Topshop takes Hong Kong
Introduction to Topshop
Topshop, founded in 1964, is part of the Arcadia Group, which also owns other retail outlets like Dorothy Perkins, Miss Selfridge, Wallis and Burton. Currently it has 137 international franchises in 37 countries.
Mainly known for its women’s clothing, Topshop’s product ranges from clothing, to shoes, to fashion accessories. Additionally, it has also expanded into the e-commerce arena in several markets that they are operating in.
Being a multinational retailer, Topshop is step closer to becoming a global brand by opening its first store in Hong Kong recently.
Mode of Entry
In order to gain familiarity with the local environment and culture of the Chinese market, Topshop joint ventured with LAB Concept, the new retail subsidary of luxury department store Lane Crawford. This allowed Topshop to be more aware of culture sensitivity, in terms of its’ products and promotion in the Chinese market, and benefit from government support. Topshop manages the merchandising, while LAB Concept manages the operation.
Findings
Controllable Factors * Product
Topshop is often seen to collaborate with local designers and celebrity to attract local customers, when venturing into the new market. An example would be Topshop in Brazil. Topshop collaborated with Greek designer, Mary Katrantzou, that generated a buzz of excitement among the brazillians. In the recent regular show at London Fashion Week, Topshop introduced the new “Unique” line that is offered in Hong Kong’s flagship store, which is also the first to be offered in Asia. Rather than a safe and repeated dull colours season after season, like Zara, such product line introduced a edgier and unique design to Topshop’s customers. Additionally, in an interview with Susan Li of Bloomberg TV, Sir Philip Green, CEO of Topshop, stated that they are not looking for low cost production that could possibly hinder the quaity of products, instead, they go for good production quality at the right price. This emphasized the importance of quality in Topshop. * Price
Upon introducing Topshop to anyone, one would describe it as, “fashionable and accessible”. Product prices in Hong Kong will not increase due to exhange currency issues, like how Apple increased its’ prices of their products. Every season, Sir Philip Green would set a currency rate across all the countries it is operating with. Thus, Topshop has a reputation of blending cutting edge style with a low retail price tag. Fashionistas worldwide, now, need not worry of the price. The Hong Kong market would definitely be attracted and respond to the democratic prices. Furthermore, using odd pricing, it signals to the consumers that the price is at its’ lowest, encouraging them to buy more. * Channel of Distribution
Partnering with local expertise, LAB Concept, has enabled Topshop to open its flagship store of 1,300-square-meter in the luxury departmental store of Lane Crawford. Having situated at a prime real estate area, Topshop is able to gain recognition from the locals and tourists. Furthermore, by leasing the best location at Time Sqaure, it is a way of enticing teenagers to their store and improves their image at the same time. Thus enabling Topshop to establish a competitive presence in a city where all the leading international “fast-fashion” brands can be found. Also, Topshop has plans to find another bigger location, of 2,000 to 3,000-square-meter, to introduce Topman into Hong Kong.
Uncontrollable Factors * Customers
Since there is a high potential of the fashion market in China, Topshop expanded into Hong Kong as a way of testing the water to better understand the preferences and tastes of the Mainland Chinese consumer market before venturing into China. Due to the reputable low taxes, out of the 49 million visitors that visited Hong Kong last year, 75% were from Mainland China. Thus, enabling Topshop to better comprehand the Mainland Chinese’s consumer behaviour. Being knowledgable of these consumers’ behaviour, Topshop would have lower business risk for the Chinese market in terms of customer’s satisfaction on their products. Therefore, expanding into Hong Kong will be an advantage in understanding the Chinese customers’ market. * Technology
As a developed country, technologies are relatively well in Hong Kong. E-commerce is definitely attacting the crowd than a physical store. Furthermore, as Hong Kong did not ban any network platforms, Topshop is able to use social networks like Instagram, Facebook and Twitter to advertise their products to attract many more consumers. * Competitive Forces
Topshop faces many competitors like Zara, H&M, Forever 21 and etc. These retailers are fashion retailers that have entered Hong Kong and established a stable status and brand recognition for few years. Furthermore, they have similar features – creative, quality design, swiftly shift to adjust the changing market’s demand, upon comparing with Topshop. However, Zara would be Topshop’s direct competitor in terms of price, product, and quality. In the face of pressure on competition, Topshop is still able to maintain its competitive advantages in the markets they are operating it. Therefore, with democratic prices, everchanging designs to suit the market, and high quality would enable Topshop to sustain it’s customer’s loyalty. * Political/Legal
Hong Kong has a stable political situation with peaceful development. With stable political situation, Topshop is able develop its market in a long term basis. However, such good conditions of political stability and prime location, comes with a big price. With limited spaces in Hong Kong, property prices are constantly increasing, and the demand has drived up shop rents. Retailers like H&M has been a victim of the high rental costs, that has caused several store to close down and the change in location. Topshop would, therefore, need to overcome the major challenge of the rising rental costs. * Economic
The GDP growth in Hong Kong is expected to increase by 4.3% in 2013, which would show the growth in living standards. With an increase in living standards, purchasing power would be higher and more consumers would be able to afford the democratic prices of Topshop’s. Thus, it guarantees the increase in sales profit.
Conclusion and Recommendations * Recommendations
Upon venturing into Hong Kong, a business should and would expect that the property prices are often skyrocketed high. It is important for Topshop to resolve such challenges as it would hinder it’s cost of operations, with high expenses incurring. Thus, I would recommend Topshop’s mode of entry to be franchise instead of joint venturing. This is because, having franchised, Topshop does not have to deal with rental issues, and annually, a percentage of the profit will be given back to the franchisaw, Topshop. Therefore, Topshop is able to achieve both venturing into the Hong Kong market and earning profits.
Besides it’s mode of entry, I would also recommend Topshop to have E-commerce in Hong Kong as well. Topshop could have it’s own online store, and at the same time work with China’s largest shopping portal – Taobao.com. By tapping on Taobao, it is a faster and more cost-efficient way to be better recognised by the locals. * Conclusion
In conclusion, assessing the market’s uncontrollable and controllable factors are important for a business venturing abroad. The business will be able to understand the local culture, preferences and taste in order to successfully adapt into the environment.
However, in the case of Topshop, it is crucial that it solves rental issue as it would and will hinder the business in terms of high expenses incurring leading to lower profits gained.

