-3600 yuan ( +/-330~360 euro )
It is obvious that following the improvement of the living standard at the lower-tier cities, the
amount that people can afford to spend on clothing does not have big differences than those
in first tier cities. In recent years, the second tier cities have been developing their economy,
commerce, industry, city construction as well as their residents income. On one hand the
increasing of minimum wages leads to the rise of the local labor and operational cost, but on
the other hand it stimulates the residents purchase power positively.
Source; www.52letao.com
18
Synovate, Consumers in upper and lower tier cities have more in common than marketers think, reveals latest Synovate
Media Atlas China research”, From http://www.synovate.com/news/article/2010/09/consumers-in-upper-and-lower-tier-citieshave-more-in-common-than-marketers-think-reveals-latest-synovate-media-atlas-china-research.html [retrieved May 2011]
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The second tier cites are nowadays very attractive for Tommy Hilifger to expand its women’s
underwear market. And indeed during the recent 2 years, many luxury brands including
Channel, Louis Vuitton, Hugo Boss, Armani, etc have already started their presence in these
cities where they have invested huge resources on marketing and branding. There is now an
ongoing trend where a lot of well known international brands which have established
presence in Chinese markets are now actively planning their expansion to lower tier cities in
China.
Below is a list of some leading second tier cities:
•
Chengdu
•
Chongqing
•
Dongguan
•
Changsha
•
Qingdao
•
Hangzhou
•
Huizhou
•
Xi’an
•
Zhengzhou
•
Wuhan
•
Shijiazhuang
•
Xiamen
•
Nanjing
•
Ningbo
•
Suzhou
•
Zhuhai
•
Tianjin
•
Harbin
•
Wuxi
•
Haikou
•
Dalian
•
Shenyang
•
Yiwu
•
Kunming
Compared with first tier cities, the second tier cities are still facing several disadvantages: the
supply chains and logistical services are less comprehensive, employees are less
qualified/educated, longer distances from air and sea ports, embassies/consulates, legal
services, quality and logistics providers, testing and inspection offices. 19However the existing
benefits are more attractive:
- relative cheaper operational, energy and labour costs
- favorable local policies
- steady flow of workers
- rapid city development
- less chance that employees will quit to get jobs with a competitor. The key employee
are more loyal to its employer and more flexible with relocating.
The most popular second tier cities in China such as Nanjing, Hangzhou, Suzhou, Xian,
Chengdu, Chongqing, Tianjin etc are forcasted to be the next major markets for high profile
brands in the coming future. Currently Tommy Hilfiger have opened 11 of its retail stores
among 10 second tier cities.
Though its women’s underwear product has not distributed to any of its retail stores in China
yet. It is predicted that the expansion of Tommy Hilfiger women’s underwear will focus more
on second tier cities in the future. With local goverments stimulating new business and
investment proposals for international brands who wish to enter these regions, these second
tier cities will be the strongest and quickest growing markets.
Distribution channels
Currently in the Chinese local markets there are two major distribution channels for fashion
brands: department stores and specialty stores.20 Besides these two, Tommy Hilfiger also
19
Trudat, Investing in China’s Second Tier Cities”, From http://trudat.info/2010/04/investing-in-chinas-second-tier-cities/
20
Li & Fung Research Centre, “China’s apparel market, 2010” ,2010, Hong Kong
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has an additional distribution channel which is the self-operated retail stores that are already
presenting its apparel collection in the market.
Department stores are retail establishments which satisfies a wide range of the consumer’s
need for personal and residential durable goods. At the same time these stores offer the
consumer a choice of multiple merchandise lines, at variable price points, in all product
categories.
Since the Chinese economic reform in 1979, the Chinese department stores also developed
swiftly along with the fast growing economy. Based on their product offerings, store
environment and management, the department stores in China can be generally divided into
three classes: the high-, mid- and low-end. There are different department store groups
dominating different areas of China, for example, Intime department store has the biggest
market presence in Zhejiang province, while Jinying department stores dominates the
Jiangsu Province. Besides, there are many other department store groups, such as Pacific,
PARKSON, Wangfujing, New World, etc.21 Many of them are expanding quickly by listing in
the financial market. Many international brands like Tommy Hilfiger are merchandised in the
department stores via the shop-in-shop concept.
Tommy Hilfiger is most well known for its casual wear and denim collection, people are
hardly aware of its women’s underwear collection in China. To change this, the priority for
marketing is to establish the women’s underwear products image among its current and
potential consumers. The priority choice is selling its women’s underwear products through
shop-in-shop concepts (setting up standardized stores/ counters) in high-end department
stores. This will help to promote the women’s underwear collection image to reach its
consumers.
A shop-in-shop concept is the balanced composition of the retailing mix resulting from a long
term joint effort of brand Tommy Hilfiger and the retailer, in this way that the targeted
consumer receives a clear and recognizable distinct image of the shop-in-store concept on
Tommy Hilfiger women’s underwear products, apart from the larger store in which the shopin-store concept is located. 22
In this way, Tommy Hilfiger will benefit from the premium store image from the high-end
department stores, as these stores place huge emphasis on the best shopping experience
for its visitors. In addition, Tommy Hilfiger women’s underwear will develop the shop-in-shop
concept in its self-operated retail stores as well so as to complete the brand story with its
correspondent apparel garments.
