SHANGHAI’S MAKEOVER: RETAIL BUILDING BOOM RAISING FASHION PROFILE

Byline: Josephine Bow

SHANGHAI — Fashion retailing is growing up in China. And, as befits the former Paris of the Orient, Shanghai intends to lead the way.
It’s no secret that the market for pricy imported fashion in China is limited. But taking a cue from the more affordable labels manufac-tured in China by companies from Hong Kong, Taiwan and South Korea, fashion professionals here think they can do just as well on their home turf.
It’s not just a manufacturing renaissance. The city is experiencing its biggest makeover ever, including large retail development, as section after section of old Thirties Shanghai goes under the bulldozer. The rubble has yielded to construction fences announcing yet another mega-scale, ultra-modern office-cum-retail complex, many financed by the front line of Hong Kong’s property conglomerates.
Since retailing in China was first opened to foreigners five years ago, construction of commercial complexes has exploded. The latest Shanghai monolith is the eye-popping Meilongzhen Westgate Mall, anchored by a Japanese Isetan department store, on bustling Nanjing Road, the city’s traditional premier shopping avenue.
The western-style mall features light, airy floors that open onto a vast atrium where fashion shows and other crowd-gathering events are staged. Isetan occupies one side, with floors full of immaculately displayed but moderately priced merchandise, mostly trendy single label in-store shops with goods made in China by foreign-invested companies. More exclusive designer labels, such as Mariella Burani, ICB and Longchamps, are sold on the fourth floor.
Sales staff look sharp, offer plenty of advice and like what they’re selling. As retail competition intensifies in China, malls are beginning to pay more attention to retail mix and segmentation. The rest of the mall is divided into single-label stores, while athletic equipment and apparel is grouped on one floor. Traffic at the mall, which opened in mid-summer, is light, but shoppers look serious.
The ambiance is light years away from China’s state-owned department stores, which continue to head the list of top gross earnings city-wide because of their low-end prices. But even these dinosaurs of China’s centrally planned system are sprucing up their act, adding modern annexes and undergoing substantial renovation.
On the manufacturing front, the third annual Shanghai Fashion Culture Festival, held in late September, is jointly sponsored by the Shanghai Municipality and China’s Textile Industry Council. Its stated goal is to boost this city’s presence in the industry, enhance global exchange and cooperation and, ultimately, restore its position as one of the fashion centers of Asia.
Although this year’s event lacked foreign star power — previous guests have included Emanuel Ungaro and Oscar de la Renta — the hubbub of activity at the various events indicated that those goals are perhaps not so very far away.
The week’s events were anchored by a four-day apparel fair. But unlike most of China’s export-oriented trade fairs, this one focuses on domestic sales. As retail competition heats up on all levels and exporters continue to face limitations caused by quota and rising labor costs (see accompanying story), the government has called for local fashion houses to respond to the overseas challenge by building up national brands, which would eventually be exported as recognized Chinese labels.
As expected, large stands were taken up by the city’s massive conglomerates, such as Shanghai Garment Group and Orient International Holdings. But it’s some of the smaller, more lively start-ups that seem to have more thoroughly absorbed the lessons of image- and brand-building, as well as controlled expansion.
Take Koach Investments Ltd., a company here producing basic women’s career apparel under the Luxman label. For anyone who wasn’t familiar with the name before, it was impossible to miss the upscale shopping bags distributed free during the show, and which somehow kept sprouting all over the city.
Capitalizing on a link with Hong Kong, the company chose to exhibit in the Hong Kong Pavilion, taking a huge area at the entrance, decorated only with headless mannequins garbed in the latest collection. The look was spare but a definite fashion statement.
The same merchandising message was repeated in its glossy catalog, which could hold its own in any international venue.
“Many people in China might not understand yet what we are doing, but we put a lot of thought into our image,” said manager John Gu, adding that the company had budgeted a whopping $120,000 for participation in the Shanghai Fair and a second Dalian Fair.
Luxman’s prices are affordable for China’s growing professional class, with suits in the fall/winter collection mostly made from imported Japanese or Italian fabric and running about $120. Coats are in the $180 to $240 range. Production is done at a factory in Shanghai’s Pudong district.
Launched only in 1995, the Luxman label is sold in 60 department stores, of which a third are here, and executives project retail sales at $10 million for 1997. A freestanding flagship — another of the shops in the Meilongzhen mall — is a model of minimalism, all blond wood fittings and color-coordinated merchandise.
Companies like Luxman are beginning to make a dent in China’s traditional department store format, where labels sell on consignment, supply sales staff and pay a percentage of sales as rent. All unsold merchandise belongs to the supplier.
“With a strong label — we are either the number-one or -two performer in all the department stores where we are sold — we can push more for outright sales,” said Gu.