Reference 1. BBC News- Topshop HK Opening (Kim Hyoyeon) [Video file]. (2013, June 6). Retrieved from http://www.youtube.com/watch?v=WKgPzH0vmN4 2. The challenges of Ever faster fashion | South China Morning Post. (2012, August 15). Retrieved June 19, 2013, from http://www.scmp.com/article/1000979/challenges-ever-faster-fashion 3. Fashion: Topshop to H&M – collections making the high-street high-end | Metro News. (2013, April 23). Retrieved June 20, 2013, from http://metro.co.uk/2013/04/23/from-topshop-to-hm-the-premium-fashion-collections-making-the-high-street-high-end-3661970/ 4. Li, B. (2013, June 10). British fashion invasion with TopShop opening first shop in Hong Kong - Campaign Asia. Retrieved June 19, 2013, from http://www.campaignasia.com/Gallery/346197,british-fashion-invasion-with-topshop-opening-first-shop-in-hong-kong.aspx 5. London, B. (2013, June 6). Thousands of Hong Kong fashion fans queue for their first Topshop fix as Philip Green opens flagship Far Eastern store | Mail Online. Retrieved June 20, 2013, from http://www.dailymail.co.uk/femail/article-2336896/Thousands-Hong-Kong-fashion-fans-queue-Topshop-fix-Philip-Green-opens-flagship-Far-Eastern-store.html 6. Sir Philip Green plans Topshop for Hong Kong | City & Business | Finance | Daily Express. (2012, December 14). Retrieved June 20, 2013, from http://www.express.co.uk/finance/city/364647/Sir-Philip-Green-plans-Topshop-for-Hong-Kong 7. Store reviews: Topshop & Uniqlo's new flagship | South China Morning Post. (2013, June 10). Retrieved June 19, 2013, from http://www.scmp.com/comment/blogs/article/1258006/store-reviews-topshop-uniqlos-new-flagship 8. Topshop in Hong Kong: What Took Them So Long?: Video - Bloomberg [Video file]. (2013, June 6). Retrieved from http://www.bloomberg.com/video/topshop-in-hong-kong-what-took-them-so-long-53fO8z02RfmqLxJWqdrulQ.html 9. Topshop opens Hong Kong store | BreakingNews.ie. (2013, June 6). Retrieved June 20, 2013, from http://www.breakingnews.ie/business/topshop-opens-hong-kong-store-596666.html 10. Topshop takes first step into China with new Hong Kong flagship store | South China Morning Post. (2013, June 6). Retrieved June 20, 2013, from http://www.scmp.com/business/companies/article/1254420/topshop-takes-first-step-china-new-hong-kong-flagship-store

Appendix

Topshop takes first step into China with new Hong Kong flagship store

British high street brand hopes to expand in the mainland market through its flagship store in Hong Kong with a fast-fashion twist

Thursday, 06 June, 2013, 4:15am

Bien Perez bien.perez@scmp.com *
Topshop's new flagship store in Central spans 14,000 square feet over two floors. Photo: Bloomberg

Topshop, the popular British high street brand, stakes its claim in Hong Kong's crowded fashion retail market with the opening today of its flagship store in Central.

The company's 14,000 square foot, two-floor shop at the corner of Queen's Road Central and Pottinger Street also marks the first step in its search for a home on the mainland, where managing director Mary Homer said expansion in major cities was planned.
"We always want to go into any market with a stand-alone flagship store," Homer told the South China Morning Post. "Shanghai and Beijing are obvious locations for us [in expanding on the mainland], but these things are dictated by finding the right property and conversations about getting a partner. Having local expertise in a new market is invaluable."
In Hong Kong, Topshop has partnered with the luxury retail group Lane Crawford to establish a competitive presence in a city where all the leading international "fast-fashion" brands can be found.
Retailers have used the term "fast fashion" to describe apparel collections based on the most recent trends, which are produced swiftly to allow more consumers to buy the designs at a lower cost.
Andrew Keith, the president of Lane Crawford, said Topshop's merchandise, from casual to formal wear, footwear to accessories and make-up collections, offered "amazing attention to quality and democratic prices, which the Hong Kong market really respond to".
Topshop is among the acknowledged leaders and innovators in the fast-fashion market segment, where the competition includes other prominent fashion chains, such as the Swedish clothing retailer H&M, the Japanese casual wear giant Uniqlo and Zara, part of the Spanish apparel conglomerate Inditex.
"This is why we have to be different and we have to keep up being different," Homer said.
She said Topshop, which has 137 international franchises in 37 countries, delivered "300 new [apparel] lines every single week, which comes to about 16,000 lines a year. "Customers will find that there's always something new in the store," she said. "Our customers demand must-have pieces of the moment and to have it first."
Topshop is controlled by Arcadia Group, a privately held retail conglomerate that also owns other British high street retailers including Miss Selfridge, Dorothy Perkins, Burton and the men's clothing specialist Topman.
In December, Arcadia sold a 25 per cent stake in Topshop to the US private equity firm Leonard Green & Partners for US$805 million.
Philip Green, Arcadia's owner and chief executive, said at the time the deal was made to pay off the group's debts and raise money for further expansion.