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Friday, February 18, 2011

SoCal Waves to Crash Over China!

Hollister is surfing into China, initiating expansion into the Asian market, and totally heating things up!
It's been a very dry season for China, and there are talks that it might have to import major amounts of grain to supplement the subsequent loss of crop. But China needs not worry because SoCal waves are about to crash over the Middle Kingdom! Okay. Fine. This will not aliviate the drought (and the People's Republic should still worry over the lack of water!), but it'll sure splash its youth with the hottest styles from across the pacific!

According to the latest A&F Earnings Call Transcript (4Q 2011), the Company is gearing up to finally launch Hollister into the Asian market. A&F is scheduled to finally open HCo's first ever Asian locations in mainland China, and Hong Kong, in 2011! And there is no short of reason for this move..

The Chinese market is evergrowing and the consumer base ever-expanding as the nation continues to experience formidble economic growth: China surpassed Japan to become the second largest economy in the summer of 2010, and it is forcasted to surpass the United States by 2035. Days before this post, the New York Times published an article highlighting this feat by including China's economic worth of $5.88 trillion compared to Japan's $5.47 trillion. China itself is the third largest consumer of luxury goods in the world (only behind the USA and JPN and likely to move up the ladder), and so the demand for all things exclusive is great. So logically, scores of businesses have landed on its shores to take a piece of that ever delicious rice cake of Chinese consumerism!

With all this growing consumerism comes a constantly growing niche of teens with yuan to spend on the latest and cooles of fashions! And therein lies the reason for Hollister's move into China, my favorite dudes and bettys! HCo plans on surfing into China to establish itself as the hottest label for the coolest (and priviledged) kids in town! A location in Hong Kong is in order, but as to where else in manland China is not yet publically known.

But why will the first HCo open in China and not in Japan as the first A&F did? After all, A&F's first locale in Europe was in the UK and HCo soon followed suit there as well. A&F's presence in the UK is, as of now, focused in London with a flagship that commands an already-established, faithful following. Meanwhile, HCo has just begun to operate stores throughout the rest of nation. The reverse is occuring in Japan: A&F has expanded its presence throughout Japan. The opening of an HCo could cause a cannibalistic effect on A&F sales in Japan as the brand is just begining to establish a faithful follwing in the market. Hollister has become a sibling rival of Abercrombie & Fitch and there is no space in the market for two siblings to attempt growth on the same ground, at the same time; an internal battle for profit is to be avoided. Curiously enough, the Company has for now skipped on China and placed Singapore as the next place for the A&F brand to expand into.  

In China, HCo will find fertile economic ground, unlike the sorry agriculture, and it will produce a bountiful surplus of financial feed for the Home Office. Oh, yes, operations in China will be paramount! Just imagine: the stores will be totally 'bursting' with people. The SoCal-crazed shoppers will be madly rushing in and satisfyingly walking out with newfound swanky swagger. Carrying HCo bags in hand, what more could the Chinese teen need as a social status indicator - perphaps a future A&F?...As if the Middle Kingdom couldn't have gotten any more cooler!