The Chinese shoe retailing scene continues to be dominated by single-brand stores in shopping malls and department stores. However, only a few relatively strong brands are able to get the best locations and Chinese customers are beginning to ask for a choice among multiple brands under the same roof, especially after they have traveled abroad.

The development of multi-brand retailing appears to be inevitable in China sooner or later, in footwear as in other sectors, but it will require patience, initiative and investments, judging from interviews held during the first theMicam Shanghai fair a few weeks ago. Some of the most interesting initiatives in this direction are being taken by large Chinese OEM manufacturers who are seeking to diversify into trading and retailing.

Italian producers are generally preferred by these manufacturers because of their high quality image. A Chinese shoemaker, John Zheng, has an interesting chain of 17 shoe shops in China, called Blocco 5, that offer Italian-made shoes under brands such as Chloe and Marc Jacobs along with his own Chinese-made brand, Stans. Some of the Marc Jacobs models are co-branded and are positioned in the highest price range, around 3,000 yuan renmimbi (€370-$490) per pair. The stores are selling about 35,000 pairs per year and are expected to grow soon to between 35 and 50 locations.

According to Zheng, however, the gap between Italian and Chinese craftsmanship is shrinking, and Italian manufacturers must adjust their supply chain to the requirements of the Chinese market if they want to have a future in China. Zheng has had to raise his storage capacity to handle his imports from Italian factories, but he is building a large industrial park near Shanghai Airport to facilitate shipments from Italy. His goal in the future is to develop Chinese brands of shoes that are made in Italy.

William Wong, who has a big factory in China producing slippers for a number of Western brands and banners, launched one of the first experiments in multi-brand shoe retailing under the name Italian Fashion Galleria (IFG) four years ago, but this project has run into a few problems that have slowed down its development. After four years, he only has four stores trading under this relatively attractive name in Chengdu, but they are still losing money.

According to Wong, who is also vice president of the Hong Kong Footwear Association, a network of 40 stores would be the minimum to provide the economies of scale required to break even because of very high operating costs. Rental costs can represent between 25 and 30 percent of the selling price because of the demand for good real estate space and high taxation. Furthermore, the landlords who have premium space want to give it only to major, well-known brands to generate traffic.

The “made in Italy” label is attractive in itself, says Wong, but he feels that it will take at least five years for this label to become a sufficiently strong concept to stand up in a market where most consumers know big individual global luxury brands such as Gucci, Prada, Salvatore Ferragamo or Tod's, which have been investing heavily in the country lately. As IFG is selling less well-known Italian brands such as Boemos, Bruno Magli, Moschino and Pakerson, he has a hard time competing with strong national brands such as Daphne, Stella or Staccato, which belong to large Chinese groups and carry much lower prices.

A visitor to theMicam Shanghai who has a store selling trendy casual shoes in Guangzough complained about taxes of up to 40 percent on imported shoes that make it difficult for him to compete against Chinese brands.

For the few existing multi-brand shops in the country, another problem is that, generally, they cannot rely on wholesale distributors for foreign brands who would take care of customs clearance and stock the merchandise for reorders by different retailers. It's a business model that has not yet taken hold in the country, forcing foreign suppliers to strike direct deals with retailers in China or to go through large shoe manufacturers that want to diversify into the distribution business. They have warehousing and other back-office facilities that can help them to develop this sort of operations on behalf of foreign brands.

Echoing the statements of other Chinese buyers of foreign footwear, Wong said that he is getting too little support from the Italian brands that he offers in his stores, especially in terms of stock replenishment. He orders minimum quantities of specific styles from the Italian producers every season, but he loses a sale if he runs out a particular size because there is no brand, importer or wholesale distributor to keep the stock and replenish his inventories during the selling season.

Wong tried to supplement his physical stores in Chengdu with the launch of a dedicated online store, but it only worked out for his own slippers. He makes about ten million of them every year. On the other hand, e-commerce is viewed by another Chinese maker of slippers and canvas shoes that is twice his size as a very promising retail channel that can be used to market good-quality classical shoes for men, women and children in the country.

Its website trades under the classicshoes.cn name, offering for the moment mainly classic men's shoes under its own brand, Estate England, and well-known brands such as Barker, Calvin Klein, Cheaney, Church's, Kenzo, Loake, Moreschi, Padders and Santoni. The principal of this virtual store, Dean Yue, also has a chain of physical men's footwear stores called Estate. He was visiting theMicam Shanghai to expand the number of brands on his website, adding also women's and children's shoes.

