SHANGHAI — After two decades of bringing some of America’s best-loved streetwear brands to Asia, fashion consultant and Evisu International founder Peter Caplowe is taking on a new challenge: introducing U.S. multibrand store American Rag to the Chinese market.
The L.A. store, known for its quality denims and heritage brands, opened its first China outlet late last month. Located in the Crystal Plaza mall on Shanghai’s Nanjing West Road, the 6,500 square-foot showroom built over three floors will stock its own vertical line, ARC, as well as rising local talents.
The opening signals two things. First, a notable pivot east in terms of expansion and corporate strategy at a time when retailers doubt the robustness of the Chinese economy. It also heralds a new chapter in the evolution of China’s fashion sector: the rise of the multibrand store.
As China’s middle class continues to expand, demand for product quality and a greater selection of international brands is growing. Meanwhile, GDP growth is juddering, sinking to a six-year low of seven percent growth in the second quarter of 2015 — leading to multiple devaluation of the yuan. While this has created rough going for the luxury sector, whose profits have tumbled in the last three years, affordable brands have faired well.
Together with American Rag’s founder Mark Werts, Caplowe believes there has been a fundamental shift in the needs of Chinese consumers, which has not been addressed. As well as affordability and quality, China’s Eighties- and Nineties-generation shoppers are looking for style and comfort — not just status symbol brand logos.
“We definitely see ourselves as trailblazers and early entrants in this space in China. We have a long-term plan to be the go-to store for the next generation who are interested in fashion and have the disposable income to buy international brands,” says Caplowe, also co-founder of The Hub, a premium fashion trade show in Hong Kong.
The number of Mainland retailers offering international multibrand experiences is still limited. In Shanghai, Lane Crawford, the high-end department store chain from Hong Kong, dominates, followed by a handful of domestic players, such as Aegis and I.T.
ARC plans to position itself differently with a new business model tailored to the Mainland market. It aims to have wide, cross-regional appeal rather than a selective regular clientele. It also wants to play down celebrity endorsements in order to cultivate a more everyman image.
Perhaps most importantly, the China arm will operate as a franchise rather than an owner-operator model, as it does in Japan. The opening of the Shanghai flagship is the first step in this plan. By the end of 2019, ARC aims to have 30 to 40 new retail spaces in Tier One and Tier Two cities in Mainland China alone.
It will start by opening a second smaller store in Shanghai plus seven regional franchises. Within three years, it hopes to have an additional three flagships, starting in Beijing, followed by Chengdu and Hong Kong or Guangzhou, depending on the future price of Hong Kong rents.
“There is a lot of franchiser capital out there — they are looking for the next thing, something new. At the moment, the franchisers seem to be stuck between the domestic brands, which are in decline, and international brands that have an owner-operator model,” explains Caplowe.
The China stores will stock local brands. Nels Fry, head of business development, says Chinese designer Chuang Qu is a name to look out for. A former designer for Mark Fairwhale, Qu has just launched his own eponymous label. He also noted Hiuman, a Shanghai-based designer and denim specialist. And Capitale Nord, the label of British-Swiss designer Kevin Tallon, formerly of Balmain and Kappa, who moved to Beijing over a decade ago is another on his radar.
The store is also setting up manufacturing bases for some of its non-Chinese brands, as well. In the next few years, it intends to open five to six factories in Guangdong and Wuxi. This bucks the trend for foreign labels that are currently minimizing their China operations or relocating them to Vietnam or Bangladesh in the face of rising wages and slowing economic growth.
But for multibrand stores, the import process is particularly painful, given each label stocked must be checked separately by customs. Manufacturing on Chinese soil solves this.
So how big a consideration is China’s retreating economy? Caplowe is unfazed: “The general slowdown has been a kind of a blessing for us. If the market is booming, then there are new store openings every week. So there are advantages,” says Caplowe.