Premium and niche foreign brands are entering or returning to China as they seek to unlock growth in the country’s vast consumer market just as many international companies are either pulling out or closing shop amid fierce competition in a fast-changing environment.

Foreign companies including American firms Alo Yoga and Church’s Texas Chicken (operating as Texas Chicken internationally), German supermarket chain Müller and British perfume brand Clive Christian have all either entered the Chinese market or are about to do so.

“Broadly, China is still too large and important a market for brands to ignore for long,” said Chloe He, director of Asia-Pacific corporate ratings at Fitch Ratings. “For mass-market brands, the appeal is scale, while for niche or premium brands, China offers a large enough pool of affluent and aspirational consumers to support growth. But that does not mean it is easy to operate here.”

Most recently, Los Angeles-based yoga apparel brand Alo, a competitor of Lululemon, announced its entry into the country on Wednesday via a WeChat post titled “Hello, China”. It is making its debut shortly after an inquiry into Lululemon’s alleged use of harmful apparel chemicals in its apparel was announced in the US in April by the Texas attorney general, which sparked widespread discussions online in China.

Alo has gained recognition for its stylish designs, social media marketing and celebrity endorsements from influencers like Hailey Bieber and Kendall Jenner. Its price positioning is comparable to Lululemon, with some items being slightly more expensive, such as a pair of yoga trousers that retails for HK$1,050 (US$134) online.

“Many foreign brands are exiting or scaling back because growth has slowed, competition from local players is intense, and margins are under pressure,” He said. “Success in China depends on whether companies can localise effectively and offer something clearly differentiated.”