Top 20 local Chinese brands made up 60 percent of total sales in the apparel market, while foreign brands' sales shrank from 46 percent to 40 percent from the year before in 2021. China's fashion, apparel, and luxury market is becoming even more competitive, and foreign brands are struggling to keep up with their local counterparts, according to McKinsey's latest report.

The report found, 52 percent of surveyed Chinese consumers prefer local fashion apparel brands, while 42 percent prefer local beauty brands compared to foreign skincare and cosmetics options.

The success of local brands is largely due to their strong localized strategies, including social media outreach to consumers via key opinion leaders (KOLs) and key opinion consumers (KOCs). To secure China's rising middle-class population as the key clientele demographic, foreign brands will need to adapt and find better ways to connect with consumers through China's multichannel e-commerce and social media platforms.

According to McKinsey's report, China's urbanization rate is expected to reach 70 percent by 2030, meaning a larger segment of consumers will have disposable income.

Foreign brands can look to better tailor their social media channels to connect with their target clientele authentically and efficiently. They can also localize product development and packaging to reflect local tastes and trends, and accelerate China-based product development and D2C capabilities.

As China's post-pandemic reopening continues, foreign brands need to pay closer attention to evolving consumer needs, tastes, and buying power if they want to succeed in this highly competitive market.