Despite the possible inconvenience that might come across size limitation on the counters
and restrictions regarding the products offering range or the display method, there exists
plenty of valuable benefits in the shop-in-shop concept:
-
Minimizes risk of market entry.
-
Benefits of existing customer flow in store
-
Synergistic combination of concession and store images
-
Well education sales employees.
-
More control over selling/display environment
21
Wikipedia, “Department store”, From: http://en.wikipedia.org/wiki/Department_store#China [retrieved May 2011]
Marco Mossinkoff, “Looking Behind the Scenes of Shop-in-Store-Concepts:Conceptual Framework Outlining Four Routes to
Success” ,2001, Amsterdam
22
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-
Benefits from store advertising and promotions
-
Share the completely advanced equipment from store security, cash control, and
credit system
Specialty stores are small stores which specialize in a specific range of merchandise and
related items. Most stores have an extensive depth of stock in the item that they specialize in
and provide high levels of service and expertise.23 Many well-known brands have their own
specialty stores at present in the Chinese market. Most of them opened their first stores in
first tier cities. However by following signs of saturation showing in these regions and the
fierce competition for prime locations it has driven up the rental cost24, many of them are
expanding to second tier cities. Nowadays these cities are showing increasing purchasing
power which demonstrates huge market potential and yet require lower operation cost.
Although the specialty stores are gradually more popular since enterprises can have assess
to better control over the store operation, budget concern wise it is better for Tommy Hilfiger
women’s underwear specialized stores to be planned as a long term goal.
5.4
Promotion
Once the products are in store and the prices are set, it is important that potential customers
are told about the product. Promotion can apply for reassuring the consumer that the product
is of good quality and persuading them to purchase the product.25 The strategies are easily
incorporated in the promotional methods used by Tommy Hilfiger women’s underwear which
will be currently concentrating on sales personnel skills and e-commerce business
development.
5.4.1 Sales Personnel
Tommy Hilfiger always considers its personnel as the most valuable asset. This will require
Tommy Hilfiger China office to select its customers-contact people carefully and train them
well. Personnel in the company must be competent. As professional underwear sales
personnel, they have to be courteous, friendly and respectful and possess the required skills
and knowledge. They need to serve customers with consistency and accuracy. Furthermore,
in order to respond quickly to requests and problems, they must understand the customer
needs and communicating clearly with them.
Products from any industry will generally experience 4 phases: introduced to the market,
growth in the market, peak of demanding, recession from the market. The same is true for
underwear business. Once new intimate products are introduced to the market, they can be
well known and accepted by consumer during the first couple of weeks, or couple of months
and even longer. This depends not only on the quality of the products itself but it also
depends on how the sales personnel promote the products to its potential clients.
“A sales personnel from one famous domestic brand tried to help a female consumer
choosing bras. The consumer has fuller breast tissue and her body is better shaped. The
sales personnel choose several pieces of bra with thick cushion or push up padding, which
were very popular at the moment. As a result, none of the bras fitted well for this client. They
are either too pressing the breast or the shoulder straps are slipping from the body easily.
23
Wikipedia, “Specialty store”, From http://en.wikipedia.org/wiki/Specialty_store [retrieved May 2011]
25
Project Alevel, “Marketing mix”, From http://www.projectalevel.co.uk/as_a2_business_studies/marketing_mix [retrieved May
2011]
24
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The sales personnel overlooked 3 points: Firstly, she did not observe the fit of the client well
and therefore the chosen bras were not tailored to client at all. Secondly, she selected the
wrong cup sizes. Thirdly, the bra types are not appropriate. In general, thick padded push-up
cups are more suitable for women who have less full breast, which is not the case for this
client. As result the client had the impression that the quality of this brand is not so ideal and
end up never willing to try on future collections from this brand.”26
It is important to learn from this example that if the sales personnel wrongly identifies the
target group, the advised product will be incompatible with the consumer’s demand and
leads to the failure of sales.
Tommy Hilfiger women’s underwear sales personnel will be trained on how to display the
garments in store, how to have the garments being popular and widely accessed by the
clients. Moreover, they will be trained on the garment fitting in order to help the customer
select the well fitted pieces. Before new season starts, the sales personnel in the store must
have studied the target group, new styles, colour story and size offer range from the
collection. They are not only promoting the underwear garment with passion but also with
knowledge. As result, consumers will experience skilful, professional and qualified service
from Tommy Hilfiger stores and will feel confident when buying its underwear products.
The core actions are:
-
-
-
-
Invite the sales representative from Tommy Hilfiger stores and shop-in-shop from
department stores to join the sales meeting and fashion shows in Europe. There they
can be introduced to the overall collections, shapes, colours. Afterward the sales
representative has to brainstorm with the shop employees.
Arrange local fitting session to train the sales employee on how to help the customers
finding the most fitted products.
Invite the sales people to pay a visit to the factory to have general knowledge of the
whole underwear production line. The sales people will be more qualified once they
understand the general process from the production start till goods pick and packed
to stores. They will feel more confident to promote the products even when facing any
doubts from clients and will be able to convince the clients professionally.
The Tommy Hilfiger underwear department in China should arrange visual
merchandising booklet per delivery with the help of European head office to direct self
owned retail stores. Based on this booklet Tommy Hilfiger underwear China office will
also help its clients to build up the “shop in shop” merchandising according to
different situation per retail store.
