Since Anta's products are not as expensive as foreign brands, they are eating into the market share of global sportswear giants such as Nike and Adidas. Anta saw record revenues of 5.1 billion yuan in the first half of this year. Despite the sales growth, Anta plans to close up to 140 stores in the second half of the year, which will leave it with around 7,300 stores.

"The online business model is more cost-effective than running physical stores. For clothing brands, it's easy to copy certain brands, therefore some smaller brands rise rapidly online.

"Brands need to seek approaches that are different from the traditional retail footprint to reach out to consumers," Wang said.

Oddly, foreign chains seem to have understood that better than Chinese fashion companies. Inditex SA's Zara, Hennes & Mauritz AB's H&M, and Uniqlo Co Ltd have sought to lure more young customers by offering stylish designs at cheaper prices.

Betting on China's booming middle class, they are enhancing their impact by rapid expansion and customized promotions.

Japan's Uniqlo already has about 360 stores in the Chinese mainland, and it plans to open another 100 stores a year here. As one of Asia's biggest clothing retailers, Uniqlo wants to grow into a world leader in fashion with a target of 5 trillion yen ($40.4 billion) in sales by 2020.

"The foreign fashion brands are good at understanding consumer behavior. They monitor age group-wise consumer behavior in stores, and adjust the designs accordingly," Wang said.

Also, foreign fashion companies have used big data to spot market trends.

"They have integrated big data into their management systems. With an accurate understanding of consumer demand, brands can quickly cater to a growing appetite among consumers and outsell rivals in the China market," Wang added.

"Traditional Chinese labels are known for their good quality and brand equity. If they can better read consumer demand using big data, adjust their designs quickly, cater to younger consumers and develop fully functional e-commerce channels, they, too, will thrive."