The Hong Kong Casual Fashion Brand Hastening its Shift to China

|China

Giordano (listed in Hong Kong), selling casual clothing, has a Uniqlo-like presence in Hong Kong, targeting the middle classes. In addition to a downturn in sales, there is a tendency for the interest of investors to be directed not toward Hong Kong enterprises, but toward Chinese ones, and there is not much vigor in the rise in share prices.

Giordano opened stores in China in 1991, ten years after its establishment, and in 1992 was listed on the Hong Kong stock exchange. The population of Hong Kong is about three times that of Niigata Prefecture. Hong Kong’s return to the neighboring giant country of more than one billion people was decided upon, and expanding into China in search of a reduction in manufacturing costs and a huge market was probably a natural choice. After the magazine owned by the founder and president Jimmy Lai, however, criticized Chinese Premier Li Peng in July 1994 in connection with the Tiananmen Square protests, business in China temporarily stalled, including the Beijing store suddenly being closed down. One week later Jimmy Lai resigned as president and Giordano has been continuing its expansion in China.

As at the end of September 2009, it had 963 stores in China, and this was close to half of the number of stores worldwide. 41% of sales are in China, which is greatly ahead of the 20% for Hong Kong and Macau. The black figures for China have been able to make up for the red figures in Taiwan, Singapore, and Australia, etc. Consequently, in planning a system where the number of staff (approximately 200) at the overall headquarters in China exceeds the number of staff (approximately 150) at the corporate headquarters in Hong Kong, they are attempting to weather the post-financial-crisis slump. They are hastening the shift to China through design, distribution and store developments. Store development is expanding from the coastal to the inland areas, and they are also eyeing development in small and medium-sized cities in the form of franchises.

Fast Retailing, which operates Uniqlo, is also said to have once studied the Giordano business model, and in 2006 expressed the intention to take over Giordano. Shares related to the takeover moved. Uniqlo’s target was said not to be the brand-name, but the acquisition of the network of stores. In terms of manufacturing and overseas development in China, Giordano is Uniqlo’s forerunner. It could be said that for Giordano, which came into existence in a small market, the importance of development overseas was higher than for Uniqlo, which was able to grow in the large—in comparison with Hong Kong—Japanese market. In fact, Giordano is striving for expansion into the Japanese market for the second time. With Kobe as its base, it opened stores in the Kansai region, and has effected the putting in order of unprofitable stores.

For all that, William Yue, the company’s public relations director, put this question to the author: “Is Japan an unfair market, as the Americans criticize it?” I also heard, as if by way of explanation: “US distributors receive support from a powerful government. Japan’s distributors were also once protected. Hong Kong companies cannot count on government support.” Hong Kong, Taiwan, Singapore and the ROK are already mature markets. The competition in the fashion industry in China is also fierce. Yet for the company there is no alternative other than to concentrate its management resources in China. The success or failure of Giordano has within it indications for Japanese firms as well.

[Translated by ERINA]