Online fashion shops booming in China

Online fashion shops booming

Updated: 2013-10-06 07:07

By Yan Yiqi in Hangzhou ( China Daily)E-commerce sites target younger, cost-conscious consumers

If you haven’t heard aboutHangzhou’s fashion scene, thenyou can’t say you know China’sfashion industry.

Hangzhou labels, which aremostly known for women’sclothing, focus on quality fabricssuch as silk, cotton andcashmere. And their low profilebut unique designs – a perfectfusion of Western and Chineseaesthetic values – are giving thebrands increased visibility on theInternet.

According to Gu Xiaohua,secretary-general of theHangzhou Textile and Garment E-commerce Industry Association, 2010 was a turning point for thegarment industry in Hangzhou,the capital of Zhejiang province.That year, many companieslaunched their online businesses.

The sector became one of thepillar industries of the city in1993, and thanks to Sijiqing – thecountry’s largest wholesale andshopping area for women’sclothing in the city – the industryhas developed fast in Hangzhousince 1996.

According to data provided by theHangzhou Textile and GarmentAssociation, more than 1,000clothing factories operate in thecity. Half of China’s about 600 medium- and high-end brands are headquartered in Hangzhou.

Brand names such as Lesies, Cocoon, JNBY and Chiu Shui have become popular in thecountry, and franchise stores for these brands are scattered across China.

Chiu Shui, for instance, opened its first shop in 2005, and by last year, the company had morethan 2,000 shops across the nation.

In 2010, the owners of women’s garment companies in Hangzhou started to expand theirbusinesses through online shops. Now, 70 percent of the about 2,500 registered women’sgarment companies in the city have online businesses.

“Although our companies didn’t enter the online space very willingly initially, the results indicatebrand new opportunities for traditional manufacturers in this industry,” said Gu.

Gu recalled that in 2009, the owners of several popular local garment brands went to theassociation, complaining about plagiarism among online shop owners on Taobao.com, China’slargest shopping website.

They complained that their designs for new seasons were often copied by Taobao.com shops,and they asked Gu to talk with local government officials and website operators to stop thecopycats.

After that meeting, the managers of some garment companies started considering launchingtheir own online shops.

With the development of e-commerce and the growing popularity of shopping websites,traditional garment companies in Hangzhou faced great challenges.

“Low prices, convenience and abundant choices are the advantages of online shops,” saidQian Feng, founder of Lesies.

“After we released new-season collections, we would see copycat designs online a week later. Itwas almost impossible for us to stop it,” said Qian, who is also president of the HangzhouGarment Designers Association.

A manager at Taobao.com pointed out a solution. He just asked: why don’t you start your ownTaobao shops? After hearing that, Gu figured out that they might have found a way out.

“Many of my peers were complaining about sluggish business. It was not that we hadn’tconsidered doing business online. It’s just that there were so many things to worry about,” Qiansaid.

Online challenges

 

Hu Changcai, Na Wain’s general manager. The brand’s online salesare soaring. Provided to China Daily

For brand owners like Qian, the biggest concern about e-commerce was how to maintain the brands’ high-endpositioning.

Qian launched the Lesies brand in 1993. After almost 20years of hard work, he turned it into a high-end label. Andeven though Lesies’ online shop was established at the endof 2011, Qian is still worried about whether the brand will beseen as a low-level product because it has an onlinepresence.

“The prices of clothes sold in online shops are only half oreven a third of those sold in brick-and-mortar stores,” hesaid.

Although Qian was initially reluctant about e-commerce, thesales revenue of Lesies’ online shop in 2012 reached 50million yuan ($8.13 million), accounting for 10 percent of thecompany’s total sales.

Gu said that at first, many brand owners, like Qian, wereunwilling to set up online shops, but since the brands hadalready made their names in China, once their online storeswere launched, the sales results were satisfactory.

Last year, two Hangzhou brands were in Taobao.com’s top10 list for women’s clothing sales in terms of revenue,according to a report released by the China E-commerceResearch Center.

One of the two brands, Na Wain Garment Co, ranked fifthwith an annual sales revenue of 190 million yuan.

Hu Changcai, general manager of Na Wain, said that it wasfortunate that the company caught the e-commerce train atthe last minute.

The company established an e-commerce department inDecember 2010.

“Before 2010, we regarded Taobao shops as distractions,hampering the healthy development of the industry,because there were so many shops that didn’t do businessaccording to the rules,” Hu said.

However, after Hu had a taste of e-commerce, he had toadmit that the field offers significant opportunities.

“Last year, the sales revenue of our online shop grew fourtimes year-on-year. That’s an unimaginably high figure for brick-and-mortar shops,” he said.

To maintain a good relationship with the company’s fast-growing customer group, Na Wainlaunched more than 150 online chat rooms for clients. Employees also get in touch with regularcustomers for suggestions and advice.

But, just like Qian at Lesies, Hu worried about brand positioning before the company launchedits online store.

“Our solution was to diversify our products online and offline. Our target customers for theonline shop are five to 10 years younger than those for the brick-and-mortar shops,” Hu said. “High-end customers can still enjoy our services in brick-and-mortar shops, while younger onescan select more affordable clothing online.”

Meanwhile, to maintain the design advantage of the online shop amid the fierce competition, NaWain established a design team with 15 people. For this year’s spring collection, for instance, atotal of 96 new designs were released within two months.

Na Wain’s brick-and-mortar shops continue to offer customers high-end and professionalservices at higher prices, while its online shop sells clothes to younger clients. Hu views onlineshoppers as potential customers for his brick-and-mortar shops.

“As they get older, online customers will gradually become offline customers,” he said.

However, for Hu, the development of brick-and-mortar stores is still and will continue to be forsome time the focus of the company.

“After all, the sales revenue of our online shop last year accounted only for 8 percent of ourtotal sales. The online business helps us to expand rapidly and to a larger range of customers,but the main profits still come from our brick-and-mortar shop sales,” he said.

Qian echoed that view.

“The online business can only be a complementary service to our brick-and-mortar shops. Thequestion is how to balance the branding strategies of online shops and those of the othershops. That’s a big problem because both of them share the same brand name,” he said.

Meanwhile, Gu said that brand owners in Hangzhou should not be afraid to venture online.

“Willingly or not, Hangzhou’s fashion brands have entered the e-commerce era along with othercompanies. Concerns and challenges remain, but opportunities and profits will come as well,”Gu said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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