Arrange weekly sales training in groups to give tips and advice on underwear selling
to sales employees. In the meantime sales employees will take this chance to
exchange their own experiences and discuss on the difficulties they have
encountered on products, consumers, etc. A recap will be reported to the China head
office as reference for improvement and ideas for forecasting.
5.4.2 E-commerce
Online fashion retailing has being developed rapidly in recent years in China.
As published by the China Daily, online retailing in China has the world’s largest web
population of at least 420 million, soared 117 per cent last year to $39 billion.
26
www.neiy.net, “Underwear sales”, From http://www.neiy.net/zhishi/system/2349.html [retrieved May 2011]
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iResearch, a Shanghai-based research firm’s report shows that the revenue size of China’s
B2B e-commerce operators reaches 9.59 billion yuan. With the economic recovery, the
revenue size of China’s B2B e-commerce operators will continue to develop at a rapid rate. It
is predicted that its growth will tend to be stable and reach RMB80 billion in 2012. About onethird of China's 420 million internet users now shop online. In the first half of 2010, internet
sales in China increased by 60 per cent compared to the same period last year. According to
the China Internet Network Information Center, in July 2010, 33.8 per cent of Chinese made
purchases via the Internet, up from 28.1 per cent in January. Fashion and accessories are
the most popular online retailing category and females are the major customers of many
online shopping websites.
On-line retailing is not the main distribution channel of Tommy Hilfiger women’s underwear in
China however it is one of the most important promotion approaches. On-line business will
be handled directly by Tommy Hilfiger China office. Goods will be packed and distributed via
DHL who will be the same carrier for the bulk shipments to the local stores. In addition to
offer a competitive on-line service for its lingerie products, below a few points can be applied;
- It is helpful to arrange fitting guidance on the website. So consumer can select the
right product matching with their own body measurements before them trying on the
garments.
- Lingerie fitting, especially bra fitting is more difficult to decide accurately only via
photos or measurement data without fitting on the actual product. Therefore it is
important to offer the exchange and return system to provide satisfied shopping
experience for consumers. However, any returned or exchanged products must be
well taken care at the hygiene aspect.
- To expand the potential of on-line shopping, the promotion of “free distribution” can
be offered when consumer purchase certain value of the goods.
5.5
Presentation
Tommy Hilfiger is well known for its casual, simple and sporty styling in its apparel retail
stores and shop-in-shop. During the starting seasons of operating in the Chinese market
Tommy Hilfiger women’s underwear should focus mainly on developing its women’s
underwear in shop-in-shop concepts inside big retail stores or in Tommy Hilfiger’s own retail
stores to accompany its apparel garments.
Presentation is the way a product is presented to the customer in shop. Shop-in-shop area
layout and visual merchandising are two important factors that add to the distinctiveness of
the products.27 The interior design of the shop-in-shop area plays a vital role. Tommy Hilfiger
women’s underwear will be presented in a very well structured, clean plain interior yet not
lose elegance and feminine. The area will occupy 20-25 square meters (including dressing
room plus a small storage) and is composed by fixtures, show tables, advertising banners
and show models. The underwear set that has the most sales potential will be placed under
the glass of the show table. The European head office will supply the big advertising board
with the model image to be placed behind the cash counter. The boxed bras and bottoms will
be well organized by size and colour placed in the fixtures. Next to the fixtures is the rail with
a couple of samples in different styles, colours and sizes hanging on it, the samples sets are
the show models and are used for customer’s trials. Chinese consumers do pay attention to
the hygiene of the products that they are buying. They always expected the garments they
purchase are new and never worn by others. In order to meet the consumer’s demands, the
boxed products will be most of time kept in the fixture with the packaging closed to maintain
the neat and fresh impression of the whole shop in shop area. Shop personnel are required
27
Pramit Das, “Effectiveness of store layout strategy in maximizing the operational efficiency of a Retail Store”, From
http://www.indianmba.com/Faculty_Column/FC913/fc913.html [retrieved May 2011]
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to check the boxed products regularly to keep the packaging un-scratched and garments are
nicely folded in the boxes without any de-shaping.
The display of lingerie shop-in-shop counter has two main intentions. First intention is to pass
the brand and its value information to the consumers, second intension is to stimulate the
sales of the garment. The accomplishment of the first intention will facilitate the achievement
of the second intention. In order to achieve both intentions, the display of Tommy Hilfiger
women’s underwear garments will comply to following 5 guidelines:
-
Easy to spot. The position where the garments can be easily spotted by the
customers will be 30 degree slightly when head-down towards the display.
-
Easy to fetch. The display of goods needs to be easier for customer to reach, touch
and pick. Taking into consideration of the average height from the female target
group, if divide the fixture into 3 section:
The middle section which is 50cm~150cm from the floor is the easiest section for
customer to fetch the product. In this area for displaying the best forecasted sellers or
the products that are point of sale, besides these garments are mainly in size M for
bottom and 75B for bras.
The semi-upper section which is 150cm~170cm from the floor and the semi-bottom
section which is 30-60cm from the floor are the area for displaying other colours and
sizes from the same style.
The top part which is 170cm~190cm from the floor and the bottom part which is 10-30
cm from the floor are the least easy section for consumer to pick up the goods, at
these areas the least popular colour and sizes ( such as A cups, XL sizes ) will be
displayed.
