Asian Jeans Brands Eye Bigger Piece of Market

Local makers look to take share from western labels with established footholds.

Uniqlo is Asia’s fourth-largest denim brand.

HONG KONG — Jeans may be quintessentially American, but in Asia denim is getting reinterpreted by fast-growing local labels that are giving Western brands some tough competition.

This story first appeared in the December 18, 2013 issue of WWD.  Subscribe Today.

The stakes are large: The Asian denim market is estimated to pull in sales of $26.9 billion in 2013, up from $17.6 billion in 2008, according to data from Euromonitor. Within the region, China has been the largest denim market since 2010, when it overtook Japan. Last year, sales of jeans in China totaled $11.5 billion, compared with $7.4 billion in Japan.

As it’s still fairly young, Asia’s denim market is relatively fragmented. The top five companies — Levi’s, Lee, Texwood, Uniqlo and Calvin Klein — collectively have about 12 percent market share, according to Euromonitor. Compare that with North America, where the top five brands take up 36.5 percent of market share, and Europe, where the top five labels have 20 percent.

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“With no dominant player, there are evident opportunities for gaining share. Competition in jeans in Asia is incredibly intense, coming from both local Asian and international players,” said Ashama Kunde, apparel analyst at Euromonitor.

Because the jeans market in Asia is less mature, there’s less of a home bias — at least for now. In North America, for instance, domestic brands such as Levi Strauss & Co. control a big chunk of the jeans market, while in Western Europe, homegrown fast-fashion companies Inditex and H&M dominate.

Western brands still enjoy some dominance in Asia, but only by a very narrow margin. Levi’s and Lee are the number-one and number-two brands in the region, respectively, with 4.4 percent and 2.6 percent market share. But while the brands are growing, it’s unlikely they will enjoy the same kind of dominance they have in North America, Euromonitor’s Kunde said.

Meanwhile, homegrown Asian brands are catching up quickly. One of those labels is Hong Kong-based Texwood Ltd., which says it was the first jeans line to enter Mainland China back in 1970. Texwood, sort of China’s answer to the Gap, is now the third largest brand in Asia with stores all across China — including Xinjiang and Inner Mongolia.

Another big Asian player in the regional denim market is Japan’s Uniqlo, coming in as the fourth largest denim brand. Additionally, Chinese labels Wei Peng, Zengzhi and Kipone and Japan’s Edwin together capture about 5 percent of the Asian market. Other Asian brands making inroads in the denim market are I.T Ltd.’s Izzue and Bauhaus, which launched its own label, Tough Jeansmith, in 1994 and has started opening stores in Paris and London. Originally a manufacturer for Western brands, Bauhaus started using its manufacturing connections to launch its own brand.

To play to the market, brands are focusing on local tastes. In Asia, consumers are more “expressive” and “overt in the way they dress,” said Evisu chief executive officer David Pun. Even Hong Kong and China show big differences in their preferences. In China, consumers want something that is “rich” in taste — visually strong and visibly branded. In Hong Kong, on the other hand, consumers like clothing that is a little bit more subtle with details and more contemporary. And they enjoy more washes, Pun added.

Evisu is a premium Japanese denim brand that folded its U.S. operations in 2010 and retrenched back to Asia, moving its headquarters to Hong Kong. The denim producer previously had sales distributed fairly evenly among the U.S., Europe and Asia, but now gets about 90 percent of its sales from Asia. Evisu has 120 stand-alone stores in Asia, 80 of which are in Mainland China.

“We want to be more focused where we think there is a strong opportunity, particularly in China. And our consumers really embrace the DNA of the brand,” explained Pun.

“The consumer wants history but also wants something different,” he explained. A lot of Western brands play up their history and heritage. Evisu calls on its history with Osaka 5, a group of five Japanese denim brands that helped revive the premium selvage denim market. The denim brand is now thinking about relaunching in the U.S. and Europe.

Another homegrown Asian brand, Hong Kong-based Esprit, which has more market share in Europe than in Asia, has been looking closer to home for growth. Esprit reengineered its denim fits and styles over the last two years and introduced a new denim line a year ago. The Asian market, Esprit said, tends to be more brand-conscious than the European market and favors “slimmer, sexier fits.” More “girly” and “bling” styles also tend to perform well. Esprit has changed the proportions for its jeans in Asia and features smaller pockets, narrower thighs and shorter inseams.

As the market develops, however, the difference in taste is starting to lessen. Six years ago, the difference between local Chinese and Western brands was very dramatic, said Richard Atkins, a Hong Kong-based denim expert and product development manager for Global Design Workshop, a denim branding and manufacturing consultant.

In the past, the washing for Chinese brands tended to be very “dramatic,” Atkins explained, but now that customers have traveled more internationally and see the bigger brands, it’s getting harder to distinguish between Western and Asian brands.

One advantage that Asian brands have over foreign competitors is the ability to compete across a wider range of price points from mass market to premium. Western brands have generally been limited to premium positioning in Asia. That’s true even of fast-fashion brands such as H&M, Lee, Zara or Levi’s, which target the moderate consumer in their home markets, but cater to premium or “aspirational” customers when in Asia.

Previous attempts by Western brands to operate at lower price points met with limited success. In 2010, Levi’s launched a new brand for the Asian market called Denizen that was tailored specifically for Asian figures but sold at a lower price point than the core Levi’s brand. The firm’s decision to discontinue the brand in Asia and shift upmarket suggests greater potential in the premium market. Levi’s latest launch, Levi’s Revel, features price points of $98 to $128 a pair. Similarly, Lee’s Diamond Cut jeans are placed in the super-premium price segment in China, compared with economy/standard in the U.S.

Being limited to the high end of the market is a big disadvantage in Asia, says Atkins, where consumers, particularly in China, are less willing to shell out for premium jeans. Chinese customers have no problem paying 20,000 yuan, or about $3,165 at current exchange, for a Louis Vuitton bag, but with premium denim, they “don’t really get it. They like fashion and are driven by fashion, but don’t see it as a premium product,” he explained. Jeans’ American heritage as workwear is not something to play up in China, where consumers are likely to question why anyone would pay a premium for workwear items.

“In China, if you increase your price too much, you lose your customer,” he said. The key price points are about 700 yuan, or about $114, to 1,000 yuan, or $158, for a pair of premium jeans, Atkins said. Southeast Asia is different in that customers are more open to Western tastes and culture and are also more willing to pay premium prices.

While Asian brands such as Evisu are primarily focusing on the booming local markets, they are also looking westward. For now, Asian denim brands are hardly making waves internationally, but that could change.

“It’s a good time for Asian brands. There’s more interest in Asian brands now,” said Pun, noting that South Korea has played a big role in making Asian tastes and Asian brands more appealing thanks to its cultural exports such as K-pop and TV dramas.