US apparel maker Cherokee made a strategic gamble last week when it moved to largely circumvent China's traditional retail store network and opened a shop on the Internet, highlighting an emerging new path for foreign mid-sized brands into the lucrative sector. Unlike real-world shops, online stores are much cheaper to set up and also target an e-commerce market set to become the world's largest over the next decade.
While the e-commerce route holds great promise for smaller Western brands and retailers, such companies could still easily suffer similar setbacks to much bigger names like electronics giant Best Buy, which pulled out of China in 2011 due to lack of name recognition in the crowded market. The lower barriers to entry also mean online competition is likely to intensify, forcing both Chinese and Western brands and retailers to spend big money on advertising and other promotion just to get noticed.
Cherokee's newly announced move will see it pair with local retailer RT-Mart to open its online store on the popular Tmall platform operated by e-commerce giant Alibaba. While Cherokee actually entered the China market two years ago in a more traditional partnership with RT-Mart, sales through that channel have been limited due to the Chinese retailer's relatively limited scope of about 200 stores nationwide.
The new Tmall presence will instantly make Cherokee's brands available to the millions of people who use the online platform, which generated $9 billion in apparel sales last year. Cherokee's Tmall store will put it online alongside other major Western names like Nike, Levi's and Gap, which also operate traditional store networks that have cost millions of dollars and years to set up.
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