"FT Confidential Research's latest quarterly brand survey reveals the growing popularity in second- and third-Tier cities is cementing the leading position of Uniqlo, H&M and Zara in China. Companies are aggressively expanding their base in China, despite the ongoing economic slowdown. Therefore, Chinese brands are finding it difficult to sustain their momentum. The latest consumer brands survey found Uniqlo remains the most popular casual wear brand among China's urban consumers, with 19.3 per cent of respondents saying it was one of the two brands they most regularly purchased, up 1.9 percentage points from the fourth quarter of 2015."

FT Confidential Research's latest quarterly brand survey reveals the growing popularity in second- and third-Tier cities is cementing the leading position of Uniqlo, H&M and Zara in China. Companies are aggressively expanding their base in China, despite the ongoing economic slowdown. Therefore, Chinese brands are finding it difficult to sustain their momentum. The latest consumer brands survey found Uniqlo remains the most popular casual wear brand among China's urban consumers, with 19.3 per cent of respondents saying it was one of the two brands they most regularly purchased, up 1.9 percentage points from the fourth quarter of 2015.

Spreading wings in Tier II cities

The popularity of fast-fashion brands has now spread beyond China's richest urban centres. Uniqlo is well-Fast fashion brandsestablished in China's Tier-I cities -- 24.9 per cent of these respondents selected the brand - with much of its improvement in our latest survey coming from second- and third-tier city respondents. Brand popularity rose 3.7 percentage points in second-tier cities compared with our last survey at the end of 2015, and 2.4 percentage points in third-tier cities. H&M and Zara, meanwhile, secured second and third place in first-tier cities, with their overall popularity rising 2.7 and 1.5 percentage points respectively since our last survey. H&M's brand popularity rose most sharply in second-tier cities, up 4 percentage points, while Zara's rose 3.5 percentage points in this city tier.

On an aggressive footing

Uniqlo's parent company, Fast Retailing, operated 472 stores in China at the end of August, up from 387 a year prior and plans to open 100 stores a year in China, including those of youth-oriented brand GU, until it hits 1,000 stores. It eventually hopes to raise its store count to 3,000. China contributes half of its global revenues. Sweden's H&M added 47 new stores within the first nine months of this year, bringing its total store count to 400. Inditex's Zara brand was the most conservative of the three, with its store count rising by just nine in that period, bringing its total to 188.

Despite their growing popularity, these brands have not been immune to China's broader economic slowdown. Uniqlo's greater China sales rose 9.3 per cent year-on-year to 332.8 bn yen ($2.9bn) in fiscal year 2016, a sharp decline from 46.3 per cent the previous year, while operating profits slipped 5.5 percent year-on-year to 36.5bn yen. H&M's China sales growth also slid, falling from 16 per cent last year to 5 per cent year-on-year in the first nine months of 2016.

Is rapid expansion sure success formula?

Analysts feel that although their popularity is increasing, it remains to be seen if lower-tier city demand will be sufficient to justify such rapid store count growth. Urban disposable incomes in the provinces can be roughly half those of Beijing and Shanghai, while FT’s monthly survey of Chinese households across all city tiers has consistently found sentiment towards clothes buying in lower-tier cities weaker than that of higher tiers. These companies may pride themselves on the affordability of their product, but a Uniqlo down jacket still costs around Rmb160 ($23) more than one sold by Shanghai-based Metersbonwe, which held on to second place overall in the brand survey.