Farm Rio - Towards the East

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SUMMARY

Farm is one of the most recognized and beloved fashion brands in Brazil. In addition to captivating the public with its prints inspired by Brazilian culture, the brand has also expanded to the international market. Its first international store opened in New York in 2019, and since then Farm has continued its global expansion process with the opening of stores in the United Kingdom, France and Italy, taking pieces that capture the Brazilian essence. Now, Farm intends to enter the Asian market, specifically in China, and it is up to Juliana, the company's expansion manager, to develop the best marketing strategy to introduce the brand to the new audience. This case invites readers to understand the challenges and opportunities of a company in the process of internationalization, in addition to encouraging the analysis of international marketing strategies and how they can be adapted to meet the needs and preferences of consumers in different markets.

Where we came from and where we are going

In August 1997, with a small Stand at Babilônia Feira Hype - a cultural and tourist fair in Rio de Janeiro - the trajectory of FARM Rio began. The co-founders of the brand, Kátia Barros and Marcello Bastos, launched a collection with 6 different models of Bodies and, six months after their debut, they became the best-selling brand at the event. In 1999, the brand began its expansion in Rio de Janeiro, opening its first store, in Copacabana, and, in 2001, two others, in the Ipanema Forum and Shopping Downtown. With the sales success, the brand did not take long to expand its operations and spread throughout the Brazilian territory, having opened - between 2004 and 2007 - stores in large capitals such as Belo Horizonte, Brasília, São Paulo and Salvador. In 2010, with the merger of Farm and Animale, the brand became part of the SOMA Group, the largest fashion group in Brazil. More than 25 years after the creation of the brand, FARM has more than 100 establishments in the country, and record gross revenue of R$1.3 billion in 2023, as disclosed by the group's financial report (Grupo Soma, 2023).

After its consolidation and structuring in the Brazilian market, in 2016, the company decided to invest in the possibility of disseminating its operation internationally.  Quickly, FARM realized that, in order to have a relevant presence in the foreign market, it would be necessary to reconfigure its image to express that the brand represents more than the sun, beach and tropical prints.

In order to gain space in this new market, The company bet on participating in the largest fashion retail fair in the world, Coterie, in New York, in 2016. The brand obtained a good number of sales, although not significant. After this event, new opportunities arose and the FARM catalog entered the portfolio of American department stores such as Bloomingdale's and Anthropologie. In 2019, the company finally opened its first stores in the United States, in the states of New York and California, with revenues of 30 million dollars (Souza, 2024)

In the following years, Farm inaugurated some Pop-ups around the US territory and, in 2021, in Europe, with the temporary store located at Le Bon Marché in Paris. In 2023, in addition to the inauguration of a pop-up in Italy, the company established its first own store on European soil, with the debut of its permanent store in the city of London, England (Torre, 2022; Barone, 2022). With its presence in the North American and European markets consolidating, the company defined new challenges, this time aiming to conquer the Asian public.

Big dreams, big projects

Born in Rio de Janeiro, Juliana has always liked fashion a lot. Since she was a little girl, she admired the colorful windows, with prints that, for her, reflected the Brazilian essence. As a teenager, walking along the Copacabana beachfront, at post 6 on the beach, she saw a store that represented everything she had always loved, FARM. Since then it has become Farmete card-carrying and dreamed of the possibility of working in the company that emitted happiness with her clothes. After graduating in Business Administration, Juliana finally saw her dream come true, when she was called to be part of the company's expansion team.

After five years working for the brand, Juliana was finally allocated to a new project, in which she would act as a manager. The Director of the expansion team revealed that she would be responsible for developing the marketing strategy to introduce FARM to the Asian market, more specifically, in China. How could she adapt FARM's positioning to the world Fashion of the Chinese market? How could you choose the best segment of the Chinese market to focus your efforts? Would FARM repeat the same success?

Exporting Brazilianness

The phenomenon of globalization, without a doubt, has brought individuals from different parts of the world closer together. However, this was not the case when talking about consumption trends, since the way each country consumes is intrinsically linked to local customs. Culture shapes values, preferences, and habits. Consequently, these factors play an essential role in shaping consumer behavior. Thus, it is extremely important that companies adjust to the complexity of the new audiences they want to reach.

To assume that successful marketing strategies in Brazil will be as successful in any other country could be a mistake. Thus, Juliana decided to understand more about FARM's internationalization. In 2016, the company had already hired a fashion consultancy to understand the feasibility of entering the North American market, and as a result, they were guided to change the company's positioning to sophisticate its products. The manager was not sure if this strategy should be replicated on Asian soil.

