BEIJING — I once met a very beautiful Russian fashion designer who wanted to crack the market in China. She was well financed and did all the right things: she had a fashion show, opened her own shop and even had a Web site all in Chinese. Still, she failed. No orders were filled after the fashion show; the shop opened and closed within three months because the landlord kept raising the rent, and the Web site finally closed because she could not get an e-commerce license.
So, to help avoid these kinds of pitfalls, here’s a short guide on getting started in the fashion business in China, all the Do’s and Don’ts.
This story first appeared in the March 21, 2012 issue of WWD. Subscribe Today.
DO: Cosy up to the Chinese Textile Industry Association and their local chapters.
To start, a little road map. The Chinese fashion industry is highly decentralized. The government did away with the Ministry of Textiles back in 1993. Since then, the industry has been regulated by the China Textile Industry Association. The Association and its local branches around the country hold valuable real estate assets; these were old textile mills located in major city centers such as Beijing and Shanghai, particularly Shanghai. For example, the property known as Mo 50 at Moganshan Road in Shanghai is owned by the local textile association. So is 751 Design Park in Beijing. Being close to the Association will most likely secure good rates for offices and events.
DON’T: Have a runway show in China — it’s a fine idea for publicity, but don’t expect Chinese buyers to show up. They don’t exist yet.
Chinese fashion retailing does not have buyers. Department stores are landlords who lease space to brands. There is no buyer system in China. So if you join China Chic and do a runway show, its only benefit is media exposure and branding. No real orders will come from the show. The few stores that might buy are so small in scale they will not be able to float even the smallest fashion design studio.
DO: Look for small manufacturers who make samples; they are more flexible.
Designers in China have a hard time finding a manufacturing partner. Most manufacturers are only interested in large orders. Small orders are very difficult to fill and frequently pushed aside when a bigger order comes in.
DO: Check out Taobao.com, an e-commerce site where you can open your own store provided you pay a registration fee.
The Internet has changed the way Chinese buy clothes. It has provided incredible opportunities for local designers and entrepreneurs. The volume of e-commerce has increased steadily for the past six years. Fortunes have been made in fashion e-commerce.
DO: Set up your own account on Weibo, the Chinese equivalent of Twitter. “Tweet” at least 50 times a day if you want a lot of fans. Post as many photos of your line as you can.
Internet marketing is very mature and effective in China now, not to mention cost efficient. All labels have their own official presence on the Internet. It’s the best way to spread the word.
DON’T: Take on a local partner and register your business in his-her name just to get around restrictions about foreign investment in retail. It’s not worth it, you are taking on way too much risk.
If you are a non-Chinese, setting up retail business can be complicated. You will need special approval and it takes a long time. There is a shortcut a lot of companies take: Find a Chinese partner and register the company as a Chinese one. This is a big no-no in my book. I have seen too many cases where the partnership had gone south and the non-Chinese partner is left with nothing. It happens all the time. The risk of the shortcut is that you have no legal recourse to protect yourself from your Chinese partner.
DO: Take advantage of government policies beneficial for companies in creative industries. They apply to all enterprises in China, including those owned by non-Chinese.
The Chinese government has initiated a campaign to boost China’s soft power. This means that the creative industry is getting not only headlines, but also a lot of government aid and tax cuts.