-
Increase the product value. Increasing of value is realized by adding some
accessories, light or reserve more space to emphasis certain underwear set so that
the consumer feels more tempted to purchase these products based on the creativity
put in displaying it.
-
Change the display frequently. Even the new garments from the next delivery story
are now in store yet; the counter display needs to be changed once per week or two
weeks to refresh and attract consumer’s sight. The possibilities are another theme
recommendation, partially updating and different colour combination.
-
Ensure there is always variety of options available. The customers are satisfied not
only from purchase their ideal product, but also from the experience of enjoying the
freedom of shopping and being surrounded by a rich selection. Therefore the shop
personnel are expected to keep on filling up the fixture to maintain a wide range of
choices on colours and sizes.
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Suggested women’s underwear “shop-in-shop” interior
show table
cashier
underwear garment ( show models in different sizes )
shelves for displaying boxed underwear garments ( well
organized in size and color)
5. fitting room
6. advertising, posting etc.
1.
2.
3.
4.
5.6
Position
An important aspect to determine Tommy Hilfiger women’s underwear position in the
Chinese market is how similar or different the brand is in comparison with other brands who
are selling the same product category.
Positioning is the attempt to control the public's perception of a product or service as it
relates to competitive products.28 Brand positioning is the brand’s benefit for consumer, an
opportunity for which is the best suited in the target audience, and who its main competitors
are. To achieve the benefit of Tommy Hilfiger women’s underwear positioning, it is necessary
to research further its market position by comparing the results with competitive brands. A
successful position is both different and important to consumers.
After researching in several famous shopping malls where there is big potential for Tommy
Hilfiger women’s underwear to develop its shop in shop concept, there are a couple of
women’s underwear brands who have being successfully existing in the market for a longer
28
Learn That, “Free Definitions : Define Positioning. What is Positioning?”, From:
http://www.learnthat.com/define/view.asp?id=57 [retrieved May 2011]
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duration and are nowadays very popular among the Chinese consumers by their customer
oriented design, fitting and competitive selling prices. And that means once Tommy Hilfiger
has set up its women’s underwear counter in these shopping area, it will be surrounded by its
competitors. These competitive brands are in rank of the Top 10 lingerie retailers in local
market as well.
In the past most Chinese consumers had a strong preference for foreign brand over local
brands. They believed that the exclusive prices for imported foreign goods are justified
because of better quality and nicer styling. However following the rapid improvement on
technology and wise marketing investments, the local brands improved enhanced their
image among the local consumers.
It is important to note that Tommy Hilfiger will not be only facing competitors from western
European brands but also Asian brands and even more from local brands. Triumph
(Germany) and Wacoal (Japan) are 2 international brands at the leading position in Chinese
lingerie market. Following the lead are the local brands Aimer, Ordifen and Maniform. These
local brands have well established their brand images among the consumers and have
developed wide distribution network in the local market.
Triumph
The brand has a long history of 125 years. In 1886, Triumph was founded in Germany in the
early 20th century. Although originally founded in Germany, the company has moved its
headquarters to Switzerland.
In 1960, Triumph opened its offices in Hong Kong and began its expansion into the Asian
market. This ground breaking decision was accompanied with a new business approach that
was considered unique at that time: a decentralized corporate structure. This business
strategy enabled customers in each country to be served by locally based designers and
business partners with particularly strong commitments to regional fashion trends and
cultural conditions.
As Triumph's international business presence developed, the company's significance for the
world of fashion increased at the same pace. Triumph Japan grew so powerfully that it was
soon among the top three lingerie & underwear producers. In keeping with the corporate
philosophy of adapting to local conditions, the brand was among the first fashion companies
to produce designs specifically for Asian sizing.
Triumph currently owns 10 stand-alone stores and 1400 counters all over China. The brand
is popular in the Chinese market for its design, exquisite workmanship, comfort and high
quality material. Triumph has its shop-in-shop in almost all big department stores. With a
positive double-digit profit figures motivating the brand, Triumph is planning to open 300
more outlets in major cities in the next 5 years.
The average price of a bra in local market is about 34 euros per piece
The average price of a bottom in local market is about 10 euros per piece
Aimer
Founded in 1993 in Beijing, Aimer has won many Chinese modern women’s heart by its
exquisite, high quality and elegant lingerie.
Aimer is China's top high class ladies lingerie company in terms of production, sales and
consumer awareness. It strives to provide high class underwear to urban ladies between 25
to 35 years old with high incomes.
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Having being active for 15 years, Aimer has established a complete design and marketing
network. It has over 300 franchised stores located in shopping malls and department stores
in China. Moreover, the sales of Aimer ranks top in the lingerie industry in China. It is the
only local luxurious brand in the Chinese lingerie market.
The brand has professional production bases and subsidiary fabric factories in Beijing and
Suzhou, with a capacity over 10 million pieces per year. It has established the Aimer
Ergonomics Laboratory together with Beijing Institute of Clothing Technology. The research
results from the laboratory have been applied into underwear design and model production.
Aimer has obtained numerous honors, such as Beijing Name Brand Product, Beijing Famous
Trademark, Beijing Top Ten Fashion Brands, Chinese Resounding Brand Yearly Creativity
Award and the resounding Trademark of China. It also has had the highest market share and
the largest sales volume for several years according to the records from the Chinese General
Chamber of Commerce.
