For years China has been a growth driver for many British retailers. Chinese residents with increasing disposable incomes, continue to be attracted strongly to traditional British brands. Luxury retailers like Burberry are strongly represented in the Chinese market, with Greater China now reported to be accounting for 25% of Burberry's sales.
However, in recent months the falling Chinese economy has created difficulties for retailers, with both Hugo Boss and Burberry warning of declining demand in the country. But while the honeymoon period may perhaps be over, British retailers are hoping that, taking a longer-term view, China's love affair with British brands will continue for some time to come.
Increasingly, it is not only luxury brands taking advantage of the prestige of Brand Britain, but retailers such as Topshop, Boots, M&S and Supergroup now also have a presence. Indeed, M&S opened its first store in Beijing in December, adding to 10 stores in the Shanghai region and 20 in Hong Kong. Even budget brands are following suit; fashion retailer New Look opened its first stores in China in 2014 and now boasts 33 in the region. As well as bricks and mortar stores, retailers are also taking advantage of the huge Chinese e-commerce market. In its most recent quarter, Nike made more profit in China than Western Europe, partly due to a dramatic increase in online sales in the country and the 'Singles Day' phenomenon. Singles Day, a holiday in China dedicated to unmarried individuals, is China's biggest online shopping day of the year.
UK retailers may soon be selling tea to China. At the end of 2015, Whittard of Chelsea announced that it is considering opening a physical and online store in mainland China, following a surge in the popularity of afternoon tea amongst the Chinese middle classes.
However, there are lessons to be learned from how UK retailers have previously entered China. It was reported, for example, that M&S's early days in China were marred by problems with its flagship store in Shanghai not stocking enough small sizes. It was also reported that Kingfisher's DIY business was slow to build in China because of the cheap labour costs.
There are plenty of issues to consider. The logistics infrastructure of the country is still developing and distribution can still be an issue. There is also the challenge of the vast disparity across the country, with planning, health and safety and tax regulations all varying from region to region. The opportunities may be great, but there are plenty of challenges and sound local knowledge is vital.