Since the beginning of the brand, Farm has proposed to serve the women's fashion market, with the main focus on promoting the style of the carioca girl. In 2012, the company's co-founder stated that its target audience could be defined as "young girls, between 20 and 25 years old, living in the South Zone of Rio de Janeiro, PUC students, who are interested in fashion and go to the beach in Leblon and Ipanema", that is, girls from classes A and B who can give off a certain value with clothing. In 2017, the company reiterated that the carioca woman is the starting point and the end point of the brand, since they represent what Farm believes beauty should be: "a happy and vibrant continuation of our girls, a live translation, in color and all stamped of their souls." It was clear to Juliana that this notion could not be merely replicated, after all, in addition to the Brazilian tropicality not being experienced in Asia, the oriental culture differs from that experienced on Brazilian soil.

Thus, Juliana chose to analyze the brand's strategies on the most traditional bias she learned in her graduation: the 4Ps of Marketing. Also known as Marketing Mix, it is the set of basic elements (Product, Price, Place, and Promotion) that make up a marketing strategy.

Starting her analysis of the product to be sold, Juliana knew the influence of the weather. In most of Brazil, the four seasons of the year are not well defined, with only two remarkable moments: a hot and humid season and a hot and dry one, with an average annual temperature of almost 25º Celsius (Agência Gov, 2023). In this way, the use of fabrics such as viscose - a highly breathable material - are common in the production of FARM's clothes.

As we move further away from Brazil, the consumer public tends to be more discrepant than similar. Using FARM's stores in London as an example, it would be unfeasible to assume that the country's cold and rainy climate makes it possible to wear the brand's loose and light dresses for most of the year. In addition, the company's creative team chose to "tone it down" when it was time to idealize the clothes that would be sold in England. The color tones became more closed and the modeling of the pieces became more conservative, in order to adapt to London customers.

Regarding the price of products, according to data from Exame magazine, in 2021, the average price of a Farm dress in Brazil was R$400.00 while, in the United States, this value was U$320.00. Although, at first glance, the prices are similar, the average spending of an American on clothes is $162.08 (Statista, 2022). Therefore, it can be seen that the value practiced in the United States represents almost double the average value paid for clothing in the month by Americans, thus consolidating itself as a more sophisticated product. Similarly, in European stores, prices are generally starting at £200.00 (Farm UK, 2024) in a context in which the average consumption - in the United Kingdom - is £76.53 (WRAP, 2022).

When analyzing the Square element, Farm has more than 100 physical stores spread across the national territory, in addition to having thousands of registered resellers and its "farmrio.com.br" website focused on the e-commerce of its products. In the foreign market, the company has eight physical stores where consumers can buy its products, spread across the United States, France, England and Italy. In addition, the brand's products are present in other stores such as Nordstrom, Anthropologie, Saks Fifth Avenue and on its own website that has three subdivisions to serve different locations: "farmrio.com" for the international public as a whole, "farmrio.uk" for the United Kingdom and "farmrio.eu" for the rest of Europe.

With regard to the production and distribution of its clothes, the company has the Farm factory in Rio De Janeiro and has access to the distribution centers of the Soma Group, which has locations in several regions of the country. In addition, the company has chosen to produce its clothes in other countries, such as Morocco and Portugal, and distributes them from three main centers, located in Mexico, the United States, and the Netherlands (Torre, 2022, Barone, 2022, FARM, 2024).

Finally, with regard to the promotion element, the company recurrently presents partnerships in its product lines, such as the lines built together with Havaianas and Adidas. In addition, on his social networks (both Brazilian and foreign), in addition to selling a Lifestyle of stylish girls who like fashion, Farm exhibits the Backstage the creation of certain content, events in which company representatives participated, and the process of idealizing the opening of new stores.

Even knowing all this, Juliana was not sure what would be the best way to enter and consolidate herself in the Chinese market. Should it use the same strategies that had worked with the brand's international audience? Or is Eastern culture so different from Western that everything should be rethought?

Ni Hao China

Knowing the nuances of the Chinese public well before developing a good internationalization strategy was indispensable. Therefore, Juliana began her research, seeking to capture all the details that could interfere with the success of her project.

Initially, Juliana considered it essential to study the relations between China and Brazil. It is not news that the countries have strategic ties of cooperation, and, without a doubt, some may favor Brazilian companies that seek to establish themselves in the Asian country. During her research, Juliana came across an article that talked about the new agreements of the Sino-Brazilian High-Level Commission for Consultation and Cooperation (Brazil-China Sociocultural Institute, 2024). In June 2024, Vice President Geraldo Alckmin paid a visit to China, in order to strengthen relations between the countries and promote commercial and artistic exchange. Some partnerships signed during the trip that deserve to be highlighted are: the Memorandum of Understanding between ApexBrasil and Shanghai Yangpu District People's Government, with the purpose of creating a Casa Brasil in Shanghai, a space for the incubation of Brazilian companies and the promotion of bilateral trade, and the Memorandum of Understanding between the National Confederation of Industry, Zhejiang University Science Park Development and ZIBS Latin America Center to promote the expansion of activities of Brazilian companies in the Chinese market and support creation.

