Sham Kar Wai on China’s Changing Fashion Landscape

On the occasion of the launch of Galeries Lafayette in Beijing, Divia Harilela sat down with Sham Kar Wai, one of Asia’s most powerful fashion moguls and the founder of Hong Kong-based fashion group I.T Limited, to talk about China’s changing fashion retail landscape.

Sham Kar Wai | Source: Courtesy

HONG KONG, China — At Comme des Garçons’ Spring/Summer 2014 show last month, Sham Kar Wai quietly took his front row seat, completely unnoticed by the press. Unlike many of his peers, he prefers to keep a relatively low profile and is often dressed casually in jeans and a simple jacket. But despite his humble appearance, Sham is one of Asia’s most powerful fashion moguls, who, as founder and chairman of Hong Kong-based fashion group I.T Limited, sits atop a large multi-channel business that includes several multi-brand concept stores (I.T, i.t, ete! and double-park) and an array of mono-brand boutiques for under-the-radar fashion brands like Comme des Garçons, Gareth Pugh and Maison Martin Margiela. The group also operates ten brands — some licensed, some developed in-house — including b+ab, 5cm and Izzue, which recently launched at Selfridges in London.

Sham started the business in 1988 with a tiny 200-square foot boutique stocking edgy brands like Doc Martens in Hong Kong’s popular shopping district of Causeway Bay. It was an immediate hit with young locals, who would later prove to be I.T’s core customer. And, over time, I.T gained a solid reputation for its cool edit of fashion forward labels, including Gareth Pugh, Ann Demeulemeester and Isabel Marant, differentiating it from other local luxury stores, like Lane Crawford and Joyce.

Although I.T issued a profit warning in May, as of February 2013, the company still recorded an annual turnover of HK$6,543.1 million (about US$843 million, at current exchange rates), a 14 percent growth over last year, driven in no small part by the group’s in-house and licensed brands.

The mainland China market, too, has played a significant role in the group’s expansion. While many Western brands have been struggling in China, I.T’s fortunes remain on the rise. In fact, mainland China now accounts for 31.1 percent of I.T Limited’s turnover (compared to 26.9 per cent last year).

The mainland has also proven to be fertile ground for testing new retail concepts for the group. In 2011, they opened  I.T Market in Beijing in partnership with Comme des Garçons’ Dover Street Market division. And, today, the group celebrates its latest venture, the opening of Galeries Lafayette in Beijing. The 47,000-square metre space is a joint venture with Galerie Lafayette France and a completely new concept for China.

On the occasion of the launch, BoF sat down with Sham to talk about China’s changing retail landscape, the luxury slowdown, opening Galeries Lafayette in Beijing, bringing Chinese brands to the international arena and finding a Chinese McQueen.

BoF: When it first launched, I.T was a pioneer in the way it championed more edgy labels. Has that mission remained the same today?

SKW: My philosophy for I.T is essentially the same. I wanted to bring something I was interested in to Hong Kong, so that translated into importing merchandise and brands from outside of Asia. Since then, it has evolved — initially, we were focusing on brands and categories, but now we are doing new things like pioneering retail concepts. It is still the same philosophy, which is bringing something new about fashion to Hong Kong, but we offer more.

BoF: As the marketplace becomes more crowded, how do you continue to differentiate I.T from other retailers?

SKW: We have always been unique. People think that what we do overlaps with Joyce and Lane Crawford, but there is a distinct difference. We have our in-house labels and brands, first and foremost. We are also focusing on bringing in fashion from other parts of Asia, like Korea and Japan — this is something we’ve been pursuing strongly for the past year. While our competitors are all about luxury, we want to appeal to everyone. When I started my business I was 21; I couldn’t afford luxury brands. What I wanted to buy was fashion that was cool and different. Today, it’s still important that we are able to offer something to everyone, not just the privileged.

BoF: I.T rides on a multi-brand, multi-layered business model with multi-brand stores and mono-brand shops, plus licences and in-house labels. Which of these businesses has been the most successful and why?

SKW: Each category has a different audience and approach, so I cannot say which is more successful. Some brands may make more money than others because they are more commercial, but they are not respected in terms of creativity. In terms of money, our own in-house brands are the most profitable because we have higher margins. But our roots are in multi-brand concepts. Both are important. One is more profitable, but can generate more cash to develop the other categories.

BoF: As one of the first multi-brand fashion retailers in China, how do you think the retail landscape has changed since you opened your first store 11 years ago?

SKW: When we started, China had no multi-brand store concepts. Now, the whole world’s economy is struggling and everyone is looking at China, because its one of the few markets that is still growing — and it’s more open: there are new locations, more shopping malls, more young people. The Chinese have been travelling and this benefits retail too. They know brands, the concepts; they are worldly. Thanks to the Internet, they can get so much information.

BoF: The Chinese customer is maturing very quickly. What changes have you seen? What challenges and opportunities does this rapid maturation present? 

