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China’s Biggest High Street Brand Facing the Cold Winter

MetersBonwe (In Chinese: Meters/bonwe 官方网站) has achieved the most popular high street brand in China in 16 years. Chairman Zhou Chengjian won the “Hu Run clothing list”  one the richest man of the country, solidifying his position on the clothing industry in China. The company has been named among the top 100 enterprises in China’s clothing industry for many years and was in the list of “Top 500 Chinese listed private Enterprise” by National Association of Commerce. Yet beneath the surface, MetersBonwe faces a host of problems, ranging from the decline of sales performance and brand reputation. With international high street brands flocked into China like Zara and H&M etc., MetersBonwe as the representative of the domestic leisure brand gradually declines.

A Declining Brand

Metersbonwe’s sales dropped sharply since 2012 when the revenue was at 9.509 billion Yuan with 4.38% decline and net profit was 850 million Yuan with a decline of 29.55%. In 2013, the revenue fell to 78.9 billion Yuan and the decline in net profit was 52.27%. Just within two years, its market value has shrunk by more than twenty billion, along with more frequent discount activities and fewer customers. A large number of stores had been closed and the main business was gradually transferred from first-tier cities to second-and-third-tier cities where customers pay more attention to low prices than fashion style. And this how in 2015, the brand has suffered a full-year losses of RMB 300 million – 450 million.

Its perennial sales promotion behavior is caused by the high inventory problem. From Daxue recent report the decline of Metersbonwe, by the end of 2011 the amount of inventory was about at 2.5 billion Yuan, still in a high level, in which the sale of products of spring and summer 2011 and its previous season were still making a profit,  reaching 1.5 billion Yuan. As time goes on, the value of the backlog of clothing was declined and its products couldn’t keep up with the trend under the inventory pressure, dragging down the brand.

A Low Standard Strategy

Metersbonwe was criticized for its slow supply chain velocity. Metersbonwe initially copied its strategy from the international and famous brand ZARA, the high street brand creator as been chosen as a study object, using Market Intelligence tool by analyzing their marketing strategy, a brand that propose lower price, fast fashion, with few stocks and orders, while overestimating the level of the enterprise’s supply chain. But the brand couldn’t compete with Zara, indeed, it took only 10 to 15 days for Zara to create and sell a cloth, the time from the production to the sale is really short, while Metersbonwe, needs 70 days for the same result. Any business that would like to copy ZARA’s strategy will be told that keeping low inventory under rapid supply chain is the foundation of this model to be profitable. An extra day in the supply chain of fashionable goods means devaluation, and therefore, most manufactured goods will only be converted to stock.

Low efficiency in corporate management is also an important reason of poor success. The production plan of Metersbonwe only depends on the popularity of the goods, in spite of its potential market demand. Indeed, the company makes little research and development in technology and design, therefore, the products from the brand cannot keep up with the clothing market changes.

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