Wacoal
Japan based Wacoal brand, which entered into Chinese market in 1986, is famous for its
sleek emergence.
Wacoal is a company with a deep understanding and concern for women, a company
dedicated to providing beautiful, well fitting, high-quality intimate apparel for the women. All
bras, panties, shape-wear and coordinating daywear are designed to enhance a woman's
beauty and self-image. Wacoal products are featured in the finest department and specialty
stores across the United States. Wacoal America is part of multinational company
headquartered in Japan. Wacoal's superior technology and quality have roots in its Japanese
heritage. The designs are created with European fashion elegance and superbly comfortable
American fits. After nearly 50 years of hard work and determination by a young Japanese
entrepreneur, Wacoal has become a leader in intimate apparel manufacturing in the United
States, Japan, Asia, and Europe. Known for the best fitting, highest quality bras in the world,
Wacoal opened its doors in the United States nearly 15 years ago. Wacoal brought the
American consumer what was sorely missing in the marketplace: luxurious intimate apparel
made from exquisite laces, embroideries, and the finest fabrications, tailored to create “The
Perfect Fit”.
In May of year 1997, the company increased its investment in a joint venture in China to
strengthen manufacturing and sales there, starting a manufacturing operation in Guandong,
China. Currently, its Chinese offices are based in Beijing, Shanghai, Dalian, Guangzhou and
Chengdu. However Wacoal will concentrate planning, selling and marketing functions into
Shanghai. The reason is the current concentration of many sales in Shanghai. Wacoal is
going to intensify the planning and development of products in linkage with its research &
development base. Head office functions such as finance and personnel will remain in
Beijing.
Wacoal’s women’s underwear focus on helping Chinese women to realise and highlight their
beautiful female body shape. In order to assist its female consumers to achieve their ideal
body image, Wacoal frequently conduct researches on female bodies of different ages to
provide the most fitting designs. It has founded its own Human Science institute and is active
for more than 30 years. The institute has measured more than 1000 Chinese female bodies
using advanced 3D measuring equipments. Based on these data the three-dimensional
models have been made to develop the proper fitting of its bras and bottoms.
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The average price in local market is about 36 euros per piece
The average price in local market is about 13 euros piece
Maniform
Maniform is a local women’s underwear brand based in Canton province and is now selling
its underwear products in China over 40 cities. The brand was established in April 1996 and
owns its independent import and export right. After more than ten years rapid, sustainable
and stable development, it has become a lingerie group specialized in lingerie Research &
Development, promotion, techniques research, marketing and processing with supplied
materials.
Maniform is the only company awarded both China Top Brand and China Well-known
Trademark in China lingerie industry. In year 2001, Maniform was voted as the best women’s
underwear brand in Canton province. The brand has its own production plant with 60000
square meters of space and 2000 employees including 100 senior technicians. The year
production capacity of its factory is 20,000,000 pieces. Maniform has 33 offices, 1500 “shopin-shop” counters,120 self-owned retail stores in China.
Thanks to the influence of fashion trends, Chinese ladies nowadays have become more and
more fashion-sensitive and demands high quality lingerie to please themselves. Maniform
designs comfortable bra cups by using high quality fabrics and cutting edge technology.
The average price of a bra in local market is 30 about euros per piece
The average price of a bottom in local market is 8 about euros per piece
Ordifen
Ordifen is a women’s underwear brand from Taiwan. Since its first “shop-in-shop” in Beijing,
it has been operated in the Chinese underwear market for 12 years. Starting from year 2001,
Ordifen had set up its own offices and factories in Beijing and Shanghai including the whole
supply chain of design, production. Currently, the brand has 20 branches in major Chinese
cities. There are now 700 Ordifen sales outlets, 200 shop-in-shop counters in major
department stores and 100 franchise stores. Despite fierce competition, Ordifen maintains an
annual growth rate of 50 percent and is China’s leading underwear manufacturer. Ordifen
products is specialized in the combination of feminine, healthy and functional.
The underwear market in China is dominated by a dozen brand names. Ordifen’s distinctive
designs make it stand out among them and its acute market sense keeps it in the lead.
Ordifen introduced its new lingerie in late 1990s when Chinese women still only had a limited
choice of clothes. This introduction has given the Chinese women a taste of the latest
fashion found in Europe and America.
In cooperation with the French company Peclers, Ordifen employed top designers to ensure
its products are consistently in the latest style. In order to emphasis the Chinese oriented
feminine and beauty of its women’s underwear, Ordifen looked to Chinese culture and
created its Chinese Red line. This collection line emphasise on the colour red which is
popular by culture in China and was a great success in the local market.
The brand also frequently takes part in different social activities to expand its brand
reputation. For instance, Ordifen sponsors lectures regarding underwear technology in more
than ten universities and its “995 Saving the Breast” social welfare activity has been on-going
for five years.
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5.7
Price
Price setting is related closely to the figures of turnover (sales revenues) and rate of return
on investment. Both figures are the keys to certain prospects to consolidate the current
economic situation for the company.
It is important for Tommy Hilfiger to make sure the price/product proportion for its women’s
underwear products is proper. If the prices are set up too high, the potential consumers can
easily choose its competitors who offer similar quality but lower priced. On the other hand if
the brand charges too low on the price, it may degrade the product’s image and it might not
cover the costs. Therefore the price decision has to be made in full consideration of all
possible aspects.
