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NEW YORK — Later this month, the “House of Mudd” will open its doors in South Korea, marking its entrance onto a new continent where the company believes it could more than double the brand’s revenues within the next two to three years.
This story first appeared in the August 1, 2002 issue of WWD. Subscribe Today.
On Aug. 23, the world’s first six Mudd boutiques will open in that country, including a Seoul flagship occupying more than 3,000 square feet. The company plans to quickly follow up with units in Beijing and Hong Kong, building a base of 30 stores by mid-September, and expects to have about 100 stores up and running by next summer.
In May, New York-based Mudd Inc. licensed the rights to produce all of its Asian merchandise and oversee the store rollout to Worth Pacific Holdings Ltd., a company with offices in Hong Kong and Guangzhou, China, which for the past two years has produced the majority of the Mudd jeans sold in the U.S. market. Assigning a 10-year master license, which also covers Singapore, Japan, Malaysia, Taiwan, Indonesia, Thailand, Vietnam, Cambodia, Australia, New Zealand and Russia, is a change in strategy for Mudd, which has 19 other licensees in the U.S. and Europe.
“The reason that we decided to change our minds with regard to the Far East is that we have such a broad product line,” said Steve Seidman, chairman of New City, N.Y.-based Ingroup Licensing, which negotiated the deal for Mudd. “We thought that if we put all our products under one roof…we would be enormously successful.”
However, the strategy of selling exclusively through single-brand stores is not one the company is strongly considering for the U.S. market, since its distribution already includes department stores, national chains and specialty stores.
“I don’t know how smart it is to go into competition with my customers,” said Dick Gilbert, president of Mudd Inc. “We’ll see how it goes. I probably would do some flagship stores — Los Angeles, Chicago, Dallas, New York. I don’t know about South Beach [Fla.] There would never be more than a few flagships. I know nothing about that business. Everything would be with retail partners.”
Mudd’s U.S. annual wholesale volume is around $280 million, including licensed products. Seidman said he believed the Asian sales could pass the $500 million mark at retail by 2005.
Worth will be working with retail partners in Asia. While that company plans to own certain flagships directly, it is lining up franchisees to open many of the units. While the Seoul flagship will be Worth-owned, the other five initial South Korean units, which are to range in size from 1,500-square-feet to 4,000-square- feet, are to be franchised.
However, having Worth headquarters in China means the company does not have to work with local investment partners to open stores in that country. While China is phasing out some of its restrictions on foreign ownership of stores as a result of its entry into the World Trade Organization, those barriers have been a limiting factor in the expansion of U.S. brands into China.
“We really had a tremendous advantage,” in lining up the Beijing flagship, said Seidman, “because Worth is a powerful company within China.”
Worth officials said they were attracted to the Mudd name because there were few low-priced American brands available in the market. Mudd products are to retail in Asia for the local equivalent of about $30, the same opening price point the brand occupies in the U.S.
“The Asian market needed a brand for the junior,” said Angela Lu, chairman of Worth.
Kenny Lai, who is the chief executive of the Mudd venture in Asia, added: “What we are trying to do is bring a new concept, a new image into the Far East market. There is nothing like this in Hong Kong. You see brands like Tommy Hilfiger, Nautica and all those big guys. We have Levi’s, Diesel; we have Replay here. But in terms of pricing, they will be higher than what we are going to see. Mudd is something very new in the market.”
Mudd, along with LEI and Paris Blues, changed the competitive playing field in the junior jeans market in the mid-Nineties. That trio of companies established inexpensive jeans brands that were priced at half the retail price of status brands, but which had more fashion cachet than what had been available for junior shoppers at the $30 price point.
But the local definition of inexpensive varies widely across the world and in Asia. A $30 pair of jeans would seem comparatively much more expensive in Cambodia, which has a per-capita gross domestic product of $1,300 — the lowest of the 14 countries covered by the deal — than in Singapore, where the per-capita GDP is $26,500 — the highest in the group.
Lai, who in the Eighties founded and until recently ran the Theme chain, which now has 300 stores, said he’s taking income disparity into account in his plans for store openings.
“Very honestly, in the beginning I think the brand will do much better in places like Japan, Korea, Taiwan and Hong Kong, because in China the price we are going to sell at will be a little high,” he said.
But personal incomes in China, as in most large nations, vary widely, and that nation’s middle class is expected to grow as the nation of 1.27 billion, with a per-capita GDP of $3,600, continues to liberalize its economy following its WTO admission.
To Lai, it makes sense to start developing the brand there now.
“We look at it this way,” he said in a phone interview from his Hong Kong office, “We have a huge population here, and if we can do like 1 percent of the population, business will be in good shape.”
While the company has no plans for major retail rollouts in the U.S., Seidman said he believed the company’s European licensees, who currently sell the brand in the U.K., Ireland, the Netherlands, Germany and Scandinavia, could emulate the model.
“We think our European partners are going to be interested in going over and having a look at it,” Seidman said, referring to the Seoul flagship.
Worth will produce most of the Mudd clothing and home furnishings its stores sell, but will buy footwear and some accessories directly from the company’s licensees for those categories.
Seidman said he expects the stores to feature the bright colors and logos the Mudd brand uses in the U.S., as well as attractions like Internet access, live deejays and video games, to encourage young shoppers to hang out in the stores.
“We want them to feel comfortable in the House of Mudd,” said Seidman.
While Mudd has used that phrase in its promotions for several years now, the Seoul location will be the first such house actually open to consumers.