In a recent market visit to one of Shanghai’s highest quality department stores, Japanese run SOGO, I saw an interesting new store on their fourth floor. The fourth floor is dedicated to young and contemporary brands, and typically does really good business in the high traffic area of Shanghai’s Jing An temple. Brands on the fourth floor include: Evisu, Adidas Originals, Replay, Levi’s, Izzue, Vans, Calvin Klein, Keen and many other well-known international brands. All of the stores looked good, and the quality of visual merchandising and store concepts are excellent in the mall. However, right next to Vans, there was an Old Navy store (or so it seems…) that looked a little out of place.

I first noticed the store, as I had recently read that GAP was planning to enter the China market in 2010, I thought perhaps this might be a trial store for Old Navy prior to GAP’s official market entry. Upon further inspection, I noticed a few odd things: the logo is not actually the Old Navy Logo, the hang tags misspelled United States and every piece of clothing had the words, San Francisco New York under the main label (last I checked, Old Navy is from San Francisco, but not New York).

The clothes in the store did resemble the Old Navy style, even if they were a bit off the current Old Navy style. The advertisements showed happy American looking consumers, and the copy on them proudly stated that Old Navy is a brand run by the famous American Brand, Gap, and the size labels stuck on each garment look identical to the ones used at Old Navy stores. The store staff were a bit surly, but really no different than any other store staff in the mall. As a long time Old Navy customer in the US, I was convinced that this could not be a real Old Navy store, but what about Chinese consumers who have never set foot in one of Old Navy’s youthful store concepts in their life, nor seen the famous campy Old Navy advertisements? How are they to know whether this store is real or fake?

This story demonstrates some of the potential pitfalls foreign brands may encounter when entering the China market. We also have indications that popular global streetwear brand Stussy, also has had its complete clothing line and brand replicated in a knock-off store along Shanghai’s popular Changle Road. One certainly expects that there will be both knock-off and copy-cat products in China, and one is also not surprised to see copy-cat stores pop-up in some of the lesser known malls, especially in third or fourth tier cities. But, most people don’t expect such a blatant rip-off of a brand concept in one of Shanghai’s top department stores in the center of town.

The following post was written by Renee Hartmann. She is the COO of Shanghai clothing brand, eno, as well as a Strategic Director for enoVate. For a Chinese perspective on the causes of this phenomenon from enoVate contributor Ren, please click here.