Firstly, prices are required to be representable, reasonable and stable for the external
surroundings which are represented by:
- Potential clients behaviour
- Competitors
- Local purchase power.
They are also required to be coverable, valuable and profitable for the internal factors which
are represented by:
Cost of the products
Productivity
Company financial aims.
5.7.1 Cost and Price in Europe
Before making the price decision for Tommy Hilfiger women’s underwear at the Chinese
market, it is always useful to first review the data at Europe side as references. Currently
Tommy Hilfiger women’s underwear has been selling in more than 15 countries in Europe at
famous department stores, Tommy retail stores and small boutiques.
The retail price for the product is finalized first between Tommy Hilfiger and its wholesale
clients. Between different European countries, the retail prices can be different but the
differences never too big. From a fixed retail price, the whole sale price is calculated by
Retail price / mark up. The average mark up used by Tommy Hilfiger in Europe is 2.49.
Majority of the bulk production are transported to Europe by sea. The freight term FOB Hong
Kong is used, which means the price that Tommy Hilfiger is paying to the factory covers until
goods are handed at the forwarder. Afterwards, the transportation cost, duty charges, taxes
and loading at port cost will be on Tommy Hilfiger’s account. Therefore landed price is used
internally which refer to the actual cost price of the goods when they are loaded at the port of
Rotterdam. The average ratio is 1,3 if the shipment is from far east, that means the landed
price is equal to FOB x 1,3.
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Average prices ( calculated base on usd ; euro = 1:1 )
USD
EURO
Style
FOB
Landed price Wholesale
Bras
Lace Brazilian
Brief
Shorty
6,68
3,30
2,92
3,01
8,68
4,29
3,79
3,91
17,4
11,65
9,62
10,8
Retail
42,5
27,95
22,7
26,8
Gross
Margin
48,3%
61,2%
58%
60%
5.7.2 Price strategies at Chinese market
Very few Tommy Hilfiger women’s underwear from past seasons is selling well in the
Chinese market. The reason for this is mainly because the retail prices there are simply too
high. Most are even higher than in Europe. Bottoms are sold around 32 euros; bras are even
up to 58 euros. Comparing with its competitors such as Triumph and Wacoal who are also
famous brands with quality, the retail prices from Tommy Hilfiger are too high to attract its
target consumers.
Very few Tommy Hilfiger women’s underwear were at Chinese
market
The retail prices from previews seasons in Chinese Yuan
In order to improve its situation, it might be worthwhile for Tommy Hilfiger to revise their price
settings for the local market. There are 3 pricing strategies suggested for Tommy Hilfiger
women’s underwear:
-
Premium pricing. Tommy Hilfiger women’s underwear applies high-level prices that
are affordable according to the purchase power of its target consumer and are
competitive to other lingerie brands of the same level. However, Tommy Hilfiger must
offer higher quality product/service in exchange.
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-
Penetration pricing. For some of its simpler products like the solid cotton basic group,
the retail prices can be offered slightly lower to gain more market share and also to
match its casual and preppy image. In the meantime increasing the retail prices
smoothly for the luxury groups such as prints and laces groups.
-
Value pricing. The target consumers can be stimulated to spend more money by
adding value instead of cutting prices directly. For instance offering packs of bundled
bottoms (per two or three), lingerie sets containing a top with a matching bottom, etc.
These sets or combination will be very appealing to customers especially when
buying the individual items separately is more expensive.
-
‘Increase’ prices without increasing price. By using the efficient way of distribution,
factory will quote the prices in local currency RMB under FCA term instead of FOB
HK in USD. Goods will be directly distributed from Shenzhen to the domestic markets
from which the additional charges caused by the transportation and currency
exchange are prevented.
Expected Gross Margin
In order to cover the costs from wages, products, equipment and transportation but also
gaining profit, the target gross margin per style needs to be reached.
- Bras demand premium techniques and workmanship; therefore the target margin is
expected to be 50%.
- Bottoms are less complicated on workmanship and fewer sequences are demanded if
comparing with bras. Therefore the margin is expected to be 55%.
- Value packs, gift packs are targeting at minimum margin of 48%.
By the end of each season, weighted margin of 50% is expected to be achieved. Weighted
margin is the consolidation all the product groups and calculated by:
(Revenue - Cost of goods sold) / Revenue.
The ratio
The ratio for calculating the actual cost price after including transportation, taxes and
insurance costs is averagely estimated as 1,18 for domestic market.
Cost price
Although for Chinese markets the women’s underwear is offered in smaller sizes as a fitting
aspect concern, however it is evaluated that the manufacturing price for the domestic market
will be very similar to the offering for European purchase order. As for Chinese purchase
order, extra sequences and fillings need to be quoted for the bras. 10% handling cost for the
pick and pack service should be taken into account. The average cost prices are estimated
as;
Product
Delivery term
Ratio
Free carrier
Free carrier
Handling
cost
10%
10%
Bras
Lace
Brazilian
Brief
Shorty
1.18
1.18
Manufacturing price
Yuan
43.4
21.4
Final Cost price
Yuan
58.8
27.7
Free carrier
Free carrier
10%
10%
1.18
1.18
18.9
19.5
24.5
25
Wholesale price
To achieve the target margin, the wholesale prices will be estimated as;
- Bras; 117,4 yuan
- Lace brazilian; 64,5 yuan
- Brief; 56,9Yuan
68
-Biyun Hu-
-
Shorty; 51,1Yuan
Retail price
Based on above wholesale prices, the final retail price is expected to be from 300~400 Yuan
for bras and 100~150 Yuan for bottoms.
