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How can apparel “tao brands” chart a new course for development in the face of new retail?
After years of being tested and shaped by market competition, Taobao brands now face both opportunities and challenges. In the face of new retail, how can apparel Taobao brands tackle the new challenges they’re confronting and forge a fresh path for their development?
Clothing Taobao Brands are entirely new apparel brands built on the foundation of internet-based e‑commerce, embodying the concept of “original online brands jointly recommended by online malls and consumers.” After going through phases of cultivation, growth, and rapid expansion, these brands have entered the era of New Retail. From their rise to their peak and eventual decline, Taobao Brands now face increasingly fierce competition, shrinking profitability, and persistent supply chain challenges. Having weathered years of market competition and undergone significant development, Taobao Brands now stand at a crossroads: while they embrace the opportunities presented by New Retail, they also confront a host of challenges.
The Development Journey of Fashion E-Commerce Brands
The rise of apparel e-commerce brands can be attributed, on the one hand, to the burgeoning internet and mobile internet, which have driven rapid growth in China’s online population and brought about profound shifts in consumer shopping habits. Online shopping has evolved from a novelty into a habitual practice, with online retail emerging as a key consumption channel—and a prime example of the “traffic dividend.” On the other hand, the establishment and ascent of major e-commerce platforms such as Taobao, Tmall, JD.com, Vipshop, Suning Commerce Group, and Mogujie have played a pivotal role in guiding and nurturing consumers. Third, a flood of entrepreneurs has flocked to e-commerce platforms to start their own businesses, turning apparel online shopping into one of the most dominant categories in online consumption. The traditional high barriers to entry in the apparel industry—previously requiring substantial capital investment to open brick‑and‑mortar stores—have been shattered, paving the way for a surge of entrepreneurs entering the e-commerce space. As a result, apparel e‑commerce enterprises have been presented with unprecedented opportunities to rapidly scale and build strong brands. Guided by efficient network‑brand management models, this trend has spurred a comprehensive digital transformation and upgrade across the entire apparel industry. Looking back at the development history of China’s apparel e‑commerce, after passing through the incubation phase, the growth phase, and the explosive growth phase, we are now gradually transitioning into the new retail era (see Table 1).
According to monitoring data from the China E-Commerce Research Center, in 2009, the transaction volume of China’s online clothing market reached 62.6 billion yuan. From 2010 to 2015, the figures were 125.7 billion, 203.5 billion, 305 billion, 434.9 billion, 615.3 billion, and 745.7 billion yuan, respectively. As of 2016, the online clothing market had grown to a scale of 934.3 billion yuan (see Figure 1).
The Current Status and Challenges of the Taobao Brand for Apparel
1. The Current Status of Taobao’s Fashion Brands
Clothing e-commerce brands are facing increasingly fierce competition. On one hand, international fast-fashion brands such as Uniqlo, ZARA, and H&M have been rapidly gaining ground in the Chinese market, expanding from first-tier cities to second- and third-tier cities and opening countless stores to capture market share, thereby posing a significant challenge to domestic apparel brands. On the other hand, offline apparel brands are increasingly embracing the internet, leading to squeezed traffic allocation and declining conversion rates. This is evident in the fact that, starting in 2015, offline brands like Uniqlo and ONLY began ranking among the top sellers during Double 11, while e-commerce brands that had long dominated the top spots in Double 11 sales started to slip down the rankings.
Tao brand apparel retailers are facing mounting pressure from multiple cost increases, leading to declining profit margins. Production costs—such as labor and materials—are on the rise for Tao brands, while the domestic traffic dividend is slowing, driving up customer acquisition and operational costs. These rising costs mean that low average order values can no longer sustain profit margins at a healthy level. On top of this, Tao brands have relatively weak brand equity, resulting in insufficient pricing power and leaving them stuck in a state of declining profitability.
Clothing Taobao brands are facing challenges in their supply chains. Frontline garment production workers are aging steadily, while there is a shortage of younger recruits, resulting in relatively low order volumes per product for Taobao brands—making them less than ideal customers for factories. The traditional supply chain model can no longer meet demand, so it’s necessary to build a new, rapid supply chain.
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