Theory's Shanghai flagship store.

BEIJING — The Chinese consumer loves luxury, and it loves celebrities, that much is known. But Theory, the American brand that helped pioneer the contemporary category in the West, has its own hypothesis about China.

“If every brand was celebrity-driven, the world would be a boring place,” Andrew Rosen, Theory Inc.’s chief executive officer, said in a telephone interview soon after the brand unveiled a Tmall flagship. “We offer a different aesthetic and lifestyle, and it’s worked for a long time. Based on what’s happening in our business in China, the consumer is reacting really well.”

As a result, the brand has been busy in the market. On top of its new Tmall front, which made its debut on Sept. 21, the company operates a Chinese web site, which functions as a branding foil to the commerce-driven nature of the new third-party marketplace shop. Offline, Theory counts 33 stores and six outlet stores in 17 cities across China, which it expects to double in three years.

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“Historically, we’ve opened eight to 10 locations every year…we’re targeting the same rate of expansion the next three years,” said Dinesh Tandon, Theory’s ceo for greater China and Southeast Asia. “We’ve got close to 35 stores in greater China and looking to have 60 to 70 by the end of three years, as far as brick-and-mortar goes.”

The company is proud, too, of the productivity per square foot it sees in that market.

“If you look at our average store, it’s 1,500 to 2,000 square feet inside, and the absolute dollar revenue would be around $3 million per store on an annual basis,” Tandon shared.


Theory's TMall landing page

Theory’s Tmall landing page.  Courtesy

While China sales are still modest for the brand, “maybe 10 percent of our global sales…ultimately I think it should be 25 percent of our business,” Rosen said.

After a few beats, he leaves room for even more growth. “We think 25 percent but who knows, business is still in its embryonic stages. As we expand outside of tier-one cities, who knows what the potential is?” he mused.

Part of that vagueness stems from the fact that there is not much of a contemporary market to speak of in China. Offering products generally in the range from $50 to $300, Tandon said, “we are early movers in this market in this respect. If you look at U.S. department stores, there would be a whole floor of contemporary brands, whereas in China, this is a boom that is about to start. We are targeting luxury malls where traditional European brands are stagnating now and that’s creating opportunity for us. There’s a bit of upside on the real estate.”

There have been shifts overall in the brand as well. Theory welcomed a new designer this year in Francesco Fucci, previously of The Row. With one collection shown so far, Fucci’s arrival has coincided with a rise in prices.

“I think the prices are about 8 percent more expensive,” Rosen said. While some of that is a choice by the brand to elevate its pricing, he added “a big part of our price increase is what has happened with raw material prices around the world.”

Could the U.S.-China tariffs adding 10 percent to imported textiles and handbags complicate things further for the brand?

“Obviously, we would prefer that we don’t have to deal with this,” Rosen said. “We don’t know what’s going to happen. I think that obviously if prices rise because of it, that’s not a great thing. But it’s going to affect everyone the same way.”

Rosen, who is often credited as a catalyst of the American fashion portfolio model, also had thoughts about the industry’s biggest news when Michael Kors revealed plans to morph into Capri Holdings following its acquisition of Versace, in a similar move to Coach Inc. when it transformed itself into Tapestry. 

“You know, listen, I think what’s happening is that the world is becoming a global marketplace,” Rosen said. “The companies that are able to operate around the world in different countries, and those that have a successful platform both physically and digitally, and develop and have a strong brand identity are getting stronger.”

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