Retail price E-commerce
Prices for E-shopping can be offered with a 10~30% discount based on the market retail
price.
69
-Biyun Hu-
Chapter 6
Swot Analysis / Matrix
This chapter will present the swot analysis matrix in which the internal and external factors will be
listed in the form of “bullet points”.
Swot Analysis / Matrix
Swot analysis is an effective way of identifying the brands strengths and weaknesses
(internal factors) and of examining the opportunities and threats (external factors) that the
brand is facing.
Matrix
Internal analysis
Strength
- Famous brand name from its apparel
business
- Strong design and comprehensive
group stories
- Shorter lead time
- Casual and preppy styling different
from its domestic competitors
- Lower operational costs
Weakness
- Women’s underwear garments are
still new to the market
- Chinese fitting and grading system
are still under constructing
- More sequence for tailoring the
product to local market
- Casual styling are less attractive to
local consumers compared with
sophisticated lace styling
- Lack of qualified and specialized
personnel
-
External analysis
Opportunities
- Efficient distribution route and lower
logistic cost
- Emerging local purchase power
- Huge potential in second tier cities
- Wide space for growing the business
- On-line retailing are highly demanded
Threats
- Complicated operation for pick and
pack service
- Increasing labour cost
- Investment on marketing and
advertising
- Additional budget for human
resources at local office
- Might encounter many returns for unfitted garments from E-commerce, as
lingerie is more exclusive at fitting
70
-Biyun Hu-
Chapter 7
Conclusion and Recommendations
This chapter will draw conclusions on Tommy Hilfiger’s women’s underwear business in China.
Recommendations will be made at the end of the chapter.
Currently Chinese garment manufacturers are facing the challenges of increasing cost price
which is caused by two major factors; firstly the increased cotton price, secondly the rise in
the minimum wage.
Cotton prices began to climb about a year ago. At the beginning, the Chinese manufacturers
tried to hold consumer prices flat. But now that cotton is 80% more expensive than it was at
the start of the year, the manufacturers have no choice but to pass on the higher cost.
In 2010 to 2011 more than 22 provinces in China have increased their minimum wages
above GDP growth. This places pressure on labour-intensive apparel manufacturers. Raising
the income tax threshold and increasing wages are two of the main ways the government
hopes to meet its target of seeing disposable income growth exceed GDP growth.
Average spot price in US cents per Pound for Upland cotton (color 41, leaf 4,
staple 34)
As of: Friday, May 06, 2011
Source: USDA Market News
Like many other well known brands, the majority of Tommy Hilfiger garments are
manufactured in China. Therefore the wholesale and retail markets back in Europe are under
pressure from the climbing costs and falling clothing prices due to the fact that Europe has
not yet recovered from the economic crisis in the past two years. The fall 2011 collection is
coming soon on the market. In this collection Tommy Hilfiger women’s underwear have to
raise prices by 14% at both wholesale and retail prices in European market.
The fact that Tommy Hilfiger has taken full ownership of its Chinese market distribution offers
its women’s underwear a good opportunity to hit the local market of China. A lot of profit can
be made in this region and its potential is yet to be unlocked. The pressure from material cost
rise can be compensated by the distribution cost, which is relatively lower following the
shorter distance in the local supply chain. The increasing wages on the other hand positively
accelerates the local economy. Consumers from many regions in China are nowadays
having the same or even higher purchase power than the consumer in European countries.
The takeover of Chinese market distribution channels is expected to transform the Chinese
lingerie activities soon from a European tag-on order to an independent business that will
71
-Biyun Hu-
bring profit and enhancement of its brand image in Asia. This is the long term goal of Tommy
Hilfiger for its women’s underwear business in the Chinese market.
One major issue that has arisen recently is that of garment safety. Chinese consumers are
sensitive to this topic and are paying more attention to the health impact of what they are
wearing. In July 2010, the Beijing Administration for Industry and Commerce revealed results
of quality inspection on apparel: 65 types of apparel failed the checks, which include
products of famous domestic and international brands. The Shanghai Administration for
Industry and Commerce Guangzhou Bureau of Quality and Technical Supervision recently
conducted random sample checks of the sportswear, swimwear, lingerie and casual wear
sold in Shanghai and Guangzhou markets and they found that 30% of products failed the
checks. Brands failing the tests included the famous and luxurious domestic lingerie brand
Aimer. Underwear has high direct contact with the skin, more than normal apparel garment.
Failures of the underwear fabric will release methanol, aromatic phenol and other harmful
substances. Poor quality underwear can become an invisible killer causing skin allergies,
blood spots or even cancer. Although Tommy Hilfiger underwear has never encountered any
safety complaints so far, extra inputs from its local office for quality assurance are needed in
order to prevent these issues from happening in the future.
In conclusion, apart from spending huge resources on brand advertising and store expansion
in China (like how other brands are currently operating their business), it is most important
for Tommy Hilfiger to have its women’s underwear products tailored to the tastes of its target
consumers and to meet the standards maintained in local regulations. Therefore it is
essential for Tommy Hilfiger to support its business in the Chinese market by allocating
budget for a body wear development team in the China.
