The Spanish textile industry is a benchmark for the sector throughout the planet. The paradigmatic example of success is INDITEX. However, there are other companies that have achieved a international expantion very wide. One of these companies is Unequal.
About Desigual
This company was founded in Ibiza in 1984 but its headquarters are in Barcelona. Recently Unequal has been in the news because he has made public that he is going to bet decisively on the chinese market, in which it was already present. Its second most important market is Japan and the company's market share in Asia is 6,5% of its total business, according to the newspaper El País. However, despite the proximity between China and Japan, their markets are very different, so the strategy to start selling in one country has nothing to do with the one that should be used in the other.
Desigual consolidates its internationalization towards China
Desigual's new commitment to China is accompanied by a strategy and a very thoughtful objective plan. The company expects to achieve a turnover of forty million euros in five years, that is, almost 11% of the total invoiced in 2021. In addition, it wants to open sixty stores throughout the country, which shows that it is still strongly committed to in-person sales.
For this new stage in China, Desigual will constitute a joint Venture with the Chinese company E-Shine. The latter is a partner company of Septwolves Industrial, a very prestigious textile sector company listed on the Shenzhen stock exchange.
Even for a company very experienced in international markets, The Chinese market is complex because its society has characteristics, behavior patterns and tastes that are very different from those of Europe or America.. All of this must be known when we want to trade in the country and sell our product.
On the other hand, Desigual's very original advertising campaigns are well known. It is a company that generates very striking marketing, which is precisely what differentiates it from its competitors. Likewise, the designs of the brand's garments have an easily recognizable appearance and are quickly associated with it.
These very determined bets on the product and marketing may not have a good entry in some markets because it is really the opposite of the adaptation of our product to the local market..
Therefore, it will be very interesting to see how the potential Chinese clientele responds to Desigual products in this second stage of the company in the Asian country. However, the general director of Desigual, Alberto Ojinaga, already announced in a public statement:
Knowledge of consumer habits and preferences in the Chinese market is key to success.
Therefore, it tells us that the brand is going to have to adapt your general strategy to the Chinese market. We are not referring only to the product, but to all the departments that in some way have a direct relationship with the customer. But without a doubt, The major changes will take place in the company's product and marketing.
In recent years, Desigual designs have been atypical and striking. This in part closes the possibility of selling to a quota of customers who reject this type of clothing, but right now the company wants to introduce and maintain basic products with more designs. mainstream to continue growing in number of sales.
Second stage of Desigual in China
This second stage of Desigual in China begins after economically complicated years. In 2019 it had a turnover of 580 million euros, according to Modaes magazine. In 2020, its turnover fell to 360 million euros, ultimately generating losses of 83 million euros mainly due to the pandemic.
After that critical year, in 2021 the company has invoiced 371 million euros, finally obtaining a meager profit of three million euros. Given this situation, Desigual begins its new stage in China with an economic situation that has little to do with the very positive results of 2019.
In addition, during these years it carried out a restructuring process of its store network that began in 2019, which involved a significant investment of money.
Desigual's international expansion cannot be understood without its firm commitment to the online sales channel. According to Modaes magazine, in 2021, 31,2% of all its sales were through the online platform, which is equivalent to a total of 116 million. During the first quarter of 2022, online sales were 85% higher than those experienced by the company in the first quarter of 2019.
This new stage in China is already preceded by a previous presence of the company in this market. opened two physical stores in Shanghai in the first decades of the 2014st century, but in XNUMX it closed them and began selling only through the online platform Tmall. Therefore, Desigual's new strategy for the Chinese market has an important basis in previous experience in the country.
This new period of Desigual houses a very firm proposal both in face-to-face commerce and in online sales. The company expects to achieve approximate revenues of 40 million euros in five years in this market, obtaining 50% of them through online sales and another 50% through physical stores.
These adjustments by the company come at a curious time because several textile companies such as INDITEX have carried out a process of restoring of part, or all, of its productive chain to nearby countries, such as India.
This relocation is mainly due to the increase in production costs in China, the obligation to improve workers' working conditions and the mistrust generated after the Covid-19 crisis. The pandemic has shown for these companies that China is not a country that complies with adequate health measures to take care of its productive fabric, and also lacks predictability regarding the political decisions that will be carried out. Therefore, at a time when companies are leaving the country, Desigual has decided to reinforce its presence.
Another novelty about this commitment to China is the mode of entry into the country, because Desigual for the first time in its entire history has created a joint Venture with a local company.
Desigual enters China with a Joint Venture
En RRYP We like to talk about the ways of entering new markets based on an advantages-disadvantages axis, and clearly the joint Venture offers very interesting advantages. The way of doing business in China is very different from Europe, and even from other surrounding countries where Desigual has a strong presence, such as Japan. China is a country with its own social, economic, political and market characteristics..
Let us now take into account that its economic model is market socialism, which we could well classify as a model Sui generis. Knowing and adapting to the Chinese idiosyncrasy and market is a challenge even for large companies, which sometimes fail in their attempt. Therefore, it is not surprising that on this occasion Desigual has decided to take advantage of E-Shine's knowledge in the local market.
Desigual has stopped seeing China as simply the world's factory, and has begun to see it as a truly very broad market with great growth opportunities. Currently, around 1.412.360.000 nationals live in China, according to the newspaper Expansión.
View: How China works on a legal level
The improvement in salary conditions in the country is beginning to consolidate a middle class capable of purchasing Desigual products, and the company has a great opportunity. Thus, being affected by the process of restoring previously explained, the Asian country is no longer solely, nor does it want to be, the factory of the world. It is also another actor in international trade with a society that wants to consume, and no longer just produce.
Conclusions on Desigual's expansion strategy in China
The Desigual company is in the process of growing its market share and presence in China. It has decided to take a step forward and bet on increasing its number of sales, reinforcing both online and in-person sales, despite the economic difficulties derived from Covid-19.
I am a graduate of the master's degree in international affairs from the Universidad Pontificia Comillas (ICADE) and I am currently studying the master's degree in access to the legal profession at the University of Oviedo. I have participated in projects at the Legal Clinics of the University of Luxembourg, Oviedo and the Universidad Pontificia Comillas, and I have completed a six-month scholarship at the BBVA General Secretariat in 2022. My main professional areas of interest are law private international and commercial advice.
