SHANGHAI — Gap said costs were not the company’s “only consideration” as China-based manufacturers face increasing pressure to protect profits amid rising wages in the southeast region of the country.
Abinta Malik, general manager and senior vice president of Gap Greater China, speaking at an international business forum here on Thursday, said that the country’s retail landscape had become “more complicated” and that conversations among executives had moved on from assuming boundless growth.
China’s manufacturing sector contracted at its fastest pace in three years in August, according to official data. This highlighted fears of a sharper slowdown in the world’s second-largest economy, despite a raft of government support measures, causing some manufacturers to move operations across the border.
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“For an apparel company you move your sourcing operations depending on cost and specialization. While the lowest cost for a cotton T-shirt might not be in China, the quality of design in denim here is very real. It’s not just about cost, it’s about the quality of the product,” said the Gap executive.
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Malik spoke on a panel named “Winning in China” at a forum organized by the Shanghai American Chamber of Commerce to mark its 100th anniversary.
She was joined by executives from a range of business sectors, including Andrew Au, chief executive officer of Citi China; John Lawler, chairman of Ford China; Amit Midha, president of Dell Asia-Pacific and Japan, and Glen Walter, ceo of Bottling Investments Group China.
The discussion took place at the Ritz-Carlton Pudong Hotel in Lujiazui, Shanghai’s financial district. The panel discussed strategies to succeed in the face of urbanization, technological transformations and changing travel habits.
Speakers echoed the need for a “regionalized approach” as consumer spending in China’s central tier two and three cities, such as Chengdu and Chongqing, takes off.
“How we price our garments has to be more regional because there are significant regional differences across the country. Take Hong Kong, for example, where you have a more fashion-forward customer versus Beijing. In Hong Kong we take an assortment of products, whereas in Beijing, the [intake] is much more tailored,” said Malik.
On the increasing competition from local retail brands, industry experts said that new domestic players have emerged from tier-two and tier-three cities, noting China’s retail market remained highly “fragmented.”
Earlier this year, executives from China’s largest online retailer Alibaba were detained by Chinese authorities as part of the government’s on-going graft campaign. When asked how Gap had been impacted, Malik replied, “We have not been affected by it [the anticorruption campaign]. In bringing our universal code of business into the market, we put a lot of focus on the education and training of our employees.” But “there are other players in our sector who have been affected.”