More importantly, as more Chinese entrepreneurs seek out start-up business opportunities, Luxman is looking to franchising as a means of rapid but controlled expansion. Guidelines for franchisee qualifications were printed up and clearly posted, a push for transparency in a country where business deals customarily depend on who the parties are, and nobody knows what the norms should be.
“Franchisee applicants must have retail experience and a suitable site of between [430 and 1,000 square feet],” said Gu.
“They must sell our label exclusively and be prepared to spend about $10,000 for interior fittings [for 1,000 square feet] to our specifications. We also monitor how shops are maintained and train sales staff.
“The minimum opening order is $6,000. We allow a 50 percent markup, and prices are controlled nationwide,” he continued. “This way, both sides have to be more responsible and professional. We are looking to build up long-term relationships.”
For the international fashion crowd, there are some serious opportunities opening up in China, and not only here. Eye-catching giant fashion photos and a constant media crush surrounded Wuhan Taihe’s booth, another fast-growing women’s career apparel manufacturer based in central China.
Four months ago, Taihe hired French artistic director Aubry Marty to bring his company up to international standards. Besides his generous base salary, his compensation package includes two apartments, a driver and a personal interpreter — “it’s what Dior of Japan was offering,” Marty said.
Marty, whose hefty resume lists stints at Paco Rabanne, Christian Dior and Christian Lacroix, and who acts as styling, decorating and photographic consultant, admitted that his first months on the job were difficult as he jockeyed for territory and learned how to work in this market.
“The problem is learning not to overshoot what is possible yet, and limiting the damage on things that don’t come out as you expect,” he said. “We are also really getting the VIP treatment. The Chinese government is far more supportive of Chinese companies who are hiring foreign consultants and improving their performance than foreign companies who are moving in or just importing.”
But it wasn’t just local companies that were busy. Some 75 exhibitors, or about a quarter of the total, were foreign, mostly from Hong Kong, Italy and Japan. Although a quick comparison with last year’s foreign exhibitor list revealed only a handful of repeats, surprisingly, many of this year’s participants expressed satisfaction over the fair’s organization and results.
“We were given advance briefings from the Italian organizers on the type of things to bring and price points to target,” said Michelangelo Zamponi of Zamponi, a medium-sized fancy leather apparel manufacturer from Italy that exports worldwide. “The Chinese buyers are looking at all the fantasy items, like stamped leathers and leather lace work, things they can’t get here yet.”
Despite high duties and taxes for items averaging about $200 each, FOB Italy, Zamponi said he had confirmed orders from trading companies and had accepted some consignment orders with strict conditions.
“China is such an exciting market right now, and it’s a lot easier doing business here than in Russia,” he said.
The lone U.S. repeater at the show was American Legend, a fur label.
“We began our China foray in 1995 by staging private fur shows in Shanghai and Beijing, with fashions from some of our top buyers,” said Michael McCrea, international marketing manager for Seattle Fur Exchange, fur supplier to American Legend and Blackglama. “After putting out the word about who we were, we then started meeting some of the actual manufacturers. We expect that this February we will be getting some of our first China buyers at our bi-annual auctions.”
McCrea’s criticisms focused on the fair venue, located in the ill-lit, maze-like Shanghai Exhibition Centre, which remains the city’s premier exhibition site.
“Sometimes we can’t even find our own stand,” he said. “Also, the Shanghai exhibition organizers seem to be more concerned so far about making money and not so much on helping optimize business conditions. That was not the case with the Dalian fair.”
Foreign exhibitors pay $350 for 10.7 square feet, nearly on par with Hong Kong rates and three times what local companies pay.
“The foreign companies get certain extras in their package,” explained energetic fair organizer Chen Rongrong. “But we certainly welcome any criticism and are trying to improve on all fronts. For example, we now know that we have to choose our dates to fit the rest of the fashion world. We have already fixed our dates for next year — May 11-15 — and we won’t change them again.”
All over the city, other Fashion Week events consolidated industry professionals. One competition featured local fashion designers, while another slickly staged presentation showcased established regional designers. Rangy Chinese models strutted their stuff, fashions were suitably international class, and unlike in the past, most of the audience clearly belonged there.
Events like the International Model show — with 44 models, half from China and the rest from abroad — are driving corporate sponsorship to new heights. Elle’s Chinese edition was handed out during the televised show, while models paraded in locally available fashion. Elizabeth Arden staged a one-day beauty show, while image consultants on television discussed how much work still remains to be done to spruce up China’s image.

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