Yue is carrying out this project together with a minority shareholder from the U.K., Mike Rowe, who is also the managing director of Padders, which has won many prizes as best comfort shoe brand in the past few years. He began to explore opportunities in the Chinese market about seven years ago, while importing lounge shoes from China. Rowe was accompanying Yue on his visit to the Shanghai fair.

With Rowe's support, Yue began to apply the multi-brand retailing concept to high-end men's shoes two and a half years ago through the Estate chain of shoe shops. There are now four of them in operation in Beijing, Shanghai and two other cities, and four others will follow soon. Yue was also planning to open a single-brand Santoni store by the end of this month.

Nicely furnished, Estate stores offer a selection of styles, mostly Goodyear-welted, by major brands such as Church's, Cheaney and Loakes. Stock replenishment is not a problem because the relatively high value of the shoes justifies air freight shipment from Europe. With Bain & Company's surveys showing very high growth in luxury men's footwear, he is envisaging the creation of at least 20 to 25 more Estate stores in China over the next three years.

He is also investing in stores and shop-in-shops that carry men's and women's shoes, in some cases along with some clothing, but again in the high price range. A special corner in a Beijing store offers women's shoes by Santoni, Church's and LK Bennett.

An executive of Daphne, a much bigger Chinese shoe manufacturer and retailer with some 6,000 shoe shops in the county, was also spotted visiting theMicam show in Shanghai to look for interesting new foreign brands to represent in China. Daphne already sells ten such brands on an exclusive basis in the country, three of them on a licensed basis. Aldo is one of its latest licensees.

Daphne has been following strictly the mono-brand retailing concept – it has about 150 Aerosoles stores in operation, for example – but is looking at a possible diversification into multi-brand retailing. It recently launched a new chain of relatively cheap but nicely laid-out stores, called Shoebox, that offers several house brands of Daphne. It has also just opened a multi-brand store in Kuala Lumpur, the capital of Malaysia.

Manas began to trade in China a few years ago through another big Chinese manufacturer and retailer, Belle International, but it is now using it only to cover the Beijing region. Because of the enormous diversity of cultures and consumer attitudes in China, the Italian company is using other partners for its development in other parts of the country.

In some cases, like at Fly London, the partner for the brand's development in Mainland China is a large Taiwanese manufacturer and retailer. In other cases it is a well-established operator in Hong Kong, where wholesale trading and multi-brand retailing are more developed.

Buyers and other officials from Amazon, Tmall, FClub and other pure e-tailers in China visited theMicam Shanghai fair, too. In a way, their websites can be regarded as multi-brand shops. Their sales are huge, but some of them sell mainly closeouts. Tmall.com, which belongs to the large Alibaba Group, has been changing its image from the sale of fakes to the sale of authentic products.

For the moment, most of the international shoe brands that they offer are sports brands such as Adidas, Nike, Timberland or Vans. However, at a conference during the show, officials of Tmall, which gets more than two billion hits a year, declared their interest in offering the products of additional international brands, also in the dressy and casual segments. It sold RMB10 billion (€1,223.9m-$1,630.0m) worth of shoes last year, including the products of G-Star and Replay, for example. The same goes for Taoxie.com, which boasts three million online users for its 40 footwear brands5

According to Taoxie.com, the market for shoes sold over the internet is expected to grow from RMB16 billion (€1.9bn-$2.6bn) in 2012 to RMB2 billion by 2015, based on present trends. Some Chinese e-tailers have developed their operations considerably. When they host a foreign brand, they offer warehousing, customer service, contents editing, data analysis and diagnostics and assessment of brand awareness, region by region. The latter can be very useful for a brand to decide where to set up a physical store.

According to research made available to exhibitors at theMicam Shanghai, the consumption of shoes reached 3.43 billion pairs worth RMB252 billion (€308.4bn-$410.7bn) in China in 2011, growing by 14 percent in volume and by 9.5 percent in value. Out of these, nearly 650 million pairs were dress or formal shoes, and 60 percent were for men. Casual shoes account for around 40 percent of the market, and women's models have the lion's share in this segment at 70 percent of the total volume.

The largest growth in recent years has taken place in the area of sports shoes. Sales in this category reached more than 800 million pairs worth 60.9 billion (€7,451.9m-$9,925.3m). This market is more concentrated, with the ten major foreign and national brands representing nearly 78 percent of domestic sales. International brands have been taking market share from local players such as Li Ning or Anta.

As this market is more developed, the multi-brand retailing concept is taking hold more firmly in the sporting goods sector. As outlined in our sister publication, Sporting Goods Intelligence Europe, Belle International has decided to try out a multi-brand concept called Top Sports, joining a few other chains such as Quest Sport. A big Japanese sporting goods retailer, Xebio, has entered the Chinese market with a store in Shanghai, and another one is planning to do the same thing.