The recommendations can be summarized as the following.
Firstly it is advised to prioritize the constructing of a professional body wear team in Tommy
Hilfiger China. Though close cooperation with the European head office, this team is
expected to be able to handle the local market independently in 2~3 years by creating
design, product development, advertising and sales completely customized to the local
market.
Secondly, though exploring the direct distribution routes to the local customers and utilizing
the advantages offered by a local carrier will minimize logistics costs and lead-times.
Thirdly, adjusting the styling, fitting packaging and price of the existing garments to the local
market can lead to a positive brand perception.
Moreover, the business of Tommy Hilfiger women’s underwear will discover more
opportunities at the second tier cities in China once it finds solution to a few problems in
these regions.
Last but not least, presenting unique “shop-in-shop” concepts and offering high quality
customer service will make the Tommy Hilfiger women’s underwear collection more
competitive in the Chinese mid-high level lingerie market.
72
-Biyun Hu-
References
Articles:
53meirong.com, 2010, “What are the most suitable bra cups for the Chinese females”.
From: http://www.53meirong.com/zatan/2010-2/83257.html
nzw.cn, 2010, “Is there a difference between 75A and 75B?”.
From: http://www.nzw.cn/2007/0514/13423.html
Synovate, 2010, Consumers in upper and lower tier cities have more in common than marketers think,
reveals latest Synovate Media Atlas China research.
From: http://www.synovate.com/news/article/2010/09/consumers-in-upper-and-lower-tier-cities-havemore-in-common-than-marketers-think-reveals-latest-synovate-media-atlas-china-research.html
Fibre2fashion.com, 2008, Lingerie and lingerie's only–A global report (Part II – China).
From: http://www.fibre2fashion.com/industry-article/15/1418/lingerie-and-lingeries-only-part-ii1.asp
[Retrieved 11 may 2010].
Liu Xianguang,”Foreign brands lead China's underwear market”.
From: http://info.hktdc.com/imn/01062802/lingerie01.htm
Sam Amico, 2010 “Job Description for a Supervisor or Manager”,
From http://www.ehow.co.uk/about_6326904_job-description-supervisor-manager.html
Trudat, Investing in China’s Second Tier Cities”,
From http://trudat.info/2010/04/investing-in-chinas-second-tier-cities/
Pramit Das,
“Effectiveness of store layout strategy in maximizing the operational efficiency of a Retail Store”,
From http://www.indianmba.com/Faculty_Column/FC913/fc913.html
Learn That, “Free Definitions : Define Positioning. What is Positioning?”,
From: http://www.learnthat.com/define/view.asp?id=57
Books:
Michel Chevalier,Pierre Xiao Lu, 2010 Luxury China: Market Opportunities and Potential, Sidney
Toledano
Charles T. Horngren, Srikant M. Datar, George Foster, Madhav Rajan, Christofer Ittner, 2010, Cost
Accounting - Managerial Emphasis, 13th Edition (Current Edition),
Journals:
China Research & Intelligence, December 2010,”Research Report on China's Underwear Industry,
2011-2012”
Logistix Partners Oy,1996, Helsinki, FI
73
-Biyun HuChristian Grönroos, 1994, Management Decision, Vol. 32 No. 2, 1994, pp. 1
PR Newswire, news-releases.
From: http://www.prnewswire.com/news-releases/tommy-hilfiger-to-assume-direct-control-ofdistribution-in-china-89578017.html
[retrieved 11-11-2010]
Authority Directory, “Marketing Mix and the Four Ps”,
From: http://www.authoritydirectory.com/blog/marketing-mix-and-the-four-ps
China Daily, May 2010, “European lingerie products not popular among Chinese women”
Lecture materials;
Project Alevel, “Marketing mix”,
From: http://www.projectalevel.co.uk/as_a2_business_studies/marketing_mix
David Morris, May 2010, IA Technical Vol. 1, pp. 9-10
Marco Mossinkoff, “Looking Behind the Scenes of Shop-in-Store-Concepts:Conceptual Framework
Outlining Four Routes to Success” ,2001, Amsterdam
Websites:
http://www.huanghout.com/help/tour.php
World Class Shipping, FCA-Free Carrier-(named place)
From: http://www.worldclassshipping.com/incoterm_fca.html
Marketing Mix and the Four Ps
From: http://www.authoritydirectory.com/blog/marketing-mix-and-the-four-ps/
Tommy Hilfiger
From: http://companyinfo.tommy.com/
Ordifen
From: http://www.ordifen.com.cn
Maniform Group
From: http://www.maniform.com.cn/eng/home.asp
Wacoal
From: http://www.wacoal.com/
Aimer
From: http://www.aimer.cn/About_Aimer.html
74
-Biyun Hu-
Triumph
From: http://www.triumph.com/uk/en/1064.html
Wikipedia, “Department store”,
From: http://en.wikipedia.org/wiki/Department_store#China
Wikipedia, “Specialty store”,
From http://en.wikipedia.org/wiki/Specialty_store
Neiy
From http://www.neiy.net/zhishi/system/2349.html
Li & Fung Research Centre
www.lifunggroup.com
75

how to improve and expand tommy hilfiger

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