Moving on to a more technical part, Juliana chose to base her strategy on the perspective of the 4Ps, just as she had done previously.

Starting with the product to be sold, Juliana decided to analyze the climate of the target country, in order to point out whether the modeling of the Brazilian pieces would suit the new audience. China's vast territorial extension results in a great climatic diversity in the country, however, it is possible to say that in general the seasons are very well defined, with some moments of heat in the middle of the year and others of intense cold at the end, with an average temperature below 5º Celsius (China Discovery, n.d.; Weather Sparks, n.d.). When analyzing from this perspective, it is appropriate to say that FARM's garments, characterized by open modeling and made with fluid fabrics, could be used in some regions of China during summer and spring, since these seasons bring mild temperatures to most cities. However, it seems that it is not so simple to ensure the suitability of products only for the climate, as it is also necessary to take into account the clothing preferences of Chinese consumers.

In China, everyday clothing preferences reflect a combination of Western and Asian influences. In big cities, such as Beijing and Shanghai, it is common to see people wearing casual and comfortable clothes, and it is possible to see many garments within the trend Streetwear , which is successful among young Chinese. Baggy pants, T-shirts Oversized , caps and sneakers are the key pieces that define this style. According to the 2023 Taobao Apparel Industry Report, since 2018, streetwear in China has grown at a steady rate of 60%, outperforming other fashion categories (China2Brazil, 2023). Despite the popularity of the laid-back style, there is a large portion of Chinese who choose to allude to their culture through clothing.

The "Guochao" or "China Chic" movement gained popularity in 2018 and continues to rise. This trend consists of celebrating Chinese culture through the incorporation of traditional components, symbols, and designs into products and marketing campaigns. In clothing, this phenomenon can be observed in the combination of modern elements with traditional Chinese clothing (such as Hanfu). According to Antoaneta Becker, a member of the China-Britain Business Council, showing respect and appreciation for China's culture has become practically a requirement for brands that want to succeed in the country (China-Britain Business Focus, 2023)

In an interview with Jing Daily in 2024, Chinese designer Lucia Liu gave the following advice to brands that want to appeal to the country's young audience: "This Chinese generation is more engaged with their culture than ever before. Gen Z really cares about the presence of some Chinese aspect. In fact, this generation no longer cares about brands in general." Basically, consumers in this age group are more interested in consuming items that make references to Chinese culture, or something that is trending in the country, than buying something just for the name of the brand. From this perspective, just as FARM incorporates nuances of Brazilian culture in its prints, Chinese designers also adopt cultural characteristics in their clothing in order to meet the new demand of the young public.

In addition, it is important to note that the Chinese, especially women, show an aversion to the sun due to concerns about maintaining fair skin, since paler skin is culturally valued and historically associated with status and beauty. Therefore, it is common for Chinese women to adopt measures to avoid sun exposure, such as wearing wide hats, umbrellas, intensive sunscreens, and clothes with more coverage on sunny days (Dao Insights, 2022).

Then, Juliana delved into the pricing of the products. According to a survey by Statista (2022), most Chinese spend between 401 and 600 yuan (between R$300 and R$454 approximately) on clothes monthly. In this situation, if FARM chose to maintain the strategy it uses in other countries, the value of a piece of clothing would be around 1200 yuan (R$910), characterizing itself as a high-value piece. This would reinforce the brand image as being a luxury brand abroad. However, it can be a risky strategy to try to compete with the low prices of e-commerce platforms that are on the rise in China.

Regarding the square aspect, it is noteworthy that China is a world reference with regard to the online retail model. For almost ten years, e-commerce in China has been the largest in the world. Data from the International Trade Administration (2023) reveal that the country alone fulfills more than 50% of online orders placed across the globe. This may be related to the fact that the largest online retail chains are headquartered in the country, such as: Shein, Alibaba, Aliexpress, Taobao, among others. In addition, the Chinese prefer to make their purchases online, from household items to clothing, due to the wide variety of products that e-commerces offer. A survey conducted in 2023 by YouGov revealed that 59.3% of Chinese prefer to shop online than buy in traditional stores.