SKW: While Hong Kongers have a good sense of fashion, the Chinese seem a lot more open and avant-garde. So while the average Hong Konger may have more sophisticated tastes, the Chinese are more stylish. They are willing to take risks, while local customers [in Hong Kong] are more conservative. In China, they are now leaning towards the more avant-garde labels. You can even see it on the streets now. The general market in China, however, is still behind and we still want to reach the masses before targeting the ultra-sophisticated, although we do have brands that appeal to them. We are more focused on educating the general market about fashion.

BoF: I.T helped pioneer the edges of China’s fashion market, bringing avant-garde labels like Comme des Garçons, Raf Simons, Rick Owens and others to the country. What is the emerging opportunity today?

SKW: I think there is still a strong demand for the high-end. When a country becomes wealthy, people are always looking for luxury, because it shows your status and what level you have achieved. But some of the young people are beginning to crave something different, usually within the contemporary realm. And those that are familiar with luxury goods now want highly unique brands.

BoF: What about lower-tier cities, specifically?

SKW: We started opening multi-brand stores in second and third tier cities a few years ago. After two years, business has grown 100 percent. We’ve also been online for two years; when we started, business was quite small, but it’s grown significantly. At this moment people are still looking for bargains online. In the future, online is an important platform for retailers, but still people enjoy the art of shopping, the environment, the experience of shopping. It’s like magazines: you need an online and a print presence.

BoF: Growing up, you were inspired by youth culture magazines like i-D and The Face. To what extent is Chinese youth culture creating new fashion business opportunities?

SKW: There are a lot of young people in China and they love fashion. It’s the youth who want to dress up and impress each other. This is a new category that is emerging.  The older generation still has spending power, but the second generation of the already wealthy are spending too. I can also see the middle class rising. In the coming 10 years, this segment will be more important for spending power with apparel especially.

BoF: This year you issued a profit warning.

SKW: We are still experiencing a slowdown, much like Western brands. Areas like Beijing aren’t growing so fast. As such, we are slowing down our expansion and waiting to see how the economy develops. Now we are trying to open only important stores. We are also looking to consolidate stores and focus on making sales per square footage higher. Making each shop more profitable is more important that opening new stores. The economy is not like three years ago, so our pace has slowed. We may open important locations but concentrate on making them more efficient. Also integral is good merchandise (which is number one for the Chinese), service and experience. We still have a lot of room to improve, as service in China is still behind Hong Kong.

BoF: Despite this you have recently opened Galeries Lafayette in Beijing. What makes this project special?

SKW: In China, we have really seen a demand for new retail concepts and it’s an area that has done very well for us. We have always done multi-brands, but we have never developed a department store. It was important that we found a model that was outside China. Local department stores are very similar — you can go in blindfold and it still feels the same. I wanted to bring something new and set a benchmark for the market. Galeries Lafayette is important, not only in France but in the world. So many Chinese shop there and they recognised the name. I myself have been shopping there for 24 years.

The trade mix is also different, as well as the look of the store. We have a lot of exclusive brands for Beijing and China. Lafayette also wants to tell the local customers that we are not about luxury — we are a fashion store.  We want to bring in European tastes, in addition to more affordable and contemporary brands. Variety is important. We also have lifestyle element. For example we are bringing in [restaurant] Angelina to China for the first time.

BoF: Recently you have launched initiatives in Europe, including amping up distribution of your in-house brands. Is the West now your target?

SKW: No! China will still play a big role, but it’s a long journey. Also, another of my dreams is to bring Chinese brands to the international arena. Our in-house labels are a great way to do this. After our project with Selfridges, we are going into discussion about permanent space with them, so there is potential. It’s about getting the right partners who are open to introducing Eastern brands. They can see that these brands are quite different — it’s fresh for them and the aesthetic is very easy. The items still have an HK twist, usually in the way the line is designed. Hong Kong is more a mosaic of East and West. This gives us a unique perspective on fashion.

BoF: You have been quoted as saying it’s your dream “to find a figurehead for Chinese fashion who is as important as McQueen was to London or Nigo is to Japan.” Is this still something you are pursuing?

SKW: This is my dream. I want to try to achieve this in my lifetime, but it’s really in the initial stages. I think China should have at least one or two brands that can be recognised internationally, but up until now it hasn’t happened. For now, we are encouraging young designers in China to go after more opportunities, to see the world and how the fashion business is run. We recently launched an initiative with Tsinghua University in Beijing to organise a fashion design competition. It was open to students from international fashion schools including The Hong Kong Polytechnic University, Parsons The New School for Design and London College of Fashion. The finalists had to create a design using old fabric from our in-house brand Izzue. We took the winners to Paris which was exciting. It’s a good opportunity to mix different cultures.

BoF: Many have said the future of fashion lies in the East. What do you think?

SKW: You always need a balance. Most of our daily fashion is from the West. How can the East dominate? But at the same time we have the spending power, but the West has the creative side. It’s all about balance and working together.