A Retail Success Story in China

Ground Floor Capital, a private equity firm, quoted me in its newsletter about China’s booming consumer market in the 2nd and 3rd tier cities. Below are excerpts from the newsletter:

KBS (Keep Best State) designs, produces and sells its own brand of apparel, principally targeting China’s middle class 20 to 40 year-olds.

The company is aiming at creating China’s leading fashion sportswear brand. It currently operates 145 stores, the majority of which are located in China’s 2nd and 3rd tier cities. 83 of the 101 new stores planned for 2011 will be franchises.

They are targeting at smaller cities, which are where the growth potential lies:

Contrary to conventional strategies that encourage retailers to target the largest markets, KBS has developed a strategy that targets 2nd and 3rd tier cities. These cities have very recently become the backbone of the Chinese growth story.

This is the exact market segment that KBS is targeting. Seventy percent of KBS’s revenue comes directly from these cities. 2nd and 3rd tier cities have smaller populations but, due to the growth in their respective middle class populations, they have become an attractive entry point for companies to build substantial market share. The growth in these cities can be attributed to the lower cost of living than that of the 1st tier cities.

And the newsletter quoted me as follows:

Helen Wang, a Forbes contributor and expert on China’s middle class, says: “middle class people have available one-third of their income for discretionary spending.” Helen defines China’s middle class as “urban professionals in foreign companies, private businesses, or state enterprises, government officials, and entrepreneurs, who have college degrees and earn an annual income from $10,000 to $60,000. Over three hundred million people, or about 25 percent of China’s population, met these criteria in 2010”.

I am glad to see someone benefited from my work.

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