Despite the great favoritism for e-commerce, physical stores still have a certain place in the market. Places such as Nanjing Road and Huaihai Road are known for being major shopping hubs, especially for clothing, with the presence of shopping malls, department stores, and luxury stores (Civitatis, n.d.).

By analyzing the promotion element, Juliana discovered valuable information about the target country. Like many parts of the world, China also has digital influencers who launch trends on social networks, called Key Opinion Leaders (KOLs). As their name implies, they play a crucial role in shaping consumer trends, promoting products, and shaping public opinion. A survey conducted by Statista (2023) showed that, among the Chinese interviewed, 86% of them made a purchase after receiving a recommendation from an influencer.

The growth of influencers in China can be attributed to several factors, including technological advancement, the emergence of new social media platforms, and the digital transformation of businesses. Platforms such as Weibo, WeChat, Douyin (known as the TikTok of the West), and Xiaohongshu (a platform that resembles Instagram) have become the main channels through which influencers connect with their followers. In addition, it is worth noting that these social networks are great allies for global brands looking to attract the Chinese public. Several well-known brands, such as Gucci and Dolce & Gabbana, post content on these media, achieving great success by creating publications aimed exclusively at the Chinese audience, rather than just replicating their posts from other digital platforms. These brands also seek partnerships with Chinese influencers and celebrities to win over the country's audience.

After analyzing the 4Ps of marketing, there was another procedure that could also be applied. Juliana knew that one of the best strategies to achieve success is to observe and learn from established Brazilian brands in the Chinese market. Havaianas is a brand with as much "Brazilianness" as FARM, and, as already mentioned, the two have made several collaborations and remain with the partnership of FARM-Havaianas flip-flops, which have the recognizable prints of FARM's clothing pieces.

Havaianas has already had a presence in China since 2012, through e-commerce sales through distributors, but at the end of 2017 the company decided to make direct sales in the country and founded its Asian office with the aim of having more control over the brand image and distribution channels. At first, the brand sought to select well the partners that would help the entry into the country, from influencers to those responsible for logistics. Thus, betting on a branding aimed at the Lifestyle of summer, to comfort and happiness, the brand decided to use the "stereotypes" of Brazil to its advantage, going headlong into more "colorful" marketing. Over time, this strategy proved to be effective, since Havaianas conquered a large audience, reaching second place in " Top of mind " in the slippers category among Chinese consumers in 2022 (StartSe, 2022), reinforcing that products with a tropical footprint have a space in the Asian market.

So, with this valuable information in hand, Juliana knew she would need to adapt her product offering and marketing strategy to meet the regional specificities of the target country.

The decision

After much research and effort, Juliana consolidated all her research, creating a report to guide her decision. What strategies does Juliana intend to suggest to the brand? What are the best plans for the Chinese territory?

DISCUSSION QUESTIONS

1. Considering the 4Ps, what strategies should FARM adopt to position itself competitively in the Chinese market and maintain its essence and identity? Explain.
2. Considering the diversity and size of China, what market segments (e.g. age, gender, lifestyle) should FARM target? Explain.
3. What digital marketing strategies would be most effective in promoting FARM in China? Explain.

GALLERY

Estadão, 2024. Brazil.

Fashion Network, 2024

Fashion United, 2024.Credits:Michael Franke. London

Fashion Network, 2024. Paris.

WWD, 2023. Italy

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About The Authors

Annelise Pinheiro de Souza Abreu she is a student at the Department of Administration (ADM/FACE) at the University of Brasília (UnB). He is a volunteer member of the ADM Casoteca. E-mail: annelisep.unb@hotmail.com

Isabela de Alcântara do Nascimento she is a student at the Department of Administration (ADM/FACE) at the University of Brasília (UnB). He is a volunteer member of the ADM Casoteca. E-mail: isabela.alcantara.nas@gmail.com

Eluiza Alberto de Morais Watanabe is a Professor at the Department of Administration and the Graduate Program in Administration (PPGA) at the University of Brasília (UnB). He holds a doctorate (UnB) and a master's degree (UFMS) in Administration. Experiences in studies related to marketing and consumer behavior. Leader of the research group Conscient- Studies in Sustainable Consumption. He is a member of SCORAI Brazil - Sustainable Consumption Research, Action and Initiative in Brazil (http://scorai.org/brazil). Interest in topics related to sustainable consumption, sustainable marketing strategies and experimental designs. Email: eluizawatanabe@unb.br

This case was written from secondary information and based on other references cited. It is not the authors' intention to evaluate or judge the company in question. This text is intended exclusively for academic study and discussion, and its use or reproduction in any other form is prohibited. Copyright infringement will subject the offender to the penalties of Law No. 9,610/1998.